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ISI
STRATEGY
FUND SHARES
(A Class of ISI Strategy Fund, Inc.)
SEMI-ANNUAL REPORT
November 30, 1998
ISI
Strategy
Fund Shares
Directors and Officers
Edward S. Hyman
Chairman
Truman T. Semans
Vice Chairman
James J. Cunnanc
Director
Joseph R. Hardiman
Director
Louis E. Levy
Director
Eugene J. McDonald
Director
R. Alan Mcdaugh
Director and President
Michael J. Napoli, Jr.
Director
Rebecca W. Rimel
Director
Carl W. Vogt, Esq.
Director
Nancy Lazar
Vice President
David R. Borger
Vice President
Carrie L. Butler
Vice President
Thomas D. Stevens
Vice President
Margaret M. Beeler
Assistant Vice President
Keith C. Reilly
Assistant Vice President
Joseph A. Finelli
Treasurer
Amy M. Olmert
Secretary
Scott J. Liotta
Assistant Secretary
Investment Objective
An open-end mutual fund seeking to maximize total return through a combination
of long-term growth of capital and current income by actively apportioning
investments between diversified investments in U.S. equity securities and
securities issued by the United States Treasury.
Investment Advisor
ISI Inc.
717 Fifth Avenue
New York, NY 10022
(800) 955-7175
Shareholder Servicing Agent
Investment Company Capital Corp.
P.O. Box 419426
Kansas City, MO 64141-6426
Distributor
ISI Group
717 Fifth Avenue
New York, NY 10022
(800) 955-7175
<PAGE>
Investment Advisor's Report
We are pleased to report on the progress of the fund during the first half
of this fiscal year. Over this time frame, the total return is 5.36%. For the
last year the return is 16.08% and since inception on September 16, 1997 the
cumulative total return is 16.89%. These figures assume the reinvestment of
dividends and exclude the impact of any sales charges. The equity and bond
markets have been very volatile over the last year but equities have
outperformed bonds: Wilshire 5000 Index +18.05%; Lehman Treasury Index +10.97%.
Please see charts below.
Wilshire 5000
11/30/97-11/30/98
[In the printed version of the document, a line graph appears which depicts the
following plot points:]
DATE PRICE DATE PRICE DATE PRICE
F F 11/13 10307.34 F 10/23 9750.47
T T 11/12 10262.82 T 10/22 9802.40
W W 11/11 10291.45 W 10/21 9720.20
T T 11/10 10352.17 T 10/20 9663.74
M 11/30 10650.20 M 11/ 9 10375.98 M 10/19 9622.85
F 11/27 10900.39 F 11/ 6 10455.22 F 10/16 9536.53
T 11/26 T 11/ 5 10377.74 T 10/15 9434.87
W 11/25 10836.96 W 11/ 4 10255.12 W 10/14 9060.46
T 11/24 10783.53 T 11/ 3 10173.34 T 10/13 8960.41
M 11/23 10831.26 M 11/ 2 10185.27 M 10/12 9013.34
F 11/20 10632.35 F 10/30 10032.19 F 10/ 9 8850.91
T 11/19 10547.20 T 10/29 9906.87 T 10/ 8 8620.80
W 11/18 10478.86 W 10/28 9751.02 W 10/ 7 8792.20
T 11/17 10415.39 T 10/27 9747.27 T 10/ 6 8951.50
M 11/16 10383.89 M 10/26 9784.17 M 10/ 5 9001.34
DATE PRICE DATE PRICE DATE PRICE
F 10/ 2 9167.94 F 9/11 9206.78 F 8/21 9996.83
T 10/ 1 9053.16 T 9/10 8963.74 T 8/20 10113.03
W 9/30 9346.81 W 9/ 9 9198.70 W 8/19 10182.52
T 9/29 9600.39 T 9/ 8 9354.26 T 8/18 10220.49
M 9/28 9603.94 M 9/ 7 M 8/17 10064.93
F 9/25 9575.98 F 9/ 4 8931.16 F 8/14 9913.77
T 9/24 9566.24 T 9/ 3 8993.54 T 8/13 10003.82
W 9/23 9767.23 W 9/ 2 9090.03 W 8/12 10088.31
T 9/22 9452.79 T 9/ 1 9090.01 T 8/11 9942.61
M 9/21 9381.67 M 8/31 8785.71 M 8/10 10102.59
F 9/18 9361.48 F 8/28 9418.02 F 8/ 7 10165.91
T 9/17 9323.13 T 8/27 9557.07 T 8/ 6 10112.68
W 9/16 9529.36 W 8/26 9948.06 W 8/ 5 10008.21
T 9/15 9453.67 T 8/25 10064.42 T 8/ 4 9971.55
M 9/14 9378.58 M 8/24 10035.48 M 8/ 3 10334.18
DATE PRICE DATE PRICE DATE PRICE
F 7/31 10420.26 F 7/10 10916.22 F 6/19 10325.86
T 7/30 10622.17 T 7/ 9 10879.93 T 6/18 10363.46
W 7/29 10469.44 W 7/ 8 10936.85 W 6/17 10386.99
T 7/28 10515.09 T 7/ 7 10839.08 T 6/16 10214.09
M 7/27 10670.28 M 7/ 6 10855.85 M 6/15 10105.45
F 7/24 10659.86 F 7/ 3 F 6/12 10316.19
T 7/23 10672.30 T 7/ 2 10764.72 T 6/11 10300.65
W 7/22 10883.25 W 7/ 1 10786.81 W 6/10 10454.89
T 7/21 10929.79 T 6/30 10663.62 T 6/ 9 10527.40
M 7/20 11091.27 M 6/29 10681.55 M 6/ 8 10501.06
F 7/17 11106.10 F 6/26 10617.67 F 6/ 5 10472.95
T 7/16 11086.69 T 6/25 10591.96 T 6/ 4 10325.22
W 7/15 11014.60 W 6/24 10620.96 W 6/ 3 10225.57
T 7/14 11024.40 T 6/23 10502.79 T 6/ 2 10300.76
M 7/13 10929.28 M 6/22 10365.39 M 6/ 1 10279.90
DATE PRICE DATE PRICE DATE PRICE
F 5/29 10314.17
T 5/28 10362.05
W 5/27 10304.06
