-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nmg+KtB7epRnz3rmOC3/jfX7la2EUM9UuBEymOGzzey9Y7J0wRPB1u/4r4xbvItB dLhDbNBO/VFeuuQaVzx8mA== 0001275125-04-000190.txt : 20040701 0001275125-04-000190.hdr.sgml : 20040701 20040701112259 ACCESSION NUMBER: 0001275125-04-000190 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040430 FILED AS OF DATE: 20040701 EFFECTIVENESS DATE: 20040701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH AMERICAN GOVERNMENT BOND FUND INC CENTRAL INDEX KEY: 0000893566 IRS NUMBER: 521798921 STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07292 FILM NUMBER: 04893554 BUSINESS ADDRESS: STREET 1: NORTH AMERICAN GOVERNMENT BOND FUND INC STREET 2: 535 MADISON AVE, 30TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: (800)955-7175 MAIL ADDRESS: STREET 1: C/O FORUM FINANCIAL GROUP, LLC STREET 2: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101-4049 N-CSRS 1 nf04-087.txt NORTH AMERICAN SEMI-ANNUAL N-CSR 04/30/04 As filed with the Securities and Exchange Commission on July 1, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07292 NORTH AMERICAN GOVERNMENT BOND FUND, INC. 535 Madison Avenue, 30th Floor New York, New York 10022 (212) 446-5600 R. Alan Medaugh, President 535 Madison Avenue, 30th Floor New York, NY 10022 (212) 446-5600 Date of fiscal year end: October 31, 2004 Date of reporting period: April 30, 2004 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. ISI INTERNATIONAL STRATEGY & INVESTMENT SEMI - ANNUAL REPORT APRIL 30, 2004 TOTAL RETURN US TREASURY FUND MANAGED MUNICIPAL FUND NORTH AMERICAN GOVERNMENT BOND FUND ISI STRATEGY FUND ISI FUNDS SEMI-ANNUAL REPORT - TABLE OF CONTENTS Investment Advisor's Message................................ 1 Performance Comparisons..................................... 2 Schedules of Investments.................................... 6 Statements of Assets and Liabilities........................ 20 Statements of Operations.................................... 22 Statements of Changes in Net Assets......................... 24 Financial Highlights........................................ 28 Notes to Financial Statements............................... 33
INVESTMENT ADVISOR'S MESSAGE Dear Shareholder: I am pleased to present the semi-annual report to shareholders for the ISI Funds. This report covers the six-month reporting period ended April 30, 2004. For this period, the Total Return US Treasury Fund, Inc. ('Total Return') produced a +0.39% return; Managed Municipal Fund, Inc. ('Managed Municipal') produced a +0.04% return; North American Government Bond Fund, Inc. ('North American') produced a -0.52% return in its Class A Shares and a -0.86% return in its Class C Shares; and ISI Strategy Fund, Inc. ('Strategy') produced a +4.42% return. These figures assume the reinvestment of dividends and capital gain distributions and exclude the impact of any sales charges. DESCRIPTION OF FUND OBJECTIVES Total Return, Managed Municipal, North American and Strategy, (each a 'Fund' and collectively, the 'Funds') are registered under the Investment Company Act of 1940, as amended, as open-end management investment companies. The Funds are organized as corporations under the laws of the State of Maryland. ISI manages all four Funds for total return through active management. Total Return's investment objective is to achieve a high level of total return with relative stability of principal, and secondarily, high current income consistent with an investment in securities issued by the United States Treasury. Managed Municipal's investment objective is designed to provide a high level of total return with relative stability of principal and, secondarily, high current income exempt from federal income tax through investment in a portfolio consisting primarily of tax-free municipal obligations. North American's investment objective is designed to provide a high level of current income, consistent with prudent investment risk. Strategy's investment objective is designed to maximize total return through a combination of long-term growth of capital and current income. We would like to welcome new investors to the ISI Funds and thank those who have been with us for some time. We appreciate your confidence. Sincerely, /s/ R. Alan Medaugh R. Alan Medaugh President May 7, 2004 1 TOTAL RETURN US TREASURY FUND - ISI SHARES PERFORMANCE COMPARISON(1) (PERFORMANCE GRAPH)
TOTAL RETURN US LEHMAN BROTHERS LEHMAN BROTHERS LONG- TREASURY FUND - ISI LEHMAN BROTHERS INTERMEDIATE TREASURY TERM TREASURY INDEX: DATE SHARES: $18,733 TREASURY INDEX: $19,809 INDEX: $18,704 $22,929 - ---- ------------------- ----------------------- --------------------- --------------------- 4/30/1994 9700 10000 10000 10000 9670 9988 10007 9934 9622 9965 10009 9840 9829 10147 10139 10173 9812 10149 10169 10098 9639 10007 10085 9780 9632 10001 10088 9746 9625 9981 10042 9804 9712 10042 10075 9955 9895 10228 10238 10210 10111 10446 10434 10500 10157 10512 10491 10590 4/30/1995 10289 10649 10612 10779 10854 11080 10911 11606 10944 11167 10984 11741 10838 11126 10989 11554 10995 11255 11077 11810 11131 11362 11151 12027 11367 11538 11275 12364 11583 11717 11413 12673 11810 11885 11527 13010 11825 11959 11626 13011 11435 11715 11502 12382 11256 11613 11445 12135 4/30/1996 11121 11543 11412 11932 11090 11520 11406 11870 11256 11666 11520 12123 11271 11694 11555 12127 11181 11670 11569 11976 11409 11861 11717 12307 11758 12122 11909 12791 12072 12332 12052 13217 11835 12205 11986 12897 11791 12217 12031 12805 11782 12232 12048 12811 11602 12100 11977 12483 4/30/1997 11778 12274 12112 12784 11893 12380 12206 12927 12071 12518 12309 13177 12574 12877 12540 13951 12340 12746 12490 13562 12558 12940 12626 13936 12816 13165 12774 14405 12909 13234 12804 14597 13092 13373 12908 14841 13290 13578 13082 15143 13229 13538 13064 15035 13259 13575 13103 15066 4/30/1998 13289 13635 13165 15122 13477 13777 13257 15411 13693 13936 13346 15769 13670 13957 13398 15703 14210 14337 13663 16412 14617 14736 13992 17012 14418 14689 14021 16755 14517 14686 13968 16884 14506 14714 14021 16849 14595 14800 14082 17000 14091 14422 13877 16164 14096 14477 13969 16127 4/30/1999 14143 14512 14008 16150 13975 14376 13919 15896 13878 14346 13945 15728 13825 14334 13958 15652 13771 14336 13986 15591 13878 14446 14095 15706 13868 14462 14113 15716 13798 14434 14119 15609 13683 14338 14079 15376 13838 14376 14041 15595 14129 14592 14150 16066 14497 14882 14331 16615 4/30/2000 14456 14835 14321 16482 14414 14857 14381 16423 14650 15108 14588 16778 14841 15264 14687 17067 15111 15488 14840 17456 14990 15500 14954 17245 15184 15651 15053 17514 15521 15972 15271 18067 15845 16277 15524 18492 15882 16409 15708 18524 16112 16607 15853 18841 16068 16661 15978 18746 4/30/2001 15748 16454 15914 18236 15785 16505 15980 18259 15840 16593 16038 18416 16308 17007 16329 19102 16579 17233 16470 19510 16701 17506 16811 19656 17245 17991 17066 20622 16675 17546 16873 19641 16510 17375 16792 19271 16618 17470 16838 19457 16726 17649 16977 19748 16334 17225 16717 18949 4/30/2002 16756 17653 17016 19669 16829 17752 17133 19731 17114 18003 17342 20085 17540 18429 17688 20704 18057 18828 17874 21608 18540 19335 18217 22509 18241 19121 18183 21862 18065 18932 18014 21620 18500 19424 18349 22506 18432 19365 18297 22430 18762 19698 18494 23109 18656 19616 18493 22818 4/30/2003 18751 19707 18530 23050 19343 20276 18818 24346 19217 20152 18788 23975 18351 19266 18376 21830 18448 19381 18402 22179 18955 19965 18783 23333 18659 19661 18600 22684 18701 19685 18595 22794 18831 19859 18736 23065 18992 20029 18828 23461 19222 20277 19003 23928 19375 20467 19137 24291 4/30/2004 18733 19809 18704 22929
Cumulative Total Returns With Load Annualized Total Returns With Load Periods Ending Since Since April 30, 2004 6 Months 1 Year 5 Years 10 Years Inception(2) 1 Year 5 Years 10 Years Inception(2) Total Return US Treasury Fund - ISI Shares -2.65% -3.13% 28.42% 87.33% 206.20% -3.13% 5.13% 6.48% 7.38% Lehman Brothers Treasury Index(3) 0.75% 0.51% 36.50% 98.09% 234.12% 0.51% 6.42% 7.07% 8.01% Lehman Brothers Intermediate Treasury Index(3) 0.56% 0.94% 33.52% 87.04% 204.02% 0.94% 5.95% 6.46% 7.36% Lehman Brothers Long-Term Treasury Index(3) 1.08% -0.53% 41.97% 129.29% 326.77% -0.53% 7.26% 8.65% 9.71%
- -------------------------------------------------------------------------------- (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 8.0 years. (2) The Fund's inception date is August 10, 1988. Benchmark returns are for the periods beginning August 31, 1988. (3) The Lehman Brothers Treasury Index is an unmanaged index reflecting the performance of all public 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) (PERFORMANCE GRAPH)
