As filed with the Securities and Exchange Commission on July 8, 2005
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.
535 Madison Avenue, 30th Floor
New York, New York 10022
(212) 466-5600
R. Alan Medaugh, President
535 Madison Avenue, 30th Floor
New York, New York 10022
(212) 446-5600
Date of fiscal year end: October 31, 2005
Date of reporting period: April 30, 2005
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS
[LOGO] ISI
INTERNATIONAL STRATEGY & INVESTMENT
SEMI - ANNUAL REPORT
APRIL 30, 2005
[GRAPHIC]
TOTAL RETURN US TREASURY FUND
MANAGED MUNICIPAL FUND
NORTH AMERICAN GOVERNMENT BOND FUND
ISI STRATEGY FUND
ISI FUNDS ANNUAL REPORT - TABLE OF CONTENTS
Investment Advisor's Message................................ 1
Performance Comparisons..................................... 2
Shareholder Expense Example................................. 6
Portfolio Profiles.......................................... 8
Schedules of Investments.................................... 9
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, 2005.
For this period, the Total Return US Treasury Fund, Inc. ('Total Return')
produced a +1.58% return; Managed Municipal Fund, Inc. ('Managed Municipal')
produced a +1.23% return; North American Government Bond Fund, Inc. ('North
American') produced a +2.19% return in its Class A Shares and a +1.87% return
in its Class C Shares; and ISI Strategy Fund ('Strategy') produced a +2.20%
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 investment management companies. The Funds are
organized as corporations under the laws of the state of Maryland.
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 U.S.
Treasuries. 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
President
May 12, 2005
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, 2005)
Total Return Lehman Brothers
US Treasury Intermediate Lehman Brothers
Fund - Lehman Brothers Treasury Long-Term
ISI Shares Treasury Index Index Treasury Index
------------ --------------- --------------- ---------------
4/30/1995 9,700 10,000 10,000 10,000
5/31/1995 10,239 10,404 10,282 10,767
6/30/1995 10,325 10,486 10,350 10,893
7/31/1995 10,223 10,447 10,355 10,719
8/31/1995 10,373 10,569 10,438 10,957
9/30/1995 10,501 10,670 10,507 11,158
10/31/1995 10,725 10,835 10,625 11,470
11/30/1995 10,929 11,003 10,755 11,757
12/31/1995 11,144 11,160 10,862 12,070
1/31/1996 11,158 11,231 10,955 12,070
2/29/1996 10,789 11,001 10,838 11,487
3/31/1996 10,620 10,905 10,785 11,258
4/30/1996 10,493 10,839 10,753 11,070
5/31/1996 10,463 10,818 10,749 11,012
6/30/1996 10,620 10,955 10,855 11,247
7/31/1996 10,634 10,981 10,888 11,251
8/31/1996 10,549 10,958 10,902 11,111
9/30/1996 10,764 11,138 11,041 11,417
10/31/1996 11,093 11,383 11,222 11,866
11/30/1996 11,390 11,580 11,357 12,262
12/31/1996 11,167 11,461 11,295 11,964
1/31/1997 11,124 11,473 11,337 11,879
2/28/1997 11,116 11,487 11,354 11,885
3/31/1997 10,947 11,362 11,287 11,580
4/30/1997 11,113 11,525 11,413 11,860
5/31/1997 11,221 11,625 11,502 11,993
6/30/1997 11,389 11,755 11,599 12,224
7/31/1997 11,864 12,092 11,817 12,942
8/31/1997 11,642 11,970 11,769 12,582
9/30/1997 11,848 12,151 11,898 12,929
10/31/1997 12,092 12,363 12,037 13,364
11/30/1997 12,180 12,427 12,065 13,542
12/31/1997 12,353 12,558 12,164 13,769
1/31/1998 12,539 12,751 12,327 14,049
2/28/1998 12,481 12,713 12,311 13,948
3/31/1998 12,510 12,747 12,347 13,977
4/30/1998 12,538 12,804 12,406 14,029
5/31/1998 12,716 12,937 12,492 14,297
6/30/1998 12,919 13,086 12,576 14,629
7/31/1998 12,898 13,107 12,625 14,568
8/31/1998 13,407 13,463 12,875 15,225
9/30/1998 13,791 13,838 13,185 15,783
10/31/1998 13,604 13,794 13,212 15,544
11/30/1998 13,697 13,791 13,163 15,663
12/31/1998 13,687 13,818 13,213 15,631
1/31/1999 13,770 13,898 13,270 15,771
2/28/1999 13,295 13,543 13,077 14,996
3/31/1999 13,299 13,595 13,163 14,961
4/30/1999 13,343 13,627 13,200 14,983
5/31/1999 13,185 13,500 13,116 14,747
6/30/1999 13,094 13,472 13,140 14,591
7/31/1999 13,044 13,461 13,153 14,521
8/31/1999 12,993 13,463 13,179 14,464
9/30/1999 13,094 13,566 13,282 14,571
10/31/1999 13,084 13,581 13,299 14,580
11/30/1999 13,018 13,555 13,305 14,481
12/31/1999 12,910 13,465 13,267 14,265
1/31/2000 13,056 13,500 13,231 14,468
2/29/2000 13,330 13,703 13,334 14,905
3/31/2000 13,678 13,975 13,504 15,414
4/30/2000 13,639 13,931 13,495 15,291
5/31/2000 13,600 13,952 13,551 15,236
6/30/2000 13,822 14,187 13,747 15,565
7/31/2000 14,002 14,333 13,840 15,833
8/31/2000 14,257 14,544 13,984 16,194
9/30/2000 14,143 14,555 14,092 15,998
10/31/2000 14,326 14,697 14,184 16,248
11/30/2000 14,644 14,998 14,390 16,761
12/31/2000 14,950 15,285 14,629 17,156
1/31/2001 14,984 15,409 14,802 17,185
2/28/2001 15,202 15,595 14,939 17,479
3/31/2001 15,160 15,645 15,057 17,391
4/30/2001 14,858 15,451 14,997 16,918
5/31/2001 14,893 15,499 15,059 16,939
6/30/2001 14,945 15,582 15,113 17,085
7/31/2001 15,386 15,971 15,387 17,721
8/31/2001 15,642 16,182 15,520 18,100
9/30/2001 15,758 16,439 15,841 18,235
10/31/2001 16,270 16,895 16,082 19,131
11/30/2001 15,733 16,476 15,899 18,222
12/31/2001 15,577 16,316 15,823 17,878
1/31/2002 15,679 16,426 15,867 18,051
2/28/2002 15,781 16,574 15,998 18,320
3/31/2002 15,411 16,175 15,753 17,579
4/30/2002 15,809 16,577 16,034 18,247
5/31/2002 15,878 16,670 16,145 18,304
6/30/2002 16,147 16,906 16,342 18,633
7/31/2002 16,549 17,306 16,668 19,208
8/31/2002 17,037 17,680 16,843 20,046
9/30/2002 17,493 18,157 17,166 20,882
10/31/2002 17,210 17,956 17,135 20,282
11/30/2002 17,044 17,778 16,975 20,058
12/31/2002 17,455 18,240 17,291 20,879
1/31/2003 17,390 18,185 17,241 20,809
2/28/2003 17,702 18,498 17,427 21,438
3/31/2003 17,602 18,421 17,427 21,169
4/30/2003 17,692 18,506 17,461 21,384
5/31/2003 18,250 19,040 17,732 22,586
6/30/2003 18,132 18,923 17,704 22,242
7/31/2003 17,314 18,092 17,317 20,252
8/31/2003 17,405 18,200 17,341 20,575
9/30/2003 17,884 18,748 17,700 21,647
10/31/2003 17,605 18,462 17,527 21,044
11/30/2003 17,644 18,485 17,522 21,146
12/31/2003 17,767 18,649 17,655 21,398
1/31/2004 17,919 18,808 17,742 21,765
2/29/2004 18,136 19,041 17,907 22,198
3/31/2004 18,280 19,220 18,033 22,535
4/30/2004 17,675 18,602 17,625 21,271
5/31/2004 17,632 18,538 17,575 21,167
6/30/2004 17,720 18,612 17,612 21,360
7/31/2004 17,847 18,789 17,732 21,722
8/31/2004 18,222 19,178 17,991 22,528
9/30/2004 18,255 19,227 18,000 22,718
10/31/2004 18,421 19,380 18,099 23,052
11/30/2004 18,165 19,119 17,913 22,539
12/31/2004 18,372 19,309 18,012 23,046
1/31/2005 18,599 19,450 18,032 23,627
2/28/2005 18,441 19,291 17,915 23,322
3/31/2005 18,381 19,228 17,877 23,167
4/30/2005 18,712 19,566 18,094 23,959
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending Since Since
April 30, 2005 6 Months 1 Year 5 Years 10 Years Inception/2/ 1 Year 5 Years 10 Years Inception/2/
Total Return US
Treasury Fund - ISI
Shares -1.51% 2.70% 33.10% 87.12% 224.85% 2.70% 5.89% 6.47% 7.30%
- ----------------------------------------------------------------------------------------------------------------
Lehman
Brothers Treasury Index/3/ 0.96% 5.19% 40.45% 95.66% 251.45% 5.19% 7.03% 6.94% 7.83%
- ----------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate Treasury
Index/3/ -0.02% 2.66% 34.08% 80.94% 212.11% 2.66% 6.04% 6.11% 7.07%
- ----------------------------------------------------------------------------------------------------------------
Lehman Brothers
Long-Term Treasury
Index/3/ 3.94% 12.64% 56.69% 139.59% 380.70% 12.64% 9.40% 9.13% 9.88%
- ----------------------------------------------------------------------------------------------------------------
/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 9.4 years.
/2/ The Fund's inception date is August 10, 1988. Benchmark returns are for the
periods beginning August 31, 1988.
/3/ The Lehman Brothers Treasury Index is an unmanaged index reflecting the
performance of all public Treasury obligations and does not focus on one
particular segment of the Treasury market. The Lehman Brothers Intermediate
Treasury Index is an unmanaged index reflecting the performance of US
Treasury securities in the intermediate-term Treasury sector. The Lehman
Brothers Long-Term Treasury Index is an unmanaged index reflecting the
performance of US Treasury securities in the long-term Treasury sector.
Benchmark returns do not reflect expenses or sales charges that have been
deducted from the Fund's returns.
