As filed with the Securities and Exchange Commission on June 30, 2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07292
NORTH AMERICAN GOVERNMENT BOND FUND, INC.
40 West 57th Street, 18th Floor
New York, New York 10019
(212) 466-5600
R. Alan Medaugh, President
40 West 57th Street, 18th Floor
New York, New York 10019
(212) 446-5600
Date of fiscal year end: October 31, 2006
Date of reporting period: April 30, 2006
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, 2006
[GRAPHIC]
TOTAL RETURN US TREASURY FUND
MANAGED MUNICIPAL FUND
NORTH AMERICAN GOVERNMENT BOND FUND
ISI STRATEGY FUND
PAGE>
ISI FUNDS SEMI - ANNUAL REPORT - TABLE OF CONTENTS
Investment Advisor's Message........ 1
Performance Comparisons............. 2
Shareholder Expense Example......... 7
Portfolio Profiles.................. 9
Schedules of Investments............ 10
Statements of Assets and Liabilities 22
Statements of Operations............ 24
Statements of Changes in Net Assets. 26
Financial Highlights................ 30
Notes to Financial Statements....... 35
INVESTMENT ADVISOR'S MESSAGE
Dear Shareholder:
I am pleased to present the semi-annual report to shareholders for the ISI
Funds (each a 'Fund' and collectively, the 'Funds'). This report covers the
six-month reporting period ended April 30, 2006. For this period, the Total
Return US Treasury Fund, Inc. ('Total Return') produced a -0.95% return;
Managed Municipal Fund, Inc. ('Managed Municipal') produced a +0.76% return;
North American Government Bond Fund, Inc. ('North American') produced a +0.24%
return in its Class A Shares and a -0.09 % return in its Class C Shares; and
ISI Strategy Fund ('Strategy') produced a +8.25% 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 are registered
under the Investment Company Act of 1940, as amended, as open-end management
investment companies. The Funds are organized as corporations under the laws of
the state of Maryland.
International Strategy & Investment, Inc. ('ISI') manages all four Funds.
Total Return's investment objective is to achieve a high level of total return
with relative stability of principal and, secondarily, high current income
consistent with an investment in securities issued by the United States
Treasury. Managed Municipal's investment objective is designed to provide a
high level of total return with relative stability of principal and,
secondarily, high current income exempt from federal income tax through
investment in a portfolio consisting primarily of tax-free municipal
obligations. North American's investment objective is designed to provide a
high level of current income, consistent with prudent investment risk.
Strategy's investment objective is designed to maximize total return through a
combination of long-term growth of capital and current income.
We would like to welcome new investors to the ISI Funds and thank those who
have been with us for some time. We appreciate your confidence.
Sincerely,
/s/
R. Alan Medaugh
President
May 8, 2006
1
TOTAL RETURN US TREASURY FUND - ISI SHARES PERFORMANCE COMPARISON/1/
Total Return US Treasury Fund - ISI Shares, Lehman Brothers Treasury Index,
Lehman Brothers Intermediate Treasury Index and Lehman Brothers Long-Term
Treasury Index: Value of a $10,000 Investment (for 10 Years ended
April 30, 2006)
[CHART]
Total Return US Lehman Lehman Brothers Lehman Brothers
Treasury Fund - Brothers Intermediate Long-Term
ISI Shares Treasury Index Treasury Index Treasury Index
---------- -------------- -------------- --------------
4/30/1996 $ 9,700 $10,000 $10,000 $10,000
5/31/1996 9,670 9,981 9,995 9,948
6/30/1996 9,815 10,107 10,095 10,160
7/31/1996 9,828 10,131 10,125 10,164
8/31/1996 9,749 10,110 10,138 10,037
9/30/1996 9,949 10,276 10,268 10,314
10/31/1996 10,252 10,502 10,436 10,719
11/30/1996 10,527 10,684 10,561 11,077
12/31/1996 10,320 10,574 10,503 10,808
1/31/1997 10,281 10,584 10,542 10,731
2/28/1997 10,274 10,597 10,558 10,736
3/31/1997 10,117 10,483 10,496 10,461
4/30/1997 10,270 10,633 10,613 10,714
5/31/1997 10,371 10,725 10,696 10,834
6/30/1997 10,526 10,845 10,787 11,043
7/31/1997 10,965 11,156 10,989 11,692
8/31/1997 10,760 11,043 10,945 11,366
9/30/1997 10,950 11,211 11,064 11,679
10/31/1997 11,175 11,406 11,194 12,073
11/30/1997 11,256 11,465 11,220 12,233
12/31/1997 11,416 11,586 11,312 12,438
1/31/1998 11,589 11,763 11,463 12,691
2/28/1998 11,535 11,728 11,448 12,600
3/31/1998 11,562 11,760 11,482 12,626
4/30/1998 11,588 11,813 11,537 12,673
5/31/1998 11,752 11,936 11,617 12,915
6/30/1998 11,940 12,073 11,695 13,216
7/31/1998 11,920 12,092 11,741 13,160
8/31/1998 12,391 12,420 11,973 13,754
9/30/1998 12,746 12,767 12,262 14,258
10/31/1998 12,573 12,726 12,286 14,042
11/30/1998 12,659 12,723 12,240 14,150
12/31/1998 12,649 12,748 12,287 14,120
1/31/1999 12,726 12,822 12,340 14,247
2/28/1999 12,287 12,495 12,161 13,547
3/31/1999 12,291 12,543 12,241 13,516
4/30/1999 12,332 12,572 12,276 13,535
5/31/1999 12,186 12,455 12,197 13,322
6/30/1999 12,102 12,429 12,220 13,181
7/31/1999 12,055 12,419 12,231 13,118
8/31/1999 12,008 12,420 12,256 13,066
9/30/1999 12,101 12,515 12,351 13,163
10/31/1999 12,092 12,529 12,367 13,171
11/30/1999 12,032 12,505 12,372 13,082
12/31/1999 11,932 12,422 12,338 12,886
1/31/2000 12,066 12,455 12,304 13,070
2/29/2000 12,320 12,642 12,400 13,464
3/31/2000 12,641 12,893 12,558 13,925
4/30/2000 12,605 12,852 12,549 13,813
5/31/2000 12,569 12,872 12,602 13,763
6/30/2000 12,775 13,089 12,784 14,061
7/31/2000 12,941 13,224 12,870 14,303
8/31/2000 13,176 13,418 13,004 14,629
9/30/2000 13,071 13,428 13,104 14,452
10/31/2000 13,240 13,559 13,190 14,678
11/30/2000 13,534 13,837 13,382 15,141
12/31/2000 13,816 14,101 13,604 15,498
1/31/2001 13,849 14,216 13,765 15,524
2/28/2001 14,049 14,388 13,892 15,790
3/31/2001 14,011 14,434 14,002 15,710
4/30/2001 13,732 14,255 13,946 15,283
5/31/2001 13,764 14,299 14,004 15,302
6/30/2001 13,812 14,376 14,054 15,434
7/31/2001 14,220 14,734 14,309 16,009
8/31/2001 14,457 14,930 14,433 16,351
9/30/2001 14,563 15,167 14,731 16,473
10/31/2001 15,037 15,587 14,955 17,282
11/30/2001 14,540 15,201 14,785 16,461
12/31/2001 14,396 15,053 14,714 16,151
1/31/2002 14,490 15,154 14,755 16,307
2/28/2002 14,585 15,291 14,877 16,550
3/31/2002 14,243 14,923 14,649 15,881
4/30/2002 14,611 15,294 14,911 16,484
5/31/2002 14,675 15,380 15,014 16,535
6/30/2002 14,923 15,597 15,197 16,832
7/31/2002 15,295 15,966 15,500 17,352
8/31/2002 15,745 16,311 15,662 18,109
9/30/2002 16,167 16,751 15,963 18,864
10/31/2002 15,905 16,566 15,934 18,322
11/30/2002 15,752 16,402 15,786 18,119
12/31/2002 16,132 16,828 16,079 18,862
1/31/2003 16,072 16,777 16,033 18,798
2/28/2003 16,360 17,065 16,206 19,367
3/31/2003 16,268 16,994 16,206 19,123
4/30/2003 16,351 17,073 16,238 19,317
5/31/2003 16,867 17,566 16,490 20,404
6/30/2003 16,757 17,458 16,464 20,092
7/31/2003 16,002 16,692 16,103 18,295
8/31/2003 16,086 16,791 16,126 18,587
9/30/2003 16,529 17,297 16,460 19,555
10/31/2003 16,271 17,033 16,299 19,011
11/30/2003 16,307 17,054 16,294 19,103
12/31/2003 16,420 17,205 16,418 19,330
1/31/2004 16,560 17,352 16,499 19,661
2/29/2004 16,761 17,567 16,652 20,053
3/31/2004 16,894 17,732 16,769 20,358
4/30/2004 16,335 17,161 16,390 19,216
5/31/2004 16,295 17,102 16,343 19,121
6/30/2004 16,377 17,171 16,378 19,296
7/31/2004 16,495 17,335 16,489 19,622
8/31/2004 16,841 17,693 16,731 20,351
9/30/2004 16,871 17,739 16,738 20,523
10/31/2004 17,025 17,879 16,830 20,825
11/30/2004 16,789 17,639 16,658 20,361
12/31/2004 16,980 17,814 16,750 20,819
1/31/2005 17,189 17,944 16,768 21,344
2/28/2005 17,044 17,797 16,660 21,069
3/31/2005 16,988 17,739 16,624 20,928
4/30/2005 17,294 18,051 16,827 21,644
5/31/2005 17,546 18,272 16,956 22,206
6/30/2005 17,708 18,384 17,009 22,539
7/31/2005 17,414 18,135 16,851 21,947
8/31/2005 17,742 18,423 17,045 22,586
9/30/2005 17,446 18,178 16,905 21,938
10/31/2005 17,260 18,036 16,830 21,534
11/30/2005 17,332 18,123 16,904 21,668
12/31/2005 17,609 18,311 17,011 22,173
1/31/2006 17,514 18,257 16,994 21,970
2/28/2006 17,568 18,283 16,988 22,126
3/31/2006 17,248 18,086 16,929 21,371
4/30/2006 17,095 18,011 16,937 20,955
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending Since Since
April 30, 2006 6 Months 1 Year 3 Years 5 Years 10 Years Inception/2/ 1 Year 3 Years 5 Years 10 Years Inception/2/
Total Return US Treasury
Fund - ISI Shares -3.94% -4.07% 1.38% 20.73% 70.95% 221.12% -4.07% 0.46% 3.84% 5.51% 6.81%
- ----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Treasury
Index/3/ -0.14% -0.22% 5.49% 26.36% 80.11% 250.67% -0.22% 1.80% 4.79% 6.06% 7.36%
- ----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate Treasury
Index/3/ 0.64% 0.66% 4.31% 21.45% 69.37% 214.17% 0.66% 1.42% 3.96% 5.41% 6.70%
- ----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Long-
Term Treasury Index/3/ -2.69% -3.18% 8.48% 37.11% 109.55% 365.39% -3.18% 2.75% 6.52% 7.68% 9.10%
- ----------------------------------------------------------------------------------------------------------------------------
/1/ PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The performance
information presented in the graph and table above does not reflect the
deduction of taxes that a shareholder would pay on Fund distributions or
the redemption of Fund shares. All performance assumes the reinvestment of
dividends and capital gain distributions and includes the Fund's maximum
3.00% sales charge. Distribution of the Fund's capital gains and non-US
Treasury income may be subject to state and local taxes. Management is not
aware of any single index that is truly representative of the Fund since
its active maturity management policy allows the manager to adjust the
weighted average maturity throughout each US Treasury sector. Currently the
Fund's weighted average maturity is approximately 9.6 years.