MANAGED MUNICIPAL LEHMAN BROTHERS LEHMAN BROTHERS FUND - ISI SHARES: GENERAL OBLIGATION PREREFUNDED MUNICIPAL CONSUMER PRICE INDEX: $16,638 INDEX: $18,423 BOND INDEX: $16,892 $12,754 ------------------ ------------------ --------------------- --------------------- 4/30/1994 9700 10000 10000 10000 9807 10078 10034 10007 9726 10017 10033 10041 9884 10174 10166 10068 9908 10217 10233 10109 9711 10074 10157 10136 9512 9929 10075 10143 9333 9773 9931 10156 9603 9946 10084 10156 9895 10182 10233 10197 10228 10451 10479 10238 10303 10592 10553 10271 4/30/1995 10268 10600 10608 10305 10665 10915 10851 10326 10519 10841 10879 10346 10625 10967 10995 10346 10722 11106 11068 10373 10768 11177 11068 10394 10979 11305 11138 10427 11170 11464 11260 10421 11310 11555 11328 10414 11389 11667 11457 10475 11268 11613 11415 10509 11053 11484 11302 10563 4/30/1996 11006 11444 11308 10604 10969 11426 11306 10624 11103 11541 11353 10631 11237 11651 11457 10651 11188 11650 11454 10672 11345 11793 11560 10706 11491 11931 11650 10740 11693 12153 11793 10760 11617 12104 11765 10760 11617 12137 11808 10794 11700 12247 11901 10828 11539 12089 11771 10855 4/30/1997 11634 12183 11810 10868 11807 12365 11978 10862 11937 12499 12058 10875 12292 12822 12262 10889 12117 12708 12204 10909 12282 12853 12308 10936 12345 12924 12357 10963 12397 12985 12384 10957 12593 13169 12491 10943 12721 13305 12600 10963 12692 13315 12635 10984 12698 13327 12632 11004 4/30/1998 12621 13257 12593 11024 12851 13475 12750 11045 12881 13524 12795 11058 12899 13556 12843 11072 13132 13770 12981 11086 13294 13955 13088 11099 13276 13958 13137 11126 13306 14004 13178 11126 13355 14048 13200 11119 13514 14233 13343 11147 13422 14160 13343 11160 13404 14166 13341 11194 4/30/1999 13447 14205 13379 11276 13310 14126 13331 11276 13099 13918 13215 11276 13149 13974 13294 11309 13011 13892 13294 11337 12948 13904 13337 11391 12797 13783 13323 11411 12962 13923 13389 11418 12847 13836 13353 11418 12757 13785 13370 11452 12963 13922 13423 11520 13285 14202 13538 11615 4/30/2000 13156 14130 13530 11622 13065 14055 13531 11635 13443 14416 13726 11696 13639 14606 13848 11723 13823 14815 13971 11723 13704 14740 13958 11784 13877 14895 14045 11805 14010 14999 14116 11811 14424 15353 14314 11805 14491 15520 14516 11879 14544 15567 14570 11927 14652 15704 14674 11954 4/30/2001 14436 15541 14606 12001 14585 15698 14747 12056 14694 15796 14825 12076 14900 16020 14968 12042 15134 16279 15151 12042 15037 16243 15208 12096 15231 16409 15344 12056 15092 16265 15240 12035 14994 16134 15174 11988 15192 16399 15395 12015 15375 16599 15562 12062 15063 16282 15246 12130 4/30/2002 15320 16618 15537 12198 15434 16709 15635 12198 15549 16896 15793 12205 15736 17105 15964 12219 15952 17300 16101 12259 16286 17650 16333 12280 16009 17364 16142 12300 15936 17279 16090 12300 16303 17618 16422 12273 16215 17588 16402 12327 16436 17830 16587 12422 16451 17865 16561 12497 4/30/2003 16570 17980 16645 12470 16883 18377 16924 12449 16734 18288 16876 12463 16102 17681 16484 12476 16283 17845 16581 12524 16738 18357 16946 12565 16631 18234 16861 12551 16799 18384 16940 12517 16937 18514 17036 12503 16937 18606 17098 12565 17239 18898 17308 12632 17094 18848 17209 12714 4/30/2004 16638 18423 16892 12754
Cumulative Total Returns With Load Annualized Total Returns With Load Periods Ending Since Since April 30, 2004 6 Months 1 Year 5 Years 10 Years Inception(2) 1 Year 5 Years 10 Years Inception(2) Managed Municipal Fund - ISI Shares -2.99% -2.58% 19.98% 66.38% 121.33% -2.58% 3.71% 5.22% 5.77% Lehman Brothers General Obligation Index(3) 1.04% 2.46% 29.69% 84.23% 154.33% 2.46% 5.34% 6.30% 6.81% Lehman Brothers Prerefunded Municipal Bond Index(3) 0.19% 1.48% 26.25% 68.92% 127.96% 1.48% 4.77% 5.38% 5.99% Consumer Price Index(4) 1.61% 2.29% 13.12% 27.54% 46.88% 2.29% 2.50% 2.46% 2.75%
- -------------------------------------------------------------------------------- (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 SHARES PERFORMANCE COMPARISON(1) (PERFORMANCE GRAPH)
NORTH AMERICAN LEHMAN BROTHERS GOVERNMENT BOND FUND LEHMAN BROTHERS EMERGING AMERICAS -ISI CLASS A SHARES: INTERMEDIATE TREASURY INDEX: MEXICO SECTION: CONSUMER PRICE INDEX: $17,799 INDEX: $18,704 $29,908 $12,754 -------------------- --------------------- ---------------------- --------------------- 4/30/1994 9700 10000 10000 10000 9632 10007 10389 10007 9549 10009 10056 10041 9643 10139 10333 10068 9811 10169 10605 10109 9769 10085 10500 10136 9706 10088 10444 10143 9727 10042 10539 10156 8929 10075 9292 10156 8822 10238 8870 10197 9029 10434 8208 10238 8887 10491 7947 10271 4/30/1995 9186 10612 8994 10305 9576 10911 9440 10326 9699 10984 10025 10346 9687 10989 10355 10346 9836 11077 10469 10373 9973 11151 10574 10394 10020 11275 10297 10427 10137 11413 10602 10421 10325 11527 11177 10414 10408 11626 11760 10475 10075 11502 11292 10509 10040 11445 11610 10563 4/30/1996 10016 11412 12033 10604 10065 11406 11929 10624 10188 11520 12115 10631 10250 11555 12144 10651 10273 11569 12570 10672 10536 11717 12995 10706 10851 11909 13042 10740 11167 12052 13511 10760 10964 11986 13633 10760 10964 12031 14108 10794 10976 12048 14352 10828 10833 11977 13787 10855 4/30/1997 10978 12112 14134 10868 11123 12206 14644 10862 11283 12309 14956 10875 11794 12540 15627 10889 11605 12490 15492 10909 11850 12626 15926 10936 11960 12774 15196 10963 12070 12804 15580 10957 12279 12908 15905 10943 12391 13082 16242 10963 12363 13064 16387 10984 12420 13103 16517 11004 4/30/1998 12477 13165 16563 11024 12549 13257 16418 11045 12694 13346 16340 11058 12708 13398 16496 11072 12928 13663 13902 11086 13240 13992 14373 11099 13150 14021 14864 11126 13270 13968 15838 11126 13315 14021 15792 11119 13361 14082 15622 11147 13051 13877 15702 11160 13161 13969 16434 11194 4/30/1999 13271 14008 16949 11276 13049 13919 16211 11276 13066 13945 16431 11276 13049 13958 16257 11309 13033 13986 16425 11337 13132 14095 16814 11391 13116 14113 17126 11411 13149 14119 17617 11418 13099 14079 18078 11418 13200 14041 17944 11452 13471 14150 18788 11520 13795 14331 19284 11615 4/30/2000 13726 14321 19020 11622 13709 14381 18650 11635 13865 14588 19384 11696 14094 14687 19853 11723 14324 14840 20351 11723 14270 14954 20399 11784 14378 15053 20197 11805 14687 15271 20504 11811 14943 15524 20807 11805 15017 15708 21196 11879 15202 15853 21046 11927 15277 15978 21133 11954 4/30/2001 15164 15914 21258 12001 15258 15980 21747 12056 15353 16038 22179 12076 15681 16329 22227 12042 15914 16470 22680 12042 15935 16811 22112 12096 16485 17066 22988 12056 16069 16873 23095 12035 15969 16792 23408 11988 16070 16838 23781 12015 16191 16977 24514 12062 15946 16717 24145 12130 4/30/2002 16172 17016 24698 12198 16193 17133 24711 12198 16314 17342 24315 12205 16624 17688 24043 12219 17063 17874 25056 12259 17356 18217 25009 12280 17181 18183 25522 12300 17113 18014 26068 12300 17385 18349 26769 12273 17272 18297 26643 12327 17531 18494 27168 12422 17526 18493 27689 12497 4/30/2003 17832 18530 28658 12470 18475 18818 29532 12449 18403 18788 29421 12463 17563 18376 28175 12476 17559 18402 28497 12524 18080 18783 29628 12565 17891 18600 29297 12551 17794 18595 29421 12517 17977 18736 29824 12503 18162 18828 30135 12565 18353 19003 30754 12632 18497 19137 31341 12714 4/30/2004 17799 18704 29908 12754
Cumulative Total Returns With Load Annualized Total Returns With Load Periods Ending Since Since April 30, 2004 6 Months 1 Year 5 Years 10 Years Inception(2) 1 Year 5 Years 10 Years Inception(2) North American Government Bond Fund - ISI Class A Shares -3.52% -3.22% 30.10% 77.99% 87.01% -3.22% 5.40% 5.94% 5.70% Lehman Brothers Intermediate Treasury Index(3) 0.56% 0.94% 33.52% 87.04% 93.74% 0.94% 5.95% 6.46% 6.06% Lehman Brothers Emerging Americas Index: Mexico Section(3) 2.09% 4.36% 76.46% 199.08% 217.55% 4.36% 12.03% 11.58% 11.35% Consumer Price Index(4) 1.61% 2.29% 13.12% 27.54% 31.84% 2.29% 2.50% 2.46% 2.49%
- -------------------------------------------------------------------------------- (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. On May 16, 2003, ISI Shares were redesignated as ISI Class A Shares. (2) The Fund's inception date is January 15, 1993. Benchmark returns are for the periods beginning January 31, 1993. (3) The Lehman Brothers Intermediate Treasury Index is an unmanaged index reflecting the performance of US Treasury securities in the intermediate-term Treasury sector. Lehman Brothers Emerging Americas Index: Mexico Section is an unmanaged sub-index of the Lehman Brothers Emerging Markets Index reflecting the performance of selected Mexican debt instruments with maturities of one year or more. The performance information in the graph and table above is quoted in US dollars. 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. 4 ISI STRATEGY FUND - ISI SHARES PERFORMANCE COMPARISON(1) (PERFORMANCE GRAPH)
ISI STRATEGY FUND - ISI WILSHIRE 5000 STOCK CONSUMER PRICE INDEX: LIPPER FLEXIBLE PORTFOLIO SHARES: $12,788 INDEX: $12,870 $11,662 FUNDS AVERAGE: $13,094 ----------------------- ------------------- --------------------- ------------------------- 9/16/1997 9700 10000 10000 10000 9719 10000 10000 10000 9554 9667 10025 9776 9767 9983 10019 9937 9933 10168 10006 10070 10020 10223 10025 10137 10459 10967 10043 10599 10810 11516 10062 10957 4/30/1998 10878 11653 10081 11046 10761 11343 10099 10919 11044 11741 10112 11132 10887 11483 10124 10986 9992 9695 10137 9874 10483 10328 10149 10265 10888 11097 10174 10722 11337 11796 10174 11138 11776 12550 10168 11553 12079 13012 10192 11756 11634 12540 10205 11431 11937 13024 10236 11737 4/30/1999 12301 13648 10310 12113 12068 13350 10310 11912 12443 14041 10310 12304 12148 13590 10341 12112 12046 13464 10366 12025 11863 13112 10416 11896 12282 13946 10434 12270 12496 14413 10440 12531 12953 15507 10440 13155 12649 14864 10472 12810 12869 15196 10534 13055 13498 16099 10620 13637 4/30/2000 13056 15260 10627 13318 12804 14727 10639 13116 13183 15377 10695 13438 13098 15063 10720 13322 13734 16157 10720 13931 13289 15403 10775 13568 13205 15076 10794 13475 12491 13576 10800 12904 12735 13818 10794 13201 13063 14347 10862 13452 12340 12986 10906 12779 11865 12112 10931 12251 4/30/2001 12299 13109 10974 12823 12379 13239 11024 12897 12254 13018 11042 12677 12259 12803 11011 12622 11814 12028 11011 12199 11107 10947 11061 11501 11416 11226 11024 11733 11874 12084 11005 12210 12006 12301 10962 12318 11903 12149 10986 12168 11765 11899 11030 12026 12087 12420 11092 12342 4/30/2002 11814 11813 11154 12041 11768 11674 11154 11983 11193 10854 11160 11383 10618 9978 11173 10768 10745 10036 11210 10861 10041 9029 11228 10161 10515 9720 11247 10599 10885 10306 11247 11000 10500 9735 11222 10682 10291 9490 11272 10530 10221 9329 11359 10435 10326 9435 11427 10471 4/30/2003 10932 10208 11402 11048 11479 10832 11383 11585 11569 10992 11396 11706 11592 11257 11408 11774 11849 11527 11452 11995 11779 11400 11489 12014 12246 12096 11476 12478 12363 12265 11445 12639 12722 12816 11433 13112 12956 13101 11489 13307 13120 13292 11551 13492 13046 13149 11625 13444 4/30/2004 12788 12870 11662 13094
Annualized Total Returns Cumulative Total Returns With Load With Load Periods Ending Since Since April 30, 2004 6 Months 1 Year 5 Years Inception(2) 1 Year 5 Years Inception(2) ISI Strategy Fund - ISI Shares 1.33% 13.48% 0.80% 27.88% 13.48% 0.16% 3.79% Wilshire 5000 Stock Index(3) 6.40% 26.07% -5.71% 28.70% 26.07% -1.17% 3.91% Consumer Price Index(4) 1.61% 2.29% 13.12% 16.62% 2.29% 2.50% 2.36% Lipper Flexible Portfolio Funds Average(5) 4.29% 17.01% 8.34% 30.94% 17.01% 1.36% 3.98%