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, 2005)
Lehman Brothers
Managed Lehman Brothers Prerefunded
Municipal Fund - General Municipal Bond Consumer Price
ISI Shares Obligation Index Index Index
-------------- ---------------- --------------- --------------
4/30/1995 9,700 10,000 10,000 10,000
5/31/1995 10,072 10,298 10,229 10,020
6/30/1995 9,933 10,228 10,255 10,040
7/31/1995 10,034 10,346 10,365 10,040
8/31/1995 10,126 10,478 10,434 10,066
9/30/1995 10,169 10,545 10,433 10,086
10/31/1995 10,368 10,665 10,500 10,119
11/30/1995 10,549 10,816 10,615 10,112
12/31/1995 10,681 10,901 10,679 10,105
1/31/1996 10,755 11,007 10,800 10,165
2/29/1996 10,641 10,956 10,761 10,198
3/31/1996 10,438 10,835 10,654 10,250
4/30/1996 10,394 10,797 10,659 10,290
5/31/1996 10,359 10,779 10,658 10,309
6/30/1996 10,485 10,888 10,702 10,316
7/31/1996 10,612 10,992 10,800 10,336
8/31/1996 10,566 10,991 10,797 10,356
9/30/1996 10,714 11,126 10,897 10,388
10/31/1996 10,852 11,256 10,982 10,421
11/30/1996 11,042 11,465 11,117 10,441
12/31/1996 10,971 11,420 11,091 10,441
1/31/1997 10,971 11,450 11,131 10,474
2/28/1997 11,049 11,554 11,219 10,507
3/31/1997 10,897 11,405 11,096 10,533
4/30/1997 10,987 11,494 11,133 10,546
5/31/1997 11,150 11,666 11,291 10,540
6/30/1997 11,273 11,792 11,367 10,553
7/31/1997 11,608 12,097 11,559 10,566
8/31/1997 11,443 11,989 11,504 10,586
9/30/1997 11,599 12,126 11,602 10,612
10/31/1997 11,658 12,193 11,648 10,639
11/30/1997 11,707 12,250 11,674 10,632
12/31/1997 11,892 12,424 11,775 10,619
1/31/1998 12,013 12,552 11,878 10,639
2/28/1998 11,985 12,562 11,910 10,658
3/31/1998 11,991 12,573 11,907 10,678
4/30/1998 11,919 12,507 11,871 10,698
5/31/1998 12,136 12,713 12,019 10,718
6/30/1998 12,164 12,759 12,061 10,731
7/31/1998 12,181 12,789 12,107 10,744
8/31/1998 12,401 12,991 12,237 10,757
9/30/1998 12,555 13,166 12,338 10,770
10/31/1998 12,537 13,168 12,384 10,797
11/30/1998 12,566 13,212 12,423 10,797
12/31/1998 12,612 13,254 12,443 10,790
1/31/1999 12,762 13,428 12,577 10,816
2/28/1999 12,675 13,359 12,578 10,830
3/31/1999 12,658 13,365 12,576 10,862
4/30/1999 12,699 13,402 12,612 10,941
5/31/1999 12,570 13,327 12,567 10,941
6/30/1999 12,370 13,131 12,457 10,941
7/31/1999 12,417 13,183 12,532 10,974
8/31/1999 12,287 13,106 12,532 11,001
9/30/1999 12,228 13,117 12,572 11,053
10/31/1999 12,085 13,003 12,559 11,073
11/30/1999 12,240 13,136 12,622 11,080
12/31/1999 12,132 13,053 12,587 11,080
1/31/2000 12,048 13,005 12,603 11,113
2/29/2000 12,242 13,135 12,654 11,178
3/31/2000 12,546 13,399 12,762 11,271
4/30/2000 12,424 13,330 12,754 11,277
5/31/2000 12,338 13,260 12,755 11,290
6/30/2000 12,695 13,601 12,939 11,350
7/31/2000 12,880 13,780 13,054 11,376
8/31/2000 13,054 13,977 13,170 11,376
9/30/2000 12,942 13,906 13,158 11,435
10/31/2000 13,105 14,052 13,240 11,455
11/30/2000 13,230 14,150 13,307 11,462
12/31/2000 13,621 14,484 13,493 11,455
1/31/2001 13,685 14,642 13,684 11,527
2/28/2001 13,735 14,686 13,734 11,573
3/31/2001 13,837 14,815 13,833 11,600
4/30/2001 13,632 14,662 13,769 11,646
5/31/2001 13,774 14,810 13,901 11,699
6/30/2001 13,877 14,902 13,975 11,718
7/31/2001 14,071 15,114 14,110 11,685
8/31/2001 14,292 15,359 14,282 11,685
9/30/2001 14,201 15,325 14,336 11,738
10/31/2001 14,384 15,481 14,464 11,699
11/30/2001 14,252 15,345 14,366 11,679
12/31/2001 14,160 15,222 14,304 11,633
1/31/2002 14,346 15,472 14,513 11,659
2/28/2002 14,520 15,660 14,669 11,705
3/31/2002 14,225 15,361 14,372 11,771
4/30/2002 14,467 15,678 14,646 11,837
5/31/2002 14,575 15,764 14,738 11,837
6/30/2002 14,684 15,940 14,887 11,843
7/31/2002 14,860 16,138 15,048 11,857
8/31/2002 15,065 16,322 15,178 11,896
9/30/2002 15,379 16,652 15,397 11,916
10/31/2002 15,118 16,382 15,217 11,936
11/30/2002 15,050 16,302 15,167 11,936
12/31/2002 15,396 16,622 15,481 11,909
1/31/2003 15,312 16,593 15,462 11,962
2/28/2003 15,522 16,822 15,636 12,054
3/31/2003 15,536 16,854 15,611 12,126
4/30/2003 15,648 16,963 15,691 12,100
5/31/2003 15,944 17,337 15,953 12,080
6/30/2003 15,803 17,254 15,909 12,094
7/31/2003 15,206 16,681 15,539 12,107
8/31/2003 15,377 16,836 15,631 12,153
9/30/2003 15,806 17,319 15,975 12,192
10/31/2003 15,706 17,203 15,894 12,179
11/30/2003 15,864 17,344 15,969 12,146
12/31/2003 15,995 17,467 16,059 12,133
1/31/2004 15,995 17,554 16,118 12,192
2/29/2004 16,280 17,829 16,315 12,258
3/31/2004 16,143 17,782 16,222 12,337
4/30/2004 15,712 17,381 15,923 12,377
5/31/2004 15,603 17,358 15,854 12,449
6/30/2004 15,671 17,426 15,898 12,489
7/31/2004 15,902 17,636 16,060 12,469
8/31/2004 16,208 17,974 16,327 12,475
9/30/2004 16,262 18,061 16,349 12,502
10/31/2004 16,375 18,203 16,435 12,568
11/30/2004 16,219 18,045 16,317 12,574
12/31/2004 16,409 18,241 16,447 12,528
1/31/2005 16,539 18,378 16,478 12,554
2/28/2005 16,460 18,306 16,413 12,627
3/31/2005 16,305 18,179 16,296 12,726
4/30/2005 16,576 18,461 16,495 12,811
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending April 30, Since Since
2005 6 Months 1 Year 5 Years 10 Years Inception/2/ 1 Year 5 Years 10 Years Inception/2/
Managed Municipal Fund -
ISI Shares -1.83% 2.34% 29.47% 65.76% 133.51% 2.34% 5.30% 5.18% 5.75%
- --------------------------------------------------------------------------------------------------------------
Lehman Brothers General
Obligation Index/3/ 1.42% 6.21% 38.49% 84.61% 170.13% 6.21% 6.73% 6.32% 6.77%
- --------------------------------------------------------------------------------------------------------------
Lehman Brothers
Prerefunded Municipal
Bond Index/3/ 0.36% 3.59% 29.33% 64.95% 136.14% 3.59% 5.28% 5.13% 5.83%
- --------------------------------------------------------------------------------------------------------------
Consumer Price Index/4/ 1.93% 3.51% 13.61% 28.11% 52.04% 3.51% 2.58% 2.51% 2.80%
- --------------------------------------------------------------------------------------------------------------
/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 Brother 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, 2005)
Lehman Brothers
Emerging
Americas Index:
Mexico Section/
North American Citigroup US
Government Bond Lehman Brothers Broad Investment-
Fund - ISI Intermediate Grade Bond Index Consumer Price
Class A Shares Treasury Index Mexico Sector/5/ Index
-------------- -------------- ---------------- ---------------
4/30/1995 9,700 10,000 10,000 10,000
5/31/1995 10,107 10,282 10,496 10,020
6/30/1995 10,237 10,350 11,146 10,040
7/31/1995 10,224 10,355 11,513 10,040
8/31/1995 10,381 10,438 11,640 10,066
9/30/1995 10,526 10,507 11,756 10,086
10/31/1995 10,575 10,625 11,449 10,119
11/30/1995 10,699 10,755 11,787 10,112
12/31/1995 10,897 10,862 12,427 10,105
1/31/1996 10,985 10,955 13,075 10,165
2/29/1996 10,633 10,838 12,555 10,198
3/31/1996 10,596 10,785 12,909 10,250
4/30/1996 10,572 10,753 13,378 10,290
5/31/1996 10,623 10,749 13,263 10,309
6/30/1996 10,753 10,855 13,470 10,316
7/31/1996 10,819 10,888 13,502 10,336
8/31/1996 10,843 10,902 13,976 10,356
9/30/1996 11,120 11,041 14,448 10,388
10/31/1996 11,453 11,222 14,501 10,421
11/30/1996 11,787 11,357 15,022 10,441
12/31/1996 11,572 11,295 15,158 10,441
1/31/1997 11,572 11,337 15,686 10,474
2/28/1997 11,585 11,354 15,956 10,507
3/31/1997 11,434 11,287 15,328 10,533
4/30/1997 11,587 11,413 15,714 10,546
5/31/1997 11,740 11,502 16,281 10,540
6/30/1997 11,909 11,599 16,629 10,553
7/31/1997 12,448 11,817 17,374 10,566
8/31/1997 12,249 11,769 17,225 10,586
9/30/1997 12,508 11,898 17,707 10,612
10/31/1997 12,623 12,037 16,895 10,639
11/30/1997 12,740 12,065 17,322 10,632
12/31/1997 12,960 12,164 17,684 10,619
1/31/1998 13,078 12,327 18,058 10,639
2/28/1998 13,048 12,311 18,220 10,658
3/31/1998 13,109 12,347 18,364 10,678
4/30/1998 13,169 12,406 18,415 10,698
5/31/1998 13,245 12,492 18,254 10,718
6/30/1998 13,398 12,576 18,167 10,731
7/31/1998 13,413 12,625 18,341 10,744
8/31/1998 13,645 12,875 15,456 10,757
9/30/1998 13,974 13,185 15,980 10,770
10/31/1998 13,879 13,212 16,526 10,797
11/30/1998 14,006 13,163 17,608 10,797
12/31/1998 14,053 13,213 17,557 10,790
1/31/1999 14,102 13,270 17,369 10,816
2/28/1999 13,775 13,077 17,457 10,830
3/31/1999 13,891 13,163 18,272 10,862
4/30/1999 14,007 13,200 18,844 10,941
5/31/1999 13,773 13,116 18,023 10,941
6/30/1999 13,790 13,140 18,269 10,941
7/31/1999 13,773 13,153 18,074 10,974
8/31/1999 13,756 13,179 18,262 11,001
9/30/1999 13,860 13,282 18,695 11,053
10/31/1999 13,843 13,299 19,041 11,073
11/30/1999 13,878 13,305 19,587 11,080
12/31/1999 13,825 13,267 20,099 11,080
1/31/2000 13,932 13,231 19,950 11,113
2/29/2000 14,218 13,334 20,889 11,178
3/31/2000 14,560 13,504 21,441 11,271
4/30/2000 14,487 13,495 21,147 11,277
5/31/2000 14,469 13,551 20,735 11,290
6/30/2000 14,634 13,747 21,551 11,350
7/31/2000 14,875 13,840 22,073 11,376
8/31/2000 15,119 13,984 22,627 11,376
9/30/2000 15,062 14,092 22,680 11,435
10/31/2000 15,176 14,184 22,456 11,455
11/30/2000 15,501 14,390 22,796 11,462
12/31/2000 15,772 14,629 23,134 11,455
1/31/2001 15,850 14,802 23,566 11,527
2/28/2001 16,045 14,939 23,399 11,573
3/31/2001 16,124 15,057 23,496 11,600
4/30/2001 16,005 14,997 23,635 11,646
5/31/2001 16,104 15,059 24,179 11,699
6/30/2001 16,205 15,113 24,659 11,718
7/31/2001 16,550 15,387 24,712 11,685
8/31/2001 16,797 15,520 25,216 11,685
9/30/2001 16,818 15,841 24,585 11,738
10/31/2001 17,400 16,082 25,559 11,699
11/30/2001 16,961 15,899 25,677 11,679
12/31/2001 16,854 15,823 26,025 11,633
1/31/2002 16,961 15,867 26,440 11,659
2/28/2002 17,088 15,998 27,255 11,705
3/31/2002 16,830 15,753 26,845 11,771
4/30/2002 17,069 16,034 27,459 11,837
5/31/2002 17,091 16,145 27,474 11,837
6/30/2002 17,219 16,342 27,033 11,843
7/31/2002 17,546 16,668 26,732 11,857
8/31/2002 18,010 16,843 27,858 11,896
9/30/2002 18,319 17,166 27,806 11,916
10/31/2002 18,134 17,135 28,376 11,936
11/30/2002 18,062 16,975 28,983 11,936
12/31/2002 18,350 17,291 29,763 11,909
1/31/2003 18,230 17,241 29,622 11,962
2/28/2003 18,503 17,427 30,205 12,054
3/31/2003 18,498 17,427 30,785 12,126
4/30/2003 18,821 17,461 31,863 12,100
5/31/2003 19,500 17,732 32,834 12,080
6/30/2003 19,424 17,704 32,710 12,094
7/31/2003 18,537 17,317 31,326 12,107
8/31/2003 18,533 17,341 31,683 12,153
9/30/2003 19,083 17,700 32,941 12,192
10/31/2003 18,884 17,527 32,573 12,179
11/30/2003 18,781 17,522 32,710 12,146
12/31/2003 18,974 17,655 33,159 12,133
1/31/2004 19,169 17,742 33,505 12,192
2/29/2004 19,371 17,907 34,193 12,258
3/31/2004 19,522 18,033 34,845 12,337
4/30/2004 18,785 17,625 33,252 12,377
5/31/2004 18,657 17,575 33,048 12,449
6/30/2004 18,683 17,612 33,160 12,489
7/31/2004 18,916 17,732 33,828 12,469
8/31/2004 19,279 17,991 34,983 12,475
9/30/2004 19,384 18,000 35,085 12,502
10/31/2004 19,568 18,099 35,572 12,568
11/30/2004 19,462 17,913 35,328 12,574
12/31/2004 19,754 18,012 35,940 12,528
1/31/2005 19,914 18,032 36,520 12,554
2/28/2005 19,753 17,915 36,494 12,627
3/31/2005 19,672 17,877 35,586 12,726
4/30/2005 19,997 18,094 36,157 12,811
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending Since Since
April 30, 2005 6 Months 1 Year 5 Years 10 Years Inception/2/ 1 Year 5 Years 10 Years Inception/2/
North American
Government Bond Fund -
ISI Class A Shares -0.88% 3.22% 33.84% 99.97% 99.08% 3.22% 6.00% 7.18% 5.76%
- --------------------------------------------------------------------------------------------------------------
North American
Government Bond Fund -
ISI Class C Shares 0.87% 4.74% - - 2.08%/3/ 4.74% - - 1.06%/3/
- --------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate Treasury
Index/4/ -0.02% 2.66% 34.08% 80.94% 98.90% 2.66% 6.04% 6.11% 5.78%
- --------------------------------------------------------------------------------------------------------------
Lehman Brothers Emerging
Americas Index: Mexico
Section/Citigroup US
Broad Investment -
Grade Bond Index Mexico
Sector/5/ 1.65% 8.74% 70.98% 261.57% 252.49% 8.74% 11.32% 13.72% 10.84%
- --------------------------------------------------------------------------------------------------------------
Consumer Price Index/6/ 1.93% 3.51% 13.61% 28.11% 36.47% 3.51% 2.58% 2.51% 2.57%
- --------------------------------------------------------------------------------------------------------------
/1/ PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The performance
information presented in the graph and table above does not reflect the
deduction of taxes that a shareholder would pay on Fund distributions or
the redemption of Fund shares. All performance assumes the reinvestment of
dividends and capital gain distributions and includes sales charges, if
applicable. ISI Class A Shares have a maximum 3.00% sales charge. ISI Class
C Shares have a maximum 1.00% contingent deferred sales charge in the first
year, which is eliminated thereafter.