T 5/26 10341.47
30-Year U.S. Treasury Yield
11/30/97-11/30/98
[In the printed version of the document, a line graph appears which depicts the
following plot points:]
DATE YIELD DATE YIELD DATE YIELD
F F 11/13 5.250 F 10/23 5.178
T T 11/12 5.249 T 10/22 5.137
W W 11/11 5.288 W 10/21 5.071
T T 11/10 5.289 T 10/20 5.069
M 11/30 5.063 M 11/ 9 5.289 M 10/19 4.983
F 11/27 5.159 F 11/ 6 5.387 F 10/16 4.978
T 11/26 5.186 T 11/ 5 5.355 T 10/15 4.967
W 11/25 5.187 W 11/ 4 5.325 W 10/14 5.031
T 11/24 5.217 T 11/ 3 5.215 T 10/13 5.089
M 11/23 5.252 M 11/ 2 5.244 M 10/12 5.117
F 11/20 5.218 F 10/30 5.157 F 10/ 9 5.115
T 11/19 5.243 T 10/29 5.078 T 10/ 8 4.999
W 11/18 5.249 W 10/28 5.120 W 10/ 7 4.860
T 11/17 5.294 T 10/27 5.089 T 10/ 6 4.735
M 11/16 5.288 M 10/26 5.107 M 10/ 5 4.716
DATE YIELD DATE YIELD DATE YIELD
F 10/ 2 4.840 F 9/11 5.229 F 8/21 5.433
T 10/ 1 4.882 T 9/10 5.204 T 8/20 5.513
W 9/30 4.978 W 9/ 9 5.262 W 8/19 5.556
T 9/29 5.094 T 9/ 8 5.363 T 8/18 5.556
M 9/28 5.141 M 9/ 7 5.284 M 8/17 5.546
F 9/25 5.109 F 9/ 4 5.288 F 8/14 5.540
T 9/24 5.164 T 9/ 3 5.303 T 8/13 5.650
W 9/23 5.168 W 9/ 2 5.333 W 8/12 5.609
T 9/22 5.152 T 9/ 1 5.341 T 8/11 5.602
M 9/21 5.125 M 8/31 5.267 M 8/10 5.624
F 9/18 5.147 F 8/28 5.338 F 8/ 7 5.631
T 9/17 5.179 T 8/27 5.344 T 8/ 6 5.671
W 9/16 5.221 W 8/26 5.417 W 8/ 5 5.671
T 9/15 5.260 T 8/25 5.428 T 8/ 4 5.631
M 9/14 5.230 M 8/24 5.471 M 8/ 3 5.659
F 7/31 5.713 F 7/10 5.625 F 6/19 5.669
T 7/30 5.722 T 7/ 9 5.605 T 6/18 5.700
W 7/29 5.769 W 7/ 8 5.626 W 6/17 5.747
T 7/28 5.740 T 7/ 7 5.603 T 6/16 5.649
M 7/27 5.708 M 7/ 6 5.572 M 6/15 5.574
F 7/24 5.686 F 7/ 3 5.599 F 6/12 5.662
T 7/23 5.657 T 7/ 2 5.600 T 6/11 5.654
W 7/22 5.681 W 7/ 1 5.629 W 6/10 5.702
T 7/21 5.663 T 6/30 5.627 T 6/ 9 5.788
M 7/20 5.713 M 6/29 5.642 M 6/ 8 5.779
F 7/17 5.746 F 6/26 5.632 F 6/ 5 5.787
T 7/16 5.727 T 6/25 5.655 T 6/ 4 5.817
W 7/15 5.705 W 6/24 5.658 W 6/ 3 5.781
T 7/14 5.717 T 6/23 5.643 T 6/ 2 5.790
M 7/13 5.693 M 6/22 5.669 M 6/ 1 5.777
DATE YIELD DATE YIELD DATE YIELD
F 5/29 5.802
T 5/28 5.825
W 5/27 5.846
T 5/26 5.835
During the last year, the Fund generally carried a modest overweighting in
equities. The Asset Mix at the end of the Fiscal year was 64% equity, 36% bond.
Equity Portfolio
The goal of the Fund's equity portfolio is to provide broad exposure to the
U.S. equity market as represented by the Wilshire 5000, the broadest measure of
the U.S. equity market. Currently, the equity portfolio has 1,398 names. The
portfolio is constructed to match the index as closely as is possible on the
basis of capitalization and industry. The Fund's industry profile compared to
the Wilshire 5000 Index is shown on the next page. The variance between the two
is very small.
1
<PAGE>
Investment Advisor's Report (continued)
Industry Weighting Comparison
(As of 11/30/98)
Percent of Market Value
Industry Portfolio (%) Index (%)
- -------- ------------- ---------
Aerospace 1.4 1.4
Air Transportation 0.6 0.6
Apparel 0.5 0.5
Banks 7.3 7.4
Business Machines 8.5 8.4
Business Services 4.6 4.7
Chemicals 2.0 2.1
Construction 0.7 0.7
Consumer Durables 0.4 0.5
Containers 0.2 0.2
Cosmetics 2.0 2.0
Domestic Oil 0.9 0.9
Drugs & Medicine 11.4 11.5
Electronics 6.4 6.6
Energy & Utilities 3.8 3.7
Energy-- Raw Materials 0.9 0.9
Food & Agriculture 4.4 4.3
Gold 0.1 0.1
Insurance 4.0 3.9
International Oil 3.3 3.3
Liquor 0.3 0.3
Media 2.9 2.9
Miscellaneous 0.0 0.0
Miscellaneous Finance 7.0 7.0
Motor Vehicles 1.5 1.5
Non-durables & Entertainment 1.4 1.4
Non-Ferrous Metals 0.3 0.3
Optical & Photo 0.4 0.3
Paper & Forest Products 1.0 1.0
Producer Goods 4.7 4.6
Real Property 0.3 0.3
Retail 6.0 6.0
RR & Shipping 0.6 0.5
Steel 0.2 0.2
Telephone 7.0 7.0
Tires & Rubber 0.2 0.2
Tobacco 1.4 1.4
Travel & Recreation 1.2 1.2
Trucking & Freight 0.2 0.2
100.0 100.0
Similarly, the market capitalization profile of the portfolio is close to
that of the index. For example, the smallest 30% of all stocks in the market
(7,272 stocks) carry a weighting of less than 1% of the index (only 0.28%). The
Fund has a similar 0.26% of its equity portfolio in the smallest stocks. The
largest 10 stocks have a large share of the overall market. (16.21% of the total
capitalization). Here again, the equity portion of the Fund has a very similar
structure. Please see below for a name by name comparison.