/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/
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, 2006)
[CHART]
Lehman Brothers
Managed Lehman Brothers Prerefunded
Municipal Fund - General Municipal Bond Consumer
ISI Shares Obligation Index Index Price Index
---------- ---------------- ----- -----------
4/30/1996 $ 9,700 $10,000 $10,000 $10,000
5/31/1996 9,669 9,984 9,999 10,019
6/30/1996 9,787 10,085 10,040 10,026
7/31/1996 9,905 10,181 10,132 10,045
8/31/1996 9,862 10,180 10,129 10,064
9/30/1996 10,000 10,305 10,223 10,096
10/31/1996 10,129 10,425 10,302 10,128
11/30/1996 10,307 10,619 10,429 10,147
12/31/1996 10,240 10,577 10,405 10,147
1/31/1997 10,240 10,605 10,442 10,179
2/28/1997 10,313 10,702 10,525 10,211
3/31/1997 10,171 10,564 10,410 10,237
4/30/1997 10,255 10,646 10,444 10,250
5/31/1997 10,408 10,805 10,593 10,243
6/30/1997 10,522 10,922 10,663 10,256
7/31/1997 10,835 11,205 10,844 10,269
8/31/1997 10,681 11,105 10,792 10,288
9/30/1997 10,826 11,231 10,885 10,313
10/31/1997 10,882 11,293 10,928 10,339
11/30/1997 10,927 11,346 10,952 10,333
12/31/1997 11,100 11,507 11,046 10,320
1/31/1998 11,213 11,626 11,143 10,339
2/28/1998 11,187 11,635 11,174 10,358
3/31/1998 11,193 11,646 11,171 10,377
4/30/1998 11,125 11,584 11,137 10,397
5/31/1998 11,328 11,775 11,275 10,416
6/30/1998 11,354 11,817 11,315 10,429
7/31/1998 11,370 11,846 11,358 10,441
8/31/1998 11,576 12,033 11,480 10,454
9/30/1998 11,719 12,194 11,574 10,467
10/31/1998 11,702 12,197 11,618 10,493
11/30/1998 11,729 12,237 11,654 10,493
12/31/1998 11,772 12,276 11,673 10,486
1/31/1999 11,912 12,437 11,799 10,512
2/28/1999 11,831 12,373 11,800 10,525
3/31/1999 11,815 12,379 11,798 10,557
4/30/1999 11,853 12,413 11,832 10,633
5/31/1999 11,733 12,344 11,789 10,633
6/30/1999 11,546 12,162 11,687 10,633
7/31/1999 11,590 12,211 11,757 10,665
8/31/1999 11,469 12,139 11,757 10,691
9/30/1999 11,414 12,150 11,794 10,742
10/31/1999 11,280 12,044 11,782 10,761
11/30/1999 11,425 12,167 11,841 10,768
12/31/1999 11,324 12,090 11,808 10,768
1/31/2000 11,245 12,045 11,824 10,800
2/29/2000 11,426 12,166 11,871 10,864
3/31/2000 11,711 12,410 11,972 10,953
4/30/2000 11,596 12,347 11,965 10,960
5/31/2000 11,516 12,282 11,966 10,972
6/30/2000 11,850 12,597 12,138 11,030
7/31/2000 12,023 12,764 12,247 11,056
8/31/2000 12,185 12,946 12,355 11,056
9/30/2000 12,080 12,880 12,344 11,113
10/31/2000 12,232 13,015 12,421 11,132
11/30/2000 12,349 13,106 12,484 11,139
12/31/2000 12,714 13,416 12,659 11,132
1/31/2001 12,773 13,562 12,838 11,203
2/28/2001 12,820 13,603 12,885 11,248
3/31/2001 12,916 13,722 12,977 11,273
4/30/2001 12,725 13,580 12,917 11,318
5/31/2001 12,856 13,717 13,041 11,369
6/30/2001 12,953 13,803 13,110 11,388
7/31/2001 13,134 13,999 13,237 11,356
8/31/2001 13,340 14,225 13,399 11,356
9/30/2001 13,255 14,194 13,450 11,408
10/31/2001 13,426 14,339 13,570 11,369
11/30/2001 13,303 14,213 13,477 11,350
12/31/2001 13,217 14,099 13,419 11,305
1/31/2002 13,391 14,330 13,615 11,331
2/28/2002 13,553 14,505 13,762 11,376
3/31/2002 13,278 14,228 13,483 11,440
4/30/2002 13,504 14,521 13,740 11,504
5/31/2002 13,605 14,601 13,827 11,504
6/30/2002 13,706 14,764 13,966 11,510
7/31/2002 13,871 14,947 14,117 11,523
8/31/2002 14,062 15,117 14,239 11,561
9/30/2002 14,355 15,423 14,444 11,580
10/31/2002 14,112 15,174 14,276 11,599
11/30/2002 14,047 15,099 14,229 11,599
12/31/2002 14,370 15,395 14,523 11,574
1/31/2003 14,293 15,369 14,506 11,625
2/28/2003 14,488 15,581 14,669 11,715
3/31/2003 14,501 15,611 14,645 11,785
4/30/2003 14,606 15,712 14,720 11,759
5/31/2003 14,882 16,058 14,967 11,740
6/30/2003 14,750 15,981 14,925 11,753
7/31/2003 14,194 15,450 14,577 11,766
8/31/2003 14,353 15,594 14,664 11,811
9/30/2003 14,754 16,041 14,986 11,849
10/31/2003 14,660 15,934 14,911 11,836
11/30/2003 14,808 16,064 14,981 11,804
12/31/2003 14,929 16,178 15,066 11,791
1/31/2004 14,929 16,259 15,121 11,849
2/29/2004 15,196 16,514 15,306 11,913
3/31/2004 15,068 16,470 15,219 11,990
4/30/2004 14,665 16,099 14,938 12,028
5/31/2004 14,564 16,077 14,874 12,099
6/30/2004 14,627 16,140 14,915 12,137
7/31/2004 14,843 16,335 15,067 12,118
8/31/2004 15,128 16,648 15,317 12,124
9/30/2004 15,179 16,728 15,337 12,150
10/31/2004 15,285 16,860 15,419 12,214
11/30/2004 15,139 16,713 15,308 12,220
12/31/2004 15,316 16,895 15,430 12,175
1/31/2005 15,437 17,022 15,459 12,201
2/28/2005 15,364 16,956 15,398 12,271
3/31/2005 15,219 16,838 15,288 12,367
4/30/2005 15,472 17,099 15,475 12,450
5/31/2005 15,569 17,216 15,523 12,438
6/30/2005 15,666 17,309 15,607 12,444
7/31/2005 15,563 17,210 15,525 12,502
8/31/2005 15,718 17,381 15,627 12,566
9/30/2005 15,600 17,264 15,580 12,719
10/31/2005 15,467 17,155 15,512 12,745
11/30/2005 15,522 17,235 15,556 12,642
12/31/2005 15,685 17,377 15,630 12,591
1/31/2006 15,726 17,425 15,669 12,687
2/28/2006 15,826 17,525 15,696 12,713
3/31/2006 15,661 17,399 15,627 12,783
4/30/2006 15,584 17,388 15,655 12,892
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending Since Since
April 30, 2006 6 Months 1 Year 3 Years 5 Years 10 Years Inception/2/ 1 Year 3 Years 5 Years 10 Years Inception/2/
Managed Municipal Fund -
ISI Shares -2.26% -2.33% 3.53% 18.80% 55.84% 135.20% -2.33% 1.16% 3.51% 4.54% 5.43%
- ----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers General
Obligation Index/3/ 1.36% 1.69% 10.67% 28.04% 73.88% 174.70% 1.69% 3.44% 5.07% 5.69% 6.45%
- ----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Prerefunded Municipal
Bond Index/3/ 0.92% 1.17% 6.35% 21.20% 56.55% 138.90% 1.17% 2.07% 3.92% 4.58% 5.53%
- ----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index/4/ 1.15% 3.55% 9.63% 13.91% 28.92% 57.42% 3.55% 3.11% 2.64% 2.57% 2.85%
- ----------------------------------------------------------------------------------------------------------------------------
/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/
North American Government Bond Fund - ISI Class A Shares, Lehman Brothers
Intermediate Treasury Index, Lehman Brothers Emerging Americas Index: Mexico
Section/Citigroup US Broad Investment-Grade Bond Index Mexico Sector and
Consumer Price Index: Value of a $10,000 Investment (for the 10 Years ended
April 30, 2006)
[CHART]
Lehman Brothers
Emerging
Americas Index:
Mexico Section/
North American Citigroup US
Government Lehman Brothers Broad Investment- Consumer
Bond Fund - ISI Intermediate Grade Bond Index Price
Class A Shares Treasury Index Mexico Sector Index
-------------- -------------- -------------- -----
4/30/1996 $ 9,700 $10,000 $10,000 $10,000
5/31/1996 9,743 9,995 9,914 10,019
6/30/1996 9,862 10,095 10,068 10,026
7/31/1996 9,922 10,125 10,092 10,045
8/31/1996 9,945 10,138 10,446 10,064
9/30/1996 10,199 10,268 10,800 10,096
10/31/1996 10,504 10,436 10,839 10,128
11/30/1996 10,810 10,561 11,228 10,147
12/31/1996 10,614 10,503 11,330 10,147
1/31/1997 10,614 10,542 11,725 10,179
2/28/1997 10,625 10,558 11,927 10,211
3/31/1997 10,487 10,496 11,457 10,237
4/30/1997 10,627 10,613 11,746 10,250
5/31/1997 10,768 10,696 12,170 10,243
6/30/1997 10,923 10,787 12,429 10,256
7/31/1997 11,417 10,989 12,987 10,269
8/31/1997 11,234 10,945 12,875 10,288
9/30/1997 11,471 11,064 13,235 10,313
10/31/1997 11,577 11,194 12,629 10,339
11/30/1997 11,684 11,220 12,948 10,333
12/31/1997 11,886 11,312 13,218 10,320
1/31/1998 11,995 11,463 13,498 10,339
2/28/1998 11,967 11,448 13,619 10,358
3/31/1998 12,023 11,482 13,727 10,377
4/30/1998 12,078 11,537 13,765 10,397
5/31/1998 12,148 11,617 13,644 10,416
6/30/1998 12,288 11,695 13,579 10,429
7/31/1998 12,302 11,741 13,709 10,441
8/31/1998 12,515 11,973 11,553 10,454
9/30/1998 12,816 12,262 11,945 10,467
10/31/1998 12,729 12,286 12,353 10,493
11/30/1998 12,846 12,240 13,162 10,493
12/31/1998 12,889 12,287 13,124 10,486
1/31/1999 12,934 12,340 12,983 10,512
2/28/1999 12,634 12,161 13,049 10,525
3/31/1999 12,740 12,241 13,658 10,557
4/30/1999 12,846 12,276 14,085 10,633
5/31/1999 12,632 12,197 13,472 10,633
6/30/1999 12,648 12,220 13,655 10,633
7/31/1999 12,632 12,231 13,510 10,665
8/31/1999 12,617 12,256 13,650 10,691
9/30/1999 12,712 12,351 13,974 10,742
10/31/1999 12,696 12,367 14,233 10,761
11/30/1999 12,728 12,372 14,641 10,768
12/31/1999 12,680 12,338 15,024 10,768
1/31/2000 12,778 12,304 14,912 10,800
2/29/2000 13,040 12,400 15,614 10,864
3/31/2000 13,354 12,558 16,026 10,953
4/30/2000 13,287 12,549 15,807 10,960
5/31/2000 13,270 12,602 15,499 10,972
6/30/2000 13,422 12,784 16,109 11,030
7/31/2000 13,643 12,870 16,499 11,056
8/31/2000 13,866 13,004 16,913 11,056
9/30/2000 13,814 13,104 16,953 11,113
10/31/2000 13,919 13,190 16,785 11,132
11/30/2000 14,217 13,382 17,040 11,139
12/31/2000 14,465 13,604 17,292 11,132
1/31/2001 14,537 13,765 17,615 11,203
2/28/2001 14,716 13,892 17,490 11,248
3/31/2001 14,789 14,002 17,562 11,273
4/30/2001 14,679 13,946 17,666 11,318
5/31/2001 14,770 14,004 18,073 11,369
6/30/2001 14,862 14,054 18,432 11,388
7/31/2001 15,179 14,309 18,472 11,356
8/31/2001 15,405 14,433 18,848 11,356
9/30/2001 15,425 14,731 18,376 11,408
10/31/2001 15,958 14,955 19,104 11,369
11/30/2001 15,556 14,785 19,193 11,350
12/31/2001 15,458 14,714 19,453 11,305
1/31/2002 15,556 14,755 19,763 11,331
2/28/2002 15,673 14,877 20,372 11,376
3/31/2002 15,436 14,649 20,066 11,440
4/30/2002 15,655 14,911 20,525 11,504
5/31/2002 15,675 15,014 20,536 11,504
6/30/2002 15,792 15,197 20,207 11,510
7/31/2002 16,093 15,500 19,981 11,523
8/31/2002 16,518 15,662 20,823 11,561
9/30/2002 16,801 15,963 20,784 11,580
10/31/2002 16,632 15,934 21,210 11,599
11/30/2002 16,565 15,786 21,664 11,599
12/31/2002 16,829 16,079 22,247 11,574
1/31/2003 16,720 16,033 22,142 11,625
2/28/2003 16,970 16,206 22,578 11,715
3/31/2003 16,966 16,206 23,011 11,785
4/30/2003 17,262 16,238 23,816 11,759
5/31/2003 17,884 16,490 24,543 11,740
6/30/2003 17,815 16,464 24,450 11,753
7/31/2003 17,002 16,103 23,415 11,766
8/31/2003 16,997 16,126 23,682 11,811
9/30/2003 17,502 16,460 24,622 11,849
10/31/2003 17,319 16,299 24,347 11,836
11/30/2003 17,225 16,294 24,450 11,804
12/31/2003 17,403 16,418 24,785 11,791
1/31/2004 17,581 16,499 25,044 11,849
2/29/2004 17,766 16,652 25,558 11,913
3/31/2004 17,905 16,769 26,046 11,990
4/30/2004 17,229 16,390 24,855 12,028
5/31/2004 17,112 16,343 24,702 12,099
6/30/2004 17,135 16,378 24,786 12,137
7/31/2004 17,349 16,489 25,286 12,118
8/31/2004 17,682 16,731 26,149 12,124
9/30/2004 17,778 16,738 26,225 12,150
10/31/2004 17,947 16,830 26,589 12,214
11/30/2004 17,850 16,658 26,407 12,220
12/31/2004 18,118 16,750 26,864 12,175
1/31/2005 18,265 16,768 27,297 12,201
2/28/2005 18,117 16,660 27,278 12,271
3/31/2005 18,043 16,624 26,600 12,367
4/30/2005 18,341 16,827 27,026 12,450
5/31/2005 18,739 16,956 27,857 12,438
6/30/2005 19,015 17,009 28,134 12,444
7/31/2005 18,788 16,851 28,054 12,502
8/31/2005 19,142 17,045 28,533 12,566
9/30/2005 18,964 16,905 28,516 12,719
10/31/2005 18,736 16,830 28,183 12,745
11/30/2005 18,940 16,904 28,709 12,642
12/31/2005 19,247 17,011 28,983 12,591
1/31/2006 19,247 16,994 29,030 12,687
2/28/2006 19,325 16,988 29,393 12,713
3/31/2006 18,884 16,929 28,439 12,783
4/30/2006 18,779 16,937 28,312 12,892
THE PERFORMANCE OF ISI CLASS C SHARES WILL VARY BASED ON DIFFERENCES IN THE
LOADS AND FEES PAID BY SHAREHOLDERS INVESTING IN ISI CLASS C SHARES VS.
SHAREHOLDERS INVESTING IN ISI CLASS A SHARES.
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending Since Since
April 30, 2006 6 Months 1 Year 3 Years 5 Years 10 Years Inception/2/ 1 Year 3 Years 5 Years 10 Years Inception/2/
North American
Government Bond Fund -
ISI Class A Shares -2.81% -0.71% 5.49% 24.08% 87.79% 103.84% -0.71% 1.80% 4.41% 6.50% 5.51%
- ----------------------------------------------------------------------------------------------------------------------------
North American
Government Bond Fund -
ISI Class C Shares -1.07% 0.76% - - - 3.85%/3/ 0.76% - - - 1.29%/3/
- ----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate Treasury
Index/4/ 0.64% 0.66% 4.31% 21.45% 69.37% 100.21% 0.66% 1.42% 3.96% 5.41% 5.38%
- ----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Emerging
Americas Index: Mexico
Section/Citigroup US
Broad Investment-Grade
Bond Index Mexico
Sector/5/ 0.46% 4.76% 18.88% 60.26% 183.12% 269.27% 4.76% 5.93% 9.89% 10.97% 10.37%
- ----------------------------------------------------------------------------------------------------------------------------
Consumer Price Index/6/ 1.15% 3.55% 9.63% 13.91% 28.92% 41.30% 3.55% 3.11% 2.64% 2.57% 2.64%
- ----------------------------------------------------------------------------------------------------------------------------
4
NORTH AMERICAN GOVERNMENT BOND FUND - ISI CLASS A AND ISI CLASS C SHARES
PERFORMANCE COMPARISON/1/
/1/ PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The performance
information presented in the graph and table above does not reflect the
deduction of taxes that a shareholder would pay on Fund distributions or
the redemption of Fund shares. All performance assumes the reinvestment of
dividends and capital gain distributions and includes sales charges, if
applicable. ISI Class A Shares have a maximum 3.00% sales charge. ISI Class
C Shares have a maximum 1.00% contingent deferred sales charge in the first
year, which is eliminated thereafter.