/2/ ISI Class A Shares inception date is January 15, 1993. Benchmark returns
are for the periods beginning January 31, 1993.
/3/ ISI Class C Shares inception date is May 16, 2003. Cumulative and
annualized returns for the Lehman Brothers Intermediate Treasury Index from
May 31, 2003 through April 30, 2005 were 2.04% and 1.06%, 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.
/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 April 30,
2005. The Lehman Brothers Emerging Americas Index: Mexico Section has been
discontinued. Lehman Brothers Emerging Americas Index: Mexico Section is 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. 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.
4
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
Fund - ISI Consumer Price Wilshire 5000 Portfolio Funds
Shares Index (Full Cap)Index Average
----------- -------------- --------------- ----------------
9/16/1997 9,700 10,000 10,000 10,000
9/30/1997 9,719 10,000 10,000 10,000
10/31/1997 9,554 10,025 9,667 9,781
11/30/1997 9,767 10,019 9,983 9,942
12/31/1997 9,933 10,006 10,168 10,077
1/31/1998 10,020 10,025 10,223 10,142
2/28/1998 10,459 10,043 10,967 10,599
3/31/1998 10,810 10,062 11,516 10,955
4/30/1998 10,878 10,081 11,653 11,041
5/31/1998 10,761 10,099 11,343 10,921
6/30/1998 11,044 10,112 11,741 11,137
7/31/1998 10,887 10,124 11,483 10,995
8/31/1998 9,992 10,137 9,695 9,891
9/30/1998 10,483 10,149 10,328 10,277
10/31/1998 10,888 10,174 11,097 10,726
11/30/1998 11,337 10,174 11,796 11,142
12/31/1998 11,776 10,168 12,550 11,558
1/31/1999 12,079 10,192 13,012 11,756
2/28/1999 11,634 10,205 12,540 11,435
3/31/1999 11,937 10,236 13,024 11,738
4/30/1999 12,301 10,310 13,648 12,112
5/31/1999 12,068 10,310 13,350 11,911
6/30/1999 12,443 10,310 14,041 12,298
7/31/1999 12,148 10,341 13,590 12,108
8/31/1999 12,046 10,366 13,464 12,019
9/30/1999 11,863 10,416 13,112 11,897
10/31/1999 12,282 10,434 13,946 12,269
11/30/1999 12,496 10,440 14,413 12,524
12/31/1999 12,953 10,440 15,507 13,136
1/31/2000 12,649 10,472 14,864 12,796
2/29/2000 12,869 10,534 15,196 13,045
3/31/2000 13,498 10,620 16,099 13,606
4/30/2000 13,056 10,627 15,260 13,288
5/31/2000 12,804 10,639 14,727 13,083
6/30/2000 13,183 10,695 15,377 13,401
7/31/2000 13,098 10,720 15,063 13,295
8/31/2000 13,734 10,720 16,157 13,900
9/30/2000 13,289 10,775 15,403 13,552
10/31/2000 13,205 10,794 15,076 13,466
11/30/2000 12,491 10,800 13,576 12,910
12/31/2000 12,735 10,794 13,818 13,209
1/31/2001 13,063 10,862 14,347 13,449
2/28/2001 12,340 10,906 12,986 12,789
3/31/2001 11,865 10,931 12,112 12,264
4/30/2001 12,299 10,974 13,109 12,822
5/31/2001 12,379 11,024 13,239 12,901
6/30/2001 12,254 11,042 13,018 12,686
7/31/2001 12,259 11,011 12,803 12,635
8/31/2001 11,814 11,011 12,028 12,224
9/30/2001 11,107 11,061 10,947 11,535
10/31/2001 11,416 11,024 11,226 11,760
11/30/2001 11,874 11,005 12,084 12,230
12/31/2001 12,006 10,962 12,301 12,335
1/31/2002 11,903 10,986 12,149 12,191
2/28/2002 11,765 11,030 11,899 12,052
3/31/2002 12,087 11,092 12,420 12,362
4/30/2002 11,814 11,154 11,813 12,069
5/31/2002 11,768 11,154 11,674 12,013
6/30/2002 11,193 11,160 10,854 11,421
7/31/2002 10,618 11,173 9,978 10,815
8/31/2002 10,745 11,210 10,036 10,908
9/30/2002 10,041 11,228 9,029 10,213
10/31/2002 10,515 11,247 9,720 10,645
11/30/2002 10,885 11,247 10,306 11,047
12/31/2002 10,500 11,222 9,735 10,736
1/31/2003 10,291 11,272 9,490 10,585
2/28/2003 10,221 11,359 9,329 10,489
3/31/2003 10,326 11,427 9,435 10,525
4/30/2003 10,932 11,402 10,208 11,101
5/31/2003 11,479 11,383 10,832 11,639
6/30/2003 11,569 11,396 10,992 11,760
7/31/2003 11,592 11,408 11,257 11,826
8/31/2003 11,849 11,452 11,527 12,047
9/30/2003 11,779 11,489 11,400 12,069
10/31/2003 12,246 11,476 12,096 12,533
11/30/2003 12,363 11,445 12,265 12,694
12/31/2003 12,722 11,433 12,816 13,163
1/31/2004 12,956 11,489 13,101 13,362
2/29/2004 13,120 11,551 13,292 13,547
3/31/2004 13,046 11,625 13,149 13,500
4/30/2004 12,788 11,663 12,870 13,178
5/31/2004 12,847 11,731 13,047 13,254
6/30/2004 13,045 11,768 13,319 13,477
7/31/2004 12,752 11,749 12,811 13,138
8/31/2004 12,881 11,756 12,853 13,216
9/30/2004 13,084 11,780 13,082 13,414
10/31/2004 13,190 11,842 13,305 13,583
11/30/2004 13,531 11,849 13,928 14,063
12/31/2004 13,862 11,805 14,434 14,454
1/31/2005 13,602 11,830 14,049 14,234
2/28/2005 13,862 11,898 14,342 14,491
3/31/2005 13,705 11,991 14,089 14,257
4/30/2005 13,480 12,072 13,771 13,985
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending April 30, Since Since
2005 6 Months 1 Year 5 Years Inception/2/ 1 Year 5 Years Inception/2/
ISI Strategy Fund - ISI
Shares -0.90% 2.23% 0.17% 34.80% 2.23% 0.03% 4.00%
- ------------------------------------------------------------------------------------------------------
Dow Jones Wilshire
5000 (Full Cap) Index/3/ 3.50% 7.00% -9.76% 37.71% 7.00% -2.03% 4.31%
- ------------------------------------------------------------------------------------------------------
Consumer Price Index/4/ 1.93% 3.51% 13.61% 20.71% 3.51% 2.58% 2.51%
- ------------------------------------------------------------------------------------------------------
Lipper Flexible
Portfolio Funds
Average/5/ 2.80% 6.09% 5.59% 39.85% 6.09% 0.79% 4.31%
- ------------------------------------------------------------------------------------------------------
/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.
5
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
and redemption payments and (2) ongoing costs, including management fees, Rule
12b-1 distribution 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, 2004 and
held for the six months through April 30, 2005.
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.
6
SHAREHOLDER EXPENSE EXAMPLE
BEGINNING ENDING EXPENSES PAID ANNUAL
ACCOUNT VALUE ACCOUNT VALUE DURING EXPENSE
NOVEMBER 1, 2004 APRIL 30, 2005 PERIOD/(1)/ RATIO
- -----------------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND
Actual Return $1,000.00 $1,015.77 $3.45 0.69%
Hypothetical Return $1,000.00 $1,021.37 $3.46 0.69%
MANAGED MUNICIPAL FUND
Actual Return $1,000.00 $1,012.26 $4.24 0.85%
Hypothetical Return $1,000.00 $1,020.58 $4.26 0.85%
NORTH AMERICAN GOVERNMENT BOND FUND
ISI CLASS A SHARES
Actual Return $1,000.00 $1,021.94 $5.16 1.03%
Hypothetical Return $1,000.00 $1,019.69 $5.16 1.03%
NORTH AMERICAN GOVERNMENT BOND FUND
ISI CLASS C SHARES
Actual Return $1,000.00 $1,018.67 $8.41 1.68%
Hypothetical Return $1,000.00 $1,016.46 $8.40 1.68%
ISI STRATEGY FUND
Actual Return $1,000.00 $1,021.97 $4.71 0.94%
Hypothetical Return $1,000.00 $1,020.13 $4.71 0.94%
- --------------------------------------------------------------------------------
(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.
7
ISI FUNDS
PORTFOLIO PROFILES (AS A % OF TOTAL NET ASSETS) (UNAUDITED) APRIL 30, 2005
TOTAL RETURN US TREASURY FUND
US Treasury Obligations 87.62%
Repurchase Agreements 11.44%
Other 0.94%
-------
100.00%
MANAGED MUNICIPAL FUND
Aaa* 64.52%
Aa* 33.10%
Repurchase Agreements 1.61%
Other 0.77%
-------
100.00%
* Ratings are based on Moody's Investor Services, Inc.
NORTH AMERICAN GOVERNMENT BOND FUND
Canadian Securities 7.20%
Mexican Securities 17.79%
US Treasury Securities 67.46%
Repurchase Agreements 6.75%
Other 0.80%
-------
100.00%
ISI STRATEGY FUND
Basic Materials 2.93%
Biotechnology 0.50%
Business Services 3.21%
Capital Goods 3.27%
Consumer Cyclicals 3.64%
Consumer Staples 9.64%
Energy 5.79%
Finance 12.36%
Health Care 8.83%
Information Services 1.77%
Internet 1.21%
Retail 3.62%
Technology 6.10%
Transportation 3.25%
Utilities 2.03%
US Treasury Securities 29.06%
Repurchase Agreements 2.03%
Other 0.76%
-------
100.00%
8
TOTAL RETURN US TREASURY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
INTEREST MATURITY PAR MARKET
SECURITY RATE DATE VALUE VALUE
-------------------------------------------------------------------------------------------------
US TREASURY OBLIGATIONS - 87.62%
US Treasury Bond 10.375% 11/15/12 $14,250,000 $ 16,543,359
US Treasury Bond 7.500% 11/15/24 4,000,000 5,485,625
US Treasury Bond 7.625% 2/15/25 11,500,000 15,992,188
US Treasury Bond 6.000% 2/15/26 11,500,000 13,616,719
US Treasury Bond 6.375% 8/15/27 28,000,000 34,820,625
US Treasury Note 1.250% 5/31/05 17,100,000 17,081,297
US Treasury Note 2.750% 6/30/06 10,000,000 9,921,875
US Treasury Note 3.125% 1/31/07 4,000,000 3,967,500
US Treasury Note 3.000% 2/15/08 15,000,000 14,714,063
US Treasury Note 5.500% 5/15/09 25,000,000 26,582,031
------------
TOTAL US TREASURY OBLIGATIONS
(COST $160,723,888)..................................................... 158,725,282
------------
REPURCHASE AGREEMENT - 11.44%
JPMORGAN CHASE BANK, N.A.
Dated 4/29/05, 2.250%, principal and interest in the amount of $20,732,887
due 5/02/05, collaterized by US Treasury Bill, par value of $21,242,000,
due 6/30/05 with a value of $21,143,862 20,729,000
------------
TOTAL REPURCHASE AGREEMENT
(COST $20,729,000)...................................................... 20,729,000
------------
TOTAL INVESTMENTS - 99.06%
(COST $181,452,888)*......................................................... 179,454,282
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.94%....................................... 1,711,075
------------
NET ASSETS - 100.00%................................................................ $181,165,357
============
- --------------------------------------------------------------------------------
*Cost for Federal income tax purposes is substantially the same as for
financial statement purposes and the net unrealized appreciation
(depreciation) consists of:
Gross Unrealized Appreciation............. $ 836,292
Gross Unrealized Depreciation............. (2,834,898)
-----------
Net Unrealized Appreciation (Depreciation) $(1,998,606)
===========
See Notes to Financial Statements.