- -------------------------------------------------------------------------------- (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 Wilshire 5000 Stock 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. 5 TOTAL RETURN US TREASURY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
INTEREST MATURITY PAR MARKET SECURITY RATE DATE VALUE VALUE - ----------------------------------------------------------------------------------------------------------- US TREASURY OBLIGATIONS - 97.33% US Treasury Bond 10.375% 11/15/12 $14,250,000 $ 17,683,359 US Treasury Bond 7.500% 11/15/24 4,000,000 5,086,875 US Treasury Bond 7.625% 2/15/25 11,500,000 14,811,641 US Treasury Bond 6.000% 2/15/26 11,500,000 12,432,578 US Treasury Bond 6.375% 8/15/27 28,000,000 31,701,250 US Treasury Note 3.250% 5/31/04 56,000,000 56,096,250 US Treasury Note 1.875% 11/30/05 19,000,000 18,946,563 US Treasury Note 3.000% 2/15/08 15,000,000 14,892,187 US Treasury Note 5.500% 5/15/09 25,000,000 27,171,875 ------------ TOTAL US TREASURY OBLIGATIONS (COST $206,374,492)...................................................... 198,822,578 ------------ REPURCHASE AGREEMENT - 1.60% JP MORGAN CHASE & CO. Dated 4/30/04, 0.750%, principal and interest in the amount of $3,256,204 due 5/3/04, collateralized by US Treasury Bond, par value of $2,675,000, due 4/15/32 with a value of $3,321,526..................................... 3,256,000 ------------ TOTAL REPURCHASE AGREEMENT (COST $3,256,000)........................................................ 3,256,000 ------------ TOTAL INVESTMENTS - 98.93% (COST $209,630,492)...................................................... 202,078,578 OTHER ASSETS IN EXCESS OF LIABILITIES - 1.07%........................................ 2,190,858 ------------ NET ASSETS - 100.00%................................................................. $204,269,436 ============
6 See Notes to Financial Statements. MANAGED MUNICIPAL FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
RATING* (MOODY'S/ PAR MARKET SECURITY S&P) VALUE VALUE - -------------------------------------------------------------------------------------------------- MUNICIPAL BONDS - 96.01% GENERAL OBLIGATIONS - 64.62% Alexandria, VA, Capital Improvement 4.250%, 6/15/21.................................... Aaa/AAA $3,300,000 $ 3,147,408 Arlington County, VA 5.000%, 10/1/14.................................... Aaa/AAA 2,000,000 2,126,860 4.500%, 1/15/28.................................... Aaa/AAA 4,500,000 4,215,375 Cary, NC 5.000%, 3/1/18..................................... Aaa/AAA 2,000,000 2,113,780 Charlotte, NC 5.000%, 2/1/19..................................... Aaa/AAA 2,300,000 2,401,752 Chesterfield County, VA 5.625%, 1/15/14.................................... Aaa/AAA 1,350,000 1,520,923 5.000%, 1/15/20.................................... Aaa/AAA 1,000,000 1,025,170 Dallas, TX 4.000%, 2/15/16.................................... Aa1/AA+ 2,450,000 2,350,653 4.500%, 2/15/23.................................... Aa1/AA+ 3,500,000 3,306,485 Delaware State, Series A 4.200%, 1/1/20..................................... Aaa/AAA 1,675,000 1,601,937 Dupage County, IL, Jail Project 5.600%, 1/1/21..................................... Aaa/AAA 1,600,000 1,777,808 Florida State, Board of Education, Public Education Capital Outlay, Series A 5.125%, 6/1/21..................................... Aa2/AA+ 1,000,000 1,033,540 Florida State, Board of Education, Public Education, Series I 4.125%, 6/1/21..................................... Aa2/AA+ 3,000,000 2,758,710 Georgia State, Series B 5.000%, 7/1/19..................................... Aaa/AAA 5,000,000 5,189,300 Georgia State, Series D 5.000%, 10/1/17.................................... Aaa/AAA 1,850,000 1,942,556 Guilford County, NC, Series B 5.250%, 10/1/16.................................... Aa1/AAA 3,000,000 3,236,490 King County, WA, Series G 5.000%, 12/1/17.................................... Aa1/AA+ 2,565,000 2,648,439
See Notes to Financial Statements. 7 MANAGED MUNICIPAL FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
RATING* (MOODY'S/ PAR MARKET SECURITY S&P) VALUE VALUE - -------------------------------------------------------------------------------------------------- Mecklenburg County, NC, Series A 4.250%, 2/1/19..................................... Aaa/AAA $2,000,000 $ 1,934,880 4.000%, 2/1/20..................................... Aaa/AAA 3,000,000 2,794,890 Minneapolis, MN, Series B 5.200%, 3/1/13..................................... Aa1/AAA 3,200,000 3,343,136 Minnesota State 5.500%, 6/1/18..................................... Aa1/AAA 2,000,000 2,180,740 Missouri State, Fourth State Building, Series A 4.125%, 10/1/19.................................... Aaa/AAA 2,000,000 1,913,960 5.000%, 6/1/23..................................... Aaa/AAA 2,000,000 2,019,020 Montgomery County, MD, Series A 4.000%, 5/1/21..................................... Aaa/AAA 2,450,000 2,241,848 5.000%, 2/1/22..................................... Aaa/AAA 2,750,000 2,847,515 North Carolina State, Public School Building 4.600%, 4/1/17..................................... Aa1/AAA 5,000,000 5,129,850 Salt Lake City, UT, School District, Series A 4.500%, 3/1/20..................................... Aaa/NR 2,240,000 2,181,670 South Carolina State, Highway, Series B 5.000%, 4/1/19..................................... Aaa/AAA 1,000,000 1,043,460 South Carolina State, State Institutional Series A 5.300%, 3/1/17..................................... Aaa/AAA 1,700,000 1,828,112 Spring Branch, TX, Independent School District 5.125%, 2/1/26..................................... Aaa/AAA 2,000,000 2,015,960 Virginia State 5.250%, 6/1/16..................................... Aaa/AAA 1,320,000 1,420,360 Washington State, Series E 5.000%, 7/1/22..................................... Aa1/AA 2,000,000 2,016,180 ------------ 77,308,767 ------------ OTHER REVENUE - 13.32% Cobb County, GA, Water & Sewer Revenue 4.250%, 7/1/20..................................... Aaa/AAA 4,700,000 4,495,456 Fairfax County, VA, Water Authority Water Revenue 5.000%, 4/1/27..................................... Aa1/AAA 3,500,000 3,538,640 Gwinnett County, GA, Water & Sewer Authority 5.300%, 8/1/20..................................... Aaa/AAA 1,250,000 1,331,600 5.250%, 8/1/24..................................... Aaa/AAA 1,500,000 1,553,295
8 See Notes to Financial Statements. MANAGED MUNICIPAL FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
RATING* (MOODY'S/ PAR MARKET SECURITY S&P) VALUE VALUE - -------------------------------------------------------------------------------------------------- Gwinnett County, GA, Water & Sewer Authority, Series B 4.750%, 8/1/21..................................... Aaa/AAA $2,000,000 $ 2,017,020 Texas, Water Development Board Revenue 4.750%, 7/15/20.................................... Aaa/AAA 3,000,000 3,006,030 ------------ 15,942,041 ------------ PREREFUNDED ISSUES - 18.07% Arlington, TX, Independent School District 5.750%, 2/15/21.................................... Aaa/NR 3,535,000 3,659,149 Charlotte, NC, Water & Sewer System Revenue 5.250%, 6/1/24..................................... Aa1/AAA 1,600,000 1,784,848 Chicago, IL, Metropolitan Water Reclamation District-Greater Chicago Capital Improvement 6.300%, 12/1/09.................................... Aaa/AA+ 1,000,000 1,073,150 Dallas, TX 5.000%, 2/15/10.................................... Aa1/AA+ 1,750,000 1,800,873 Delaware State, Series A 5.125%, 4/1/16..................................... Aaa/AAA 2,150,000 2,284,031 5.500%, 4/1/19..................................... Aaa/AAA 2,500,000 2,805,625 Florida State, Transportation 5.800%, 7/1/18..................................... Aa2/AAA 2,000,000 2,121,960 South Carolina State, Highway, Series B 5.650%, 7/1/21..................................... Aaa/AAA 1,260,000 1,385,105 Tennessee State, Series A 5.500%, 3/1/09..................................... Aa2/AA 1,535,000 1,588,525 Tennessee State, Series A 5.550%, 3/1/10..................................... Aa2/AA 1,000,000 1,035,290 Texas State, Series A 6.000%, 10/1/14.................................... Aaa/AA 2,000,000 2,085,320 ------------ 21,623,876 ------------ TOTAL MUNICIPAL BONDS (COST $111,648,096).................................................. 114,874,684 ------------
See Notes to Financial Statements. 9 MANAGED MUNICIPAL FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
MARKET ISSUER VALUE - ------------------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS - 3.28% JP MORGAN CHASE & CO. Dated 4/30/04, 0.750%, principal and interest in the amount of $3,923,245 due 5/3/04, collateralized by US Treasury Note, par value of $4,000,000, due 1/15/14 with a value of $4,003,251................................. $ 3,923,000 ------------ TOTAL REPURCHASE AGREEMENT (COST $3,923,000)................................................... 3,923,000 ------------ TOTAL INVESTMENTS - 99.29% (COST $115,571,096)................................................. 118,797,684 OTHER ASSETS IN EXCESS OF LIABILITIES - 0.71%................................. 844,975 ------------ NET ASSETS - 100.00%.......................................................... $119,642,659 ============
- -------------------------------------------------------------------------------- *The Moody's and Standard & Poor's ratings indicated are believed to be the most recent ratings available as of April 30, 2004. Moody's Municipal Bond Ratings: Aaa Judged to be of the best quality. Aa Judged to be of high quality by all standards. Issues are sometimes denoted with a 1, 2 or 3, which denote a high, medium or low ranking within the rating.
S & P Municipal Bond Ratings: AAA Of the highest quality. AA The second strongest capacity for payment of debt services. Those issues determined to possess very strong safety characteristics are denoted with a plus (+) sign. NR Not Rated.