Top 10 Holdings
(As of 11/30/98)
ISI Strategy Fund Wilshire 5000
Equity Portfolio % Market
Company % Market Value Value
- ------- ---------------- -------------
Microsoft Corp. 2.6% 2.5%
General Electric Co. 2.5 2.5
Merck & Co., Inc. 1.6 1.6
Exxon Corp. 1.5 1.5
Intel Corp. 1.5 1.5
Coca-Cola Co. 1.4 1.5
Wal Mart Stores, Inc. 1.4 1.4
IBM 1.4 1.3
Pfizer Inc. 1.2 1.2
Philip Morris Cos, Inc. 1.2 1.2
Subtotal 16.3% 16.2%
Bond Portfolio
The bond portfolio has two characteristics that helped performance over the
last year. First, it invests only in Treasuries. During the last 12 months,
Treasuries have outperformed other sectors. For example, the Lehman Treasury
Index was up +10.97% while the Lehman Corporate Index was up +8.26%. Second, the
Fund, because of ISI's positive outlook for bonds, had a long maturity
orientation.
2
<PAGE>
Investment Advisor's Report
(concluded)
At the end of the fiscal year, the Fund's average maturity was 16.5 years
including reserves. Over the last year, the Intermediate Treasury Index was up
+9.10% while the Long Treasury Index was up a larger +15.67%.
ISI Economic and Market Outlook
Overview
ISI expects the Federal Reserve to continue lowering short term rates. We
expect the economy will slow and that the U.S. will enter a period of mild
deflation in the first half of 1999. Corporate profits are likely to be under
some pressure because of price competition and a tight labor market. We expect
long term Treasury interest rates will trend lower and that stock prices are
likely to trend higher.
Forecast Table
ISI Forecast
------------
98:1Q 98:2Q 98:3Q 98:4Q 99:1Q 99:2Q
----- ----- ----- ----- ----- -----
Nominal GDP 6.4% 2.7% 4.7% 3.0% 1.5% 1.5%
GDP Deflator 1.1 0.9 0.8 0.0 -0.5 -0.5
Real GDP 5.4 1.8 3.9 3.0 2.0 2.0
30 Year Bond Yields* 5.9 5.6 5.0 5.1 4.7 4.6
Fed Funds Rate* 5.5 5.5 5.2 4.7 4.5 4.2
S&P 500 Operating
EPS** $46 $46 $44 $46 $44 $42
*End of Quarter
**S&P 500 EPS, seasonally adjusted, annual rate.
Sincerely,
/s/ R. Alan Medaugh
- -------------------
R. Alan Medaugh
President
December 21, 1998
Economic Outlook
A global economic slowdown with deflation is unfolding. On the economic
side, ISI's strength vs. weakness economic diffusion index for the U.S. has hit
a new low in mid-December. Growth in Europe is slowing. Latin America is
entering a recession. Japan is still weak. The other Asian economies are
recovering, but they aren't large enough to offset the weakness developing in
other regions. On the deflation side, inflation in Europe is essentially zero,
and mild deflation is likely in 1999. For example, France's CPI was up just 0.2%
year over year in November. Mild deflation is also likely in the U.S. A big wave
of Asian price cuts is headed our way. For example, Japan's Wholesale Price
Index (WPI) is deflating at a -13.4% annual rate. Taiwan's WPI is deflating at a
- -13.6% rate. Singapore's export prices are down by -11.2%.
Odds are now over 50% that U.S. wages have started to slow. The Federal
Reserve reported in its December Beige Book that "wage pressures have subsided
somewhat." The semiannual National Association of Purchasing Managers (NAPM)
survey released in early December found that labor costs remain subdued. These
two recent reports confirm the slowdown reported by the Bureau of Labor
Statistics (BLS) in their November Employment report. The BLS showed average
hourly earnings dropping from a 4.4% annual rate earlier this year to 3.7% in
November. Corporate mergers and layoffs are a sign that companies are fighting a
difficult pricing environment by cutting costs wherever possible. In this
environment, U.S. corporate profits are likely to slow, but not decline
precipitously, setting a cyclical low in mid-1999. ISI expects corporate profits
for the S&P 500 companies to fall 5% between mid-1998 and mid-1999.
3
<PAGE>
Economic Outlook (concluded)
Financial Crisis Environment
Over the last 30 years there have been eight major financial crises. Please
see chart below.