9
MANAGED MUNICIPAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
RATING/1/
INTEREST MATURITY (MOODY'S/ PAR MARKET
SECURITY RATE DATE S&P) VALUE VALUE
- --------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 97.62%
GENERAL OBLIGATIONS - 68.11%
Alexandria, VA, Capital Improvement 4.250% 6/15/21 Aaa/AAA $3,300,000 $ 3,343,527
Arlington County, VA 5.000% 10/1/14 Aaa/AAA 2,000,000 2,140,780
Arlington County, VA 4.500% 1/15/28 Aaa/AAA 4,500,000 4,550,895
Cary, NC 5.000% 3/1/18 Aaa/AAA 2,000,000 2,170,580
Charlotte, NC 5.000% 2/1/19 Aaa/AAA 2,300,000 2,445,682
Chesterfield County, VA 5.000% 1/15/20 Aaa/AAA 1,000,000 1,059,980
Dallas, TX 4.000% 2/15/16 Aa1/AA+ 2,450,000 2,463,646
Dallas, TX 4.500% 2/15/23 Aa1/AA+ 3,500,000 3,539,620
Delaware State, Series A 4.200% 1/1/20 Aaa/AAA 1,675,000 1,692,119
Dupage County, IL, Jail Project 5.600% 1/1/21 Aaa/AAA 1,600,000 1,876,400
Florida State, Board of Education, Public Education
Capital Outlay, Series A 5.125% 6/1/21 Aa1/AAA 1,000,000 1,070,690
Florida State, Board of Education, Public Education,
Series I 4.125% 6/1/21 Aa1/AAA 3,000,000 2,975,520
Georgia State, Series D 5.000% 10/1/17 Aaa/AAA 390,000 421,153
King County, WA, Series G 5.000% 12/1/17 Aa1/AA+ 2,565,000 2,676,167
Maryland State, Capital Improvement, Series A 4.000% 2/15/20 Aaa/AAA 4,000,000 3,993,160
Mecklenburg County, NC, Series A 4.250% 2/1/19 Aaa/AAA 2,000,000 2,036,300
Mecklenburg County, NC, Series A 4.000% 2/1/20 Aaa/AAA 3,000,000 2,991,570
Minneapolis, MN, Series B 5.200% 3/1/13 Aa1/AAA 3,200,000 3,227,264
Minnesota State 5.500% 6/1/18 Aa1/AAA 2,000,000 2,202,040
Missouri State, Fourth State Building, Series A 4.125% 10/1/19 Aaa/AAA 2,000,000 2,021,640
Missouri State, Fourth State Building, Series A 5.000% 6/1/23 Aaa/AAA 2,000,000 2,089,440
Montgomery County, MD, Series A 4.000% 5/1/21 Aaa/AAA 2,450,000 2,431,380
Montgomery County, MD, Series A 5.000% 2/1/22 Aaa/AAA 2,750,000 2,974,537
North Carolina State, Public School Building 4.600% 4/1/17 Aa1/AAA 5,000,000 5,222,200
Salt Lake City, UT, School District, Series A 4.500% 3/1/20 Aaa/NR 2,240,000 2,292,640
South Carolina State, Highway, Series B 5.000% 4/1/19 Aaa/AAA 1,000,000 1,078,200
Washington State, Series E 5.000% 7/1/22 Aa1/AA 2,000,000 2,064,240
------------
67,051,370
------------
See Notes to Financial Statements.
10
MANAGED MUNICIPAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
RATING/1/
INTEREST MATURITY (MOODY'S/ PAR MARKET
SECURITY RATE DATE S&P) VALUE VALUE
- ---------------------------------------------------------------------------------------------------------
OTHER REVENUE - 6.90%
Gwinnett County, GA, Water & Sewer Authority 5.250% 8/1/24 Aaa/AAA $1,500,000 $ 1,629,765
Gwinnett County, GA, Water & Sewer Authority,
Series B 4.750% 8/1/21 Aaa/AAA 2,000,000 2,089,440
Texas, Water Development Board Revenue 4.750% 7/15/20 Aaa/AAA 3,000,000 3,074,280
------------
6,793,485
------------
PREREFUNDED ISSUES - 22.61%
Charlotte, NC, Water & Sewer System Revenue,
6/1/09 @ 101 5.250% 6/1/24 Aa1/AAA 1,600,000 1,752,208
Chesterfield Country, VA, 1/15/10 @ 100 5.625% 1/15/14 Aaa/AAA 1,350,000 1,501,592
Chicago, IL, Metropolitan Water Reclamation
District-Greater Chicago Capital Improvement,
12/1/05 @ 100 6.300% 12/1/09 Aaa/AA+ 1,000,000 1,021,720
Delaware State, Series A, 4/1/06 @ 100 5.125% 4/1/16 Aaa/AAA 2,150,000 2,197,623
Delaware State, Series A, 4/1/10 @ 100 5.500% 4/1/19 Aaa/AAA 2,500,000 2,778,525
Florida State, Transportation, 7/1/05 @ 101 5.800% 7/1/18 Aa1/AAA 2,000,000 2,031,160
Georgia State, Series D, 10/1/10 @ 100 5.000% 10/1/17 Aaa/AAA 1,460,000 1,595,532
Guilford County, NC, Series B, 10/1/10 @ 102 5.250% 10/1/16 Aa1/AAA 3,000,000 3,364,740
Gwinnett County, GA, Water & Sewer Authority,
8/1/09 @ 101 5.300% 8/1/20 Aaa/AAA 1,250,000 1,374,750
South Carolina State, Highway, Series B, 7/1/06 @ 102 5.650% 7/1/21 Aaa/AAA 1,260,000 1,326,893
South Carolina State, State Institutional, Series A,
3/1/10 @ 101 5.300% 3/1/17 Aaa/AAA 1,700,000 1,885,317
Virginia State, 6/1/09 @ 100 5.250% 6/1/16 Aaa/AAA 1,320,000 1,435,460
------------
22,265,520
------------
TOTAL MUNICIPAL BONDS
(COST $90,903,606).............................................................. 96,110,375
------------
See Notes to Financial Statements.
11
MANAGED MUNICIPAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
MARKET
SECURITY VALUE
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 1.61%
JPMORGAN CHASE BANK, N.A.
Dated 4/29/05, 2.250%, principal and interest in the amount of $1,584,297
due 5/2/05, collateralized by US Treasury Bill, par value of $1,624,000,
due 6/30/05 with a value of $1,616,497 $ 1,584,000
------------
TOTAL REPURCHASE AGREEMENT
(COST $1,584,000)........................................................... 1,584,000
------------
TOTAL INVESTMENTS - 99.23%
(COST $92,487,606)*......................................................... 97,694,375
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.77%...................................... 756,975
------------
NET ASSETS - 100.00%............................................................... $ 98,451,350
============
- --------------------------------------------------------------------------------
/1/The Moody's and Standard & Poor's ratings are unaudited.
Moody's Municipal Bond Ratings:
AaaJudged to be of the best quality.
Aa Judged to be of high quality by all standards. Issues are sometimes
denoted with a 1, 2 or 3, which denote a high, medium or low ranking
within the rating.
S&P Municipal Bond Ratings:
AAAOf 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) consists of:
Gross Unrealized Appreciation............. $5,224,505
Gross Unrealized Depreciation............. (17,736)
----------
Net Unrealized Appreciation (Depreciation) $5,206,769
==========
See Notes to Financial Statements.
12
NORTH AMERICAN GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
INTEREST MATURITY PAR/NOMINAL MARKET
SECURITY RATE DATE VALUE/1/ VALUE
--------------------------------------------------------------------------
CANADIAN SECURITIES - 7.20%
Canadian Government Bond 5.000% 6/1/14 C 17,360,000 $ 14,688,329
------------
TOTAL CANADIAN SECURITIES
(COST $14,964,274)............................... 14,688,329
------------
MEXICAN SECURITIES - 17.79%
Mexican Bono/2/ 8.000% 12/28/06 P 97,157,700 8,518,429
Mexican Bono/2/ 9.000% 12/24/09 80,112,300 6,931,956
Mexican Bono/2/ 8.000% 12/23/10 185,014,100 15,116,029
Mexican Bono/2/ 9.000% 12/20/12 31,470,000 2,630,242
Mexican Bono/2/ 9.500% 12/18/14 24,013,700 2,032,641
Mexican Cetes/3/ 10.430%/4/ 6/9/05 11,755,140 1,051,623
------------
TOTAL MEXICAN SECURITIES
(COST $36,600,527)............................... 36,280,920
------------
US SECURITIES - 67.46%
US Treasury Bond 7.625% 2/15/25 $ 10,100,000 14,045,313
US Treasury Bond 6.000% 2/15/26 11,500,000 13,616,719
US Treasury Bond 6.375% 8/15/27 22,100,000 27,483,422
US Treasury Note 1.250% 5/31/05 5,150,000 5,144,367
US Treasury Note 2.750% 6/30/06 10,000,000 9,921,875
US Treasury Note 2.375% 8/15/06 2,000,000 1,972,188
US Treasury Note 3.125% 1/31/07 5,000,000 4,959,375
US Treasury Note 3.000% 2/15/08 16,100,000 15,793,094
US Treasury Note 3.250% 8/15/08 5,500,000 5,412,344
US Treasury Note 3.125% 9/15/08 2,000,000 1,959,062
US Treasury Note 5.000% 2/15/11 19,500,000 20,560,313
US Treasury Note 5.000% 8/15/11 6,500,000 6,864,609
US Treasury Note 4.250% 8/15/13 9,750,000 9,829,219
------------
TOTAL US SECURITIES
(COST $140,813,049).............................. 137,561,900
------------
See Notes to Financial Statements.
13
NORTH AMERICAN GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
MARKET
SECURITY VALUE
----------------------------------------------------------------------------
REPURCHASE AGREEMENT - 6.75%
JPMORGAN CHASE BANK, N.A. Dated 4/29/05, 2.250%,
principal and interest in the amount of
$13,744,582 due 5/02/05, collateralized by US
Treasury Bill, par value of $14,113,000, due 6/30/05
with a value of $14,047,798 $ 13,772,000
-------------
TOTAL REPURCHASE AGREEMENT (COST $13,772,000)............ 13,772,000
-------------
TOTAL INVESTMENTS - 99.20% (COST $206,149,850)*............... 202,303,149
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.80%................. 1,623,422
-------------
NET ASSETS - 100.00%.......................................... $203,926,571
=============
- --------------------------------------------------------------------------------
/1/Par Value is shown in local currency: Canadian dollars (C), Mexican pesos
(P) and US dollars ($).
/2/Bonos are fixed rate, local currency-denominated coupon bonds issued by the
Mexican government.
/3/Cetes are short-term Mexican government debt securities.
/4/Yield as of April 30, 2005.
*Cost for Federal income tax purposes is substantially the same as for
financial statement purposes and the net unrealized appreciation
(depreciation) consists of:
Gross Unrealized Appreciation............. $ 574,625
Gross Unrealized Depreciation............. (4,421,326)
-----------
Net Unrealized Appreciation (Depreciation) $(3,846,701)
===========
See Notes to Financial Statements.