10 See Notes to Financial Statements. NORTH AMERICAN GOVERNMENT BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
INTEREST MATURITY PAR/NOMINAL MARKET SECURITY RATE DATE VALUE(1) VALUE - --------------------------------------------------------------------------------------------- CANADIAN SECURITIES - 7.20% Canadian Government Bond 4.500% 9/1/07 C 14,800,000 $ 11,191,381 Canadian Government Bond 6.000% 6/1/11 8,500,000 6,815,676 ------------ TOTAL CANADIAN SECURITIES (COST $15,747,640).................................................. 18,007,057 ------------ MEXICAN SECURITIES - 20.08% Mexican Bono(2) 14.000% 9/2/04 P 120,484,000 10,826,908 Mexican Bono(2) 14.500% 5/12/05 71,387,700 6,753,040 Mexican Bono(2) 10.500% 8/24/06 52,868,200 4,947,092 Mexican Bono(2) 8.000% 12/28/06 30,686,400 2,730,487 Mexican Bono(2) 9.000% 7/9/09 77,131,000 7,039,937 Mexican Bono(2) 10.500% 7/14/11 160,487,300 15,198,138 Mexican Bono(2) 9.000% 12/20/12 31,470,000 2,715,738 ------------ TOTAL MEXICAN SECURITIES (COST $55,011,568).................................................. 50,211,340 ------------ US SECURITIES - 70.39% US Treasury Bond 7.625% 2/15/25 $ 10,100,000 13,008,484 US Treasury Bond 6.000% 2/15/26 11,500,000 12,432,578 US Treasury Bond 6.375% 8/15/27 22,100,000 25,021,344 US Treasury Note 3.250% 5/31/04 42,000,000 42,072,188 US Treasury Note 1.875% 11/30/05 28,000,000 27,921,250 US Treasury Note 2.375% 8/15/06 2,000,000 1,994,062 US Treasury Note 3.000% 2/15/08 16,100,000 15,984,281 US Treasury Note 3.250% 8/15/08 5,500,000 5,465,625 US Treasury Note 3.125% 9/15/08 2,000,000 1,973,125 US Treasury Note 5.000% 2/15/11 19,500,000 20,569,453 US Treasury Note 4.250% 8/15/13 9,750,000 9,585,469 ------------ TOTAL US SECURITIES (COST $184,802,163)................................................. 176,027,859 ------------
See Notes to Financial Statements. 11 NORTH AMERICAN GOVERNMENT BOND FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
MARKET SECURITY VALUE - --------------------------------------------------------------------------------------------- REPURCHASE AGREEMENT - 1.75% JP MORGAN CHASE & CO. Dated 4/30/04, 0.750%, principal and interest in the amount of $4,377,274 due 5/3/04, collateralized by US Treasury Note, par value of $4,465,000, due 1/15/14 with a value of $4,468,629................................... $ 4,377,000 ------------ TOTAL REPURCHASE AGREEMENT (COST $4,377,000)...................................................... 4,377,000 ------------ TOTAL INVESTMENTS - 99.42% (COST $259,938,371).................................................... 248,623,256 OTHER ASSETS IN EXCESS OF LIABILITIES - 0.58%................................. 1,448,860 ------------ NET ASSETS - 100.00%.......................................................... $250,072,116 ============
- -------------------------------------------------------------------------------- (1) Par Value is shown in local currency: Canadian dollars (C), Mexican pesos (P) and US dollars ($). (2) Bonos are fixed rate, local currency-denominated coupon bonds issued by the Mexican government. 12 See Notes to Financial Statements. ISI STRATEGY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
MARKET MARKET SECURITY SHARES VALUE SECURITY SHARES VALUE - -------------------------------------------------------------------------------------------------------------------------- COMMON STOCK - 68.78% BIOTECHNOLOGY - 1.40% BASIC MATERIALS - 3.11% Caremark Rx, Inc.+ 6,431 $ 217,689 Air Products & Chemicals, Inc. 250 $ 12,453 Invitrogen Corp.+ 5,000 361,150 Alcoa, Inc. 712 21,894 ----------- Allegheny Technologies, Inc. 1,300 13,286 578,839 Archer-Daniels-Midland Co. 6,000 105,360 ----------- Bowater, Inc. 100 4,195 BUSINESS SERVICES - 0.14% Buckeye Technologies, Inc.+ 3,400 35,700 CCC Information Services+ 548 8,823 Caraustar Industries, Inc.+ 2,400 30,360 Cendant Corp. 190 4,499 Central Garden & Pet Co.+ 5,000 192,550 ServiceMaster Co. 1,100 13,343 Cleveland-Cliffs, Inc.+ 450 21,321 United Rentals, Inc.+ 1,325 22,790 Corn Products International, Inc. 1,500 63,750 Weight Watchers International, Crown Holdings, Inc.+ 4,600 38,824 Inc.+ 160 6,240 Dow Chemical Co. 592 23,496 ----------- Du Pont (E.I.) de Nemours & Co. 3,206 137,698 55,695 FMC Corp.+ 2,100 90,069 ----------- Glaims Gold Ltd.+ 5,100 73,440 CAPITAL GOODS - 3.52% Lafarge North America, Inc. 200 8,850 3M Co. 1,262 109,138 Monsanto Co. 282 9,754 AGCO Corp.+ 3,100 59,675 Nucor Corp. 100 5,940 Amerco, Inc.+ 3,300 92,829 OM Group, Inc.+ 3,000 76,350 American Standard Cos., Inc.+ 300 31,557 Owens-Illinois, Inc.+ 2,900 40,484 Avery Dennison Corp. 100 6,423 Playtex Products, Inc.+ 700 5,187 Aviall, Inc.+ 2,100 34,755 Potlatch Corp. 2,800 106,064 Boeing Co. 730 31,164 PPG Industries, Inc. 200 11,862 Caterpillar, Inc. 510 39,642 Praxair, Inc. 300 10,965 Clarcor, Inc. 100 4,402 Quanex Corp. 300 12,240 Deere & Co. 200 13,608 Rohm & Haas Co. 273 10,587 Emerson Electric Co. 460 27,701 Smurfit-Stone Container Corp.+ 1,900 32,661 General Electric Co. 4,414 132,199 Sonoco Products Co. 270 6,712 Harsco Corp. 97 4,222 Temple-Inland, Inc. 100 6,177 Illinois Tool Works, Inc. 690 59,485 UnionBanCal Corp. 200 10,686 Johnson Controls, Inc. 1,220 66,929 United States Steel Corp. 516 14,773 Kennametal, Inc. 1,600 69,056 Valspar Corp. 100 4,965 Lockheed Martin Corp. 200 9,540 Vulcan Materials Co. 100 4,624 Manitowoc Co. 5,000 152,050 Weyerhaeuser Co. 350 20,720 Mastec, Inc.+ 700 5,131 Worthington Industries, Inc. 1,000 18,050 Navistar International Corp.+ 5,000 225,750 ----------- Orbital Sciences Corp.+ 2,000 25,760 1,282,047 Pitney Bowes, Inc. 429 18,769 ----------- Raytheon Co. 200 6,452 Solectron Corp.+ 8,800 43,120 Teleflex, Inc. 100 4,565 Terex Corp.+ 2,700 88,695 Textron, Inc. 200 11,036 United Stationers, Inc.+ 600 22,800
See Notes to Financial Statements. 13 ISI STRATEGY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
MARKET MARKET SECURITY SHARES VALUE SECURITY SHARES VALUE - -------------------------------------------------------------------------------------------------------------------------- COMMON STOCK CONSUMER STAPLES - 5.22% CAPITAL GOODS (CONTINUED) Altria Group, Inc. 2,171 $ 120,230 URS Corp.+ 1,430 $ 36,937 AMC Entertainment, Inc.+ 5,000 79,750 York International Corp. 500 19,600 Anheuser-Busch Cos., Inc. 3,202 164,070 ----------- Bunge Ltd. 1,400 51,870 1,452,990 Cablevision Systems Corp.+ 3,325 72,585 ----------- Cardinal Health, Inc. 416 30,472 CONSUMER CYCLICALS - 8.55% Clear Channel Communications, Inc. 85 3,527 Black & Decker Corp. 100 5,785 Clorox Co. 268 13,877 Brunswick Corp. 271 11,141 Coca-Cola Co. 5,612 283,799 Carnival Corp. 196 8,363 Colgate Palmolive Co. 820 47,462 Centex Corp. 5,400 258,930 ConAgra Foods, Inc. 469 13,549 Dow Jones & Co., Inc. 100 4,609 COX Communications, Inc. - Class A+ 701 22,916 Eagle Materials, Inc. 8 526 Dean Foods Co.+ 5,000 167,900 Ford Motor Co. 10,800 165,888 Eastman Kodak Co. 5,570 143,650 General Motors Corp. 2,545 120,684 Echostar Communications Genesis Intermedia, Inc.+* 600 - Corp. - Class A+ 100 3,319 Genuine Parts Co. 1,450 51,910 Entercom Communications Corp.+ 260 11,856 Harley-Davidson, Inc. 300 16,896 Fortune Brands, Inc. 38 2,897 Harrah's Entertainment, Inc. 200 10,636 Kimberly-Clark Corp. 214 14,006 KB Home 200 13,786 Liberty Media Corp. - Class A+ 7,580 82,925 Knight-Ridder, Inc. 169 13,087 PepsiCo, Inc. 2,711 147,722 Lear Corp. 300 18,186 Procter & Gamble Co. 3,772 398,889 Lee Enterprises, Inc. 100 4,778 Sara Lee Corp. 300 6,924 Lennar Corp. - Class A 400 18,740 Sysco Corp. 670 25,627 Marriott International, Time Warner, Inc.+ 4,250 71,485 Inc. - Class A 300 14,148 Univision Communications, Masco Corp. 210 5,882 Inc. - Class A+ 1,402 47,458 McClatchy Co. - Class A 150 10,650 Viacom, Inc. - Class B 1,566 60,526 McGraw-Hill Cos., Inc. 300 23,658 Walt Disney Co. 2,385 54,927 Meredith Corp. 100 5,094 Yum! Brands, Inc.+ 180 6,982 Mohawk Industries, Inc.+ 150 11,571 ----------- Nike, Inc. - Class B 350 25,182 2,151,200 NVR, Inc.+ 5,000 2,255,000 ----------- Pulte Homes, Inc. 394 19,373 ENERGY - 5.63% Scholastic Corp.+ 600 17,016 ChevronTexaco Corp. 5,214 477,081 Scripps (E.W.) Co. - Class A 300 31,665 ConocoPhillips 4,325 308,372 V.F. Corp. 200 9,232 Devon Energy Corp. 5,136 314,323 Washington Post Co. - Class B 36 33,120 Exxon Mobil Corp. 14,663 623,911 Whirlpool Corp. 5,200 340,652 Marathon Oil Corp. 4,500 151,020 ----------- Sunoco, Inc. 1,513 95,168 3,526,188 Valero Energy Corp. 5,500 350,680 ----------- ----------- 2,320,555 -----------
14 See Notes to Financial Statements. ISI STRATEGY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
MARKET MARKET SECURITY SHARES VALUE SECURITY SHARES VALUE - -------------------------------------------------------------------------------------------------------------------------- COMMON STOCK La Quinta Corp.+ 2,800 $ 20,132 FINANCE - 10.69% Legg Mason, Inc. 200 18,412 Affiliated Managers Group+ 600 $ 29,220 Lehman Brothers Holdings, Inc. 400 29,360 Aflac, Inc. 560 23,649 Liberty Property Trust 100 3,655 Alliance Capital Management Holding Lincoln National Corp. 100 4,488 LP 100 3,335 LNR Property Corp. 1,700 85,374 AMBAC Financial Group, Inc. 250 17,250 M & T Bank Corp. 512 43,520 American Capital Strategies Ltd. 1,889 49,586 Marsh & McLennan Cos., Inc. 1,525 68,777 American Express Co. 1,825 89,334 MBIA, Inc. 150 8,833 Associated Banc Corp. 121 4,955 MBNA, Inc. 1,475 35,960 AvalonBay Communities, Inc. 100 4,963 Mellon Financial Corp. 210 6,224 Bank of America Corp. 6,992 562,786 Mercantile Bankshares Corp. 100 4,292 Bank of Hawaii Corp. 1,855 81,101 Mercury General Corp. 100 5,099 Bank of New York Co., Inc. 670 19,524 Merrill Lynch & Co., Inc. 1,120 60,738 BB&T Corp. 1,391 47,976 Metlife, Inc. 648 22,356 Bear Stearns Cos. Inc. 220 17,631 MGIC Investment Corp. 153 11,264 Boston Properties, Inc. 100 4,700 Moody's Corp. 3,907 252,041 Capital One Financial Corp. 150 9,829 Morgan Stanley 2,481 127,499 Charter One Financial, Inc. 160 5,339 National City Corp. 710 24,616 Chubb Corp. 400 27,600 New Century Financial 1,868 79,259 Citigroup, Inc. 7,702 370,389 North Fork Bancorp., Inc. 150 5,568 City National Corp. 100 6,165 Northern Trust Corp. 300 12,684 Comerica, Inc. 250 12,907 Old Republic International Corp. 150 3,483 Commerce Bancorp, Inc./NJ 870 49,599 PNC Financial Services Group, Inc. 460 24,426 Commerce Bancshares, Inc. 132 5,927 Popular, Inc. 100 4,200 Countrywide Financial Corp. 399 23,661 Progressive Corp. 910 79,643 Equity Office Properties Trust 344 8,658 Prudential Financial, Inc. 1,450 63,713 Equity Residential 200 5,492 Public Storage, Inc. 186 7,773 Fannie Mae 5,652 388,405 Radian Group, Inc. 200 9,302 Fidelity National Financial, Inc. 520 19,032 Regions Financial Corp. 200 6,942 Financial Federal Corp.+ 812 25,416 Rouse Co. 100 4,330 First Horizon National Corp. 100 4,396 SEI Investments, Co. 1,000 29,520 Franklin Resources, Inc. 300 16,449 Simon Property Group, Inc. 100 4,821 Freddie Mac 1,060 61,904 SLM Corp. 1,250 47,888 Golden West Financial Corp. 300 31,533 St. Paul Travelers Cos., Inc. 100 4,067 Greenpoint Financial Corp. 225 8,775 State Street Corp. 300 14,640 Health Care Property Investors, Student Loan Corp. 710 100,536 Inc. 200 4,780 SunTrust Banks, Inc. 602 40,966 Host Marriott Corp.+ 5,200 61,880 T. Rowe Price Group, Inc. 100 5,128 iStar Financial, Inc. 100 3,554 TCF Financial Corp. 100 4,955 J.P. Morgan Chase & Co. 2,580 97,008 Torchmark Corp. 200 10,408 Jefferson-Pilot Corp. 225 11,158 Transatlantic Holdings, Inc. 820 73,390 KeyCorp 310 9,207 Kimco Realty Corp. 3,450 147,453
See Notes to Financial Statements. 15 ISI STRATEGY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