[In the printed version of the document, a line graph appears
which depicts the following plot points:]
FED
FUNDS
RATE
Jan-68 4.60
Feb-68 4.72
Mar-68 5.05
Apr-68 5.76
May-68 6.12
Jun-68 6.07
Jul-68 6.02
Aug-68 6.03
Sep-68 5.78
Oct-68 5.92
Nov-68 5.81
Dec-68 6.02
Jan-69 6.30
Feb-69 6.64
Mar-69 6.79
Apr-69 7.41
May-69 8.67
Jun-69 8.90
Jul-69 8.61
Aug-69 9.19
Sep-69 9.15
Oct-69 8.00
Nov-69 8.85
Dec-69 8.97
Jan-70 8.98
Feb-70 8.98
Mar-70 7.76
Apr-70 8.10
May-70 7.94
Jun-70 7.60
Jul-70 7.21
Aug-70 6.61
Sep-70 6.29
Oct-70 6.20
Nov-70 5.60
Dec-70 4.90
Jan-71 4.14
Feb-71 3.72
Mar-71 3.71
Apr-71 4.15
May-71 4.63
Jun-71 4.91
Jul-71 5.31
Aug-71 5.57
Sep-71 5.55
Oct-71 5.20
Nov-71 4.91
Dec-71 4.14
Jan-72 3.50
<PAGE>
FED
FUNDS
RATE
Feb-72 3.29
Mar-72 3.83
Apr-72 4.17
May-72 4.27
Jun-72 4.46
Jul-72 4.55
Aug-72 4.80
Sep-72 4.87
Oct-72 5.04
Nov-72 5.06
Dec-72 5.33
Jan-73 5.94
Feb-73 6.58
Mar-73 7.09
Apr-73 7.12
May-73 7.84
Jun-73 8.49
Jul-73 10.40
Aug-73 10.50
Sep-73 10.78
Oct-73 10.01
Nov-73 10.03
Dec-73 9.95
Jan-74 9.65
Feb-74 8.97
Mar-74 8.35
Apr-74 10.51
May-74 11.31
Jun-74 11.93
Jul-74 12.92
Aug-74 12.01
Sep-74 11.34
Oct-74 10.06
Nov-74 9.45
Dec-74 8.53
Jan-75 7.13
Feb-75 6.24
Mar-75 5.54
Apr-75 5.49
May-75 5.22
Jun-75 5.55
Jul-75 6.10
Aug-75 6.14
Sep-75 6.24
Oct-75 5.82
Nov-75 5.22
Dec-75 5.20
Jan-76 4.87
Feb-76 4.77
<PAGE>
FED
FUNDS
RATE
Mar-76 4.84
Apr-76 4.82
May-76 5.29
Jun-76 5.48
Jul-76 5.31
Aug-76 5.29
Sep-76 5.25
Oct-76 5.03
Nov-76 4.95
Dec-76 4.65
Jan-77 4.61
Feb-77 4.68
Mar-77 4.69
Apr-77 4.73
May-77 5.35
Jun-77 5.39
Jul-77 5.42
Aug-77 5.90
Sep-77 6.14
Oct-77 6.47
Nov-77 6.51
Dec-77 6.56
Jan-78 6.70
Feb-78 6.78
Mar-78 6.79
Apr-78 6.89
May-78 7.36
Jun-78 7.60
Jul-78 7.81
Aug-78 8.04
Sep-78 8.45
Oct-78 8.96
Nov-78 9.76
Dec-78 10.03
Jan-79 10.07
Feb-79 10.06
Mar-79 10.09
Apr-79 10.01
May-79 10.24
Jun-79 10.29
Jul-79 10.47
Aug-79 10.94
Sep-79 11.43
Oct-79 13.77
Nov-79 13.18
Dec-79 13.78
Jan-80 13.82
Feb-80 14.13
Mar-80 17.19
<PAGE>
FED
FUNDS
RATE
Apr-80 17.61
May-80 10.98
Jun-80 9.47
Jul-80 9.03
Aug-80 9.61
Sep-80 10.87
Oct-80 12.81
Nov-80 15.85
Dec-80 18.90
Jan-81 19.08
Feb-81 15.93
Mar-81 14.70
Apr-81 15.72
May-81 18.52
Jun-81 19.10
Jul-81 19.04
Aug-81 17.82
Sep-81 15.87
Oct-81 15.08
Nov-81 13.31
Dec-81 12.37
Jan-82 13.22
Feb-82 14.78
Mar-82 14.68
Apr-82 14.94
May-82 14.45
Jun-82 14.15
Jul-82 12.59
Aug-82 10.12
Sep-82 10.31
Oct-82 9.71
Nov-82 9.20
Dec-82 8.95
Jan-83 8.68
Feb-83 8.51
Mar-83 8.77
Apr-83 8.80
May-83 8.63
Jun-83 8.98
Jul-83 9.37
Aug-83 9.56
Sep-83 9.45
Oct-83 9.48
Nov-83 9.34
Dec-83 9.47
Jan-84 9.56
Feb-84 9.59
Mar-84 9.91
Apr-84 10.28
FED
FUNDS
RATE
May-84 10.32
Jun-84 11.06
Jul-84 11.23
Aug-84 11.64
Sep-84 11.30
Oct-84 9.99
Nov-84 9.43
Dec-84 8.38
Jan-85 8.35
Feb-85 8.50
Mar-85 8.58
Apr-85 8.27
May-85 7.97
Jun-85 7.53
Jul-85 7.88
Aug-85 7.90
Sep-85 7.92
Oct-85 7.99
Nov-85 8.05
Dec-85 8.27
Jan-86 8.14
Feb-86 7.86
Mar-86 7.49
Apr-86 8.99
May-86 6.85
Jun-86 6.92
Jul-86 6.56
Aug-86 6.17
Sep-86 5.89
Oct-86 5.85
Nov-86 6.04
Dec-86 6.91
Jan-87 6.43
Feb-87 6.10
Mar-87 6.13
Apr-87 6.37
May-87 6.85
Jun-87 6.73
Jul-87 6.58
Aug-87 6.73
Sep-87 7.22
Oct-87 7.29
Nov-87 6.68
Dec-87 6.77
Jan-88 6.83
Feb-88 6.58
Mar-88 6.58
Apr-88 6.87
May-88 7.09
<PAGE>
FED
FUNDS
RATE
Jun-88 7.51
Jul-88 7.75
Aug-88 8.01
Sep-88 8.19
Oct-88 8.30
Nov-88 8.35
Dec-88 8.76
Jan-89 9.12
Feb-89 9.38
Mar-89 9.85
Apr-89 9.84
May-89 9.81
Jun-89 9.53
Jul-89 9.24
Aug-89 8.99
Sep-89 9.02
Oct-89 8.84
Nov-89 8.55
Dec-89 8.45
Jan-90 8.23
Feb-90 8.24
Mar-90 8.28
Apr-90 8.26
May-90 8.18
Jun-90 8.29
Jul-90 8.15
Aug-90 8.13
Sep-90 8.20
Oct-90 8.11
Nov-90 7.81
Dec-90 7.31
Jan-91 6.91
Feb-91 6.25
Mar-91 6.12
Apr-91 5.91
May-91 5.78
Jun-91 5.90
Jul-91 5.82
Aug-91 5.66
Sep-91 5.45
Oct-91 5.21
Nov-91 4.81
Dec-91 4.43
Jan-92 4.03
Feb-92 4.06
Mar-92 3.98
Apr-92 3.73
May-92 3.82
Jun-92 3.76
<PAGE>
FED
FUNDS
RATE
Jul-92 3.25
Aug-92 3.30
Sep-92 3.22
Oct-92 3.10
Nov-92 3.09
Dec-92 2.92
Jan-93 3.02
Feb-93 3.03
Mar-93 3.07
Apr-93 2.96
May-93 3.00
Jun-93 3.04
Jul-93 3.08
Aug-93 3.03
Sep-93 3.09
Oct-93 2.99
Nov-93 3.02
Dec-93 2.96
Jan-94 3.05
Feb-94 3.25
Mar-94 3.34
Apr-94 3.56
May-94 4.01
Jun-94 4.25
Jul-94 4.26
Aug-94 4.47
Sep-94 4.73
Oct-94 4.76
Nov-94 5.29
Dec-94 5.45
Jan-95 5.53
Feb-95 5.92
Mar-95 5.98
Apr-95 6.05
May-95 6.01
Jun-95 6.00
Jul-95 5.85