/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, 2006 were 2.71% and .92%, respectively.
/4/ The Lehman Brothers Intermediate Treasury Index is an unmanaged index
reflecting the performance of US Treasury securities in the
intermediate-term Treasury sector. Benchmark returns do not reflect
expenses or sales charges that have been deducted from the Fund's returns.
/5/ Reflects the performance of the Lehman Brothers Emerging Americas Index:
Mexico Section through October 31, 2004 and the Citigroup US Broad
Investment-Grade Bond Index Mexico Sector from that date through
October 31, 2005. The Lehman Brothers Emerging Americas Index: Mexico
Section has been discontinued. Lehman Brothers Emerging Americas Index:
Mexico Section was an unmanaged sub-index of the Lehman Brothers Emerging
Americas Index reflecting the performance of selected Mexican debt
instruments with maturities of one year or more. The Citigroup US Broad
Investment-Grade Bond Index Mexico Sector is an unmanaged sub-index of the
Citigroup US Broad Investment-Grade Bond Index reflecting the performance
of selected Mexican debt instruments with maturities of one year or more.
Benchmark returns do not reflect expenses or sales charges that have been
deducted from the Fund's returns.
/6/ The Consumer Price Index is a widely used measure of inflation.
5
ISI STRATEGY FUND - ISI SHARES PERFORMANCE COMPARISON/1/
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/)
[CHART]
Dow Jones
Wilshire 5000 Consumer Lipper Flexible
ISI Strategy Fund - (Full Cap Price Portfolio Funds
ISI Shares Index) 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 9,667 10,025 9,756
11/30/1997 9,767 9,983 10,019 9,907
12/31/1997 9,933 10,168 10,006 10,040
1/31/1998 10,020 10,223 10,025 10,092
2/28/1998 10,459 10,967 10,043 10,541
3/31/1998 10,810 11,516 10,062 10,891
4/30/1998 10,878 11,653 10,081 10,980
5/31/1998 10,761 11,343 10,099 10,850
6/30/1998 11,044 11,741 10,112 11,036
7/31/1998 10,887 11,483 10,124 10,896
8/31/1998 9,992 9,695 10,137 9,824
9/30/1998 10,483 10,328 10,149 10,200
10/31/1998 10,888 11,097 10,174 10,595
11/30/1998 11,337 11,796 10,174 10,994
12/31/1998 11,776 12,550 10,168 11,385
1/31/1999 12,079 13,012 10,192 11,616
2/28/1999 11,634 12,540 10,205 11,261
3/31/1999 11,937 13,024 10,236 11,580
4/30/1999 12,301 13,648 10,310 11,978
5/31/1999 12,068 13,350 10,310 11,770
6/30/1999 12,443 14,041 10,310 12,164
7/31/1999 12,148 13,590 10,341 11,973
8/31/1999 12,046 13,464 10,366 11,911
9/30/1999 11,863 13,112 10,416 11,781
10/31/1999 12,282 13,946 10,434 12,135
11/30/1999 12,496 14,413 10,440 12,442
12/31/1999 12,953 15,507 10,440 13,109
1/31/2000 12,649 14,864 10,472 12,846
2/29/2000 12,869 15,196 10,534 13,206
3/31/2000 13,498 16,099 10,620 13,749
4/30/2000 13,056 15,260 10,627 13,415
5/31/2000 12,804 14,727 10,639 13,253
6/30/2000 13,183 15,377 10,695 13,529
7/31/2000 13,098 15,063 10,720 13,425
8/31/2000 13,734 16,157 10,720 14,057
9/30/2000 13,289 15,403 10,775 13,728
10/31/2000 13,205 15,076 10,794 13,660
11/30/2000 12,491 13,576 10,800 13,125
12/31/2000 12,735 13,818 10,794 13,477
1/31/2001 13,063 14,347 10,862 13,680
2/28/2001 12,340 12,986 10,906 13,045
3/31/2001 11,865 12,112 10,931 12,517
4/30/2001 12,299 13,109 10,974 13,061
5/31/2001 12,379 13,239 11,024 13,189
6/30/2001 12,254 13,018 11,042 12,956
7/31/2001 12,259 12,803 11,011 12,946
8/31/2001 11,814 12,028 11,011 12,565
9/30/2001 11,107 10,947 11,061 11,911
10/31/2001 11,416 11,226 11,024 12,108
11/30/2001 11,874 12,084 11,005 12,540
12/31/2001 12,006 12,301 10,962 12,644
1/31/2002 11,903 12,149 10,986 12,513
2/28/2002 11,765 11,899 11,030 12,400
3/31/2002 12,087 12,420 11,092 12,708
4/30/2002 11,814 11,813 11,154 12,458
5/31/2002 11,768 11,674 11,154 12,415
6/30/2002 11,193 10,854 11,160 11,779
7/31/2002 10,618 9,978 11,173 11,138
8/31/2002 10,745 10,036 11,210 11,247
9/30/2002 10,041 9,029 11,228 10,544
10/31/2002 10,515 9,720 11,247 10,955
11/30/2002 10,885 10,306 11,247 11,375
12/31/2002 10,500 9,735 11,222 11,088
1/31/2003 10,291 9,490 11,272 10,944
2/28/2003 10,221 9,329 11,359 10,836
3/31/2003 10,326 9,435 11,427 10,857
4/30/2003 10,932 10,208 11,402 11,457
5/31/2003 11,479 10,832 11,383 12,054
6/30/2003 11,569 10,992 11,396 12,184
7/31/2003 11,592 11,257 11,408 12,270
8/31/2003 11,849 11,527 11,452 12,527
9/30/2003 11,779 11,400 11,489 12,557
10/31/2003 12,246 12,096 11,476 13,053
11/30/2003 12,363 12,265 11,445 13,249
12/31/2003 12,722 12,816 11,433 13,755
1/31/2004 12,956 13,101 11,489 13,976
2/29/2004 13,120 13,292 11,551 14,190
3/31/2004 13,046 13,149 11,625 14,162
4/30/2004 12,788 12,870 11,663 13,825
5/31/2004 12,847 13,047 11,731 13,906
6/30/2004 13,045 13,319 11,768 14,158
7/31/2004 12,752 12,811 11,749 13,790
8/31/2004 12,881 12,853 11,756 13,885
9/30/2004 13,084 13,082 11,780 14,148
10/31/2004 13,190 13,305 11,842 14,315
11/30/2004 13,531 13,928 11,849 14,888
12/31/2004 13,862 14,434 11,805 15,330
1/31/2005 13,602 14,049 11,830 15,101
2/28/2005 13,862 14,342 11,898 15,424
3/31/2005 13,705 14,089 11,991 15,173
4/30/2005 13,480 13,771 12,072 14,868
5/31/2005 13,895 14,308 12,060 15,270
6/30/2005 14,057 14,437 12,066 15,469
7/31/2005 14,426 15,041 12,122 15,960
8/31/2005 14,557 14,894 12,184 15,978
9/30/2005 14,694 14,999 12,333 16,227
10/31/2005 14,455 14,738 12,357 15,900
11/30/2005 14,873 15,331 12,258 16,290
12/31/2005 14,961 15,346 12,208 16,482
1/31/2006 15,451 15,895 12,301 17,133
2/28/2006 15,415 15,887 12,326 17,066
3/31/2006 15,648 16,195 12,395 17,361
4/30/2006 15,648 16,367 12,500 17,658
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending Since Since
October 31, 2005 6 Months 1 Year 3 Years 5 Years Inception/2/ 1 Year 3 Years 5 Years Inception/2/
ISI Strategy Fund - ISI
Shares 5.05% 12.62% 38.85% 23.46% 56.48% 12.62% 11.56% 4.31% 5.33%
- -------------------------------------------------------------------------------------------------------------
Dow Jones Wilshire 5000
(Full Cap) Index/3/ 11.05% 18.85% 60.32% 24.85% 63.67% 18.85% 17.04% 4.54% 5.91%
- -------------------------------------------------------------------------------------------------------------
Consumer Price Index/4/ 1.15% 3.55% 9.63% 13.91% 25.00% 3.55% 3.11% 2.64% 2.63%
- -------------------------------------------------------------------------------------------------------------
Lipper Flexible
Portfolio Funds
Average/5/ 9.44% 16.63% 49.24% 33.47% 76.58% 16.63% 14.06% 5.56% 6.47%
- -------------------------------------------------------------------------------------------------------------
/1/ PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The performance
information presented in the graph and table above does not reflect the
deduction of taxes that a shareholder would pay on Fund distributions or
the redemption of Fund shares. All performance assumes the reinvestment of
dividends and capital gain distributions and includes the Fund's maximum
3.00% sales charge. Performance would have been lower during the specified
period if certain of the Fund's fees and expenses had not been waived.
/2/ The Fund's inception date is September 16, 1997. Benchmark returns are for
the periods beginning September 30, 1997.
/3/ The Dow Jones Wilshire 5000 (Full Cap) Index is an unmanaged index that
represents the broadest measure of the US equity market. Benchmark returns
do not reflect expenses or sales charges that have been deducted from the
Fund's returns.
/4/ The Consumer Price Index is a widely used measure of inflation.
/5/ Lipper figures represent the average total returns by all the mutual funds
designated by Lipper, Inc. as falling into the category indicated. The
Lipper Flexible Portfolio Funds category includes funds that allocate their
investments across various asset classes, including domestic common stocks,
bonds and money market instruments with a focus on total return. Benchmark
returns do not reflect expenses or sales charges that have been deducted
from the Fund's returns.
6
SHAREHOLDER EXPENSE EXAMPLE
As a shareholder of a Fund, you incur two types of costs: (1) transaction
costs for certain share classes, including sales charges (loads) on purchase
payments or other distributions; and (2) ongoing costs, including management
fees, Rule 12b-1 distribution/shareholder service fees for certain share
classes and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in a Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The following example is based on $1,000 invested on November 1, 2005 and
held for the six months through April 30, 2006.
ACTUAL EXPENSES - The "Actual Return" rows in the following table provide
information about actual account values and actual expenses. You may use the
information, together with the amount you invested, to estimate the expenses
that you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the "Expenses Paid During Period" column to estimate
the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES - The "Hypothetical Return"
rows in the following table provide information about hypothetical account
values and hypothetical expenses based on each Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
actual return of each Fund. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing cost of
investing in a Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of other funds.
Expenses shown in the table are meant to highlight your ongoing costs only
and do not reflect any transactional costs, such as sales charges (loads).
Therefore, the "Hypothetical Return" rows in the table are useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. If these transactional costs were included, your costs
would have been higher.
7
SHAREHOLDER EXPENSE EXAMPLE
BEGINNING ENDING EXPENSES PAID ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE DURING EXPENSE
NOVEMBER 1, 2005 APRIL 30, 2006 PERIOD/(1)/ RATIO
- --------------------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND
Actual Return $1,000.00 $ 990.46 $3.65 0.74%
Hypothetical Return $1,000.00 $1,021.12 $3.71 0.74%
MANAGED MUNICIPAL FUND
Actual Return $1,000.00 $1,007.58 $4.43 0.89%
Hypothetical Return $1,000.00 $1,020.38 $4.46 0.89%
NORTH AMERICAN GOVERNMENT BOND FUND
ISI CLASS A SHARES
Actual Return $1,000.00 $1,002.36 $5.21 1.05%
Hypothetical Return $1,000.00 $1,019.59 $5.26 1.05%
NORTH AMERICAN GOVERNMENT BOND FUND
ISI CLASS C SHARES
Actual Return $1,000.00 $ 999.11 $8.43 1.70%
Hypothetical Return $1,000.00 $1,016.36 $8.50 1.70%
ISI STRATEGY FUND
Actual Return $1,000.00 $1,082.51 $4.85 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.
8
ISI FUNDS
PORTFOLIO PROFILES (AS A % OF TOTAL NET ASSETS) (UNAUDITED) APRIL 30, 2006
TOTAL RETURN US TREASURY FUND
US Treasury Obligations 93.10%
Repurchase Agreements 5.71%
Other Assets and Liabilities 1.19%
-------
100.00%
MANAGED MUNICIPAL FUND
Aaa* 71.41%
Aa* 26.90%
Repurchase Agreements 0.84%
Other Assets and Liabilities 0.85%
-------
100.00%
*Ratings are based on Moody's Investor Services, Inc.
NORTH AMERICAN GOVERNMENT BOND FUND
Canadian Securities 11.82%
Mexican Securities 8.88%
US Treasury Securities 67.17%
Repurchase Agreements 11.63%
Other Assets and Liabilities 0.50%
-------
100.00%
ISI STRATEGY FUND
Basic Materials 2.73%
Biotechnology 1.58%
Business Services 3.56%
Capital Goods 9.12%
Consumer Cyclicals 1.08%
Consumer Staples 6.88%
Energy 6.57%
Finance 19.14%
Health Care 6.01%
Information Services 2.07%
Internet 3.76%
Retail 2.78%
Technology 6.46%
Transportation 3.93%
Utilities 1.12%
US Treasury Securities 19.47%
Repurchase Agreements 3.47%
Other Assets and Liabilities 0.27%
-------
100.00%
9
TOTAL RETURN US TREASURY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
INTEREST MATURITY PAR MARKET
SECURITY RATE DATE VALUE VALUE
---------------------------------------------------------------------------------------------------
US TREASURY OBLIGATIONS - 93.10%
US Treasury Bond 10.375% 11/15/12 $14,250,000 $ 15,392,227
US Treasury Bond 7.625% 2/15/25 11,500,000 14,633,750
US Treasury Bond 6.000% 2/15/26 11,500,000 12,459,531
US Treasury Bond 6.375% 8/15/27 28,000,000 31,758,125
US Treasury Note 2.750% 6/30/06 4,000,000 3,986,875
US Treasury Note 3.125% 1/31/07 4,000,000 3,946,250
US Treasury Note 3.000% 2/15/08 15,000,000 14,521,875
US Treasury Note 5.500% 5/15/09 25,000,000 25,449,219
US Treasury Note 4.125% 8/15/10 6,000,000 5,820,938
US Treasury Note 4.125% 5/15/15 10,000,000 9,335,937
------------
TOTAL US TREASURY OBLIGATIONS
(COST $146,834,181)....................................................... 137,304,727
------------
REPURCHASE AGREEMENT - 5.71%
JPMORGAN CHASE BANK, N.A.