MARKET MARKET SECURITY SHARES VALUE SECURITY SHARES VALUE - -------------------------------------------------------------------------------------------------------------------------- COMMON STOCK Johnson & Johnson 6,006 $ 324,504 FINANCE (CONTINUED) Manor Care, Inc. 460 14,922 Union Planters Corp. 300 $ 8,340 Medco Health Solutions, Inc.+ 2,180 77,172 UnumProvident Corp. 1,438 22,361 Medtronic, Inc. 2,670 134,728 US Bancorp 2,473 63,408 Merck & Co., Inc. 13,043 613,021 Valley National Bancorp 456 11,780 Mylan Laboratories, Inc. 262 6,002 Wachovia Corp. 1,867 85,415 Oxford Health Plans, Inc. 1,180 64,239 Washington Mutual, Inc. 1,084 42,699 Pacificare Health Systems, Inc.+ 2,000 71,520 Wells Fargo & Co. 3,286 185,528 Pfizer, Inc. 13,263 474,285 Westamerica Bancorp 100 4,860 Pharmaceutical Resources, Inc.+ 700 28,210 White Mountains Insurance Group Renal Care Group, Inc.+ 100 4,948 Ltd. 25 12,875 Respironics, Inc.+ 100 5,241 Wilmington Trust Corp. 200 6,954 Schering-Plough Corp. 100 1,673 WSFS Financial Corp. 2,350 113,881 St. Jude Medical, Inc.+ 820 62,533 Zions Bancorp 100 5,652 Stryker Corp. 300 29,679 ----------- UnitedHealth Group, Inc. 1,599 98,307 4,406,561 Watson Pharmaceuticals, Inc.+ 100 3,561 ----------- Wellpoint Health Networks, Inc.+ 870 97,170 HEALTH CARE - 12.13% Wyeth 8,630 328,544 Abbott Laboratories 9,335 410,927 ----------- Adolor Corp.+ 2,100 33,747 5,000,204 Aetna, Inc. 7,600 628,900 ----------- Allergan, Inc. 210 18,491 INFORMATION SERVICES - 1.76% American Medical Service Group, Alltel Corp. 377 18,978 Inc.+ 2,300 58,880 AT&T Corp. 5,900 101,185 Bausch & Lomb, Inc. 100 6,283 BellSouth Corp. 780 20,132 Baxter International, Inc. 500 15,825 Commonwealth Telephone Enterprises, Beckman Coulter, Inc. 100 5,584 Inc.+ 5,000 208,300 Becton Dickinson & Co. 200 10,110 Nextel Communications, Inc. - Class Beverly Enterprises, Inc.+ 4,000 23,800 A+ 430 10,260 Biomet, Inc. 275 10,863 Nextel Partners, Inc. - Class A+ 5,200 69,420 Boston Scientific Corp.+ 1,540 63,433 Powerwave Technologies, Inc.+ 7,400 50,098 Bristol-Myers Squibb Co. 3,805 95,506 Sprint Corp. - FON Group 1,500 26,835 C.R. Bard, Inc. 210 22,317 Verizon Communications, Inc. 5,888 222,213 Cigna Corp. 8,700 561,237 ----------- Dentsply International, Inc. 150 7,269 727,421 Edwards Lifesciences Corp.+ 380 13,095 ----------- Eli Lilly & Co. 2,396 176,849 INTERNET - 7.74% Express Scripts, Inc.+ 400 30,936 3Com Corp.+ 14,400 88,704 Forest Laboratories, Inc.+ 1,596 102,910 Amazon.Com, Inc.+ 6,642 288,661 Guidant Corp. 1,155 72,777 Ameritrade Holding Corp.+ 9,200 112,608 HCA, Inc. 2,560 104,013 Cisco Systems, Inc.+ 31,157 650,247 Health Net, Inc.+ 1,820 46,301 Citrix Systems, Inc.+ 6,800 129,540 Henry Schein, Inc.+ 150 10,570 E*Trade Financial Corp.+ 9,200 104,512 Humana, Inc.+ 1,800 29,322 eBay, Inc.+ 12,020 959,436
16 See Notes to Financial Statements. ISI STRATEGY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
MARKET MARKET SECURITY SHARES VALUE SECURITY SHARES VALUE - -------------------------------------------------------------------------------------------------------------------------- COMMON STOCK Analog Devices, Inc. 200 $ 8,520 INTERNET (CONTINUED) Applera Corp. - Celera Genomics Intuit, Inc.+ 6,817 $ 289,518 Group+ 1,340 15,799 Juniper Networks, Inc.+ 3,000 65,640 Applied Materials, Inc.+ 3,630 66,175 Level 3 Communications, Inc.+ 11,900 33,677 Asyst Technologies, Inc.+ 100 661 Netbank, Inc. 1,059 11,427 Corning, Inc.+ 1,645 18,144 Network Associates, Inc.+ 6,500 101,920 Dell, Inc.+ 4,691 162,825 Sun Microsystems, Inc.+ 18,165 70,843 Flir Systems, Inc.+ 200 9,382 VeriSign, Inc.+ 6,400 103,232 IBM 3,422 301,718 Yahoo!, Inc.+ 3,618 182,564 Integrated Circuit Systems, Inc.+ 210 4,975 ----------- Intel Corp. 10,874 279,788 3,192,529 Iron Mountain, Inc.+ 229 10,422 ----------- KLA-Tencor Corp.+ 200 8,334 RETAIL - 2.92% Linear Technology Corp. 1,361 48,492 Albertson's, Inc. 4,676 109,231 Maxtor Corp.+ 2,700 17,577 Autonation, Inc.+ 234 3,983 Microsoft Corp. 20,946 543,968 Autozone, Inc.+ 100 8,757 Motorola, Inc. 4,970 90,703 Bed Bath & Beyond, Inc.+ 200 7,424 Oracle Corp.+ 10,181 114,231 Best Buy Co., Inc. 304 16,492 Photronics, Inc.+ 100 1,489 Costco Wholesale Corp. 660 24,717 QLogic Corp.+ 352 9,500 CVS Corp. 272 10,507 Qualcomm, Inc. 2,344 146,406 Footstar, Inc.+ 400 1,942 SoftBrands, Inc.+ 45 50 Gap, Inc. 1,912 42,083 Texas Instruments, Inc. 5,615 140,936 Home Depot, Inc. 1,520 53,489 Vitesse Semiconductor Corp.+ 1,700 7,276 Ingram Micro, Inc.+ 2,700 32,265 Xerox Corp.+ 1,745 23,435 Kroger Co.+ 4,810 84,175 Xilinx, Inc. 1,000 33,630 Lowe's Cos., Inc. 1,134 59,036 ----------- May Department Stores Co. 255 7,854 2,110,373 Office Depot, Inc.+ 100 1,751 ----------- RadioShack Corp. 300 9,228 TRANSPORTATION - 0.27% Saks, Inc. 380 5,472 ExpressJet Holdings, Inc. - Class Sears Roebuck & Co. 4,810 192,641 A+ 1,500 19,080 Target Corp. 1,198 51,957 Ryder Systems, Inc. 1,900 69,901 TJX Cos., Inc. 200 4,914 United Parcel Service, Inc. - Class Walgreen Co. 1,525 52,582 B 300 21,045 Wal-Mart Stores, Inc. 7,466 425,562 ----------- ----------- 110,026 1,206,062 ----------- ----------- UTILITIES - 0.58% TECHNOLOGY - 5.12% American Electric Power Co., Inc. 3,550 108,062 Agilent Technologies, Inc.+ 205 5,537 FirstEnergy Corp. 200 7,820 Amkor Technology, Inc.+ 5,000 40,400 NiSource, Inc. 2,200 44,352 PPL Corp. 93 3,985
See Notes to Financial Statements. 17 ISI STRATEGY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
MARKET SECURITY SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK UTILITIES (CONTINUED) Public Service Enterprise Group, Inc. 293 $ 12,570 Xcel Energy, Inc. 3,800 63,574 ----------- 240,363 ----------- TOTAL COMMON STOCK (COST $24,921,405) 28,361,053 ----------- RIGHTS - 0.00% Seagate* (Cost $0) 300 - ----------- WARRANTS - 0.00% Citigroup, Inc. 100 98 MasoTech* 200 - Tokheim Corp. 500 4 ----------- TOTAL WARRANTS (COST $8,690) 102 -----------
18 See Notes to Financial Statements. ISI STRATEGY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
INTEREST MATURITY PAR MARKET SECURITY RATE DATE VALUE VALUE - ------------------------------------------------------------------------------------------------------- US TREASURY SECURITIES - 11.41% US Treasury Bond 9.250% 2/15/16 $1,000,000 $ 1,400,156 US Treasury Bond 8.750% 5/15/17 1,500,000 2,051,016 US Treasury Note 5.500% 5/15/09 250,000 271,719 US Treasury Note 4.250% 8/15/13 1,000,000 983,125 ----------- TOTAL US TREASURY SECURITIES (COST $4,564,243)............................................................... 4,706,016 ----------- REPURCHASE AGREEMENT - 19.49% JP MORGAN CHASE & CO. Dated 4/30/04, 0.750%, principal and interest in the amount of $8,039,502 due 5/3/04, collateralized by US Treasury Obligations, par value of $8,142,000, due 1/15/14 to 4/15/32 with a value of $8,200,407............................... 8,039,000 ----------- TOTAL REPURCHASE AGREEMENT (COST $8,039,000)............................................................... 8,039,000 ----------- TOTAL INVESTMENTS IN SECURITIES - 99.68% (COST $37,533,338).............................................................. 41,106,171 OTHER ASSETS IN EXCESS OF LIABILITIES - 0.32%........................................ 133,025 ----------- NET ASSETS - 100.00%................................................................. $41,239,196 ===========
- -------------------------------------------------------------------------------- + Non-income producing security. * Security fair valued in good faith under procedures established by and under the general supervision of the Fund's Board of Directors. See Notes to Financial Statements. 19 ISI FUNDS STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2004
TOTAL RETURN US MANAGED TREASURY FUND MUNICIPAL FUND - ---------------------------------------------------------------------------------------------- ASSETS: Investments: In securities, at market value (cost $206,374,492 and $111,648,096, respectively)... $198,822,578 $114,874,684 Repurchase agreement (cost $3,256,000 and $3,923,000, respectively)....... 3,256,000 3,923,000 Cash...................................................... 586 527 Receivables: Capital shares sold..................................... 165,513 - Interest................................................ 3,159,043 1,349,572 Prepaid expenses.......................................... 18,894 18,502 ------------ ------------ Total assets.............................................. 205,422,614 120,166,285 ------------ ------------ LIABILITIES: Payables: Capital shares redeemed................................. 186,235 - Dividends............................................... 814,116 405,356 Accrued Liabilities: Investment advisory fees................................ 38,815 40,017 Distribution fees....................................... 43,013 25,010 Accrued expenses and other.............................. 70,999 53,243 ------------ ------------ Total liabilities......................................... 1,153,178 523,626 ------------ ------------ Net assets.................................................. $204,269,436 $119,642,659 ============ ============ COMPONENTS OF NET ASSETS: Paid in capital........................................... $215,229,333 $117,216,561 Distributions in excess of net investment income.......... (3,686,801) (834,289) Accumulated net realized gain from investment transactions............................................ 278,818 33,799 Net unrealized appreciation/(depreciation) on investments............................................. (7,551,914) 3,226,588 ------------ ------------ Net assets.................................................. $204,269,436 $119,642,659 ============ ============ SHARES OF BENEFICIAL INTEREST OUTSTANDING ISI Shares (115,000,000 and 55,000,000 shares authorized, respectively)........................................... 21,727,960 11,209,778 ------------ ------------ NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ISI Shares (net assets / shares of beneficial interest outstanding)............................................ $ 9.40 $ 10.67 ------------ ------------ MAXIMUM OFFERING PRICE PER SHARE ISI Shares ($9.40 / 0.97 and $10.67 / 0.97, respectively)........................................... $ 9.69 $ 11.00 ------------ ------------
20 See Notes to Financial Statements. ISI FUNDS STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2004
NORTH AMERICAN GOVERNMENT BOND FUND ISI STRATEGY FUND - ------------------------------------------------------------------------------------------------ ASSETS: Investments: In securities, at market value (cost $255,561,371 and $29,494,338, respectively)............................ $244,246,256 $33,067,171 Repurchase agreement (cost $4,377,000 and $8,039,000, respectively)......................................... 4,377,000 8,039,000 Cash...................................................... 800 375 Receivables: Capital shares sold..................................... 53,894 75,269 Interest and dividends.................................. 3,572,985 121,499 Prepaid expenses.......................................... 43,638 10,493 ------------ ----------- Total assets.............................................. 252,294,573 41,313,807 ------------ ----------- LIABILITIES: Payables: Capital shares redeemed................................. 595,548 2,024 Dividends............................................... 1,349,374 - Accrued Liabilities: Investment advisory fees................................ 84,856 12,666 Distribution fees....................................... 90,072 8,537 Shareholder servicing fees.............................. 3,726 - Accrued expenses and other.............................. 98,881 51,384 ------------ ----------- Total liabilities......................................... 2,222,457 74,611 ------------ ----------- Net assets.................................................. $250,072,116 $41,239,196 ============ =========== COMPONENTS OF NET ASSETS: Paid in capital........................................... $269,148,465 $40,458,894 Undistributed (distributions in excess of) net investment income.................................................. (6,638,875) 14,602 Accumulated net realized loss from investment and foreign currency transactions................................... (1,072,010) (2,807,133) Net unrealized appreciation/(depreciation) on investments and foreign currencies.................................. (11,365,464) 3,572,833 ------------ ----------- Net assets.................................................. $250,072,116 $41,239,196 ============ =========== SHARES OF BENEFICIAL INTEREST OUTSTANDING ISI Class A Shares (50,000,000 shares authorized)......... 31,623,784 - ------------ ----------- ISI Class C Shares (5,000,000 shares authorized).......... 2,412,077 - ------------ ----------- ISI Shares (25,000,000 shares authorized)................. - 3,776,003 ------------ ----------- NET ASSET VALUE AND REDEMPTION PRICE PER SHARE (net assets / shares of beneficial interest outstanding) ISI Class A Shares (based on net assets of $232,369,684)........................................... $ 7.35 $ - ------------ ----------- ISI Class C Shares (based on net assets of $17,702,432)... $ 7.34 $ - ------------ ----------- ISI Shares................................................ $ - $ 10.92 ------------ ----------- MAXIMUM OFFERING PRICE PER SHARE ISI Class A Shares ($7.35 / 0.97)......................... $ 7.58 $ - ------------ ----------- ISI Shares ($10.92 / 0.97)................................ $ - $ 11.26 ------------ -----------