Aug-95 5.74
Sep-95 5.80
Oct-95 5.76
Nov-95 5.80
Dec-95 5.60
Jan-96 5.56
Feb-96 5.22
Mar-96 5.31
Apr-96 5.22
May-96 5.24
Jun-96 5.27
Jul-96 5.40
<PAGE>
FED
FUNDS
RATE
Aug-96 5.22
Sep-96 5.30
Oct-96 5.24
Nov-96 5.31
Dec-96 5.29
Jan-97 5.25
Feb-97 5.18
Mar-97 5.39
Apr-97 5.51
May-97 5.50
Jun-97 5.56
Jul-97 5.52
Aug-97 5.54
Sep-97 5.54
Oct-97 5.50
Nov-97 5.52
Dec-97 5.50
Jan-98 5.50
Feb-98 5.50
Mar-98 5.50
Apr-98 5.50
May-98 5.50
Jun-98 5.50
Jul-98 5.50
Aug-98 5.50
Sep-98 5.25
Oct-98 5.00
Nov-98 4.75
Dec-98 4.75
Each of the first seven financial crises were accompanied by U.S. Federal
Reserve easing. The latest one, Asia, has seen easing only after the passage of
about a year. The financial market dynamics that occur when interest rate
cutting starts is especially beneficial to the bond and stock markets. The
process begins with slower economic growth, lower inflation and lower short term
rates. The excess money and credit resulting from an easier Federal Reserve
flows into the markets because the real economy does not require the added
liquidity. Lower bond rates and higher stock prices are the normal products of
an easier monetary stance caused by a financial crisis.
SEC Calculations
The shareholder letter included in this report contains statistics designed
to help you evaluate the performance of your Fund's management. The Securities
and Exchange commission (SEC) requires that when we report such figures, we also
include the fund's total return, according to a standardized formula, for
various time periods through the end of the most recent calendar quarter. The
SEC total return figures differ from those we reported because the time periods
may be different and because the SEC calculation includes the impact of the
Fund's currently effective 4.45% maximum sales charge.
AVERAGE ANNUAL TOTAL RETURN
% Return with
Periods ended 11/30/98: Sales Charge
----------------------- -------------
One Year 10.91%
-----------------------------------------------
Since Inception (9/16/97) 9.60%
-----------------------------------------------
These total returns correspond to those experienced by individual
shareholders only if their shares were purchased on the first day of each time
period and the maximum sales charge was paid.
Any performance figures shown are for the full period indicated. Since
investment return and principal value will fluctuate, an investor's shares may
be worth more or less than their original cost when redeemed. Past performance
is not an indicator of future results.
4
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- 64.1%
Aerospace -- 0.9%
Boeing Co. 1,200 $ 48,750
Coltec Industries* 200 3,862
General Dynamics Corp. 200 11,612
Goodrich (B.F.) Co. 210 7,967
Gulfstream Aerospace Corp.* 100 5,137
Litton Industries, Inc. 100 6,119
Lockheed Martin 200 20,750
Northrop Grumman Corp. 100 8,125
OEA, Inc.* 200 2,612
Raytheon Co. 400 22,150
Rockwell International Corp. 200 9,787
Sundstrand Corporation 100 5,400
Textron, Inc. 200 15,537
TRW, Inc. 100 5,506
United Technologies Corp. 300 32,156
--------
205,470
--------
Air Transport -- 0.4%
AAR Corp. 200 5,050
Airborne Freight Corp. 100 2,669
Alaska Air Group, Inc. 100 3,744
AMR Corp. 200 13,187
ASA Holdings 100 3,394
Comair Corp. 100 3,062
Continental Airlines, Inc.* 100 3,531
Delta Air Lines, Inc. 200 10,737
FDX Corporation* 200 12,975
Galileo International, Inc. 200 8,000
Northwest Airlines Corp. - Class A* 100 2,506
PS Group Holdings, Inc. 100 1,113
Skywest, Inc.* 200 5,412
U S Air Group, Inc. 100 5,200
UAL Corp. 100 6,369
--------
86,949
--------
Apparel -- 0.3%
Abercrombie & Fitch Co. - Class A* 102 5,712
Burlington Industries, Inc.* 300 3,131
Fruit of the Loom, Inc.* 100 1,475
Jo-Ann Stores Inc. - Class A* 300 4,725
Jones Apparel Group, Inc.* 200 4,637
Kellwood Co. 100 2,700
Liz Claiborne, Inc. 100 3,387
Mays (J.W.), Inc.* 100 706
Nautica Enterprises* 100 1,969
Market
Shares Value
------ ------
Apparel -- continued
Nike, Inc. 400 $ 16,000
Reebok International Ltd. 200 3,187
S&K Famous Brands, Inc.* 100 987
Springs Industries, Inc. - Class A 100 3,894
Unifi, Inc. 100 1,925
VF Corp. 100 4,906
Warnaco Group, Inc. 100 2,475
WestPoint Stevens, Inc.* 100 3,000
Wolverine World Wide, Inc. 200 2,725
-------
67,541
-------
Banks -- 4.8%
Amsouth Bancorp 150 6,338