Dated 4/28/06, 4.150%, principal and interest in the amount of $8,428,914
due 5/1/06, collaterized by US Treasury Securities, par value of $8,580,000,
due 4/15/11 with a value of $8,598,790.................................... 8,426,000
------------
TOTAL REPURCHASE AGREEMENT
(COST $8,426,000)......................................................... 8,426,000
------------
TOTAL INVESTMENTS - 98.81%
(COST $155,260,181)*........................................................... 145,730,727
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.19%......................................... 1,759,971
------------
NET ASSETS - 100.00%.................................................................. $147,490,698
============
- --------------------------------------------------------------------------------
*Cost for Federal income tax purposes is substantially the same as for
financial statement purposes and the net unrealized appreciation
(depreciation) on a tax basis consists of:
Gross Unrealized Appreciation............. $ 72,229
Gross Unrealized Depreciation............. (9,601,683)
-----------
Net Unrealized Appreciation (Depreciation) $(9,529,454)
===========
See Notes to Financial Statements.
10
MANAGED MUNICIPAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
RATING
INTEREST MATURITY (MOODY'S/ PAR MARKET
SECURITY RATE DATE S&P) VALUE VALUE
- --------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 98.31%
GENERAL OBLIGATIONS - 60.88%
Alexandria, VA, Capital Improvement................. 4.250% 6/15/21 Aaa/AAA $3,300,000 $ 3,243,801
Arlington County, VA................................ 5.000% 10/1/14 Aaa/AAA 2,000,000 2,075,180
Arlington County, VA................................ 4.500% 1/15/28 Aaa/AAA 4,500,000 4,459,680
Cary, NC............................................ 5.000% 3/1/18 Aaa/AAA 2,000,000 2,100,680
Chesterfield County, VA............................. 5.000% 1/15/20 Aaa/NR 1,000,000 1,039,250
Dallas, TX.......................................... 4.000% 2/15/16 Aa1/AA+ 2,450,000 2,405,631
Dallas, TX.......................................... 4.500% 2/15/23 Aa1/AA+ 3,500,000 3,473,295
Delaware State, Series A............................ 4.200% 1/1/20 Aaa/AAA 1,675,000 1,648,368
Dupage County, IL, Jail Project..................... 5.600% 1/1/21 Aaa/AAA 1,600,000 1,763,680
Florida State, Board of Education, Public Education,
Series I.......................................... 4.125% 6/1/21 Aa1/AAA 3,000,000 2,882,400
Henrico County, VA.................................. 4.250% 7/15/24 Aaa/AAA 2,830,000 2,715,979
Maryland State, Capital Improvement, Series A....... 4.000% 2/15/20 Aaa/AAA 4,000,000 3,830,840
Mecklenburg County, NC, Series A.................... 4.250% 2/1/19 Aaa/AAA 2,000,000 1,985,300
Mecklenburg County, NC, Series A.................... 4.000% 2/1/20 Aaa/AAA 3,000,000 2,881,470
Minnesota State..................................... 5.500% 6/1/18 Aa1/AAA 2,000,000 2,121,180
Missouri State, Fourth State Building, Series A..... 4.125% 10/1/19 Aaa/AAA 2,000,000 1,957,540
Montgomery County, MD, Series A..................... 4.000% 5/1/21 Aaa/AAA 2,450,000 2,336,933
Salt Lake City, UT, School District, Series A....... 4.500% 3/1/20 Aaa/NR 2,240,000 2,251,021
South Carolina State, Highway, Series B............. 5.000% 4/1/19 Aaa/AA+ 1,000,000 1,043,890
Virginia State, Series A............................ 4.500% 6/1/27 Aaa/AAA 1,550,000 1,528,129
Washington, MD, Suburban Sanitation District........ 4.250% 6/1/26 Aaa/AAA 2,500,000 2,369,625
Washington State, Series E.......................... 5.000% 7/1/22 Aa1/AA 2,000,000 2,022,160
------------
52,136,032
------------
OTHER REVENUE - 5.92%
Gwinnett County, GA, Water & Sewer Authority,
Series B.......................................... 4.750% 8/1/21 Aaa/AAA 2,000,000 2,044,840
Texas, Water Development Board Revenue.............. 4.750% 7/15/20 Aaa/AAA 3,000,000 3,022,680
------------
5,067,520
------------
See Notes to Financial Statements.
11
MANAGED MUNICIPAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
RATING
INTEREST MATURITY (MOODY'S/ PAR MARKET
SECURITY RATE DATE S&P) VALUE VALUE
- -------------------------------------------------------------------------------------------------------
PREREFUNDED ISSUES - 31.51%
Charlotte, NC, Water & Sewer System Revenue,
6/1/09 @ 101...................................... 5.250% 6/1/24 Aa1/AAA $1,600,000 $ 1,684,992
Chesterfield Country, VA, 1/15/10 @ 100............. 5.625% 1/15/14 Aaa/AAA 1,350,000 1,438,601
Florida State, Board of Education, Public Education
Capital Outlay, Series A, 6/1/10 @ 101............ 5.125% 6/1/21 Aaa/AAA 1,000,000 1,060,580
Georgia State, Series D, 10/1/10 @ 100.............. 5.000% 10/1/17 Aaa/AAA 1,460,000 1,535,248
Georgia State, Series D, Unrefunded Balance,
10/1/10 @ 100..................................... 5.000% 10/1/17 Aaa/AAA 390,000 410,101
Guilford County, NC, Series B, 10/1/10 @ 102........ 5.250% 10/1/16 Aa1/AAA 3,000,000 3,235,920
Gwinnett County, GA, Water & Sewer Authority,
8/1/09 @ 101...................................... 5.300% 8/1/20 Aaa/AAA 1,250,000 1,321,287
Gwinnett County, GA, Water & Sewer Authority,
8/1/12 @ 100...................................... 5.250% 8/1/24 Aaa/AAA 1,500,000 1,614,165
Missouri State, Fourth State Building, Series A,
6/1/08 @ 100...................................... 5.000% 6/1/23 Aaa/AAA 2,000,000 2,053,220
Montgomery County, MD, Series A, 2/1/12 @ 101....... 5.000% 2/1/22 Aaa/AAA 2,750,000 2,939,447
North Carolina State, Public School Building,
4/1/09 @ 102...................................... 4.600% 4/1/17 Aa1/AAA 5,000,000 5,214,100
South Carolina State, Highway, Series B,
7/1/06 @ 102...................................... 5.650% 7/1/21 Aaa/AA+ 1,260,000 1,289,282
South Carolina State, State Institutional, Series A,
3/1/10 @ 101...................................... 5.300% 3/1/17 Aaa/AA+ 1,700,000 1,810,313
Virginia State, 6/1/09 @ 100........................ 5.250% 6/1/16 Aaa/AAA 1,320,000 1,379,915
-----------
26,987,171
-----------
TOTAL MUNICIPAL BONDS
(COST $82,266,865)............................................................. 84,190,723
-----------
See Notes to Financial Statements.
12
MANAGED MUNICIPAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
MARKET
SECURITY VALUE
-------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 0.84%
JPMORGAN CHASE BANK, N.A.
Dated 4/28/06, 4.150%, principal and interest in the amount of $717,248
due 5/1/06, collateralized by US Treasury Security, par value of $730,000,
due 4/15/11 with a value of $731,599.................................... $ 717,000
------------
TOTAL REPURCHASE AGREEMENT
(COST $717,000)......................................................... 717,000
------------
TOTAL INVESTMENTS - 99.15%
(COST $82,983,865)*.......................................................... 84,907,723
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.85%....................................... 727,447
------------
NET ASSETS - 100.00%................................................................ $ 85,635,170
============
- --------------------------------------------------------------------------------
/1/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) on a tax basis consists of:
Gross Unrealized Appreciation............. $2,678,560
Gross Unrealized Depreciation............. (754,702)
----------
Net Unrealized Appreciation (Depreciation) $1,923,858
==========
See Notes to Financial Statements.
13
NORTH AMERICAN GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
INTEREST MATURITY PAR/NOMINAL MARKET
SECURITY RATE DATE VALUE/1/ VALUE
------------------------------------------------------------------------
CANADIAN SECURITIES - 11.82%
Canadian Government Bond 4.500% 6/1/15 C23,800,000 $ 21,343,364
-------------
TOTAL CANADIAN SECURITIES
(COST $20,964,780)............................ 21,343,364
-------------
MEXICAN SECURITIES - 8.88%
Mexican Bono/2/ 9.000% 12/22/11 P80,322,900 7,487,369
Mexican Cetes/3/ 9.175%/4/ 7/6/06 95,970,000 8,554,196
-------------
TOTAL MEXICAN SECURITIES
(COST $16,341,107)............................ 16,041,565
-------------
US SECURITIES - 67.17%
US Treasury Bond 7.625% 2/15/25 $10,100,000 12,852,250
US Treasury Bond 6.000% 2/15/26 11,500,000 12,459,531
US Treasury Bond 6.375% 8/15/27 22,100,000 25,066,235
US Treasury Note 3.125% 1/31/07 2,000,000 1,973,125
US Treasury Note 3.000% 2/15/08 16,100,000 15,586,813
US Treasury Note 3.250% 8/15/08 5,500,000 5,309,219
US Treasury Note 3.125% 9/15/08 2,000,000 1,922,500
US Treasury Note 5.000% 2/15/11 19,500,000 19,588,359
US Treasury Note 5.000% 8/15/11 6,500,000 6,527,422
US Treasury Note 4.250% 8/15/13 9,750,000 9,303,633
US Treasury Note 4.125% 5/15/15 11,500,000 10,736,328
-------------
TOTAL US SECURITIES
(COST $131,330,933)........................... 121,325,415
-------------
See Notes to Financial Statements.
14
NORTH AMERICAN GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
MARKET
SECURITY VALUE
--------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 11.63%
JPMORGAN CHASE BANK, N.A.
Dated 4/28/06, 4.150%, principal and interest in the amount of $21,007,263
due 5/1/06, collaterized by US Treasury Security, par value of $21,375,000,
due 4/15/11 with a value of $21,421,811.................................. $ 21,000,000
------------
TOTAL REPURCHASE AGREEMENT
(COST $21,000,000)....................................................... 21,000,000
------------
TOTAL INVESTMENTS - 99.50%
(COST $189,636,820)*.......................................................... 179,710,344
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.50%........................................ 910,439
------------
NET ASSETS - 100.00%................................................................. $180,620,783
============
- --------------------------------------------------------------------------------
/1/Par Value is shown in local currency: Canadian dollars (C), Mexican pesos
(P) and US dollars ($).
/2/Bonos are fixed rate, local currency-denominated coupon bonds issued by the
Mexican government.
/3/Cetes are short-term zero-coupon Mexican government debt securities.
/4/Yield as of April 30, 2006.
*Cost for Federal income tax purposes is substantially the same as for
financial statement purposes and the net unrealized appreciation
(depreciation) on a tax basis consists of:
Gross Unrealized Appreciation............. $ -
Gross Unrealized Depreciation............. (9,926,476)
-----------
Net Unrealized Appreciation (Depreciation) (9,926,476)
===========
See Notes to Financial Statements.
15
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
MARKET
SECURITY SHARES VALUE
------------------------------------------------------------
COMMON STOCK - 76.79%
BASIC MATERIALS - 2.73%
Bowater, Inc. 5,100 $ 139,077
Corn Products International, Inc. 4,200 117,600
Crown Holdings, Inc.+ 3,000 48,090
FMC Corp. 2,100 133,476
Hercules, Inc.+ 2,900 41,209
International Flavors & Fragrances, Inc. 11,500 406,295
Nucor Corp. 2,400 261,168
OfficeMax, Inc.+ 7,600 294,120
Owens-Illinois, Inc.+ 4,500 82,260
PolyOne Corp.+ 8,800 78,144
Temple-Inland, Inc. 200 9,288
Wausau Paper Corp. 12,400 178,312
Weyerhaeuser Co. 350 24,664
Worthington Industries 1,500 29,625
------------
1,843,328
------------
BIOTECHNOLOGY - 1.58%
Abraxis BioScience, Inc.+ 238 7,435
Albany Molecular Research, Inc.+ 1,100 11,000
Amgen, Inc.+ 1,300 88,010
Biogen Idec, Inc.+ 1,000 44,850
Caremark Rx, Inc. 6,431 292,932
Genentech, Inc.+ 1,800 143,478
Genzyme Corp.+ 5,000 305,800
Onyx Pharmaceuticals, Inc.+ 100 2,335
Serologicals Corp.+ 5,100 158,712
Zymogenetics, Inc.+ 500 10,235
------------
1,064,787
------------
BUSINESS SERVICES - 3.56%
Alderwoods Group, Inc.+ 4,004 76,316
Allied Waste Industries, Inc.+ 5,600 79,296
Cendant Corp. 5,190 90,462
CheckFree Corp.+ 5,000 269,350
Computer Sciences Corp.+ 5,000 292,750
Expedia, Inc.+ 2,543 47,427
First Data Corp. 5,000 238,450
Getty Images, Inc.+ 1,000 64,010
IMS Health, Inc. 5,000 135,900
Interpublic Group of Cos., Inc.+ 1,900 18,202
Laidlaw International, Inc. 5,000 123,750
Landauer, Inc. 700 34,440
Regis Corp. 4,211 147,680
Rent-A-Center, Inc.+ 6,000 165,720
MARKET
SECURITY SHARES VALUE
ServiceMaster Co. 1,100 $ 13,244
United Rentals, Inc.+ 10,023 357,520
VCA Antech, Inc.+ 5,400 167,886
Waste Management, Inc. 2,026 75,894
Weight Watchers International, Inc.+ 160 7,896
------------
2,406,193
------------
CAPITAL GOODS - 9.12%
3M Co. 2,400 205,032
AGCO Corp.+ 5,800 137,286
American Standard Cos., Inc. 2,900 126,237
Applied Films Corp.+ 2,000 43,840
Benchmark Electronics, Inc.+ 1,900 51,870
Boeing Co. 2,730 227,819
Caterpillar, Inc. 3,220 243,883
C & D Technologies, Inc. 2,800 22,568
Clarcor, Inc. 200 7,000
Cree, Inc.+ 5,000 149,100
CTS Corp. 6,700 94,537
DHB Industries, Inc.+ 9,000 34,290
Deere & Co. 200 17,556
Dycom Industries, Inc.+ 1,500 32,865
Emerson Electric Co. 2,460 208,977
General Electric Co. 20,614 713,038
Goodrich Corp. 1,100 48,950
Griffon Corp.+ 1,500 40,005
Harsco Corp. 97 8,085
Honeywell International, Inc. 3,500 148,750
Illinois Tool Works, Inc. 2,690 276,263
Ingersoll-Rand Co., Ltd. - Class A 2,900 126,875
Johnson Controls, Inc. 3,120 254,436
Kennametal, Inc. 1,600 98,960
Littelfuse, Inc.+ 2,400 77,496
Manitowoc Co. 10,000 495,900
Mueller Industries, Inc. 1,000 37,880
Navistar International Corp.+ 3,900 102,882
Orbital Sciences Corp.+ 8,300 129,895
Pall Corp. 1,200 36,216
Pitney Bowes, Inc. 4,329 181,169
Raytheon Co. 200 8,854
Reliance Steel & Aluminum Co. 2,000 177,900
RTI International Metals, Inc.+ 2,000 120,280
Schnitzer Steel Industries, Inc. 2,800 110,124
Solectron Corp.+ 4,100 16,400
Spectrum Brands, Inc.+ 2,400 39,720
Symbol Technologies, Inc. 1,800 19,170
See Notes to Financial Statements.