See Notes to Financial Statements. 21 ISI FUNDS STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2004
TOTAL RETURN US MANAGED TREASURY FUND MUNICIPAL FUND - -------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest................................................ $ 3,454,466 $ 2,662,231 ----------- ----------- EXPENSES: Investment advisory fees................................ 256,493 243,642 Distribution fees....................................... 275,737 152,276 Administration fees..................................... 55,147 30,455 Transfer agent fees..................................... 49,839 20,281 Custody fees............................................ 7,058 4,321 Professional fees....................................... 36,993 28,815 Accounting fees......................................... 27,013 27,928 Printing and shareholder reports........................ 8,461 5,604 Registration fees....................................... 11,988 14,294 Directors' fees......................................... 11,878 6,503 Miscellaneous........................................... 9,210 7,560 ----------- ----------- Total expenses....................................... 749,817 541,679 ----------- ----------- Net investment income................................... 2,704,649 2,120,552 ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investment transactions.......... 279,013 33,799 Net change in unrealized appreciation/depreciation on investments.......................................... (1,819,017) (2,203,730) ----------- ----------- Net realized and unrealized gain (loss) on investments.......................................... (1,540,004) (2,169,931) ----------- ----------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:.......... $ 1,164,645 $ (49,379) =========== ===========
22 See Notes to Financial Statements. ISI FUNDS STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2004
NORTH AMERICAN GOVERNMENT BOND FUND ISI STRATEGY FUND - ---------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest................................................ $ 5,784,385 $ 175,017 Dividend................................................ - 188,159 ----------- ---------- Total Income....................................... 5,784,385 363,176 ----------- ---------- EXPENSES: Investment advisory fees................................ 539,819 75,671 Distribution fees: ISI Class A Shares................................. 507,843 - ISI Class C Shares................................. 59,954 - ISI Shares......................................... - 47,294 Administration fees..................................... 67,477 20,412 Transfer agent fees: ISI Class A Shares................................. 68,838 - ISI Class C Shares................................. 8,262 - ISI Shares......................................... - 14,380 Custody fees............................................ 40,631 21,828 Professional fees....................................... 48,040 22,121 Accounting fees......................................... 38,451 28,923 Shareholder servicing fees: ISI Class C Shares................................. 19,985 - Printing and shareholder reports........................ 11,048 3,939 Registration fees....................................... 21,295 8,909 Directors' fees......................................... 14,595 1,998 Miscellaneous........................................... 11,852 6,328 ----------- ---------- Total expenses..................................... 1,458,090 251,803 Less: fee waiver and/or expense reimbursements.......... - (7,763) ----------- ---------- Net expenses....................................... 1,458,090 244,040 ----------- ---------- Net investment income................................... 4,326,295 119,136 ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investment transactions............................ (1,083,388) 1,160,216 Foreign currency transactions...................... 11,408 - Net change in unrealized appreciation/depreciation on investments and foreign currencies................. (4,332,988) 102,775 ----------- ---------- Net realized and unrealized gain (loss) on investments and foreign currencies............................. (5,404,968) 1,262,991 ----------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:.......... $(1,078,673) $1,382,127 =========== ==========
See Notes to Financial Statements. 23 TOTAL RETURN US TREASURY FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS FOR THE YEAR ENDED ENDED APRIL 30, OCTOBER 31, 2004(1) 2003 - -------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 2,704,649 $ 6,263,843 Net realized gain on investment transactions............ 279,013 13,569,304 Net change in unrealized appreciation/depreciation on investments.......................................... (1,819,017) (13,632,522) ------------ ------------ Increase in net assets from operations.................. 1,164,645 6,200,625 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income and net realized short-term gains................................................ (5,408,656) (12,426,417) Net realized long-term capital gains.................... (7,280,828) - ------------ ------------ Total distributions..................................... (12,689,484) (12,426,417) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares............................ 5,181,738 19,262,461 Dividend reinvestments.................................. 8,211,975 7,616,844 Cost of shares redeemed................................. (26,626,050) (54,554,409) ------------ ------------ Decrease in net assets from capital share transactions......................................... (13,232,337) (27,675,104) ------------ ------------ Total decrease in net assets............................ (24,757,176) (33,900,896) NET ASSETS: Beginning of period..................................... 229,026,612 262,927,508 ------------ ------------ End of period (including distributions in excess of net investment income of $3,686,801 and $982,794, respectively)........................................ $204,269,436 $229,026,612 ============ ============ SHARE TRANSACTIONS: Shares sold............................................. 530,728 1,898,497 Shares issued to shareholders on reinvestment of dividends............................................ 847,698 750,559 Shares redeemed......................................... (2,747,623) (5,382,976) ------------ ------------ Decrease in shares from capital share transactions...... (1,369,197) (2,733,920) ============ ============
- -------------------------------------------------------------------------------- (1) Unaudited. 24 See Notes to Financial Statements. MANAGED MUNICIPAL FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS FOR THE YEAR ENDED ENDED APRIL 30, OCTOBER 31, 2004(1) 2003 - -------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 2,120,552 $ 3,881,685 Net realized gain on investment transactions............ 33,799 458,899 Net change in unrealized appreciation/depreciation on investments.......................................... (2,203,730) (439,966) ------------ ------------ Increase (decrease) in net assets from operations....... (49,379) 3,900,618 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income and net realized short-term gains................................................ (2,560,571) (4,545,840) Net realized long-term capital gains.................... - (458,899) ------------ ------------ Total distributions..................................... (2,560,571) (5,004,739) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares............................ 22,079,699 18,611,488 Dividend reinvestments.................................. 1,251,773 2,602,438 Cost of shares redeemed................................. (8,156,812) (16,229,802) ------------ ------------ Increase in net assets from capital share transactions......................................... 15,174,660 4,984,124 ------------ ------------ Total increase in net assets............................ 12,564,710 3,880,003 NET ASSETS: Beginning of period..................................... 107,077,949 103,197,946 ------------ ------------ End of period (including distributions in excess of net investment income of $834,289 and $394,270, respectively)........................................ $119,642,659 $107,077,949 ============ ============ SHARE TRANSACTIONS: Shares sold............................................. 2,008,510 1,688,868 Shares issued to shareholders on reinvestment of dividends............................................ 113,561 236,891 Shares redeemed......................................... (741,879) (1,476,733) ------------ ------------ Increase in shares from capital share transactions...... 1,380,192 449,026 ============ ============
- -------------------------------------------------------------------------------- (1) Unaudited. See Notes to Financial Statements. 25 NORTH AMERICAN GOVERNMENT BOND FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS FOR THE YEAR ENDED ENDED APRIL 30, OCTOBER 31, 2004(1) 2003 - --------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income.................................... $ 4,326,295 $ 8,320,234 Net realized gain (loss) on investment and foreign currency transactions................................ (1,071,980) 14,360,348 Net change in unrealized appreciation/depreciation on investments and foreign currencies................... (4,332,988) (11,632,023) ------------ ------------ Increase (decrease) in net assets from operations........ (1,078,673) 11,048,559 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM:(2) Net investment income and net realized short-term capital gains: ISI Class A Shares................................... (8,729,000) (20,717,901) ISI Class C Shares................................... (503,496) (274,098) Net realized long-term capital gains: ISI Class A Shares................................... (2,732,055) (486,266) ISI Class C Shares................................... (152,251) (6,433) ------------ ------------ Total distributions...................................... (12,116,802) (21,484,698) ------------ ------------ CAPITAL SHARE TRANSACTIONS:(2) Proceeds from sale of shares: ISI Class A Shares................................... 17,741,996 66,866,368 ISI Class C Shares................................... 5,427,459 14,038,549 Dividend reinvestments: ISI Class A Shares................................... 5,822,850 11,214,133 ISI Class C Shares................................... 317,841 155,876 Cost of shares redeemed: ISI Class A Shares................................... (46,639,087) (57,844,825) ISI Class C Shares................................... (724,175) (168,139) ------------ ------------ Increase (decrease) in net assets from capital share transactions......................................... (18,053,116) 34,261,962 ------------ ------------ Total increase (decrease) in net assets.................. (31,248,591) 23,825,823 NET ASSETS: Beginning of period...................................... 281,320,707 257,494,884 ------------ ------------ End of period (including distributions in excess of net investment income of $6,638,375 and $1,732,674, respectively)........................................ $250,072,116 $281,320,707 ============ ============ SHARE TRANSACTIONS:(2) Shares sold: ISI Class A Shares................................... 2,310,774 8,402,353 ISI Class C Shares................................... 709,065 1,758,597 Shares issued to shareholders on reinvestment of dividends: ISI Class A Shares................................... 762,151 1,416,957 ISI Class C Shares................................... 41,650 19,950 Shares redeemed: ISI Class A Shares................................... (6,088,592) (7,262,057) ISI Class C Shares................................... (95,417) (21,768) ------------ ------------ Increase (decrease) in shares from capital share transactions: ISI Class A Shares................................... (3,015,667) 2,557,253 ============ ============ ISI Class C Shares................................... 655,298 1,756,779 ============ ============