14
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
MARKET
SECURITY SHARES VALUE
-----------------------------------------------------------
COMMON STOCK - 68.15%
BASIC MATERIALS - 2.93%
Air Products & Chemicals, Inc. 250 $ 14,683
AK Steel Holding Corp.+ 5,000 36,250
Alcoa, Inc. 712 20,662
Allegheny Technologies, Inc. 548 12,275
Archer-Daniels-Midland Co. 6,000 107,940
Bowater, Inc. 100 3,249
Buckeye Technologies, Inc.+ 3,400 26,860
Caraustar Industries, Inc.+ 2,400 21,456
Crown Holdings, Inc.+ 4,600 69,230
Dow Chemical Co. 592 27,190
Du Pont (E .I.) de Nemours & Co. 1,412 66,519
FMC Corp.+ 2,100 102,900
Glatfelter 873 10,415
Hercules, Inc.+ 10,807 142,977
International Paper Co. 3,719 127,525
Massey Energy Co. 4,900 176,939
Monsanto Co. 282 16,531
Nucor Corp. 5,200 265,720
OM Group, Inc.+ 3,000 65,820
Owens-Illinois, Inc.+ 100 2,452
PPG Industries, Inc. 200 13,510
Praxair, Inc. 300 14,049
Rohm & Haas Co. 273 11,919
RPM International, Inc. 9,400 162,150
Smurfit-Stone Container Corp.+ 1,900 24,909
Sonoco Products Co. 270 7,314
Temple-Inland, Inc. 200 6,750
Weyerhaeuser Co. 350 24,014
------------
1,582,208
------------
BIOTECHNOLOGY - 0.50%
American Pharmaceutical Partners, Inc.+ 238 12,405
Caremark Rx, Inc.+ 6,431 257,562
------------
269,967
------------
BUSINESS SERVICES - 3.21%
Alderwoods Group, Inc.+ 4,004 52,252
Allied Waste Industries, Inc.+ 5,600 44,744
CCC Information Services Group+ 548 12,785
Cendant Corp. 5,190 103,333
CheckFree Corp.+ 5,000 183,400
Computer Sciences Corp.+ 5,000 217,400
First Data Corp. 5,000 190,150
IMS Health, Inc. 5,000 119,900
MARKET
SECURITY SHARES VALUE
Interpublic Group of Cos., Inc.+ 1,900 $ 24,434
Landauer, Inc. 700 31,745
Regis Corp. 4,211 150,459
Rent-A-Center, Inc.+ 6,000 144,240
ServiceMaster Co. 1,100 14,113
United Rentals, Inc.+ 10,023 184,323
VCA Antech, Inc.+ 5,400 125,712
Waste Management, Inc. 4,426 126,097
Weight Watchers International, Inc.+ 160 6,680
------------
1,731,767
------------
CAPITAL GOODS - 3.27%
AGCO Corp.+ 3,100 53,320
American Standard Cos., Inc.+ 900 40,239
Boeing Co. 730 43,450
Caterpillar, Inc. 510 44,906
Clarcor, Inc. 100 5,061
Cree, Inc.+ 5,000 120,950
DDi Corp.+ 7,500 20,625
Deere & Co. 200 12,508
Emerson Electric Co. 460 28,828
General Electric Co. 9,414 340,787
Harsco Corp. 97 5,204
Illinois Tool Works, Inc. 690 57,836
Johnson Controls, Inc. 1,220 66,941
Kennametal, Inc. 1,600 72,480
Manitowoc Co. 5,000 200,000
Orbital Sciences Corp.+ 2,000 18,640
Pitney Bowes, Inc. 429 19,185
Raytheon Co. 200 7,522
Sanmina-SCI Corp.+ 3,900 15,639
Solectron Corp.+ 4,100 13,530
Spectrum Brands, Inc.+ 4,900 178,556
Terex Corp.+ 2,700 100,926
Textron, Inc. 200 15,070
United Stationers, Inc.+ 600 25,308
URS Corp.+ 1,430 43,973
York International Corp. 5,500 215,214
------------
1,766,698
------------
CONSUMER CYCLICALS - 3.64%
Black & Decker Corp. 100 8,363
Brunswick Corp. 271 11,382
Centex Corp. 400 23,088
D.R. Horton, Inc. 6,666 203,313
Ford Motor Co. 10,800 98,388
See Notes to Financial Statements.
15
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
MARKET
SECURITY SHARES VALUE
----------------------------------------------------------
COMMON STOCK
CONSUMER CYCLICALS (CONTINUED)
General Motors Corp. 2,545 $ 67,901
Genesis Intermedia, Inc.^+ 600 -
Genuine Parts Co. 1,450 62,205
Harley-Davidson, Inc. 300 14,106
Harrah's Entertainment, Inc. 200 13,124
KB Home 400 22,800
Knight-Ridder, Inc. 169 10,934
La Quinta Corp.+ 100 870
Lear Corp. 300 10,167
Lee Enterprises Inc. 100 4,151
Lennar Corp. - Class A 400 20,588
Marriott International, Inc. - Class A 300 18,825
Masco Corp. 210 6,613
McGraw-Hill Cos., Inc. 300 26,124
Meredith Corp. 100 4,700
Mohawk Industries, Inc.+ 150 11,672
News Corp. Ltd. - Class A 10,404 158,973
New York Times Co. - Class A 5,000 166,800
Penn National Gaming, Inc.+ 9,398 296,037
Scholastic Corp.+ 600 20,910
Scripps (E.W.) Co. - Class A 600 30,558
V.F. Corp. 5,200 294,268
Washington Post Co. - Class B 36 31,113
Whirlpool Corp. 5,200 322,712
------------
1,960,685
------------
CONSUMER STAPLES - 9.64%
Altria Group, Inc. 2,171 141,093
AmerisourceBergen Corp. 5,000 306,400
Anheuser-Busch Cos., Inc. 3,202 150,078
Aramark Corp. - Class B 5,637 138,163
Brinker International, Inc.+ 5,000 169,000
Bunge Ltd. 4,276 242,877
Cardinal Health, Inc. 9,215 512,077
Clear Channel Communications, Inc. 85 2,715
Clorox Co. 268 16,964
Coca-Cola Co. 5,612 243,785
Colgate Palmolive Co. 820 40,828
ConAgra Foods, Inc. 469 12,546
Dean Foods Co.+ 5,000 171,800
EchoStar Communications Corp. -
Class A 5,000 144,750
Eastman Kodak Co. 5,570 139,250
Entercom Communications Corp.+ 260 8,380
MARKET
SECURITY SHARES VALUE
Fortune Brands, Inc. 38 $ 3,214
IAC/InterActiveCorp.+ 5,086 110,570
Kimberly-Clark Corp. 514 32,099
Liberty Media Corp. - Class A+ 7,580 76,103
Liberty Media International,
Inc. - Class A+ 5,379 223,067
McDonald's Corp. 10,000 293,100
McKesson Corp. 4,700 173,900
PepsiCo, Inc. 2,711 150,840
Procter & Gamble Co. 7,644 413,923
Regal Entertainment Group - Class A 5,000 101,450
Reynolds American, Inc. 5,000 389,850
Sara Lee Corp. 300 6,417
Sirius Satellite Radio, Inc.+ 8,200 39,032
SpectraSite, Inc.+ 2,048 114,954
SUPERVALU, Inc. 5,000 157,800
Time Warner, Inc.+ 11,036 185,515
UnitedGlobalCom, Inc. - Class A+ 19,900 178,105
Univision Communications,
Inc. - Class A+ 1,402 36,859
Viacom, Inc. - Class B 1,866 64,601
Yum! Brands, Inc. 180 8,453
------------
5,200,558
------------
ENERGY - 5.79%
ChevronTexaco Corp. 10,628 552,656
ConocoPhillips 4,325 453,476
Devon Energy Corp. 4,624 208,866
Exxon Mobil Corp. 14,763 841,934
Lone Star Technologies+ 4,900 190,806
Marathon Oil Corp. 4,500 209,565
Sunoco, Inc. 1,513 150,180
Valero Energy Corp. 7,425 508,835
Veritas DGC, Inc.+ 300 7,680
------------
3,123,998
------------
FINANCE - 12.36%
Affiliated Managers Group+ 600 37,518
AMBAC Financial Group, Inc. 250 16,713
American Equity Investment Life
Holding Co. 2,261 26,996
American Express Co. 1,825 96,178
American Home Mortgage Investment
Corp. 5,000 163,500
American International Group, Inc. 10,000 508,500
AmeriCredit Corp.+ 5,000 117,000
See Notes to Financial Statements.
16
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
MARKET
SECURITY SHARES VALUE
--------------------------------------------------------
COMMON STOCK
FINANCE (CONTINUED)
Anworth Mortgage Asset Corp. 14,967 $ 139,642
Arthur J. Gallagher & Co. 5,000 139,200
Associated Banc Corp. 181 5,597
Bank of America Corp. 3,984 179,439
Bank of New York Co., Inc. 670 18,720
BB&T Corp. 1,391 54,541
Bear Stearns Cos., Inc. 220 20,825
Boston Properties, Inc. 5,100 338,997
Capital One Financial Corp. 150 10,634
Citigroup, Inc. 7,702 361,686
City National Corp. 100 7,050
Colonial BancGroup, Inc. 5,000 110,300
Comerica, Inc. 250 14,315
Commerce Bancorp, Inc. 1,740 48,703
Commerce Bancshares, Inc. 138 6,650
Compass Bancshares, Inc. 5,000 215,100
Doral Financial Corp. 11,300 158,765
Equity Office Properties Trust 344 10,826
Equity Residential 200 6,870
Fannie Mae 652 35,175
Fidelity National Financial, Inc. 520 16,697
First Horizon National Corp. 100 4,153
Franklin Resources, Inc. 300 20,604
Genworth Financial, Inc. 5,000 139,750
Golden West Financial Corp. 600 37,398
Goldman Sachs Group, Inc. 5,000 533,950
Health Care Property Investors, Inc. 200 5,128
Host Marriott Corp. 5,200 87,464
Irwin Financial Corp. 3,645 73,155
iStar Financial, Inc. 100 3,984
J.P. Morgan Chase & Co. 2,580 91,564
Kimco Realty Corp. 3,450 191,096
Legg Mason, Inc. 300 21,258
Lehman Brothers Holdings, Inc. 5,400 495,288
Liberty Property Trust 100 3,983
M & T Bank Corp. 512 52,966
MBIA, Inc. 150 7,857
MBNA, Inc. 1,475 29,131
Mellon Financial Corp. 210 5,815
Mercantile Bankshares Corp. 100 5,081
Merrill Lynch & Co., Inc. 6,120 330,052
Moody's Corp. 1,987 163,212
Morgan Stanley 2,481 130,550
MARKET
SECURITY SHARES VALUE
North Fork Bancorp., Inc. 579 $ 16,299
Northern Trust Corp. 300 13,509
Old Republic International Corp. 150 3,540
PNC Financial Services Group, Inc. 460 24,486
ProLogis 5,000 197,950
Public Storage, Inc. 186 10,918
Radian Group, Inc. 200 8,886
Regions Financial Corp. 546 18,286
SEI Investments Co. 1,000 32,810
Simon Property Group, Inc. 100 6,607
SLM Corp. 1,250 59,550
South Financial Group, Inc. 5,000 131,950
St. Paul Travelers Cos., Inc. 100 3,580
State Street Corp. 300 13,869
Stewart Information Services Corp. 1,469 52,913
Student Loan Corp. 810 156,938
SunTrust Banks, Inc. 602 43,844
T. Rowe Price Group, Inc. 100 5,517
TCF Financial Corp. 200 5,058
Torchmark Corp. 200 10,686
UCBH Holdings, Inc. 10,000 157,300
UnionBanCal Corp. 200 12,312
UnumProvident Corp. 1,438 24,043
US Bancorp 2,473 68,997
Valley National Bancorp 455 11,279
Wachovia Corp. 1,867 95,553
Washington Mutual, Inc. 1,084 44,791
Westamerica Bancorp. 100 4,994
Wilmington Trust Corp. 200 7,070
WSFS Financial Corp. 2,350 120,156
Zions Bancorp. 100 7,003
------------
6,670,270
------------
HEALTH CARE - 8.83%
Abbott Laboratories 4,335 213,109
Aetna, Inc. 6,000 440,220
Allergan, Inc. 210 14,782
Alpharma, Inc. - Class A 5,000 47,200
Bausch & Lomb, Inc. 100 7,500
Baxter International, Inc. 500 18,550
Beckman Coulter, Inc. 100 6,671
Becton Dickinson & Co. 200 11,704
Beverly Enterprises, Inc.+ 4,000 46,880
Biomet, Inc. 275 10,640
Bristol-Myers Squibb Co. 2,247 58,422
C.R. Bard, Inc. 420 29,891
See Notes to Financial Statements.
17
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
MARKET
SECURITY SHARES VALUE
----------------------------------------------------------
COMMON STOCK
HEALTH CARE (CONTINUED)
Cigna Corp. 5,100 $ 469,098
Curative Health Services, Inc.+ 2,417 3,819
Dentsply International, Inc. 150 8,199
Edwards Lifesciences Corp.+ 380 16,735
Eli Lilly & Co. 2,396 140,094
Express Scripts, Inc.+ 5,000 448,200
Guidant Corp. 1,155 85,562
HCA, Inc. 2,560 142,950
Health Net, Inc.+ 1,820 61,934
Henry Schein, Inc.+ 300 11,253
Hospira, Inc.+ 933 31,302
Humana, Inc.+ 1,800 62,370
Johnson & Johnson 6,006 412,192
Manor Care, Inc. 460 15,341
Medco Health Solutions, Inc.+ 5,000 254,850
Medtronic, Inc. 2,670 140,709
Merck & Co., Inc. 13,143 445,548
Mylan Laboratories, Inc. 262 4,323
PacifiCare Health Systems, Inc.+ 5,000 298,800
Par Pharmaceutical Cos., Inc.+ 700 21,021
Pfizer, Inc. 13,363 363,073
Renal Care Group, Inc.+ 150 5,723
Stryker Corp. 600 29,130
UnitedHealth Group, Inc. 2,349 222,004
Watson Pharmaceuticals, Inc.+ 100 3,000
Wyeth 3,630 163,132
------------
4,765,931
------------
INFORMATION SERVICES - 1.77%
Alltel Corp. 5,377 306,274
AT&T Corp. 1,715 32,808
BellSouth Corp. 5,680 150,463
Nextel Communications, Inc. - Class A+ 430 12,036
Sprint Corp. 11,000 244,860
Verizon Communications, Inc. 5,888 210,790
------------
957,231
------------
INTERNET - 1.21%
Cisco Systems, Inc.+ 14,057 242,905
eBay, Inc.+ 6,840 217,033
VeriSign, Inc.+ 1,400 37,044
Yahoo!, Inc.+ 4,520 155,985
------------
652,967
------------
MARKET
SECURITY SHARES VALUE
RETAIL - 3.62%
American Eagle Outfitters 10,000 $ 262,200
Autonation, Inc.+ 234 4,275
Bed Bath & Beyond, Inc.+ 200 7,442
Best Buy Co., Inc. 304 15,303
Costco Wholesale Corp. 660 26,783
CVS Corp. 272 14,030
Gap, Inc. 1,912 40,821
Home Depot, Inc. 1,520 53,762
Kroger Co.+ 4,810 75,854
Lowe's Cos., Inc. 1,134 59,093
Office Depot, Inc.+ 100 1,958
RadioShack Corp. 300 7,491
Saks, Inc.+ 380 6,475
Sears Holdings Corp.+ 5,000 676,200
Target Corp. 1,198 55,587
Urban Outfitters, Inc.+ 5,000 221,500
Walgreen Co. 1,525 65,667
Wal-Mart Stores, Inc. 7,566 356,661
------------
1,951,102
------------
TECHNOLOGY - 6.10%
Agilent Technologies, Inc.+ 5,105 105,929
Analog Devices, Inc. 5,200 177,372
Apple Computer, Inc.+ 10,000 360,600
Applied Materials, Inc. 3,630 53,978
Autodesk, Inc.+ 10,000 318,300
Dell, Inc.+ 4,691 163,388
Harris Corp. 10,000 282,000
IBM 3,422 261,372
Integrated Circuit Systems, Inc.+ 210 3,837
Intel Corp. 10,874 255,756
KLA-Tencor Corp. 200 7,804
Linear Technology Corp. 1,361 48,642
Maxtor Corp.+ 2,700 13,095
Microsoft Corp. 29,646 750,044
Oracle Corp.+ 5,181 59,892
Photronics, Inc.+ 100 1,590
Qualcomm, Inc. 4,688 163,564
Texas Instruments, Inc. 5,615 140,150
Veritas Software Corp.+ 3,559 73,280
Xerox Corp.+ 1,745 23,121
Xilinx, Inc. 1,000 26,940
------------
3,290,654
------------
See Notes to Financial Statements.