16
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
MARKET
SECURITY SHARES VALUE
------------------------------------------------------
COMMON STOCK
CAPITAL GOODS (CONTINUED)
Terex Corp.+ 2,700 $ 233,685
Textron, Inc. 4,800 431,760
Titanium Metals Corp.+ 4,600 329,590
Tredegar Corp. 5,500 88,330
United Stationers, Inc.+ 600 32,190
URS Corp.+ 1,430 61,590
Vishay Intertechnology, Inc.+ 5,000 77,850
Wabash National Corp. 2,000 36,200
------------
6,163,303
------------
CONSUMER CYCLICALS - 1.08%
Brunswick Corp. 271 10,629
Centex Corp. 400 22,240
D.R. Horton, Inc. 1,166 35,003
Ford Motor Co. 10,800 75,060
General Motors Corp. 2,545 58,230
Genuine Parts Co. 1,450 63,292
Goodyear Tire & Rubber Co.+ 1,400 19,600
Harley-Davidson, Inc. 300 15,252
Lear Corp.+ 1,600 37,728
Live Nation, Inc.+ 10 190
Liz Claiborne, Inc. 1,600 62,480
McGraw-Hill Cos., Inc. 600 33,396
Meredith Corp. 100 4,960
News Corp. Ltd. - Class A 10,404 178,533
Scholastic Corp.+ 600 15,924
Scripps (E.W.) Co. - Class A 100 4,608
Viacom, Inc. - Class B+ 933 37,161
Whirlpool Corp. 600 53,850
------------
728,136
------------
CONSUMER STAPLES - 6.88%
Altria Group, Inc. 2,171 158,830
American Tower Corp. - Class A+ 3,321 113,379
AmerisourceBergen Corp. 10,000 431,500
Anheuser-Busch Cos., Inc. 3,202 142,745
Aramark Corp. - Class B 5,637 158,456
Brinker International, Inc. 5,000 195,800
Bunge Ltd. 4,276 228,125
Cardinal Health, Inc. 5,815 391,640
CBS Corp., Class B 933 23,763
Clear Channel Communications, Inc. 85 2,425
Coca-Cola Co. 5,612 235,480
ConAgra Foods, Inc. 469 10,637
MARKET
SECURITY SHARES VALUE
Dean Foods Co.+ 5,000 $ 198,050
Eastman Kodak Co. 5,570 150,167
EchoStar Communications
Corp. - Class A+ 5,000 154,500
Entercom Communications Corp. 260 6,882
Fortune Brands, Inc. 38 3,051
IAC/InterActiveCorp.+ 2,543 73,416
Kimberly-Clark Corp. 2,514 147,144
Liberty Global, Inc. - Class A+ 6,533 135,298
Liberty Media Corp. - Class A+ 7,580 63,293
McDonald's Corp. 10,000 345,700
McKesson Corp. 4,700 228,373
PepsiCo, Inc. 2,711 157,889
Procter & Gamble Co. 7,644 444,957
Reynolds American, Inc. 100 10,965
Sara Lee Corp. 300 5,361
Sirius Satellite Radio, Inc.+ 1,900 8,892
SUPERVALU, Inc. 5,000 145,050
Time Warner, Inc. 11,036 192,026
TreeHouse Foods, Inc.+ 1,000 26,200
Univision Communications,
Inc. - Class A+ 1,402 50,037
Yum! Brands, Inc. 180 9,302
------------
4,649,333
------------
ENERGY - 6.57%
Chesapeake Energy Corp. 5,200 164,736
Chevron Corp. 11,128 679,031
ConocoPhillips 8,650 578,685
Denbury Resources, Inc.+ 4,000 130,400
Devon Energy Corp. 4,624 277,949
Exxon Mobil Corp. 20,363 1,284,498
Forest Oil Corp.+ 3,500 127,995
Global Power Equipment Group, Inc.+ 2,200 9,460
Hugoton Royalty Trust 131 3,625
Lone Star Technologies+ 300 15,903
Marathon Oil Corp. 4,500 357,120
Mariner Energy, Inc.+ 2,832 55,082
PetroHawk Energy Corp.+ 300 3,774
Sunoco, Inc. 3,026 245,227
Valero Energy Corp. 6,150 398,151
Veritas DGC, Inc.+ 300 14,376
XTO Energy, Inc 2,200 93,170
------------
4,439,182
------------
See Notes to Financial Statements.
17
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
MARKET
SECURITY SHARES VALUE
------------------------------------------------------
COMMON STOCK
FINANCE - 19.14%
Affiliated Managers Group, Inc.+ 2,600 $ 263,380
AMBAC Financial Group, Inc. 250 20,590
American Equity Investment Life
Holding Co. 1,261 17,099
American Express Co. 1,825 98,203
American Home Mortgage
Investment Corp. 3,800 131,936
American International Group, Inc. 10,500 685,125
AmeriCredit Corp.+ 5,000 151,400
Ameriprise Financial, Inc. 365 17,900
Anworth Mortgage Asset Corp. 14,967 120,784
Arthur J. Gallagher & Co. 200 5,488
Associated Banc Corp. 181 6,121
Assurant, Inc. 2,100 101,157
Bank of America Corp. 4,722 235,722
Bank of New York Co., Inc. 670 23,551
BB&T Corp. 6,391 274,430
Bear Stearns Cos., Inc. 220 31,352
BlackRock, Inc., Class A 2,600 394,004
Boston Properties, Inc. 5,100 450,177
Brown & Brown, Inc. 2,300 71,829
Capital One Financial Corp. 150 12,996
Charles Schwab Corp. 14,100 252,390
Chicago Mercantile Exchange
Holdings, Inc. 800 366,400
Citigroup, Inc. 12,702 634,465
City National Corp. 100 7,296
Colonial BancGroup, Inc. 5,000 129,650
Comerica, Inc. 250 14,218
Commerce Bancorp, Inc. 4,540 183,144
Commerce Bancshares, Inc. 144 7,524
Compass Bancshares, Inc. 5,000 274,800
Conseco, Inc.+ 1,700 42,925
Eaton Vance Corp. 3,700 105,339
Equity Office Properties Trust 344 11,111
Equity Residential 200 8,974
Fannie Mae 2,652 134,191
Federated Investors, Inc., Class B 1,000 35,100
Fidelity National Financial, Inc. 520 21,830
Fidelity National Title Group,
Inc. - Class A 91 1,971
First American Corp. 2,500 106,500
First Horizon National Corp. 100 4,242
MARKET
SECURITY SHARES VALUE
Franklin Resources, Inc. 1,300 $ 121,056
Genworth Financial, Inc. 7,200 239,040
Golden West Financial Corp. 2,600 186,862
Goldman Sachs Group, Inc. 5,000 801,450
Health Care Property Investors, Inc. 200 5,484
Host Hotels & Resorts, Inc. 5,200 109,304
Irwin Financial Corp. 3,645 66,922
iStar Financial, Inc. 100 3,826
JPMorgan Chase & Co. 3,580 162,460
Kimco Realty Corp. 6,900 256,197
Legg Mason, Inc. 2,300 272,504
Lehman Brothers Holdings, Inc. 5,400 816,210
Liberty Property Trust 100 4,470
Loews Corp. - Carolina Group 3,500 179,340
M & T Bank Corp. 2,512 299,933
MBIA, Inc. 150 8,945
Mellon Financial Corp. 210 7,902
Mercantile Bankshares Corp. 150 5,637
Merrill Lynch & Co., Inc. 6,120 466,711
Moody's Corp. 6,974 432,458
Morgan Stanley 2,481 159,528
National City Corp. 2,700 99,630
North Fork Bancorp., Inc. 579 17,445
Northern Trust Corp. 300 17,667
Old Republic International Corp. 187 4,161
PMI Group, Inc. 2,900 133,835
PNC Financial Services Group, Inc. 460 32,876
Progressive Corp. 1,600 173,648
ProLogis 5,000 251,100
Public Storage, Inc. 186 14,300
Radian Group, Inc. 200 12,544
Regions Financial Corp. 546 19,934
SEI Investments Co. 3,200 137,408
Simon Property Group, Inc. 100 8,188
SLM Corp. 1,250 66,100
South Financial Group, Inc. 5,000 135,650
St. Paul Travelers Cos., Inc. 100 4,403
State Street Corp. 300 19,596
Stewart Information Services Corp. 1,469 63,461
Student Loan Corp. 810 168,683
SunTrust Banks, Inc. 2,602 201,213
T. Rowe Price Group, Inc. 100 8,419
TCF Financial Corp. 200 5,372
TD Banknorth, Inc. 7,400 219,706
Torchmark Corp. 200 12,022
See Notes to Financial Statements.
18
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
MARKET
SECURITY SHARES VALUE
-------------------------------------------------
COMMON STOCK
FINANCE (CONTINUED)
UCBH Holdings, Inc. 2,500 $ 44,225
UnionBanCal Corp. 200 14,018
UnumProvident Corp. 23,038 467,902
US Bancorp 2,473 77,751
Valley National Bancorp 477 12,421
Wachovia Corp. 1,867 111,740
Washington Mutual, Inc. 3,284 147,977
Westamerica Bancorp. 100 5,114
Wilmington Trust Corp. 200 8,860
WSFS Financial Corp. 2,350 147,886
Zions Bancorp. 100 8,303
------------
12,935,111
------------
HEALTH CARE - 6.01%
Abbott Laboratories 4,335 185,278
Aetna, Inc. 12,000 462,000
Allergan, Inc. 210 21,571
Alpharma, Inc. - Class A 1,800 47,250
Bausch & Lomb, Inc. 100 4,895
Baxter International, Inc. 500 18,850
Beckman Coulter, Inc. 100 5,136
Becton Dickinson & Co. 200 12,608
Biomet, Inc. 275 10,225
Boston Scientific Corp.+ 1,940 45,092
Bristol-Myers Squibb Co. 2,247 57,029
Cigna Corp. 5,100 545,700
C.R. Bard, Inc. 420 31,273
Dentsply International, Inc. 150 8,950
Edwards Lifesciences Corp.+ 380 16,887
Eli Lilly & Co. 2,396 126,796
HCA, Inc. 1,560 68,468
Health Net, Inc.+ 1,820 74,074
Henry Schein, Inc.+ 300 13,986
Hospira, Inc.+ 2,933 113,067
Humana, Inc.+ 600 27,108
Johnson & Johnson 6,006 352,012
Manor Care, Inc. 460 20,171
Medco Health Solutions, Inc.+ 5,000 266,150
Medtronic, Inc. 2,670 133,820
Merck & Co., Inc. 1,843 63,436
Mylan Laboratories, Inc. 262 5,722
Pfizer, Inc. 20,763 525,927
Stryker Corp. 2,600 113,750
MARKET
SECURITY SHARES VALUE
UnitedHealth Group, Inc. 10,198 $ 507,248
Watson Pharmaceuticals, Inc.+ 100 2,844
Wyeth 3,630 176,672
------------
4,063,995
------------
INFORMATION SERVICES - 2.07%
Alltel Corp. 5,377 346,117
AT&T Corp. 1,336 35,017
BellSouth Corp. 8,380 283,076
Citizens Communciations Co. 3,000 39,840
Powerwave Technologies, Inc.+ 5,100 56,865
Sprint Nextel Corp. 16,827 417,310
Talk America Holdings, Inc.+ 3,300 30,063
Verizon Communications, Inc. 5,888 194,481
------------
1,402,769
------------
INTERNET - 3.76%
Amazon.Com, Inc.+ 6,000 211,260
Cisco Systems, Inc.+ 28,857 604,554
Citrix Systems, Inc.+ 2,000 79,840
E*Trade Financial Corp.+ 15,700 390,616
eBay, Inc.+ 6,840 235,364
Google, Inc. - Class A+ 1,200 501,528
Juniper Networks, Inc.+ 5,700 105,336
Qwest Communications International,
Inc.+ 24,900 167,079
VeriSign, Inc.+ 1,400 32,928
Yahoo!, Inc.+ 6,420 210,448
------------
2,538,953
------------
RETAIL - 2.78%
American Eagle Outfitters 5,000 162,000
Autonation, Inc.+ 234 5,270
Bed Bath & Beyond, Inc.+ 200 7,670
Best Buy Co., Inc. 456 25,837
Borders Group, Inc. 2,500 59,000
Circuit City Stores, Inc. 4,100 117,875
Costco Wholesale Corp. 2,860 155,670
CVS Corp. 544 16,168
Dillard's, Inc. - Class A 4,671 121,820
Gap, Inc. 1,912 34,588
Home Depot, Inc. 1,520 60,694
Lowe's Cos., Inc. 1,134 71,499
Office Depot, Inc.+ 100 4,058
RadioShack Corp. 300 5,100
Saks, Inc. 380 7,653
See Notes to Financial Statements.