- -------------------------------------------------------------------------------- (1) Unaudited. (2) On May 16, 2003, the Fund commenced the offering of ISI Class C Shares and ISI Shares were redesignated as ISI Class A Shares. 26 See Notes to Financial Statements. ISI STRATEGY FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS FOR THE YEAR ENDED ENDED APRIL 30, OCTOBER 31, 2004(1) 2003 - -------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 119,136 $ 175,912 Net realized gain (loss) on investment transactions..... 1,160,216 (75,683) Net change in unrealized appreciation/depreciation on investments........................................ 102,775 3,392,601 ----------- ----------- Increase in net assets from operations.................. 1,382,127 3,492,830 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income................................... (119,286) (174,119) ----------- ----------- Total distributions..................................... (119,286) (174,119) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares............................ 14,915,965 10,757,570 Dividend reinvestments.................................. 102,186 151,755 Cost of shares redeemed................................. (5,303,320) (3,890,270) ----------- ----------- Increase in net assets from capital share transactions....................................... 9,714,831 7,019,055 ----------- ----------- Total increase in net assets............................ 10,977,672 10,337,766 NET ASSETS: Beginning of period..................................... 30,261,524 19,923,758 ----------- ----------- End of period (including undistributed net investment income of $14,602 and $14,752, respectively)....... $41,239,196 $30,261,524 =========== =========== SHARE TRANSACTIONS: Shares sold............................................. 1,368,631 1,088,564 Shares issued to shareholders on reinvestment of dividends.......................................... 9,276 16,233 Shares redeemed......................................... (485,305) (415,768) ----------- ----------- Increase in shares from capital share transactions...... 892,602 689,029 =========== ===========
- -------------------------------------------------------------------------------- (1) Unaudited. See Notes to Financial Statements. 27 TOTAL RETURN US TREASURY FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) ISI SHARES
SIX MONTHS FOR THE YEARS ENDED OCTOBER 31, ENDED ---------------------------------------------------- APRIL 30, 2004(1) 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period....................... $ 9.92 $ 10.18 $ 10.20 $ 9.57 $ 9.35 $ 10.62 -------- -------- -------- -------- -------- -------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income............. 0.10 0.23 0.35 0.45 0.50 0.64 Net realized and unrealized gain (loss) on investments........ (0.06) 0.01 0.20 0.82 0.38 (1.03) -------- -------- -------- -------- -------- -------- Total from investment operations................... 0.04 0.24 0.55 1.27 0.88 (0.39) -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS: Net investment income and short-term capital gains..... (0.24) (0.50) (0.53) (0.45) (0.50) (0.71) Net realized long-term capital gains........................ (0.32) - (0.04) - - (0.17) Tax return of capital............. - - - (0.19) (0.16) - -------- -------- -------- -------- -------- -------- Total distributions............... (0.56) (0.50) (0.57) (0.64) (0.66) (0.88) -------- -------- -------- -------- -------- -------- Net asset value, end of period.... $ 9.40 $ 9.92 $ 10.18 $ 10.20 $ 9.57 $ 9.35 ======== ======== ======== ======== ======== ======== TOTAL RETURN(2)....................... 0.39%(4) 2.30% 5.78% 13.57% 9.49% (3.82)% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s)....................... $204,269 $229,027 $262,928 $149,588 $136,728 $151,532 Ratios to average daily net assets: Net investment income........ 2.47%(3) 2.50% 3.64% 4.51% 5.10% 4.68% Expenses..................... 0.68%(3) 0.67% 0.74% 0.78% 0.82% 0.81% Portfolio turnover rate........... 18%(4) 125% 129% 61% 15% 77%
- -------------------------------------------------------------------------------- (1) Unaudited. (2) Total return excludes the effect of sales charges. (3) Annualized. (4) Not Annualized. 28 See Notes to Financial Statements. MANAGED MUNICIPAL FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) ISI SHARES
SIX MONTHS FOR THE YEARS ENDED OCTOBER 31, ENDED ------------------------------------------------- APRIL 30, 2004(1) 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period....................... $ 10.89 $ 11.00 $ 10.99 $ 10.47 $ 10.12 $ 11.01 -------- -------- -------- ------- ------- ------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income............. 0.20 0.40 0.45 0.45 0.47 0.45 Net realized and unrealized gain (loss) on investments........ (0.19) 0.01 0.09 0.55 0.36 (0.83) -------- -------- -------- ------- ------- ------- Total from investment operations................... 0.01 0.41 0.54 1.00 0.83 (0.38) -------- -------- -------- ------- ------- ------- LESS DISTRIBUTIONS: Net investment income and short-term capital gains..... (0.23) (0.47) (0.45) (0.47) (0.48) (0.47) Net realized long-term capital gains........................ -- (0.05) (0.08) (0.01) -- (0.04) -------- -------- -------- ------- ------- ------- Total distributions............... (0.23) (0.52) (0.53) (0.48) (0.48) (0.51) -------- -------- -------- ------- ------- ------- Net asset value, end of period.... $ 10.67 $ 10.89 $ 11.00 $ 10.99 $ 10.47 $ 10.12 ======== ======== ======== ======= ======= ======= TOTAL RETURN(2)....................... 0.04%(4) 3.89% 5.11% 9.76% 8.44% (3.61)% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s)....................... $119,643 $107,078 $103,198 $66,105 $65,233 $70,609 Ratios to average daily net assets: Net investment income........ 3.50%(3) 3.66% 3.92% 4.18% 4.60% 4.23% Expenses after waivers and/or reimbursements.......... 0.90%(3) 0.89% 0.94% 0.93% 0.90% 0.90% Expenses before waivers and/or reimbursements... 0.90%(3) 0.89% 0.96% 0.99% 1.01% 1.10% Portfolio turnover rate........... 1%(4) 11% 11% 21% 22% 8%
- -------------------------------------------------------------------------------- (1) Unaudited. (2) Total return excludes the effect of sales charges. (3) Annualized. (4) Not Annualized. See Notes to Financial Statements. 29 NORTH AMERICAN GOVERNMENT BOND FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) ISI CLASS A SHARES(1)
SIX FOR THE APRIL 1, MONTHS YEAR 2002 ENDED ENDED THROUGH FOR THE YEARS ENDED MARCH 31, APRIL 30, OCTOBER 31, OCTOBER 31, --------------------------------------- 2004(2) 2003 2002(3) 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period............. $ 7.73 $ 8.03 $ 7.80 $ 8.17 $ 8.07 $ 8.42 $ 8.74 -------- -------- -------- -------- -------- ------- ------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income...... 0.08 0.25 0.18 0.38 0.44 0.49 0.60 Net realized and unrealized gain (loss) on investments and foreign currency transactions.......... (0.12) 0.07 0.41 (0.03) 0.38 (0.12) (0.09) -------- -------- -------- -------- -------- ------- ------- Total from investment operations............ (0.04) 0.32 0.59 0.35 0.82 0.37 0.51 -------- -------- -------- -------- -------- ------- ------- LESS DISTRIBUTIONS: Net investment income and short-term capital gains................. (0.26) (0.61) (0.22) (0.58) (0.53) (0.49) (0.60) In excess of net investment income................ - - - -(4) (0.01) - - Net realized long-term capital gains......... (0.08) (0.01) (0.02) (0.06) (0.06) - (0.23) Tax return of capital...... - - (0.12) (0.08) (0.12) (0.23) - -------- -------- -------- -------- -------- ------- ------- Total distributions........ (0.34) (0.62) (0.36) (0.72) (0.72) (0.72) (0.83) -------- -------- -------- -------- -------- ------- ------- Net asset value, end of period................ $ 7.35 $ 7.73 $ 8.03 $ 7.80 $ 8.17 $ 8.07 $ 8.42 ======== ======== ======== ======== ======== ======= ======= TOTAL RETURN(5)................ (0.52)%(6) 4.14% 7.75%(6) 4.38% 10.74% 4.82% 5.96% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s)................ $232,370 $267,756 $257,495 $220,629 $117,445 $61,697 $55,891 Ratios to average daily net assets: Net investment income............ 3.27%(7) 3.03% 3.84%(7) 4.60% 5.62% 5.59% 5.79% Expenses after waivers and/or reimbursements.... 1.04%(7) 1.09% 1.01%(7) 1.13% 1.24% 1.25% 1.25% Expenses before waivers and/or reimbursements.... 1.04%(7) 1.09% 1.01%(7) 1.13% 1.24% 1.41% 1.42% Portfolio turnover rate.... 20%(6) 152% 95%(6) 136% 89% 32% 173%
- -------------------------------------------------------------------------------- (1) On May 16, 2003, ISI Shares were designated ISI Class A Shares. (2) Unaudited. (3) The Fund changed its fiscal year end from March 31 to October 31. (4) Less than $0.01 per share. (5) Total return excludes the effect of sales charges. (6) Not Annualized. (7) Annualized. 30 See Notes to Financial Statements. NORTH AMERICAN GOVERNMENT BOND FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) ISI CLASS C SHARES
SIX MONTHS MAY 16, 2003(2) ENDED THROUGH APRIL 30, 2004(1) OCTOBER 31, 2003 - --------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period.................... $ 7.72 $ 8.20 ------- ------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income................................... 0.14 0.17 Net realized and unrealized gain (loss) on investments and foreign currency transactions.................. (0.20) (0.38) ------- ------- Total from investment operations........................ (0.06) (0.21) ------- ------- LESS DISTRIBUTIONS: Net investment income and short-term capital gains...... (0.24) (0.26) Net realized long-term capital gains.................... (0.08) (0.01) ------- ------- Total distributions..................................... (0.32) (0.27) ------- ------- Net asset value, end of period.......................... $ 7.34 $ 7.72 ======= ======= TOTAL RETURN(3)............................................. (0.86)%(4) (2.62)%(4) SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s)........................ $17,702 $13,565 Ratios to average daily net assets: Net investment income.............................. 2.57%(5) 3.32%(5) Expenses after waivers and/or reimbursements....... 1.76%(5) 1.85%(5) Expenses before waivers and/or reimbursements...... 1.76%(5) 2.12%(5) Portfolio turnover rate................................. 20%(4) 152%(4) - ---------------------------------------------------------------------------------------------------
(1) Unaudited. (2) Commencement of operations. (3) Total return excludes the effect of sales charges. (4) Not Annualized. (5) Annualized. See Notes to Financial Statements. 31 ISI STRATEGY FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) ISI SHARES
SIX FOR THE JUNE 1, MONTHS YEAR 2002 ENDED ENDED THROUGH FOR THE YEARS ENDED MAY 31, APRIL 30, OCTOBER 31, OCTOBER 31, ------------------------------------- 2004(1) 2003 2002(2) 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period............. $ 10.50 $ 9.08 $ 10.23 $ 10.89 $ 12.15 $ 11.91 $ 11.00 ------- ------- ------- ------- ------- ------- ------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income...... 0.03 0.08 0.05 0.12 0.25 0.26 0.21 Net realized and unrealized gain (loss) on investments........... 0.42 1.42 (1.14) (0.66) (0.62) 0.46 1.10 ------- ------- ------- ------- ------- ------- ------- Total from investment operations............ 0.45 1.50 (1.09) (0.54) (0.37) 0.72 1.31 ------- ------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS: Net investment income and short-term capital gains................. (0.03) (0.08) (0.06) (0.12) (0.27) (0.24) (0.21) Net realized long-term capital gains......... -- -- -- -- (0.62) (0.24) (0.19) ------- ------- ------- ------- ------- ------- ------- Total distributions........ (0.03) (0.08) (0.06) (0.12) (0.89) (0.48) (0.40) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of period................ $ 10.92 $ 10.50 $ 9.08 $ 10.23 $ 10.89 $ 12.15 $ 11.91 ======= ======= ======= ======= ======= ======= ======= TOTAL RETURN(3)................ 4.42%(4) 16.47% (10.65)%(4) (4.93)% (3.32)% 6.09% 12.15% SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (000s)................ $41,239 $30,262 $19,924 $24,398 $27,051 $36,544 $35,734 Ratios to average daily net assets: Net investment income........... 0.63%(5) 0.77% 1.18%(5) 1.14% 2.09% 2.10% 1.81% Expenses after waivers and/or reimbursements... 1.30%(5) 1.30% 1.30%(5) 1.19% 1.00% 1.00% 1.00% Expenses before waivers and/or reimbursements... 1.34%(5) 1.79% 1.99%(5) 1.42% 1.38% 1.31% 1.68% Portfolio turnover rate.... 39%(4) 60% 12%(4) 72% 57% 59% 32%