18
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
MARKET
SECURITY SHARES VALUE
---------------------------------------------------------
COMMON STOCK
TRANSPORTATION - 3.25%
CNF, Inc. 5,000 $ 213,750
CSX Corp. 5,000 200,650
FedEx Corp. 5,100 433,245
General Maritime Corp. 3,245 142,293
Ryder Systems, Inc. 1,900 70,167
Union Pacific Corp. 5,000 319,650
United Parcel Service, Inc. - Class B 5,300 377,943
------------
1,757,698
------------
UTILITIES - 2.03%
American Electric Power Co., Inc. 3,550 125,031
CMS Energy Corp.+ 5,060 65,375
PPL Corp. 93 5,046
TXU Corp. 10,487 899,680
------------
1,095,132
------------
TOTAL COMMON STOCK
(COST $32,877,380)........................ 36,776,866
------------
MARKET
SECURITY SHARES VALUE
RIGHTS - 0.00%
Seagate^+ (Cost $0) 300 $ -
------------
WARRANTS - 0.00%
MascoTech^+ 200 -
Tokheim Corp.+ 500 1
------------
TOTAL WARRANTS
(COST $8,109)........... 1
------------
See Notes to Financial Statements.
19
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2005
INTEREST MATURITY PAR MARKET
RATE DATE VALUE VALUE
-----------------------------------------------------------------------------------------------
US TREASURY SECURITIES - 29.06%
US Treasury Bond 9.250% 2/15/16 $1,000,000 $ 1,426,094
US Treasury Bond 8.750% 5/15/17 1,500,000 2,111,484
US Treasury Note 1.250% 5/31/05 2,250,000 2,247,539
US Treasury Note 2.750% 6/30/06 2,500,000 2,480,469
US Treasury Note 5.500% 5/15/09 250,000 265,820
US Treasury Note 4.250% 8/15/13 1,000,000 1,008,125
US Treasury Note 4.750% 5/15/14 3,000,000 3,127,500
US Treasury Note 4.250% 8/15/14 3,000,000 3,013,125
-----------
TOTAL US TREASURY SECURITIES
(COST $15,238,121)..................................................... 15,680,156
-----------
REPURCHASE AGREEMENT - 2.03%
JPMORGAN CHASE BANK, N.A.
Dated 4/29/05, 2.250%, principal and interest in the amount of $1,094,205
due 5/2/05, collaterized by US Treasury Bill, par value of $1,122,000,
due 6/30/05 with a value of $1,116,816 1,094,000
-----------
TOTAL REPURCHASE AGREEMENT
(COST $1,094,000)...................................................... 1,094,000
-----------
TOTAL INVESTMENTS IN SECURITIES - 99.24%
(COST $49,217,610)*......................................................... 53,551,023
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.76%...................................... 410,973
-----------
NET ASSETS - 100.00%............................................................... $53,961,996
===========
- --------------------------------------------------------------------------------
+Non-income producing security.
^Security fair valued in good faith under procedures established by and under
the general supervision of the Fund's Board of Directors.
*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............. $ 6,457,546
Gross Unrealized Depreciation............. (2,124,133)
-----------
Net Unrealized Appreciation (Depreciation) $ 4,333,413
===========
See Notes to Financial Statements.
20
ISI FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2005
TOTAL RETURN US MANAGED
TREASURY FUND MUNICIPAL FUND
- -------------------------------------------------------------------------------------------------------
ASSETS:
Investments:
In securities, at market value
(cost $160,723,888 and $90,903,606, respectively).................. $158,725,282 $96,110,375
Repurchase agreement
(cost $20,729,000 and $1,584,000, respectively).................... 20,729,000 1,584,000
Cash................................................................... 672 150
Receivables:
Interest............................................................. 2,457,289 1,089,279
Prepaid expenses....................................................... 17,032 17,605
------------ -----------
Total assets........................................................... 181,929,275 98,801,409
------------ -----------
LIABILITIES:
Payables:
Capital shares redeemed.............................................. 77,727 -
Dividends............................................................ 550,250 255,999
Accrued Liabilities:
Investment advisory fees............................................. 35,409 32,702
Directors' fees and expenses......................................... 1,885 993
Distribution fees.................................................... 37,315 20,439
Accrued expenses and other........................................... 61,332 39,926
------------ -----------
Total liabilities...................................................... 763,918 350,059
------------ -----------
Net assets.............................................................. $181,165,357 $98,451,350
============ ===========
COMPONENTS OF NET ASSETS:
Paid in capital........................................................ $184,902,493 $93,530,949
Distributions in excess of net investment income....................... (1,951,105) (305,422)
Accumulated net realized gain from investment transactions............. 212,575 19,054
Net unrealized appreciation (depreciation) on investments.............. (1,998,606) 5,206,769
------------ -----------
Net assets.............................................................. $181,165,357 $98,451,350
============ ===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING:
ISI Shares (115,000,000 and 55,000,000 shares authorized, respectively) 19,020,135 9,078,409
------------ -----------
NET ASSET VALUE PER SHARE:
ISI Shares (net assets / shares of beneficial interest outstanding).... $ 9.52 $ 10.84
------------ -----------
MAXIMUM OFFERING PRICE PER SHARE:
ISI Shares ($9.52 / 0.97 and $10.84 / 0.97, respectively).............. $ 9.81 $ 11.18
------------ -----------
See Notes to Financial Statements.
21
ISI FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2005
NORTH AMERICAN
GOVERNMENT
BOND FUND ISI STRATEGY FUND
- ------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments:
In securities, at market value (cost $192,377,850 and $48,123,610, respectively)... $188,531,149 $52,457,023
Repurchase agreement (cost $13,772,000 and $1,094,000, respectively)............... 13,772,000 1,094,000
Cash................................................................................. 648 1,706
Receivables:
Capital shares sold................................................................ 122,725 210,864
Interest and dividends............................................................. 2,618,975 247,566
Prepaid expenses..................................................................... 35,471 10,412
------------ -----------
Total assets......................................................................... 205,080,968 54,021,571
------------ -----------
LIABILITIES:
Payables:
Capital shares redeemed............................................................ 102,223 411
Dividends.......................................................................... 821,674 -
Accrued Liabilities:
Investment advisory fees........................................................... 66,738 17,975
Directors' fees and expenses....................................................... 2,344 303
Distribution fees.................................................................. 71,701 11,234
Shareholder servicing fees......................................................... 3,545 -
Accrued expenses and other......................................................... 86,172 29,652
------------ -----------
Total liabilities.................................................................... 1,154,397 59,575
------------ -----------
Net assets............................................................................. $203,926,571 $53,961,996
============ ===========
COMPONENTS OF NET ASSETS:
Paid in capital.................................................................... $211,425,435 $51,486,881
Undistributed (distributions in excess of) net investment income................... (3,490,972) 44,682
Accumulated net realized loss from investment and foreign currency transactions.... (164,372) (1,902,980)
Net unrealized appreciation (depreciation) on investments and foreign currencies... (3,843,520) 4,333,413
------------ -----------
Net assets............................................................................. $203,926,571 $53,961,996
============ ===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING:
ISI Class A Shares (50,000,000 shares authorized).................................. 25,333,274 -
------------ -----------
ISI Class C Shares (5,000,000 shares authorized)................................... 2,372,152 -
------------ -----------
ISI Shares (25,000,000 shares authorized).......................................... - 4,745,205
------------ -----------
NET ASSET VALUE PER SHARE:
(net assets / shares of beneficial interest outstanding)
ISI Class A Shares (based on net assets of $186,487,351)........................... $ 7.36 $ -
------------ -----------
ISI Class C Shares (based on net assets of $17,439,220)............................ $ 7.35 $ -
------------ -----------
ISI Shares......................................................................... $ - $ 11.37
------------ -----------
MAXIMUM OFFERING PRICE PER SHARE:
ISI Class A Shares ($7.36 / 0.97).................................................. $ 7.59 $ -
------------ -----------
ISI Shares ($11.37 / 0.97)......................................................... $ - $ 11.72
------------ -----------
See Notes to Financial Statements.
22
ISI FUNDS
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2005
TOTAL RETURN US MANAGED
TREASURY FUND MUNICIPAL FUND
- -------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest......................................................... $3,353,442 $2,375,985
---------- ----------
EXPENSES:
Investment advisory fees......................................... 226,387 209,720
Distribution fees................................................ 231,234 131,074
Administration fees.............................................. 86,096 48,783
Transfer agent fees.............................................. 31,633 8,986
Custody fees..................................................... 6,675 4,396
Professional fees................................................ 36,027 27,527
Registration fees................................................ 11,317 10,152
Directors' fees.................................................. 7,801 4,438
Miscellaneous.................................................... 5,290 2,937
---------- ----------
Total expenses................................................. 642,460 448,013
---------- ----------
Net investment income............................................ 2,710,982 1,927,972
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions................... 212,575 29,496
Net change in unrealized appreciation/depreciation on investments 58,488 (761,936)
---------- ----------
Net realized and unrealized gain (loss) on investments........... 271,063 (732,440)
---------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS............................ $2,982,045 $1,195,532
========== ==========
See Notes to Financial Statements.
23
ISI FUNDS
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2005
NORTH AMERICAN
GOVERNMENT
BOND FUND ISI STRATEGY FUND
- --------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest.............................................................. $4,804,654 $319,451
Dividends............................................................. - 311,503
---------- --------
Total income........................................................ 4,804,654 630,954
---------- --------
EXPENSES:
Investment advisory fees.............................................. 421,322 104,083
Distribution fees:
ISI Class A Shares.................................................. 385,552 -
ISI Class C Shares.................................................. 67,069 -
ISI Shares.......................................................... - 65,052
Administration fees................................................... 98,215 24,456
Transfer agent fees:
ISI Class A Shares.................................................. 43,065 -
ISI Class C Shares.................................................. 4,339 -
ISI Shares.......................................................... - 9,783
Custody fees.......................................................... 29,293 4,559
Professional fees..................................................... 41,361 21,790
Shareholder servicing fees:
ISI Class C Shares.................................................. 22,356 -
Registration fees..................................................... 18,447 10,663
Directors' fees....................................................... 8,798 2,308
Miscellaneous......................................................... 6,354 1,224
---------- --------
Total expenses...................................................... 1,146,171 243,918
---------- --------
Net investment income................................................. 3,658,483 387,036
---------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES:
Net realized gain from:
Investment transactions............................................. 535,338 279,463
Foreign currency transactions....................................... 51,086 -
Net change in unrealized appreciation/depreciation on investments and
foreign currencies.................................................. 238,007 261,438
---------- --------
Net realized and unrealized gain on investments and foreign currencies 824,431 540,901
---------- --------
INCREASE IN NET ASSETS FROM OPERATIONS................................. $4,482,914 $927,937
========== ========
See Notes to Financial Statements.