19
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
MARKET
SECURITY SHARES VALUE
-------------------------------------------------------
COMMON STOCK
RETAIL (CONTINUED)
Sears Holdings Corp.+ 1,200 $ 172,428
Target Corp. 1,198 63,614
Tech Data Corp.+ 1,700 62,424
Urban Outfitters, Inc.+ 700 16,240
Walgreen Co. 1,525 63,943
Wal-Mart Stores, Inc. 14,266 642,398
------------
1,875,949
------------
TECHNOLOGY - 6.46%
ACCO Brands, Corp.+ 8 172
Agilent Technologies, Inc.+ 5,105 196,134
Agilysys, Inc. 1,300 18,824
Analog Devices, Inc. 6,800 257,856
Anixter International, Inc. 1,900 96,596
Apple Computer, Inc.+ 1,300 91,507
Applied Materials, Inc. 3,630 65,159
Autodesk, Inc.+ 7,200 302,688
Broadcom Corp., Class A+ 1,950 80,165
Compuware Corp.+ 3,100 23,808
Dell, Inc.+ 4,691 122,904
Discovery Holding Co. - Class A+ 758 11,294
Ditech Communications Corp.+ 3,400 32,028
Entegris, Inc.+ 2,200 22,396
ESS Technology+ 14,300 45,331
Gateway, Inc.+ 49,700 109,340
Harmonic, Inc.+ 4,800 25,680
Harris Corp. 2,100 97,797
IBM 3,422 281,767
Integrated Device Technology, Inc.+ 273 4,155
Intel Corp. 14,274 285,195
International Rectifier Corp.+ 1,000 45,200
KLA-Tencor Corp. 200 9,632
Komag, Inc.+ 2,300 96,692
Linear Technology Corp. 1,361 48,316
Lucent Technologies, Inc.+ 40,300 112,437
Mentor Graphics Corp.+ 1,700 22,321
Microsoft Corp. 30,146 728,026
Novellus Systems, Inc.+ 3,500 86,450
Oracle Corp.+ 5,181 75,591
MARKET
SECURITY SHARES VALUE
Photronics, Inc.+ 100 $ 1,797
Qualcomm, Inc. 4,688 240,682
Seagate Technology 10,000 265,600
Skyworks Solutions, Inc.+ 7,900 56,485
Symantec Corp.+ 4,001 65,536
Texas Instruments, Inc. 5,615 194,897
Unisys Corp.+ 4,000 24,960
Xerox Corp.+ 1,745 24,500
Xilinx, Inc. 3,500 96,845
------------
4,366,763
------------
TRANSPORTATION - 3.93%
AMR Corp.+ 300 7,392
Burlington Northern Santa Fe Corp. 2,900 230,637
CH Robinson Worldwide, Inc. 3,800 168,530
Con-way, Inc. 5,000 278,600
CSX Corp. 5,000 342,450
Expeditors International of Washington,
Inc. 1,200 102,732
FedEx Corp. 3,400 391,442
General Maritime Corp. 3,700 122,914
JB Hunt Transport Services, Inc. 5,600 133,448
Royal Carribean Cruises, Ltd. 1,900 79,401
Ryder Systems, Inc. 1,139 59,399
Southwest Airlines Co. 17,400 282,228
Union Pacific Corp. 400 36,484
United Parcel Service, Inc. - Class B 4,600 372,922
World Air Holdings, Inc.+ 4,900 44,688
------------
2,653,267
------------
UTILITIES - 1.12%
AES Corp.+ 5,000 84,850
Allegheny Energy, Inc.+ 7,200 256,536
American Electric Power Co., Inc. 1,250 41,825
CMS Energy Corp.+ 4,060 54,079
PPL Corp. 186 5,401
TXU Corp. 6,274 311,379
------------
754,070
------------
TOTAL COMMON STOCK
(COST $40,843,345) 51,885,139
------------
See Notes to Financial Statements.
20
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2006
INTEREST MATURITY PAR MARKET
RATE DATE VALUE VALUE
-----------------------------------------------------------------------------------------------
US TREASURY SECURITIES - 19.47%
US Treasury Bond.......... 9.250% 2/15/16 $1,000,000 $ 1,317,031
US Treasury Bond.......... 8.750% 5/15/17 1,500,000 1,948,828
US Treasury Note.......... 2.750% 6/30/06 1,500,000 1,495,078
US Treasury Note.......... 5.500% 5/15/09 250,000 254,492
US Treasury Note.......... 4.250% 8/15/13 1,000,000 954,219
US Treasury Note.......... 4.750% 5/15/14 3,000,000 2,944,687
US Treasury Note.......... 4.250% 8/15/14 3,000,000 2,841,563
US Treasury Note.......... 4.125% 5/15/15 1,500,000 1,400,391
-----------
TOTAL US TREASURY SECURITIES
(COST $13,439,815)..................................................... 13,156,289
-----------
REPURCHASE AGREEMENT - 3.47%
JPMORGAN CHASE BANK, N.A.
Dated 4/28/06, 4.150%, principal and interest in the amount of $2,347,812
due 5/1/06, collaterized by US Treasury Bond, par value of $2,390,000
due 4/15/11 with a value of $2,395,234................................. 2,347,000
-----------
TOTAL REPURCHASE AGREEMENT
(COST $2,347,000)...................................................... 2,347,000
-----------
TOTAL INVESTMENTS IN SECURITIES - 99.73%
(COST $56,630,160)*......................................................... 67,388,428
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.27%...................................... 184,744
-----------
NET ASSETS - 100.00%............................................................... $67,573,172
===========
- --------------------------------------------------------------------------------
+Non-income producing security.
*Cost for Federal income tax purposes is substantially the same as for
financial statement purposes and net unrealized appreciation (depreciation)
consists of:
Gross Unrealized Appreciation............. $12,229,041
Gross Unrealized Depreciation............. (1,470,773)
-----------
Net Unrealized Appreciation (Depreciation) $10,758,268
===========
See Notes to Financial Statements.
21
ISI FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2006
TOTAL RETURN US MANAGED
TREASURY FUND MUNICIPAL FUND
- -------------------------------------------------------------------------------------------------------
ASSETS:
Investments:
In securities, at market value
(cost $146,834,181 and $82,266,865, respectively).................. $137,304,727 $84,190,723
Repurchase agreement
(cost $8,426,000 and $717,000, respectively)....................... 8,426,000 717,000
Cash................................................................... 579 867
Receivables:
Capital shares sold.................................................. 8,342 19,006
Interest............................................................. 2,416,380 998,412
Prepaid expenses....................................................... 17,414 20,360
------------ -----------
Total assets........................................................... 148,173,442 85,946,368
------------ -----------
LIABILITIES:
Payables:
Capital shares redeemed.............................................. 101,999 -
Dividends............................................................ 472,302 228,948
Accrued Liabilities:
Investment advisory fees............................................. 30,992 28,461
Directors' fees and expenses......................................... 1,481 874
Distribution fees.................................................... 30,696 17,788
Accrued expenses and other........................................... 45,274 35,127
------------ -----------
Total liabilities...................................................... 682,744 311,198
------------ -----------
Net assets.............................................................. $147,490,698 $85,635,170
============ ===========
COMPONENTS OF NET ASSETS:
Paid in capital........................................................ $157,403,880 $83,149,937
Undistributed (distributions in excess of) net investment income....... (532,749) 196,366
Accumulated net realized gain from investment transactions............. 149,021 365,009
Net unrealized appreciation (depreciation) on investments.............. (9,529,454) 1,923,858
------------ -----------
Net assets.............................................................. $147,490,698 $85,635,170
============ ===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING:
ISI Shares (115,000,000 and 55,000,000 shares authorized, respectively) 16,265,006 8,112,311
------------ -----------
NET ASSET VALUE PER SHARE:
ISI Shares (net assets / shares of beneficial interest outstanding).... $ 9.07 $ 10.56
------------ -----------
MAXIMUM OFFERING PRICE PER SHARE:
ISI Shares ($9.07 / 0.97 and $10.56 / 0.97, respectively).............. $ 9.35 $ 10.89
------------ -----------
See Notes to Financial Statements.
22
ISI FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2006
NORTH AMERICAN
GOVERNMENT
BOND FUND ISI STRATEGY FUND
- ------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments:
In securities, at market value (cost $168,636,820 and $54,283,160, respectively)... $158,710,344 $65,041,428
Repurchase agreement (cost $21,000,000 and $2,347,000, respectively)............... 21,000,000 2,347,000
Cash................................................................................. 14 1,783
Foreign currency (cost $36).......................................................... 37 -
Receivables:
Capital shares sold................................................................ 12,911 78,698
Interest and dividends............................................................. 1,944,856 265,298
Prepaid expenses..................................................................... 23,882 11,888
------------ -----------
Total assets......................................................................... 181,692,044 67,746,095
------------ -----------
LIABILITIES:
Payables:
Capital shares redeemed............................................................ 125,225 104,128
Dividends.......................................................................... 745,944 -
Accrued Liabilities:
Investment advisory fees........................................................... 59,750 22,184
Directors' fees and expenses....................................................... 1,842 708
Distribution fees.................................................................. 64,160 13,865
Shareholder servicing fees......................................................... 3,150 -
Accrued expenses and other......................................................... 71,190 32,038
------------ -----------
Total liabilities.................................................................... 1,071,261 172,923
------------ -----------
Net assets............................................................................. $180,620,783 $67,573,172
============ ===========
COMPONENTS OF NET ASSETS:
Paid in capital...................................................................... $190,892,748 $56,760,006
Undistributed (distributions in excess of) net investment income..................... (1,708,460) 46,555
Accumulated net realized gain from investment and foreign currency transactions...... 1,357,762 8,343
Net unrealized appreciation (depreciation) on investments and foreign currencies..... (9,921,267) 10,758,268
------------ -----------
Net assets............................................................................. $180,620,783 $67,573,172
============ ===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING:
ISI Class A Shares (50,000,000 shares authorized).................................. 23,045,587 -
------------ -----------
ISI Class C Shares (5,000,000 shares authorized)................................... 2,099,107 -
------------ -----------
ISI Shares (25,000,000 shares authorized).......................................... - 5,177,558
------------ -----------
NET ASSET VALUE PER SHARE:
(net assets / shares of beneficial interest outstanding)
ISI Class A Shares (based on net assets of $165,562,564)........................... $ 7.18 $ -
------------ -----------
ISI Class C Shares (based on net assets of $15,058,219)............................ $ 7.17 $ -
------------ -----------
ISI Shares......................................................................... $ - $ 13.05
------------ -----------
MAXIMUM OFFERING PRICE PER SHARE:
ISI Class A Shares ($7.18 / 0.97).................................................. $ 7.40 $ -
------------ -----------
ISI Shares ($13.05 / 0.97)......................................................... $ - $ 13.45
------------ -----------
See Notes to Financial Statements.
23
ISI FUNDS
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2006
TOTAL RETURN US MANAGED
TREASURY FUND MUNICIPAL FUND
- -------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest......................................................... $ 3,186,125 $ 2,033,465
----------- -----------
EXPENSES:
Investment advisory fees......................................... 199,168 179,032
Distribution fees................................................ 197,005 111,895
Compliance services.............................................. 5,309 3,022
Administration fees.............................................. 78,386 44,482
Transfer agent fees.............................................. 26,398 7,476
Custody fees..................................................... 9,385 6,488
Professional fees................................................ 39,653 28,196
Registration fees................................................ 12,393 11,868
Directors' fees.................................................. 8,331 4,732
Miscellaneous.................................................... 4,279 2,428
----------- -----------
Total expenses................................................. 580,307 399,619
----------- -----------
Net investment income............................................ 2,605,818 1,633,846
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions................... 149,021 365,066
Net change in unrealized appreciation/depreciation on investments (4,069,311) (1,289,529)
----------- -----------
Net realized and unrealized loss on investments.................. (3,920,290) (924,463)
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS............................ $(1,314,472) $ 709,383
=========== ===========
See Notes to Financial Statements.
24
ISI FUNDS
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2006
NORTH AMERICAN
GOVERNMENT
BOND FUND ISI STRATEGY FUND
- -------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest............................................................. $ 4,246,438 $ 339,024
Dividends............................................................ - 326,117
----------- ----------
Total income....................................................... 4,246,438 665,141
----------- ----------
EXPENSES:
Investment advisory fees............................................. 375,738 130,032
Distribution fees:
ISI Class A Shares................................................. 344,430 -
ISI Class C Shares................................................. 58,704 -
ISI Shares......................................................... - 81,270
Compliance services.................................................. 6,335 2,179
Administration fees.................................................. 93,419 32,341
Transfer agent fees:
ISI Class A Shares................................................. 36,659 -
ISI Class C Shares................................................. 3,329 -
ISI Shares......................................................... - 11,883
Custody fees......................................................... 21,670 6,654
Professional fees.................................................... 43,797 23,951
Shareholder servicing fees:
ISI Class C Shares................................................. 19,568 -
Registration fees.................................................... 19,864 13,198
Directors' fees...................................................... 9,930 3,403
Miscellaneous........................................................ 5,039 1,591
----------- ----------
Total expenses..................................................... 1,038,482 306,502
----------- ----------
Net investment income................................................ 3,207,956 358,639
----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment transactions............................................ 1,372,010 2,225,021
Foreign currency transactions...................................... (14,248) -
Net change in unrealized appreciation/depreciation on investments and
foreign currencies................................................. (3,806,118) 2,529,356
----------- ----------
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... (2,448,356) 4,754,377
----------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS................................ $ 759,600 $5,113,016
=========== ==========
See Notes to Financial Statements.
25
TOTAL RETURN US TREASURY FUND
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31, 2005
- -------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................................... $ 2,605,818 $ 5,445,594
Net realized gain on investment transactions.............................. 149,021 632,100
Net change in unrealized appreciation/depreciation on investments......... (4,069,311) (3,403,049)
------------ ------------
Increase (decrease) in net assets from operations......................... (1,314,472) 2,674,645
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................................... (2,969,099) (4,865,040)
Net realized gain on investments.......................................... - (632,100)
Return of capital......................................................... - (1,616,199)
------------ ------------
Total distributions....................................................... (2,969,099) (7,113,339)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares.............................................. 3,777,798 11,040,344
Dividend reinvestments.................................................... 1,673,430 4,648,102
Cost of shares redeemed................................................... (19,650,661) (40,065,709)
------------ ------------
Decrease in net assets from capital share transactions.................... (14,199,433) (24,377,263)
------------ ------------
Total decrease in net assets.............................................. (18,483,004) (28,815,957)
NET ASSETS:
Beginning of year......................................................... 165,973,702 194,789,659
------------ ------------
End of year (including distributions in excess of net investment income of
$532,749 and $169,468, respectively).................................... $147,490,698 $165,973,702
============ ============
SHARE TRANSACTIONS:
Shares sold............................................................... 403,022 1,162,672
Shares issued to shareholders on reinvestment of dividends................ 179,010 489,356
Shares redeemed........................................................... (2,109,304) (4,220,380)
------------ ------------
Decrease in shares from capital share transactions........................ (1,527,272) (2,568,352)
============ ============
See Notes to Financial Statements.