- -------------------------------------------------------------------------------- (1) Unaudited. (2) The Fund changed its fiscal year end from May 31 to October 31. (3) Total return excludes the effect of sales charges. (4) Not Annualized. (5) Annualized. 32 See Notes to Financial Statements. 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'), formerly ISI Shares and effective May 16, 2003, ISI North American Government Bond Fund Class C Shares ('ISI Class C Shares'). ISI Shares and North American ISI Class A Shares are subject to a maximum front-end sales charge of 3.00%. A sales charge of 1.00% is imposed on the sale of shares 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 for which market quotations are readily available are valued using the last reported sales price or official closing price provided by independent pricing services as of the close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time), on each Fund business day. In the absence of a sale, such securities are valued at the mean of the last bid and the last asked prices. Non-exchange traded securities for which over-the-counter quotations are 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 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 the Funds value their investments. After consideration of various factors, the Funds may value the securities at their last reported price or at fair value. On April 30, 2004, Strategy had fair valued securities, which are footnoted accordingly in the Fund's schedule of investments. C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded on trade date. Realized gains and losses are determined by comparing the proceeds of a sale or the cost of a purchase with a specific 33 ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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. 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 rates approved by the Funds' Board of Directors. To the extent that their net investment income and short-term capital gains are less than the approved rate, the Funds may pay some of their dividends from long-term capital gains or as a return of shareholder capital. Strategy declares dividends quarterly from its net investment income. An additional distribution of net realized short-term and long-term capital gains earned by the Funds, if any, may be made annually to the extent they exceed capital loss carryforwards. 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 the Internal Revenue Code and to distribute substantially all of its taxable income to shareholders. Accordingly, no federal income taxes have been accrued. The Funds may periodically make reclassifications among certain capital accounts as a result of differences in the characterization and allocation of certain income and capital gain distributions determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States. These book/tax differences may be either temporary or permanent. To the extent they are permanent, they are charged or credited to paid-in-capital or accumulated net realized gain as appropriate, in the period that the differences arose. 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, foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of interest recorded on its 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. On April 30, 2004, there were no open forward currency contracts. 34 ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED) H. REPURCHASE AGREEMENTS The Funds may make short-term investments in repurchase agreements that are fully collateralized by US government securities. Under the terms of a repurchase agreement, a financial institution sells fixed-income securities to the Funds and agrees to buy them back on a specified day in return for the principal amount of the original sale plus accrued interest. The custodial bank holds the collateral in a separate account until the agreement matures. If the value of the securities falls below the principal amount of the repurchase agreement plus accrued interest, the financial institution deposits additional collateral by the following business day. If the financial institution either fails to deposit the required additional collateral or fails to repurchase the securities as agreed, the Funds have the right to sell the securities and recover any resulting loss from the financial institution. If the financial institution enters into bankruptcy, the Funds' claims on the collateral may be subject to legal proceedings. I. ESTIMATES In preparing its financial statements in conformity with accounting principles generally accepted in the United States, 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, 2005, to the extent necessary, to limit all expenses to 1.85% of the average daily net assets of ISI Class C Shares. ISI has contractually agreed to waive its fees and/or reimburse expenses of Strategy through February 28, 2005, to the extent necessary, to limit all expenses to 1.30% of its average daily net assets. For the six-months ended April 30, 2004, ISI waived Strategy fees of $7,763. Los Angeles Capital Management and Equity Research, Inc. is Strategy's Sub-Advisor and is responsible for managing the common stocks in the Fund's portfolio. The Sub-Advisor is paid by ISI. Forum Administrative Services, LLC ('FAdS') is the Funds' Administrator. FAdS receives, for its services, a minimum monthly fee or an annual fee based on each Fund's average daily net assets which is calculated daily and paid monthly. Forum Shareholder Services, LLC ('FSS') is the Funds' Transfer Agent. FSS receives for its services a monthly fee and a monthly per account fee, all of which are calculated daily and paid monthly. Forum Accounting Services, LLC ('FAcS') is the Funds' Accountant. FAcS receives for its services a monthly fee plus an annual fee based on each Fund's average daily net assets, all of which are calculated daily and paid monthly. Certain officers and directors of the Funds are also officers or directors of ISI or FAcS. These persons are not paid by the Funds for serving in these capacities. The Northern Trust Company is the Funds' Custodian. ISI Group, Inc. ('ISI Group'), an affiliate of ISI, is the Distributor for the Funds. Total Return, Managed Municipal and Strategy each pay ISI Group an annual fee, 35 ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED) pursuant to Rule 12b-1, that is calculated daily and paid monthly at the annual rate of 0.25% of their average daily net assets. North American ISI Class A Shares and ISI Class C Shares pay ISI Group an annual fee, pursuant to Rule 12b-1, that is calculated daily and paid monthly at the annual rate of 0.40% and 0.75% of their average daily net assets, respectively. ISI Group also acts as the Shareholder Servicing Agent for the North American Class C Shares. North American Class C Shares pays ISI Group an annual fee, pursuant to an agreement, that is calculated daily and paid monthly at the annual rate of 0.25% of its average daily net assets. For the six months ended April 30, 2004, ISI Group earned commissions on sales of ISI Shares of Total Return, Managed Municipal, and Strategy of $5,244, $11,062 and $12,411, respectively and $26,278 on sales of ISI Class A Shares of North American. NOTE 3 - INVESTMENT TRANSACTIONS The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended April 30, 2004 were as follows:
- -------------------------------------------------------------------------------------------------------------- Non-US Government Obligations US Government Obligations - -------------------------------------------------------------------------------------------------------------- Purchases Sales Purchases Sales Total Return $ - $ - $ 29,896,442 $ 25,417,463 Managed Municipal 18,368,979 1,530,000 - - North American 11,768,617 9,807,994 38,888,707 31,699,181 Strategy 15,115,758 9,905,686 2,725,945 2,032,180 - --------------------------------------------------------------------------------------------------------------
The cost basis of investments, aggregate gross unrealized appreciation and depreciation for all investments held at April 30, 2004 were as follows:
- -------------------------------------------------------------------------------------------------------------- Net Appreciation/ Cost Appreciation Depreciation (Depreciation) - -------------------------------------------------------------------------------------------------------------- Total Return $209,630,492 $1,091,839 $ (8,643,753) $ (7,551,914) Managed Municipal 115,571,096 4,720,738 (1,494,150) 3,226,588 North American 259,938,371 2,259,417 (13,574,532) (11,315,115) Strategy 37,533,338 4,295,910 (723,077) 3,572,833 - --------------------------------------------------------------------------------------------------------------
36 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 - PROXY VOTING GUIDELINES 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. This information is also available from the EDGAR database on the SEC's Web site at http://www.sec.gov. Total Return, Managed Municipal and North American are not required to adopt proxy voting policies and procedures under the applicable rule. 37 ISI INTERNATIONAL STRATEGY & INVESTMENT DIRECTORS AND OFFICERS EDWARD S. HYMAN THOMAS D. STEVENS* Chairman Vice President R. ALAN MEDAUGH STEPHEN V. KILLORIN President Vice President JOSEPH R. HARDIMAN MARGARET M. BEELER Director Assistant Vice President W. MURRAY JACQUES KEITH C. REILLY Director Assistant Vice President LOUIS E. LEVY STACEY E. HONG Director Treasurer NANCY R. LAZAR THOMAS G. SHEEHAN Vice President Secretary CARRIE L. BUTLER *Thomas D. Stevens is an Vice President officer for only the ISI Strategy Fund. EDWARD J. VEILLEUX Vice President
INVESTMENT ADVISOR ISI, INC. 535 MADISON AVENUE, 30TH FLOOR NEW YORK, NY 10022 (800) 955-7175 SHAREHOLDER SERVICING AGENT FORUM SHAREHOLDER SERVICES, LLC TWO PORTLAND SQUARE PORTLAND, ME 04101 (800) 882-8585 DISTRIBUTOR ISI GROUP, INC. 535 MADISON AVENUE, 30TH FLOOR NEW YORK, NY 10022 (800) 955-7175 ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 10. 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 Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-2 under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR. (b) There were no changes in the registrant's internal control over financial reporting (as defined in rule 30a-3(d) under the Act), or the internal control over financial reporting of its service providers during the last fiscal half year (the registrant's second half year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (Exhibit filed herewith). (b) Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (Exhibit furnished 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/ Stacey E. Hong ------------------ Stacey E. Hong, Treasurer Date: June 23, 2004 ------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /S/ R. Alan Medaugh ------------------- R. Alan Medaugh, President Date: June 24, 2004 ------------- By: /S/ Stacey E. Hong ------------------ Stacey E. Hong, Treasurer Date: June 23, 2004 ------------- EX-31 2 cert302.txt ITEM 11(A)(2) - 302 CERTIFICATION CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, R. Alan Medaugh, certify that: 1. I have reviewed this report on Form N-CSR of North American Government Bond Fund, Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) NA c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal controls over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 24, 2004 ------------- /S/ R. Alan Medaugh - ------------------- R. Alan Medaugh President CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Stacey E. Hong, certify that: 1. I have reviewed this report on Form N-CSR of North American Government Bond Fund, Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) NA c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal controls over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 24, 2004 ------------- /S/ Stacey E. Hong - ------------------ Stacey E. Hong Treasurer EX-32 3 cert906.txt ITEM 11(B) - 906 CERTIFICATION Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) In connection with the attached Report of North American Government Bond Fund, Inc. (the "Trust") on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the Trust does hereby certify that, to the best of such officer's knowledge: 1. The Report fully complies with the requirements of 13(a) or 15(d) of the Securities and Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust as of, and for, the periods presented in the Report. Dated: June 24, 2004 ------------- /S/ R. Alan Medaugh - ------------------- R. Alan Medaugh President Dated: June 23, 2004 ------------- /S/ Stacey E, Hong - ------------------ Stacey E. Hong Treasurer A signed original of this written statement required by Section 906 has been provided to the Trust and will be retained by the Trust and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----