24
TOTAL RETURN US TREASURY FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005/1/ OCTOBER 31, 2004
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................................... $ 2,710,982 $ 5,326,381
Net realized gain on investment transactions.............................. 212,575 172,261
Net change in unrealized appreciation/depreciation on investments......... 58,488 3,675,803
------------ ------------
Increase in net assets from operations.................................... 2,982,045 9,174,445
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................................... (3,912,065) (5,093,609)
Net realized gain on investments.......................................... - (7,452,894)
Return of capital......................................................... - (4,778,172)
------------ ------------
Total distributions....................................................... (3,912,065) (17,324,675)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares.............................................. 6,872,951 8,438,737
Dividend reinvestments.................................................... 2,160,795 11,673,042
Cost of shares redeemed................................................... (21,728,028) (46,198,502)
------------ ------------
Decrease in net assets from capital share transactions.................... (12,694,282) (26,086,723)
------------ ------------
Total decrease in net assets.............................................. (13,624,302) (34,236,953)
NET ASSETS:
Beginning of year......................................................... 194,789,659 229,026,612
------------ ------------
End of year (including distributions in excess of net investment income of
$1,951,105 and $750,022, respectively).................................. $181,165,357 $194,789,659
============ ============
SHARE TRANSACTIONS:
Shares sold............................................................... 726,704 876,475
Shares issued to shareholders on reinvestment of dividends................ 228,620 1,214,305
Shares redeemed........................................................... (2,295,819) (4,827,307)
------------ ------------
Decrease in shares from capital share transactions........................ (1,340,495) (2,736,527)
============ ============
- --------------------------------------------------------------------------------
/1/Unaudited.
See Notes to Financial Statements.
25
MANAGED MUNICIPAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005/1/ OCTOBER 31, 2004
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................................... $ 1,927,972 $ 4,152,470
Net realized gain (loss) on investment transactions....................... 29,496 (10,442)
Net change in unrealized appreciation/depreciation on investments......... (761,936) 538,387
------------ ------------
Increase in net assets from operations.................................... 1,195,532 4,680,415
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................................... (1,856,592) (4,831,949)
Net realized gain on investments.......................................... - -
------------ ------------
Total distributions....................................................... (1,856,592) (4,831,949)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares.............................................. 2,307,714 23,397,588
Dividend reinvestments.................................................... 929,820 2,803,487
Cost of shares redeemed................................................... (17,968,933) (19,283,681)
------------ ------------
Increase (decrease) in net assets from capital share transactions......... (14,731,399) 6,917,394
------------ ------------
Total increase (decrease) in net assets................................... (15,392,459) 6,765,860
NET ASSETS:
Beginning of year......................................................... 113,843,809 107,077,949
------------ ------------
End of year (including distributions in excess of net investment income of
$305,422 and $376,802, respectively).................................... $ 98,451,350 $113,843,809
============ ============
SHARE TRANSACTIONS:
Shares sold............................................................... 212,371 2,132,728
Shares issued to shareholders on reinvestment of dividends................ 85,940 258,162
Shares redeemed........................................................... (1,654,809) (1,785,569)
------------ ------------
Increase (decrease) in shares from capital share transactions............. (1,356,498) 605,321
============ ============
- --------------------------------------------------------------------------------
/1/Unaudited.
See Notes to Financial Statements.
26
NORTH AMERICAN GOVERNMENT BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005/1/ OCTOBER 31, 2004
- ------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income........................................................ $ 3,658,483 $ 7,908,972
Net realized gain (loss) on investment and foreign currency transactions..... 586,424 (2,896,707)
Net change in unrealized appreciation/depreciation on investments
and foreign currencies...................................................... 238,007 2,950,949
------------ ------------
Increase in net assets from operations....................................... 4,482,914 7,963,214
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
ISI Class A Shares.......................................................... (5,507,323) (4,897,323)
ISI Class C Shares.......................................................... (455,054) (320,142)
Net realized gain on investments:
ISI Class A Shares.......................................................... - (2,733,166)
ISI Class C Shares.......................................................... - (151,110)
Return of capital:
ISI Class A Shares.......................................................... - (10,681,891)
ISI Class C Shares.......................................................... - (698,284)
------------ ------------
Total distributions.......................................................... (5,962,377) (19,481,916)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares:
ISI Class A Shares.......................................................... 15,215,768 23,239,002
ISI Class C Shares.......................................................... 1,670,360 7,255,836
Dividend reinvestments:
ISI Class A Shares.......................................................... 2,462,000 10,083,386
ISI Class C Shares.......................................................... 179,140 590,444
Cost of shares redeemed:
ISI Class A Shares.......................................................... (34,099,473) (86,037,048)
ISI Class C Shares.......................................................... (2,903,945) (2,051,441)
------------ ------------
Decrease in net assets from capital share transactions....................... (17,476,150) (46,919,821)
------------ ------------
Decrease in net assets....................................................... (18,955,613) (58,438,523)
NET ASSETS:
Beginning of year........................................................... 222,882,184 281,320,707
------------ ------------
End of year (including distributions in excess of net investment income of
$3,490,972 and $1,187,078, respectively)................................... $203,926,571 $222,882,184
============ ============
SHARE TRANSACTIONS:
Shares sold:
ISI Class A Shares.......................................................... 2,063,237 3,060,803
ISI Class C Shares.......................................................... 226,186 956,786
Shares issued to shareholders on reinvestment of dividends:
ISI Class A Shares.......................................................... 334,703 1,343,772
ISI Class C Shares.......................................................... 24,385 78,912
Shares redeemed:
ISI Class A Shares.......................................................... (4,625,992) (11,482,700)
ISI Class C Shares.......................................................... (393,643) (277,253)
------------ ------------
Increase (decrease) in shares from capital share transactions:
ISI Class A Shares.......................................................... (2,228,052) (7,078,125)
============ ============
ISI Class C Shares.......................................................... (143,072) 758,445
============ ============
- --------------------------------------------------------------------------------
/1/Unaudited.
See Notes to Financial Statements.
27
ISI STRATEGY FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005/1/ OCTOBER 31, 2004
- -----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................ $ 387,036 $ 374,935
Net realized gain (loss) on investment transactions.............. 279,463 1,784,906
Net change in unrealized appreciation/depreciation on investments 261,438 601,917
----------- -----------
Increase in net assets from operations........................... 927,937 2,761,758
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................ (401,855) (330,186)
----------- -----------
Total distributions.............................................. (401,855) (330,186)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares..................................... 12,521,698 21,196,828
Dividend reinvestments........................................... 358,325 287,106
Cost of shares redeemed.......................................... (4,363,693) (9,257,446)
----------- -----------
Increase in net assets from capital share transactions........... 8,516,330 12,226,488
----------- -----------
Total increase in net assets..................................... 9,042,412 14,658,060
NET ASSETS:
Beginning of year................................................ 44,919,584 30,261,524
----------- -----------
End of year (including undistributed net investment income of
$44,682 and $59,501, respectively)............................. $53,961,996 $44,919,584
=========== ===========
SHARE TRANSACTIONS:
Shares sold...................................................... 1,085,930 1,942,633
Shares issued to shareholders on reinvestment of dividends....... 30,746 25,905
Shares redeemed.................................................. (377,744) (845,666)
----------- -----------
Increase in shares from capital share transactions............... 738,932 1,122,872
=========== ===========
- --------------------------------------------------------------------------------
/1/Unaudited.
See Notes to Financial Statements.
28
TOTAL RETURN US TREASURY FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
ISI SHARES
SIX MONTHS
ENDED
APRIL 30, FOR THE YEARS ENDED OCTOBER 31,
2005/1/ ------------------------------------------------
---------- 2004 2003 2002 2001 2000
- --------------------------------------------- -------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year........ $ 9.57 $ 9.92 $ 10.18 $ 10.20 $ 9.57 $ 9.35
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.14/2/ 0.24/2/ 0.23 0.35 0.45 0.50
Net realized and unrealized gain (loss) on
investments............................. 0.01 0.19 0.01 0.20 0.82 0.38
-------- -------- -------- -------- -------- --------
Total from investment operations.......... 0.15 0.43 0.24 0.55 1.27 0.88
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income..................... (0.20) (0.23) (0.25) (0.40) (0.45) (0.50)
Net realized gain on investments.......... - (0.33) (0.25) (0.17) - -
Tax return of capital..................... - (0.22) - - (0.19) (0.16)
-------- -------- -------- -------- -------- --------
Total distributions....................... (0.20) (0.78) (0.50) (0.57) (0.64) (0.66)
-------- -------- -------- -------- -------- --------
Net asset value, end of year.............. $ 9.52 $ 9.57 $ 9.92 $ 10.18 $ 10.20 $ 9.57
======== ======== ======== ======== ======== ========
TOTAL RETURN/3,5/.......................... 1.58% 4.64% 2.30% 5.78% 13.57% 9.49%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s).......... $181,165 $194,790 $229,027 $262,928 $149,588 $136,728
Ratios to average daily net assets:/4/
Net investment income................... 2.93% 2.56% 2.50% 3.64% 4.51% 5.10%
Expenses................................ 0.69% 0.69% 0.67% 0.74% 0.78% 0.82%
Portfolio turnover rate/5/................ 8% 31% 125% 129% 61% 15%
- --------------------------------------------------------------------------------
/1/Unaudited.
/2/Calculated using the average shares outstanding for the period.
/3/Total return excludes the effect of sales charges.
/4/Annualized for periods less than one year.
/5/Total return and portfolio turnover for less than one year are not
annualized.
See Notes to Financial Statements.
29
MANAGED MUNICIPAL FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
ISI SHARES
SIX MONTHS
ENDED
APRIL 30, FOR THE YEARS ENDED OCTOBER 31,
2005/1/ ----------------------------------------------
---------- 2004 2003 2002 2001 2000
- --------------------------------------------- -----------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year........ $ 10.91 $ 10.89 $ 11.00 $ 10.99 $ 10.47 $ 10.12
-------- -------- -------- -------- ------- -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.20/2/ 0.38/2/ 0.40 0.45 0.45 0.47
Net realized and unrealized gain (loss) on
investments............................. (0.08) 0.08 0.01 0.09 0.55 0.36
-------- -------- -------- -------- ------- -------
Total from investment operations.......... 0.12 0.46 0.41 0.54 1.00 0.83
-------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Net investment income..................... (0.19) (0.44) (0.47) (0.45) (0.45) (0.47)
Net realized gain on investments.......... - - (0.05) (0.08) (0.03) (0.01)
-------- -------- -------- -------- ------- -------
Total distributions....................... (0.19) (0.44) (0.52) (0.53) (0.48) (0.48)
-------- -------- -------- -------- ------- -------
Net asset value, end of year.............. $ 10.84 $ 10.91 $ 10.89 $ 11.00 $ 10.99 $ 10.47
======== ======== ======== ======== ======= =======
TOTAL RETURN/3,5/.......................... 1.23% 4.26% 3.89% 5.11% 9.76% 8.44%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s).......... $ 98,451 $113,844 $107,078 $103,198 $66,105 $65,233
Ratios to average daily net assets:/4/
Net investment income................... 3.67% 3.53% 3.66% 3.92% 4.18% 4.60%
Expenses after waivers and/or
reimbursements........................ 0.85% 0.88% 0.89% 0.94% 0.93% 0.90%
Expenses before waivers and/or
reimbursements........................ 0.85% 0.88% 0.89% 0.96% 0.99% 1.01%
Portfolio turnover rate/5/................ 4% 17% 11% 11% 21% 22%
- --------------------------------------------------------------------------------
/1/Unaudited.
/2/Calculated using the average shares outstanding for the period.
/3/Total return excludes the effect of sales charges.
/4/Annualized for periods less than one year.
/5/Total return and portfolio turnover for less than one year are not
annualized.
See Notes to Financial Statements.
30
NORTH AMERICAN GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED)
ISI CLASS A SHARES/1/
SIX MONTHS APRIL 1, 2002
ENDED FOR THE YEARS ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, FOR THE YEARS ENDED MARCH 31,
2005/2/ ------------------ 2002/3/ ---------------------------
---------- 2004 2003 ------------- 2002 2001 2000
- ----------------------------------------- --------------------- -----------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period.............................. $ 7.41 $ 7.73 $ 8.03 $ 7.80 $ 8.17 $ 8.07 $ 8.42
-------- -------- -------- -------- -------- -------- -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................. 0.13/4/ 0.24/4/ 0.25 0.18 0.38 0.44 0.49
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions............... 0.03 0.03 0.07 0.41 (0.03) 0.38 (0.12)
-------- -------- -------- -------- -------- -------- -------
Total from investment
operations.......................... 0.16 0.27 0.32 0.59 0.35 0.82 0.37
-------- -------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Net investment income................. (0.21) (0.16) (0.29) (0.17) (0.41) (0.47) (0.49)
Net realized gain on investments...... - (0.08) (0.33) (0.07) (0.23) (0.13) -
Return of capital..................... - (0.35) - (0.12) (0.08) (0.12) (0.23)
-------- -------- -------- -------- -------- -------- -------
Total distributions................... (0.21) (0.59) (0.62) (0.36) (0.72) (0.72) (0.72)
-------- -------- -------- -------- -------- -------- -------
Net asset value, end of period........ $ 7.36 $ 7.41 $ 7.73 $ 8.03 $ 7.80 $ 8.17 $ 8.07
======== ======== ======== ======== ======== ======== =======
TOTAL RETURN/5,6/...................... 2.19% 3.62% 4.14% 7.75% 4.38% 10.74% 4.82%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s)...... $186,487 $204,266 $267,756 $257,495 $220,629 $117,445 $61,697
Ratios to average daily net assets:/7/
Net investment income............... 3.52% 3.22% 3.03% 3.84% 4.60% 5.62% 5.59%
Expenses after waivers and/or
reimbursements.................... 1.03% 1.05% 1.09% 1.01% 1.13% 1.24% 1.25%
Expenses before waivers and/or
reimbursements.................... 1.03% 1.05% 1.09% 1.01% 1.13% 1.24% 1.41%
Portfolio turnover rate/6/............ 27% 47% 152% 95% 136% 89% 32%
- --------------------------------------------------------------------------------
/1/On May 16, 2003, ISI Shares were redesignated as ISI Class A Shares.