26
MANAGED MUNICIPAL FUND
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31, 2005
- ------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................................... $ 1,633,846 $ 3,703,880
Net realized gain (loss) on investment transactions...................... 365,066 299,727
Net change in unrealized appreciation/depreciation on investments........ (1,289,529) (2,755,318)
------------ ------------
Increase in net assets from operations................................... 709,383 1,248,289
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................................... (1,406,186) (3,358,372)
Net realized gain on investments......................................... (289,342) -
------------ ------------
Total distributions...................................................... (1,695,528) (3,358,372)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares............................................. 1,869,737 4,114,915
Dividend reinvestments................................................... 843,016 1,897,217
Cost of shares redeemed.................................................. (10,118,159) (23,719,137)
------------ ------------
Increase (decrease) in net assets from capital share transactions........ (7,405,406) (17,707,005)
------------ ------------
Total increase (decrease) in net assets.................................. (8,391,551) (19,817,088)
NET ASSETS:
Beginning of year........................................................ 94,026,721 113,843,809
------------ ------------
End of year (including accumulated undistributed (distributions in excess
of) net investment income of $196,366 and $(31,294), respectively)..... $ 85,635,170 $ 94,026,721
============ ============
SHARE TRANSACTIONS:
Shares sold.............................................................. 174,374 379,795
Shares issued to shareholders on reinvestment of dividends............... 78,690 175,163
Shares redeemed.......................................................... (945,527) (2,185,091)
------------ ------------
Decrease in shares from capital share transactions....................... (692,463) (1,630,133)
============ ============
See Notes to Financial Statements.
27
NORTH AMERICAN GOVERNMENT BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31, 2005
- -----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................................................... $ 3,207,956 $ 7,249,304
Net realized gain (loss) on investment and foreign currency transactions................. 1,357,762 3,611,619
Net change in unrealized appreciation/depreciation on investments and foreign currencies. (3,806,118) (2,033,622)
------------ ------------
Increase in net assets from operations................................................... 759,600 8,827,301
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
ISI Class A Shares...................................................................... (4,214,594) (7,838,916)
ISI Class C Shares...................................................................... (333,473) (595,672)
Net realized gain on investments:
ISI Class A Shares...................................................................... - (785,944)
ISI Class C Shares...................................................................... - (70,866)
Return of capital:
ISI Class A Shares...................................................................... - (1,356,475)
ISI Class C Shares...................................................................... - (122,309)
------------ ------------
Total distributions...................................................................... (4,548,067) (10,770,182)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares:
ISI Class A Shares...................................................................... 14,538,842 30,035,408
ISI Class C Shares...................................................................... 1,381,744 3,448,814
Dividend reinvestments:
ISI Class A Shares...................................................................... 1,891,152 5,220,552
ISI Class C Shares...................................................................... 141,568 359,466
Cost of shares redeemed:
ISI Class A Shares...................................................................... (24,510,464) (60,640,430)
ISI Class C Shares...................................................................... (2,078,730) (6,317,975)
------------ ------------
Decrease in net assets from capital share transactions................................... (8,635,888) (27,894,165)
------------ ------------
Decrease in net assets................................................................... (12,424,355) (29,837,046)
NET ASSETS:
Beginning of year........................................................................ 193,045,138 222,882,184
------------ ------------
End of year (including distributions in excess of net investment income of
$1,708,460 and $368,349, respectively).................................................. $180,620,783 $193,045,138
============ ============
SHARE TRANSACTIONS:
Shares sold:
ISI Class A Shares...................................................................... 1,971,297 4,053,791
ISI Class C Shares...................................................................... 186,579 464,623
Shares issued to shareholders on reinvestment of dividends:
ISI Class A Shares...................................................................... 255,317 704,417
ISI Class C Shares...................................................................... 19,153 48,592
Shares redeemed:
ISI Class A Shares...................................................................... (3,321,166) (8,179,395)
ISI Class C Shares...................................................................... (283,273) (851,791)
------------ ------------
Decrease in shares from capital share transactions:
ISI Class A Shares...................................................................... (1,094,552) (3,421,187)
============ ============
ISI Class C Shares...................................................................... (77,541) (338,576)
============ ============
See Notes to Financial Statements.
28
ISI STRATEGY FUND
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31, 2005
- ----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................ $ 358,639 $ 736,821
Net realized gain (loss) on investment transactions.............. 2,225,021 (35,017)
Net change in unrealized appreciation/depreciation on investments 2,529,356 4,156,937
----------- -----------
Increase in net assets from operations........................... 5,113,016 4,858,741
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................ (353,952) (753,672)
----------- -----------
Total distributions.............................................. (353,952) (753,672)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares..................................... 8,040,188 18,477,449
Dividend reinvestments........................................... 307,497 674,238
Cost of shares redeemed.......................................... (5,738,508) (7,971,409)
----------- -----------
Increase in net assets from capital share transactions........... 2,609,177 11,180,278
----------- -----------
Total increase in net assets..................................... 7,368,241 15,285,347
NET ASSETS:
Beginning of year................................................ 60,204,931 44,919,584
----------- -----------
End of year (including undistributed net investment income of
$46,555 and $41,868, respectively)............................. $67,573,172 $60,204,931
=========== ===========
SHARE TRANSACTIONS:
Shares sold...................................................... 632,145 1,583,999
Shares issued to shareholders on reinvestment of dividends....... 24,078 56,938
Shares redeemed.................................................. (446,730) (679,145)
----------- -----------
Increase in shares from capital share transactions............... 209,493 961,792
=========== ===========
See Notes to Financial Statements.
29
TOTAL RETURN US TREASURY FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED)
ISI SHARES
SIX MONTHS
ENDED FOR THE YEARS ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------
2006 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year........ $ 9.33 $ 9.57 $ 9.92 $ 10.18 $ 10.20 $ 9.57
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.15/1/ 0.29/1/ 0.24/1/ 0.23 0.35 0.45
Net realized and unrealized gain (loss) on
investments............................. (0.24) (0.16) 0.19 0.01 0.20 0.82
-------- -------- -------- -------- -------- --------
Total from investment operations.......... (0.09) 0.13 0.43 0.24 0.55 1.27
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income..................... (0.17) (0.25) (0.23) (0.25) (0.40) (0.45)
Net realized gain on investments.......... - (0.03) (0.33) (0.25) (0.17) -
Tax return of capital..................... - (0.09) (0.22) - - (0.19)
-------- -------- -------- -------- -------- --------
Total distributions....................... (0.17) (0.37) (0.78) (0.50) (0.57) (0.64)
-------- -------- -------- -------- -------- --------
Net asset value, end of year.............. $ 9.07 $ 9.33 $ 9.57 $ 9.92 $ 10.18 $ 10.20
======== ======== ======== ======== ======== ========
TOTAL RETURN/2, 4/......................... (0.95)% 1.38% 4.64% 2.30% 5.78% 13.57%
SUPPLEMENTAL DATA AND RATIOS/3/:
Net assets, end of period (000s).......... $147,491 $165,974 $194,790 $229,027 $262,928 $149,588
Ratios to average daily net assets:
Net investment income................... 3.31% 3.01% 2.56% 2.50% 3.64% 4.51%
Expenses................................ 0.74% 0.70% 0.69% 0.67% 0.74% 0.78%
Portfolio turnover rate/4/................ 5% 16% 31% 125% 129% 61%
- --------------------------------------------------------------------------------
/1/Calculated using the average shares outstanding for the period.
/2/Total return excludes the effect of sales charges.
/3/Annualized for periods less than one year.
/4/Not annualized for periods less than one year.
See Notes to Financial Statements.
30
MANAGED MUNICIPAL FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED)
ISI SHARES
SIX MONTHS
ENDED FOR THE YEARS ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------
2006 2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year........ $ 10.68 $ 10.91 $ 10.89 $ 11.00 $ 10.99 $ 10.47
------- -------- -------- -------- -------- -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................... .19/1/ 0.40/1/ 0.38/1/ 0.40 0.45 0.45
Net realized and unrealized gain (loss) on
investments............................. (.11) (0.27) 0.08 0.01 0.09 0.55
------- -------- -------- -------- -------- -------
Total from investment operations.......... 0.08 0.13 0.46 0.41 0.54 1.00
------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Net investment income..................... (0.17) (0.36) (0.44) (0.47) (0.45) (0.45)
Net realized gain on investments.......... (0.03) - - (0.05) (0.08) (0.03)
------- -------- -------- -------- -------- -------
Total distributions....................... (0.20) (0.36) (0.44) (0.52) (0.53) (0.48)
------- -------- -------- -------- -------- -------
Net asset value, end of year.............. $ 10.56 $ 10.68 $ 10.91 $ 10.89 $ 11.00 $ 10.99
======= ======== ======== ======== ======== =======
TOTAL RETURN/2, 4/......................... 0.76% 1.19% 4.26% 3.89% 5.11% 9.76%
SUPPLEMENTAL DATA AND RATIOS/3/:
Net assets, end of period (000s).......... $85,635 $ 94,027 $113,844 $107,078 $103,198 $66,105
Ratios to average daily net assets:
Net investment income................... 3.65% 3.64% 3.53% 3.66% 3.92% 4.18%
Expenses after waivers and/or
reimbursements........................ 0.89% 0.86% 0.88% 0.89% 0.94% 0.93%
Expenses before waivers and/or
reimbursements........................ 0.89% 0.86% 0.88% 0.89% 0.96% 0.99%
Portfolio turnover rate/4/................ 5% 7% 17% 11% 11% 21%
- --------------------------------------------------------------------------------
/1/Calculated using the average shares outstanding for the period.
/2/Total return excludes the effect of sales charges.
/3/Annualized for periods less than one year.
/4/Not 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) (UNAUDITED)
ISI CLASS A SHARES/1/
APRIL 1,
SIX MONTHS FOR THE YEARS ENDED 2002 FOR THE YEARS
ENDED OCTOBER 31, THROUGH ENDED MARCH 31,
APRIL 30, ---------------------------- OCTOBER 31, ------------------
2006 2005 2004 2003 2002/2/ 2002 2001
- ------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period................................ $ 7.34 $ 7.41 $ 7.73 $ 8.03 $ 7.80 $ 8.17 $ 8.07
-------- -------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.13/3/ 0.26/3/ 0.24/3/ 0.25 0.18 0.38 0.44
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions................. (0.11) 0.06 0.03 0.07 0.41 (0.03) 0.38
-------- -------- -------- -------- -------- -------- --------
Total from investment operations....... 0.02 0.32 0.27 0.32 0.59 0.35 0.82
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income.................. (0.18) (0.31) (0.16) (0.29) (0.17) (0.41) (0.47)
Net realized gain on investments....... - (0.03) (0.08) (0.33) (0.07) (0.23) (0.13)
Return of capital...................... - (0.05) (0.35) - (0.12) (0.08) (0.12)
-------- -------- -------- -------- -------- -------- --------
Total distributions.................... (0.18) (0.39) (0.59) (0.62) (0.36) (0.72) (0.72)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period......... $ 7.18 $ 7.34 $ 7.41 $ 7.73 $ 8.03 $ 7.80 $ 8.17
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN/4, 5/....................... 0.24% 4.39% 3.62% 4.14% 7.75% 4.38% 10.74%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s)....... $165,563 $177,101 $204,266 $267,756 $257,495 $220,629 $117,445
Ratios to average daily net assets:/6/
Net investment income................ 3.47% 3.55% 3.22% 3.03% 3.84% 4.60% 5.62%
Expenses............................. 1.05% 1.04% 1.05% 1.09% 1.01% 1.13% 1.24%
Portfolio turnover rate/5/............. 12% 66% 47% 152% 95% 136% 89%
- --------------------------------------------------------------------------------
/1/On May 16, 2003, ISI Shares were redesignated as ISI Class A Shares.
/2/The Fund changed its fiscal year end from March 31 to October 31.
/3/Calculated using the average shares outstanding for the period.
/4/Total return excludes the effect of sales charges.
/5/Not annualized for periods less than one year.
/6/Annualized for periods less than one year.
See Notes to Financial Statements.
32
NORTH AMERICAN GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED)
ISI CLASS C SHARES
MAY 16,
SIX MONTHS FOR THE YEARS ENDED 2003/1/
ENDED OCTOBER 31, THROUGH
APRIL 30, ------------------ OCTOBER 31,
2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period...................... $ 7.33 $ 7.40 $ 7.72 $ 8.20
-------- -------- -------- -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.10/2/ 0.21/2/ 0.19/2/ 0.17
Net realized and unrealized gain (loss) on investments and
foreign currency transactions........................... (0.10) 0.06 0.02 (0.38)
-------- -------- -------- -------
Total from investment operations.......................... 0.00 0.27 0.21 (0.21)
-------- -------- -------- -------
LESS DISTRIBUTIONS:
Net investment income..................................... (0.16) (0.26) (0.14) (0.21)
Net realized gain on investments.......................... - (0.03) (0.08) (0.06)
Return of capital......................................... - (0.05) (0.31) -
-------- -------- -------- -------
Total distributions....................................... (0.16) (0.34) (0.53) (0.27)
-------- -------- -------- -------
Net asset value, end of period............................ $ 7.17 $ 7.33 $ 7.40 $ 7.72
======== ======== ======== =======
TOTAL RETURN/3,4/.......................................... (0.09)% 3.73% 2.91% (2.62)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s).......................... $ 15,058 $ 15,944 $ 18,616 $13,565
Ratios to average daily net assets:/5/
Net investment income................................... 2.82% 2.89% 2.50% 3.32%
Expenses after waivers and/or reimbursements............ 1.70% 1.69% 1.77% 1.85%
Expenses before waivers and/or reimbursements........... 1.70% 1.69% 1.77% 2.12%
Portfolio turnover rate/4/................................ 12% 66% 47% 152%
- --------------------------------------------------------------------------------
/1/Commencement of operations.
/2/Calculated using the average shares outstanding for the period.
/3/Total return excludes the effect of sales charges.
/4/Not annualized for periods less than one year.
/5/Annualized for periods less than one year.
See Notes to Financial Statements.