Arrow Financial Corp. 200 5,225
Associated Banc-Corp 100 3,412
Bank of New York Co., Inc. 900 30,825
Bank One Corp. 1,436 73,685
Bankamerica Corporation 2,123 138,393
BankBoston Corp. 400 16,650
Bankers Trust New York Corp. 100 8,700
BB&T Corp. 300 11,081
Carolina First Corp. 100 2,494
CCB Financial Corp. 200 10,850
Centura Banks, Inc. 100 6,800
Chase Manhattan Corp. 1,100 69,781
City National Corp. 100 3,737
CNB Bancshares, Inc. 205 8,892
Comerica, Inc. 150 9,675
Commerce Bancorp, Inc. 6 286
Commerce Bancshares, Inc. 100 4,437
Community Banks, Inc. 150 3,581
Compass Bancshares, Inc. 100 3,725
Crestar Financial Corp. 100 6,637
Fifth Third Bancorp 300 19,912
First American Corp. (Tenn.) 100 4,331
First Financial Bancorp 200 6,712
First Security Corp. 200 4,025
First Tennessee National Corp. 200 6,700
First Union Corp. 1,182 71,806
First Virginia Bankshares 100 4,487
Firstar Corporation New Wisconsin 328 24,026
Firstmerit Corporation 100 2,625
Fleet Financial Group, Inc. 600 25,012
Franchise Finance Corp. 100 2,456
Fulton Financial Corp. 100 2,200
GBC Bancorp 200 4,975
5
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Banks -- continued
GreenPoint Financial Corp. 100 $ 3,806
Hallmark Capital Corp.* 200 2,575
Hibernia Corp. 200 3,375
Huntington Bancshares, Inc. 210 6,221
Irwin Financial Corp. 100 2,862
KeyCorp 500 15,344
Keystone Financial, Inc. 100 3,237
Little Falls Bancorp, Inc. 200 3,600
Marshall & Ilsley Corp. 100 5,094
Matewan Bancshares 100 2,500
Mellon Bank Corp. 300 18,881
Mercantile Bancorp 200 8,812
Mercantile Bankshare 100 3,512
Merchants New York Bancorp, Inc. 200 7,125
Morgan, (J.P.) & Co., Inc. 200 21,375
National Bancorp Alaska, Inc. 300 9,300
National City Bankshares, Inc. 220 8,379
National City Corp. 420 28,245
National Community Bancorp* 100 1,812
Niagara Bancorp, Inc. 400 4,300
North Fork Bancorporation, Inc. 150 3,159
Northern Trust Corp. 100 8,075
Old Kent Financial Corp. 105 4,515
Pacific Century Financial Corp. 200 4,275
Peoples Bank of Bridgeport* 100 2,962
Peoples Heritage Financial Group, Inc. 200 4,100
PNC Bank Corp. 400 20,625
Popular, Inc. 200 5,950
Provident Bankshares Corp. 105 2,822
Provident Financial Group 200 8,100
Queens County Bancorp 100 3,000
Regions Financial Corp. 300 11,625
Republic New York Corp. 200 9,350
Southtrust Corp. 150 5,512
Southwest Bancorp of Texas, Inc. * 200 3,600
State Street Corp. 200 13,725
Statefed Financial Corp. 100 1,062
Summit Bancorp 200 8,362
Suntrust Banks, Inc. 300 20,944
Synovus Financial Corp. 350 7,722
Tompkins County Trustco, Inc. 200 6,500
Trustmark Corp. 100 2,069
U.S. Bancorp, Inc. - PA 200 3,937
U.S.Bancorp 900 33,131
Union Planters Corp. 200 9,525
Unionbancal Corp. 100 9,944
UST Corp. 100 2,475
Market
Shares Value
------ ------
Banks -- continued
Valley National Bancorp 320 $ 9,280
Wachovia Corp. 200 17,462
Wells Fargo Company 2,000 72,000
Western Bancorp 42 1,370
Wilmington Trust Corp. 100 5,800
Zions Bancorp 100 5,050
----------
1,092,854
----------
Business Machines -- 5.5%
3Com Corp. * 500 19,344
Adaptec, Inc.* 200 3,250
Adobe Systems, Inc. 100 4,475
Autodesk, Inc. 100 3,637
BMC Software, Inc.* 300 15,319
Cabletron Systems, Inc.* 200 2,800
Centigram Communications Corp.* 400 3,050
Ceridian Corp. 100 6,506
Cirrus Logic* 100 1,231
Cisco Systems, Inc.* 1,875 141,328
Compaq Computer Corp. 2,189 71,142
Compuware Corp.* 200 12,450
Comverse Technology* 100 5,750
Concord EFS, Inc. * 150 4,772
Data Dimensions, Inc.* 200 2,550
Davox Corp. * 100 712
Dell Computer Corp.* 1,600 97,300
Diebold, Inc. 100 3,437
Gateway 2000, Inc.* 200 11,225
Honeywell, Inc. 200 15,987
Ikon Office Solutions, Inc. 100 975
Input/Output, Inc.* 100 819
International Business Machines Corp. 1,200 198,000
Iomega Corp.* 300 2,269
Learning Co., Inc.* 100 2,906
Lexmark International Group, Inc. - Class A* 100 7,637
Microage, Inc.* 200 3,500
Microchip Technology, Inc.* 100 3,481
Micromuse, Inc.* 100 2,281
Micron Electronics, Inc.* 200 4,550
Microsoft Corporation* 3,100 378,200
NCR Corp.* 100 3,725
Network Appliance Corp.* 100 7,512
Novellus Systems, Inc.* 100 4,962
Oracle Systems Corp.* 1,400 47,950
Pitney Bowes, Inc. 300 16,800
Platinum Technology, Inc.* 157 2,777
6
<PAGE>
November 30, 1998
Market
Shares Value
------ ------
ISI Strategy Fund, Inc.