/2/Unaudited.
/3/The Fund changed its fiscal year end from March 31 to October 31.
/4/Calculated using the average shares outstanding for the period.
/5/Total return excludes the effect of sales charges.
/6/Total return and portfolio turnover for less than one year are not
annualized.
/7/Annualized for periods less than one year.
See Notes to Financial Statements.
31
NORTH AMERICAN GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED)
ISI CLASS C SHARES
SIX MONTHS FOR THE MAY 16, 2003/2
ENDED YEAR ENDED /THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31,
2005/1/ 2004 2003
- ---------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.................. $ 7.40 $ 7.72 $ 8.20
-------- -------- -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................................. 0.11/3/ 0.19/3/ 0.17
Net realized and unrealized gain (loss) on investments
and foreign currency transactions................... 0.03 0.02 (0.38)
-------- -------- -------
Total from investment operations...................... 0.14 0.21 (0.21)
-------- -------- -------
LESS DISTRIBUTIONS:
Net investment income................................. (0.19) (0.14) (0.21)
Net realized gain on investments...................... - (0.08) (0.06)
Return of capital..................................... - (0.31) -
-------- -------- -------
Total distributions................................... (0.19) (0.53) (0.27)
-------- -------- -------
Net asset value, end of period........................ $ 7.35 $ 7.40 $ 7.72
======== ======== =======
TOTAL RETURN/4,5/...................................... 1.87% 2.91% (2.62)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s)...................... $ 17,439 $ 18,616 $13,565
Ratios to average daily net assets:/6/
Net investment income............................... 2.88% 2.50% 3.32%
Expenses after waivers and/or reimbursements........ 1.68% 1.77% 1.85%
Expenses before waivers and/or reimbursements....... 1.68% 1.77% 2.12%
Portfolio turnover rate/5/............................ 27% 47% 152%/5/
- --------------------------------------------------------------------------------
/1/Unaudited.
/2/Commencement of operations.
/3/Calculated using the average shares outstanding for the period.
/4/Total return excludes the effect of sales charges.
/5/Total return and portfolio turnover for less than one year are not
annualized.
/6/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 INDICATED)
ISI SHARES
SIX MONTHS JUNE 1, 2002
ENDED FOR THE YEARS ENDED THROUGH
APRIL 30, OCTOBER 31, OCTOBER 31, FOR THE YEARS ENDED MAY 31,
2005/1/ ----------------- 2002/2/ ---------------------------
---------- 2004 2003 ------------ 2002 2001 2000
- ------------------------------------------ --------------------- ----------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period... $ 11.21 $ 10.50 $ 9.08 $ 10.23 $ 10.89 $ 12.15 $ 11.91
-------- -------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.09/3/ 0.10/3/ 0.08 0.05 0.12 0.25 0.26
Net realized and unrealized gain (loss)
on investments....................... 0.16 0.70 1.42 (1.14) (0.66) (0.62) 0.46
-------- -------- ------- ------- ------- ------- -------
Total from investment operations....... 0.25 0.80 1.50 (1.09) (0.54) (0.37) 0.72
-------- -------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income.................. (0.09) (0.09) (0.08) (0.06) (0.12) (0.27) (0.24)
Net realized gain on investments....... - - - - - (0.62) (0.24)
-------- -------- ------- ------- ------- ------- -------
Total distributions.................... (0.09) (0.09) (0.08) (0.06) (0.12) (0.89) (0.48)
-------- -------- ------- ------- ------- ------- -------
Net asset value, end of period......... $ 11.37 $ 11.21 $ 10.50 $ 9.08 $ 10.23 $ 10.89 $ 12.15
======== ======== ======= ======= ======= ======= =======
TOTAL RETURN/4,5/....................... 2.20% 7.71% 16.47% (10.65)% (4.93)% (3.32)% 6.09%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s)....... $ 53,962 $ 44,920 $30,262 $19,924 $24,398 $27,051 $36,544
Ratios to average daily net assets:/6/
Net investment income................ 1.49% 0.92% 0.77% 1.18% 1.14% 2.09% 2.10%
Expenses after waivers and/or
reimbursements..................... 0.94% 1.12% 1.30% 1.30% 1.19% 1.00% 1.00%
Expenses before waivers and/or
reimbursements..................... 0.94% 1.12% 1.79% 1.99% 1.42% 1.38% 1.31%
Portfolio turnover rate/5/............. 15% 66% 60% 12% 72% 57% 59%
- --------------------------------------------------------------------------------
/1/Unaudited.
/2/The Fund changed its fiscal year end from May 31 to October 31.
/3/Calculated using the average shares outstanding for the period.
/4/Total return excludes the effect of sales charges.
/5/Total return and portfolio turnover for less than one year are not
annualized.
/6/Annualized for periods less than one year.
See Notes to Financial Statements.
33
ISI FUNDS NOTES TO FINANCIAL STATEMENTS
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 U.S. Treasury Securities. 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 redemption of North
American's ISI Class C Shares 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 for which market quotations are readily available
are valued on each Fund business day using the last reported sales price
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, 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 they are currently priced
by the Funds).
In such cases, the administrator consults with the investment advisor to
determine the methodology for valuing the security, including information and
sources of information that may be used to value the security. This
34
ISI FUNDS NOTES TO FINANCIAL STATEMENTS
information is referred to the Fund's Board, which values the security based
upon the information or which assigns the security such other value as it may
determine.
As of April 30, 2005, Strategy had fair valued securities, which are
footnoted accordingly in the Fund's schedule of investments.
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 and pay monthly dividends at fixed rates approved by the
Funds' Board. 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.
Taxable net capital gains, if any, are distributed at least annually. The Funds
record dividends and distributions on the ex-dividend date.
E. FEDERAL INCOME TAXES
Each Fund has a policy to qualify as a regulated investment company under
subchapter M of the Internal Revenue Code and to distribute substantially all
of its income to shareholders. 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, 2005, there were no
open forward currency contracts.
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
35
ISI FUNDS NOTES TO FINANCIAL STATEMENTS
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.
Actual results may be different.
NOTE 2 - FEES AND TRANSACTIONS WITH AFFILIATES
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, 2006, to the extent necessary, to limit the
expenses of ISI Class C Shares to 1.85% of the class' average daily net assets.
ISI has contractually agreed to waive its fees and/or reimburse expenses of
Strategy through February 28, 2006, to the extent necessary, to limit all
expenses to 1.30% of its average daily net assets. For the six months ended
April 30, 2005, there were no fees waived.
Los Angeles Capital Management and Equity Research, Inc. is Strategy's
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.
Forum Administrative Services, LLC ('FAdS'), Forum Accounting Services, LLC
('FAcS'), and Forum Shareholder Services, LLC ('FSS') serve as the Funds'
Administrator, Accountant, and Transfer Agent, respectively. For their
services, these companies receive a combined fee based on average net assets
(subject to a minimum monthly fee) and monthly fees per open account.
Asset-based fees are calculated daily and all fees are paid monthly.
Certain officers and directors of the Funds are also officers or directors of
ISI or FAdS. These persons are not paid by the Funds for serving in these
capacities.
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
fee, pursuant to Rule 12b-1, that is calculated daily and paid monthly at the
annual rate of 0.25% of their average daily net assets. North American's ISI
Class A Shares and ISI Class C Shares pay ISI Group a fee, pursuant to Rule
12b-1, that is calculated daily and paid monthly at the annual rate of 0.15%
and 0.75% of its average daily net assets, respectively.
ISI Group also acts as the Shareholder Servicing Agent for the North American
ISI Class A and ISI Class C Shares. ISI Group is paid a fee, pursuant to an
agreement, that is calculated daily and paid monthly at the annual rate of
0.25% of the average daily net assets of each class.
For the six months ended April 30, 2005, ISI Group earned commissions on
sales of ISI Shares of Total Return, Managed Municipal, and Strategy of $4,372,
$2,161 and $17,624, respectively, and $10,431 on sales of ISI Class A Shares of
North American.
36
ISI FUNDS NOTES TO FINANCIAL STATEMENTS
NOTE 3 - 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. Reclassifications are made to the
Funds' capital accounts to reflect income and gains available for distribution
(or available capital loss carryforward) under income tax regulations. The tax
character of distributions paid during the year and the tax components of net
assets will be updated at the Funds' fiscal year-end.
As of October 31, 2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
- ----------------------------------------------------------------------------------------
Undistributed Unrealized
Undistributed Long-Term Capital Loss Appreciation
Ordinary Income Capital Gains Carryforward (Depreciation) Total
- ----------------------------------------------------------------------------------------
Total Return $ - $ - $ - $(2,057,094) $(2,057,094)
Managed Municipal - - (10,442) 5,968,705 5,958,263
North American - - (750,796) (4,081,527) (4,832,323)
Strategy 59,502 - (1,970,751) 3,860,292 1,949,033
- ----------------------------------------------------------------------------------------
The difference between book basis and tax basis unrealized appreciation
(depreciation) for Strategy was primarily due to wash sales.
Managed Municipal's and North American's capital loss carryforwards of
$10,442 and $750,796, respectively, expire in 2012. Strategy's capital loss
carryforwards of $95,684 and $1,875,067 expire in 2009 and 2010, respectively.
To the extent future capital gains are offset by capital loss carryforwards,
such gains will not be distributed. During the year ended October 31, 2004,
Strategy utilized $1,631,267 of capital loss carryforwards.
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the six months ended April 30, 2005, were as
follows:
-------------------------------------------------------------------------
Non-US Government Obligations US Government Obligations
-------------------------------------------------------------------------
Purchases Sales Purchases Sales
Total Return $ - $ - $10,947,422 $17,663,250
Managed Municipal 3,959,960 9,820,000 - -
North American 38,534,520 34,247,045 12,938,516 22,941,477
Strategy 14,353,569 4,635,950 2,983,984 2,590,430
-------------------------------------------------------------------------
NOTE 4 - 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
37
ISI FUNDS NOTES TO FINANCIAL STATEMENTS
governments may be affected by adverse international political and economic
developments that may not impact the value of US government securities.
NOTE 5 - 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 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 under the applicable rule.
NOTE 6 - AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
Effective June 30, 2004, 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. The Funds' Form N-Q is available on the SEC's website at
http://www.sec.gov or may be reviewed and copied at the SEC's Public Reference
Room in Washington, DC. Information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
38
[THIS PAGE INTENTIONALLY LEFT BLANK]
[LOGO] ISI
INTERNATIONAL STRATEGY & INVESTMENT
DIRECTORS AND OFFICERS
EDWARD S. HYMAN STEPHEN V. KILLORIN
CHAIRMAN VICE PRESIDENT
R. ALAN MEDAUGH TREASURER
PRESIDENT CHIEF COMPLIANCE OFFICER
JOSEPH R. HARDIMAN CHIEF FINANCIAL OFFICER
DIRECTOR MARGARET M. BEELER
W. MURRAY JACQUES ASSISTANT VICE PRESIDENT
DIRECTOR SECRETARY
LOUIS E. LEVY KEITH C. REILLY
DIRECTOR ASSISTANT VICE PRESIDENT
NANCY R. LAZAR FREDERICK SKILLIN
VICE PRESIDENT ASSISTANT TREASURER
CARRIE L. BUTLER DANA A. LUKENS
VICE PRESIDENT ASSISTANT SECRETARY
EDWARD J. VEILLEUX
VICE PRESIDENT *Thomas D. Stevens is an
THOMAS D. STEVENS* officer for only the ISI Strategy Fund.
VICE PRESIDENT
INVESTMENT ADVISOR
ISI, INC.
535 MADISON AVENUE, 30TH FLOOR
NEW YORK, NY 10022
(800) 955-7175
SHAREHOLDER SERVICING AGENT
FORUM SHAREHOLDER SERVICES
TWO PORTLAND SQUARE
PORTLAND, ME 04101
(800) 882-8585
DISTRIBUTOR
ISI GROUP, INC.
535 MADISON AVENUE, 30TH FLOOR
NEW YORK, NY 10022
(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 July 6, 2005
---------------------------
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 July 6, 2005
---------------------------
By /S/ Stephen V. Killorin
---------------------------
Stephen V. Killorin, Treasurer
Date June 23, 2005
---------------------------