33
ISI STRATEGY FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED)
ISI SHARES
JUNE 1,
SIX MONTHS FOR THE YEARS ENDED 2002 FOR THE YEARS
ENDED OCTOBER 31, THROUGH ENDED MAY 31,
APRIL 30, --------------------------- OCTOBER 31, -----------------
2006 2005 2004 2003 2002/1/ 2002 2001
- ---------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period.............................. $ 12.12 $ 11.21 $ 10.50 $ 9.08 $ 10.23 $ 10.89 $ 12.15
-------- -------- -------- ------- ------- ------- -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................. 0.07/2/ 0.16/2/ 0.10/2/ 0.08 0.05 0.12 0.25
Net realized and unrealized gain
(loss) on investments............... 0.93 0.91 0.70 1.42 (1.14) (0.66) (0.62)
-------- -------- -------- ------- ------- ------- -------
Total from investment
operations.......................... 1.00 1.07 0.80 1.50 (1.09) (0.54) (0.37)
-------- -------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income................. (0.07) (0.16) (0.09) (0.08) (0.06) (0.12) (0.27)
Net realized gain on
investments......................... - - - - - - (0.62)
-------- -------- -------- ------- ------- ------- -------
Total distributions................... (0.07) (0.16) (0.09) (0.08) (0.06) (0.12) (0.89)
-------- -------- -------- ------- ------- ------- -------
Net asset value, end of period........ $ 13.05 $ 12.12 $ 11.21 $ 10.50 $ 9.08 $ 10.23 $ 10.89
======== ======== ======== ======= ======= ======= =======
TOTAL RETURN/3, 4/..................... 8.25% 9.59% 7.71% 16.47% (10.65)% (4.93)% (3.32)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s)...... $ 67,573 $ 60,205 $ 44,920 $30,262 $19,924 $24,398 $27,051
Ratios to average daily net assets:/5/
Net investment income............... 1.10% 1.33% 0.92% 0.77% 1.18% 1.14% 2.09%
Expenses after waivers and/or
reimbursements.................... 0.94% 0.94% 1.12% 1.30% 1.30% 1.19% 1.00%
Expenses before waivers and/or
reimbursements.................... 0.94% 0.94% 1.12% 1.79% 1.99% 1.42% 1.38%
Portfolio turnover rate/4/............ 15% 30% 66% 60% 12% 72% 57%
- --------------------------------------------------------------------------------
/1/The Fund changed its fiscal year end from May 31 to October 31.
/2/Calculated using the average shares outstanding for the period.
/3/Total return excludes the effect of sales charges.
/4/Not annualized for periods less than one year.
/5/Annualized for periods less than one year.
See Notes to Financial Statements.
34
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
Total Return US Treasury Fund, Inc. ('Total Return'), Managed Municipal Fund,
Inc. ('Managed Municipal'), North American Government Bond Fund, Inc. ('North
American') and ISI Strategy Fund, Inc. ('Strategy'), (each a 'Fund' and
collectively, the 'Funds') are registered under the Investment Company Act of
1940, as amended, as open-end management investment companies. The Funds are
organized as corporations under the laws of the State of Maryland.
Total Return's investment objective is to achieve a high level of total
return with relative stability of principal and, secondarily, high current
income consistent with an investment in securities issued by the United States
Treasury. Managed Municipal's investment objective is to provide a high level
of total return with relative stability of principal and, secondarily, high
current income exempt from Federal income tax through investment in a portfolio
consisting primarily of tax-free municipal obligations. North American's
investment objective is designed to provide a high level of current income,
consistent with prudent investment risk. Strategy's investment objective is to
maximize total return through a combination of long-term growth of capital and
current income.
Total Return, Managed Municipal and Strategy currently offer ISI Shares to
investors. North American offers ISI North American Government Bond Fund
Class A Shares ('ISI Class A Shares') and ISI North American Government Bond
Fund Class C Shares ('ISI Class C Shares'). ISI Shares and North American's ISI
Class A Shares are subject to a maximum front-end sales charge of 3.00%. A
contingent deferred sales charge of 1.00% is imposed on the sale of North
American's ISI Class C Shares if redeemed within the first year of purchase.
Total Return, Managed Municipal and Strategy are authorized to issue
115,000,000, 55,000,000 and 25,000,000 shares, respectively, of ISI Shares at
$0.001 par value. North American is authorized to issue 50,000,000 ISI Class A
Shares and 5,000,000 ISI Class C Shares at $0.001 par value.
B. VALUATION OF SECURITIES
Exchange traded securities and over-the-counter securities listed on the
NASDAQ National Market System for which market quotations are readily available
are valued each Fund business day using the last reported sales price or the
NASDAQ Official Closing Price ('NOCP'), provided by independent pricing
services as of the close of trading on the New York Stock Exchange (normally
4:00 p.m. Eastern time). In the absence of a sale or NOCP, such securities are
valued at the mean of the last bid and the last asked prices. Non-exchange
traded securities for which over-the-counter quotations are readily available
are generally valued at the mean between the last bid and last asked prices.
Money market instruments that mature in 60 days or less may be valued at
amortized cost unless the Fund's investment advisor believes another valuation
is more appropriate.
When valuing securities for which market quotations are not readily available
or for which the market quotations that are available are considered
unreliable, the Funds determine a fair value in good faith under procedures
established by and under the general supervision of the Funds' Boards of
Directors (the 'Board'). The Funds may use these procedures to establish the
fair value of securities when, for example, a significant event occurs between
the time the market closes and the time as of which the Funds value their
investments if such an event is likely to affect the Fund's net asset value per
share. Fair valuation may also be used for securities that are subject to legal
or contractual restrictions on resale, securities for which no or limited
trading activity has occurred for a period of time, or securities that are
otherwise deemed to be illiquid (i.e., securities that cannot be disposed of
within seven days at approximately the price at which the security is currently
priced by the Funds).
If a fair value is required, the investment adviser or sub-adviser in the
case of Strategy, determines the value of
35
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
the security until the Board meets to establish the fair value of the security.
As of April 30, 2006, there were no fair valued securities.
C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on trade date. Realized gains and losses
are determined by comparing the proceeds of a sale or the cost of a purchase
with a specific offsetting transaction. Dividend income is recorded on the
ex-dividend date. Interest income, including amortization of premiums and
accretion of discounts, is accrued daily. Estimated expenses are also accrued
daily. With respect to North American, income, gains (losses) and common
expenses are allocated to each class based on its respective net assets. Class
specific expenses are charged directly to each class.
D. DISTRIBUTIONS
Total Return declares a dividend daily, and Managed Municipal and North
American declare monthly dividends at fixed rates approved by the Funds' Board.
These dividends are paid monthly. To the extent that their net investment
income and short-term capital gains are less than the approved fixed rate, some
of their dividends may be paid from long-term capital gains or as a return of
shareholder capital. Strategy declares and pays dividends quarterly from its
net investment income. Net realized capital gains, if any, are distributed at
least annually. The Funds record dividends and distributions on the ex-dividend
date.
E. FEDERAL INCOME TAXES
Each Fund has a policy to qualify as a regulated investment company under
subchapter M of the Internal Revenue Code and to distribute all its taxable
income. In addition, by distributing in each calendar year substantially all of
its net income, capital gains and other amounts. 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 March 31, 2006, 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
36
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
securities to the Funds and agrees to buy them back on a specified day in
return for the principal amount of the original sale plus accrued interest. The
custodial bank holds the collateral in a separate account until the agreement
matures. If the value of the securities falls below the principal amount of the
repurchase agreement plus accrued interest, the financial institution deposits
additional collateral by the following business day. If the financial
institution either fails to deposit the required additional collateral or fails
to repurchase the securities as agreed, the Funds have the right to sell the
securities and recover any resulting loss from the financial institution. If
the financial institution enters into bankruptcy, the Funds' claims on the
collateral may be subject to legal proceedings.
I. ESTIMATES
In preparing its financial statements in conformity with US generally
accepted accounting principles, management makes estimates and assumptions.
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 their 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, 2007, 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, 2006, there were no fees waived.
Los Angeles Capital Management and Equity Research, Inc. ('LA Capital
Management') 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.
Citigroup Fund Services, LLC ('Citigroup') serves as the Funds'
Administrator, Accountant, and Transfer Agent. For its services, Citigroup
receives a combined fee based on the aggregate average net assets of the Funds
(subject to a minimum monthly fee) and monthly fees per open shareholder
account. Average net asset-based fees are calculated daily and all fees are
paid monthly.
The Northern Trust Company is the Funds' Custodian.
ISI Group, Inc. ('ISI Group'), an affiliate of ISI, is the Distributor for
the Funds. Total Return, Managed Municipal and Strategy each pay ISI Group a
distribution/shareholder service fee, pursuant to Rule 12b-1, that is
calculated daily and paid monthly at the annual rate up to 0.25% of their
average daily net assets. North American's ISI Class A Shares and ISI Class C
Shares pay ISI Group a distribution/shareholder service fee, pursuant to Rule
12b-1, that is calculated daily and paid monthly at the annual rate up to 0.40%
and 1.00% (which includes up to 0.25% for shareholder servicing fees for each
class) of their average daily net assets, respectively.
For the six months ended April 30, 2006, ISI Group earned commissions on
sales of ISI Shares of Total Return, Managed Municipal, and Strategy of $2,125,
$1,894 and $11,451, respectively, and $7,818 on sales of ISI Class A Shares of
North American. ISI Group retained $2,215 of the back-end sales charges on the
sale of ISI Class C Shares of North American.
EJV Financial Services, LLC ("EJV") provides certain compliance support
services to the Fund's Chief Compliance Officer. Ed J. Veilleux, Vice President
of the Funds is also principal of EJV.
37
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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. Distributions during the fiscal
years ended October 31, 2005 and 2004 were characterized for tax purposes as
follows:
- --------------------------------------------------------------------------------------------------------
Long-Term Capital
Ordinary Income Tax-Exempt Income Gains Return of Capital
- --------------------------------------------------------------------------------------------------------
October 31, October 31, October 31, October 31,
----------- ----------- ----------- -----------
2005 2004 2005 2004 2005 2004 2005 2004
---- ---- ---- ---- ---- ---- ---- ----
Total Return $5,069,701 $9,554,624 $ - $ - $427,439 $2,991,879 $1,616,199 $ 4,778,172
Managed Municipal 68,211 787,393 3,290,161 4,044,556 - - - -
North American 9,291,398 5,217,465 - - - 2,884,276 1,478,784 11,380,175
Strategy 753,672 330,186 - - - - - -
- --------------------------------------------------------------------------------------------------------
As of October 31, 2005, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
- ----------------------------------------------------------------------------------------------------
Undistributed Undistributed Undistributed Unrealized
Tax Exempt Ordinary Long-Term Capital Loss Appreciation
Income Income Capital Gains Carryforward (Depreciation) Total
- ----------------------------------------------------------------------------------------------------
Total Return $ - $ - $ - $ - $(5,460,143) $(5,460,143)
Managed Municipal 84,094 - 289,285 - 3,213,387 3,586,766
North American - - - - (6,115,149) (6,115,149)
Strategy - 40,256 - (2,047,065) 8,060,920 6,054,111
- ----------------------------------------------------------------------------------------------------
The difference between book basis and tax basis unrealized appreciation
(depreciation) for Strategy was primarily due to wash sales.
Strategy's capital loss carryforwards of $95,684, $1,875,067 and $76,314
expire in 2009, 2010 and 2013, respectively. To the extent future capital gains
are offset by capital loss carryforwards, such gains will not be distributed.
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, For the six months ended April 30, 2006, were as
follows:
-------------------------------------------------------------------------
Non-US Government Obligations US Government Obligations
-------------------------------------------------------------------------
Purchases Sales Purchases Sales
Total Return $ - $ - $7,234,246 $13,423,383
Managed Municipal 4,017,900 8,465,856 - -
North American 11,378,279 24,543,118 7,940,025 19,084,455
Strategy 11,589,852 8,798,155 - 729,080
-------------------------------------------------------------------------
38
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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
governments may be affected by adverse international political and economic
developments that may not impact the value of US government securities.
NOTE 5 - CONTRACTUAL OBLIGATIONS
In the ordinary course of business, the Funds enter into contracts that
contain a variety of indemnifications. Each Fund's maximum exposure under these
arrangements is unknown. However, the Funds have not had prior claims or losses
pursuant to these indemnification provisions and expect the risk of loss
thereunder to be remote.
NOTE 6 - 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, 2005 is
available, without charge and upon request, by calling (800) 955-7175. This
information is also available from the EDGAR database on the SEC's website at
http://www.sec.gov.
Total Return, Managed Municipal and North American are not required to adopt
proxy voting policies and procedures.
NOTE 7 - AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Funds file their complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. Each Funds' Form
N-Q is available on the SEC's website at http://www.sec.gov or may be reviewed
and copied at the SEC's Public Reference Room in Washington, DC. Information on
the operation of the Public Reference Room may be obtained by calling
800-SEC-0330.
NOTE 8 - CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Effective January 6, 2006, Ernst & Young LLP ("E & Y") resigned as each
Fund's independent registered public accountants. As of the same date and based
upon the recommendation of each Fund's Audit and Compliance Committee, each
Fund's Board of Directors approved Briggs Bunting & Dougherty, LLP as the
Funds' independent registered public accounting firm for the Funds' fiscal
years ending October 31, 2006. E & Y's reports on each Fund's financial
statements for the fiscal years ended October 31, 2004 and October 31, 2005
contained no adverse opinion or disclaimer of opinion nor were they qualified
or modified as to the uncertainty, audit scope, or accounting principles.
During the Funds' fiscal years ended October 31, 2004 and October 31, 2005 and
during the period of November 1, 2005 through January 6, 2006 (collectively,
the "Period"), (i) there were no disagreements with E & Y on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
E & Y, would have caused it to make reference to the subject matter of
disagreements in connection with its report on each Fund's financial statements
for such year, and (ii) there were no "reportable events" of the kind described
in Item 304 (a)(1)(v) of Regulation S-K under the Securities Exchange Act of
1934, as amended.
39
[THIS PAGE INTENTIONALLY LEFT BLANK]
LOGO
DIRECTORS AND OFFICERS
EDWARD S. HYMAN STEPHEN V. KILLORIN
CHAIRMAN VICE PRESIDENT
R. ALAN MEDAUGH TREASURER
PRESIDENT CHIEF COMPLIANCE OFFICER
W. MURRAY JACQUES CHIEF FINANCIAL OFFICER
DIRECTOR MARGARET M. BEELER
LOUIS E. LEVY VICE PRESIDENT
DIRECTOR SECRETARY
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.
40 WEST 57TH STREET, 18TH FLOOR
NEW YORK, NY 10019
(800) 955-7175
SHAREHOLDER SERVICING AGENT
CITIGROUP FUND SERVICES, LLC
TWO PORTLAND SQUARE
PORTLAND, ME 04101
(800) 882-8585
DISTRIBUTOR
ISI GROUP, INC.
40 WEST 57TH STREET, 18TH FLOOR
NEW YORK, NY 10019
(800) 955-7175
ITEM 2. CODE OF ETHICS
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrant's President and Treasurer have concluded that the
registrant's disclosure controls and procedures (as defined in rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")) are effective, based on
their evaluation of these disclosure controls and procedures required by Rule
30a-3(b) as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in rule 30a-3(d) under the Act) that occurred during the
registrant's last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).
(a)(3) Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant NORTH AMERICAN GOVERNMENT BOND FUND, INC
By /s/ R. Alan Medaugh
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R. Alan Medaugh, President
Date June 26, 2006
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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
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R. Alan Medaugh, President
Date June 26, 2006
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By /s/ Stephen V. Killorin
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Stephen V. Killorin, Treasurer
Date June 26, 2006
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