Statement of Net Assets (continued)
(Unaudited)
Common Stock -- continued
Business Machines -- continued
Rainbow Technologies, Inc.* 200 $ 3,100
Seagate Technology, Inc.* 300 8,850
Sigma Designs, Inc.* 900 2,756
Sterling Commerce, Inc.* 100 3,625
Sterling Software, Inc. 100 2,575
Storage Technology Corp.* 200 7,000
Sun Microsystems, Inc.* 500 37,031
Sybase, Inc.* 100 725
Tech Data Corp.* 200 8,050
Teleglobe, Inc. 177 4,812
Telxon Corp. 100 2,700
Total System Services, Inc. 450 9,787
Vitech America, Inc. * 100 1,737
Wang Labs, Inc.* 100 2,550
Xerox Corp. 400 43,000
----------
1,252,907
----------
Business Services -- 3.0%
ABR Information Services, Inc.* 100 1,700
ACNielsen Corp.* 100 2,756
Affiliated Computer Services, Inc. - Class A* 200 7,662
Allied Waste Industries, Inc.* 200 4,075
America Online 600 52,537
American Management Systems, Inc.* 100 2,950
Answerthink Consulting Group* 100 1,938
Apollo Group, Inc. - Class A* 100 3,225
Aspen Technology, Inc.* 100 1,406
At Home Corp. - Series A* 100 5,825
Automatic Data Processing, Inc. 400 30,800
Aztec Manufacturing Co.* 100 994
BEA Systems, Inc.* 200 2,400
Block, H&R, Inc. 200 8,987
Browning-Ferris Industries, Inc. 200 5,900
Cambridge Technology Partners* 100 2,087
Caribiner International, Inc.* 100 931
CDI Corp.* 100 2,681
CDW Computer Centers* 100 8,100
Checkfree Holdings Corp.* 300 4,875
Cintas Corp. 100 5,500
Citrix Systems, Inc.* 150 12,450
Comarco, Inc. 100 2,300
Computer Associates International, Inc. 650 28,762
Computer Sciences Corp.* 200 11,425
Corrections Corp. of America* 200 4,100
Credit Acceptance Corp.* 100 663
Cytec Industries, Inc. * 200 4,512
Market
Shares Value
------ ------
Business Services -- continued
Deluxe Corp. 100 $ 3,475
DeVRY, Inc. * 200 5,275
DST Systems* 200 10,825
Dun & Bradstreet 200 6,037
Ecolab, Inc. 100 3,094
Equifax, Inc. 200 8,300
Excite, Inc.* 200 9,787
First Data Corp. 500 13,344
Fiserv, Inc.* 150 6,628
Fore Systems, Inc.* 100 1,512
Forrester Research, Inc.* 100 3,162
Great Plains Software, Inc.* 100 3,925
HBO & Co. 600 14,962
Hudson General Corp. 100 5,775
I2 Technologies, Inc.* 200 4,950
IDX Systems Corp.* 100 4,106
IMS Health 200 13,275
Information Resources, Inc.* 100 838
Integrated Circuit Systems, Inc.* 200 2,875
Interpublic Group of Cos., Inc. 200 13,750
Intuit * 200 11,575
J. D. Edwards & Co.* 100 3,475
Jacobs Engineering Group, Inc. 100 3,769
Keane, Inc. 100 2,875
Labor Ready, Inc.* 150 3,272
Lanvision Systems, Inc.* 100 100
Lason Holdings, Inc.* 100 6,138
Level 8 Systems, Inc.* 100 712
LHS Group, Inc. 200 9,487
Manpower, Inc. 100 2,225
Media Arts Group, Inc.* 300 4,387
MemberWorks, Inc.* 100 2,437
Mentor Corp. MN 200 3,700
Metamor Worldwide, Inc.* 100 2,369
Modis Professional Services* 200 2,387
Morrison Health Care, Inc. 100 1,825
National Service Industries, Inc. 200 7,725
Network Associates, Inc.* 150 7,631
New Era of Networks* 100 7,400
NFO Worldwide, Inc.* 100 1,262
Nielsen Media Research 265 3,975
Nova Corp. (Georgia) * 100 3,181
Offshore Logistics, Inc. 100 1,244
Olsten Corp. 100 750
Omnicom Group, Inc. 200 10,687
Online System Services, Inc.* 100 1,237
Open Market, Inc. * 100 1,725
7
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Business Services -- continued
Parametric Technology Corp.* 300 $ 5,100
Paychex, Inc. 150 7,462
Peoplesoft, Inc.* 300 6,169
Peregrine Systems, Inc.* 100 3,694
Policy Management Systems* 100 5,112
Pre-Paid Legal Services, Inc.* 100 2,600
Preview Travel, Inc.* 100 1,900
Programmers Paradise, Inc.* 500 5,406
Project Software & Development, Inc.* 200 6,025
Protection One, Inc. * 300 2,887
Protein Design Labs, Inc.* 200 4,400
PSW Technologies, Inc.* 100 300
R.H. Donnelley 220 3,286
Republic Industries, Inc. * 600 10,200
Reynolds & Reynolds 200 4,225
Robert Half International, Inc. 100 4,700
Rural/Metro Corp. * 300 3,075
Siebel Systems, Inc. * 100 2,425
SS&C Technologies, Inc.* 600 6,975
Stratasys, Inc. 400 2,300
Sungard Data Systems, Inc.* 100 3,200
Symantec Corp.* 100 2,000
Synopsys, Inc.* 100 4,737
Syntel, Inc.* 50 675
Tetra Technologies, Inc.* 100 1,262
The Servicemaster Company 400 8,600
Tier Technologies, Inc.* 200 2,750
True North Communications, Inc. 100 2,812
Tyco International Ltd. 76 5,002
Unisource Worldwide, Inc. 100 787
USWEB Corporation* 200 4,550
Verisign, Inc.* 100 4,013
VERITAS Software Corp.* 200 11,950
Viad Corp. 100 2,331
Visio Corp.* 100 3,537
Vitesse Semiconductor, Inc. * 100 3,562
Walker Interactive Systems, Inc.* 100 800
Waste Management, Inc. 689 29,541
Yahoo!* 200 38,400
Young & Rubicam* 100 2,987
--------
686,723
--------
Chemicals -- 1.3%
Air Products & Chemicals, Inc. 300 11,437
Airgas, Inc. * 200 2,025
Albemarle Corp. 100 1,862
Market
Shares Value
------ ------
Chemicals -- continued
Amcol International Corp. 550 $ 5,844
Cabot Corp. 100 3,012
Crompton & Knowles Corp. 100 1,937
Dow Chemical Co. 300 29,212
Dupont, (E.I.) de Nemours & Co. 1,400 82,250
Eastman Chemical Co. 100 5,794
Ferro Corp. 100 2,794
Hercules, Inc. 100 3,287
International Specialty Products* 200 2,625
JLM Industries, Inc.* 100 563
Lubrizol Corp. 100 2,713
Lyondell Petrochemical Co. 100 1,863
Millennium Chemicals, Inc. 100 2,387
Minnesota Mining & Manufacturing Co. 500 40,156
Monsanto Co. 700 31,719
Morton Intl., Inc. New 100 2,944
Olin Corporation 100 3,056
Oxigene, Inc.* 300 2,662
PPG Industries, Inc. 300 18,356
Praxair, Inc. 200 7,637
Rohm & Haas Co. 300 10,481
RPM, Inc. (Ohio) 200 3,275
Sigma Aldrich Corp. 200 6,425
Solutia, Inc.* 100 2,237
Twinlab Corp.* 100 1,662
Union Carbide Corp. Hldg Co. 100 4,475
W.R. Grace & Co.* 200 3,300
Witco Corp. 100 1,906
--------
299,896
--------
Construction -- 0.4%
Alyn Corp.* 100 475
Apogee Enterprises, Inc. 100 1,237
Centex Corp. 100 3,569
Clayton Homes, Inc. 100 1,550
Crane Co. 150 4,847
Fluor Corporation 100 4,281
Integrated Electrical Services* 100 1,913
Interface, Inc. - Class A 200 2,500
Johns Manville Corp. 200 2,887
Justin Industries, Inc. 200 2,575
Lafarge Corp. 100 3,706
Lawson Products, Inc. 100 2,300
Martin Marietta Materials, Inc. 100 4,850
Masco Corp. 400 11,550
Morrison Knudsen Corp.* 200 1,925
8
<PAGE>
November 30, 1998
Market
Shares Value
------ ------
ISI Strategy Fund, Inc.
Statement of Net Assets (continued)
(Unaudited)
Common Stock -- continued
Construction -- continued
Omniquip Intl 200 $ 2,694
Owens Corning 100 3,731
Palm Harbor Homes, Inc.* 125 3,234
Puerto Rican Cement Co., Inc. 100 3,700
Republic Group, Inc. 100 1,719
Sherwin Williams Co. 200 5,675
Southdown, Inc.* 88 5,126
Stanley Works 100 3,056
Toll Brothers, Inc.* 200 4,862
United Mobile Homes, Inc. 100 987
USG Corp. 200 9,887
Walter Industries, Inc.* 200 2,862
West Teleservices* 200 2,225
--------
99,923
--------
Consumer Durables -- 0.3%
Bassett Furniture Industries, Inc. 200 5,050
Black & Decker Corp. 100 5,419
Craig Corp. 100 869
Harman International Industries, Inc. 100 4,269
Hillenbrand Industries, Inc. 100 5,681
Kimball International, Inc. - Class B 200 3,850
Ladd Furniture, Inc. 200 3,500
Leggett & Platt, Inc. 200 4,537
Linens 'N Things, Inc.* 100 3,062
Maytag Corp. 100 5,413
Mohawk Industries, Inc.* 100 3,731
Newell Co. 200 8,850
RF Monolithics, Inc.* 100 1,062
Shaw Industries, Inc. 200 4,050
Sunbeam Oster Corp. 100 612
Whirlpool Corp. 100 5,600
Windmere Corp. 300 1,837
--------
67,392
--------
Containers -- 0.1%
Bemis Co., Inc. 100 3,781
BWAY Corp.* 100 1,631
Crown Cork & Seal Co., Inc.* 200 6,750
Owens-Illinois, Inc.* 300 9,637
Sealed Air Corp. - New 53 2,339
Sonoco Products 100 2,994
US Can Corp.* 100 1,756
--------
28,888
--------
Market
Shares Value
------ ------
Cosmetics -- 1.3%
Alberto-Culver Co. - Class B 100 $ 2,562
Avon Products, Inc. 200 8,125
Bush Boake Allen, Inc.* 200 6,825
Clorox Company 100 11,106
Colgate-Palmolive Co. 300 25,687
Dial Corp. 200 5,250
Estee Lauder Co. - Class A 100 7,506
French Fragrances, Inc.* 400 2,600
Gillette Co. 1,400 64,312
International Flavors & Fragrances, Inc. 100 4,187
Nu Skin Asia Pacific, Inc.* 200 4,787
Procter & Gamble Co. 1,700 148,962
Thermolase Corp.* 400 2,050
--------
293,959
--------
Domestic Oil -- 0.6%
Amerada Hess Corp. 100 5,550
Ashland 100 4,863
Atlantic Richfield Co. 400 26,600
Benton Oil & Gas Co.* 100 375
Callon Petroleum Co.* 100 1,281
Costilla Energy, Inc.* 400 2,350
Cross Timbers Oil Co. 100 1,138
Diamond Offshore Drilling, Inc. 200 4,475
Global Industries, Ltd.* 200 1,138
Holly Corp. 100 1,625
Magellan Petroleum Corporation* 200 275
Midcoast Energy Resources, Inc. 10 208
Murphy Oil Corp. 100 3,988
Newfield Exploration Co.* 100 1,950
Ocean Energy, Inc.* 200 1,625
Oryx Energy Co. 200 2,763
Pennzoil Co. 100 3,713
Phillips Petroleum Co. 300 12,600
Pioneer Natural Resouces Co.* 100 1,325
Pool Energy Service Co.* 100 1,125
Pride International, Inc.* 300 2,269
R&B Falcon Corp.* 200 1,838
Santa Fe Energy Resources, Inc. 100 769
Seven Seas Petroleum, Inc.* 200 1,600
St. Mary Land & Exploration Co. 100 1,900
Sunoco, Inc. 100 3,387
Teppco Partners, L.P. 200 5,288
Tosco Corp. 200 5,225
Transmontaigne Oil Co.* 100 1,500
Transocean Offshore, Inc. 100 2,469
9
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued)
(Unaudited)
November 30, 1998
Market
Shares Value
------ ------
Common Stock -- continued
Oil - Domestic -- continued
Tuboscope Vetco International Corp.* 200 $ 1,663
Union Pacific Resources Group, Inc. 300 3,356
Unocal Corp. 300 10,163
Unova, Inc.* 100 1,694
USX Marathon Group 400 11,350
--------
133,438
--------
Drugs and Medicine -- 7.3%
Abbott Laboratories 1,900 91,200
Aetna, Inc. 200 15,462
Allegiance Corp. 200 8,062
Allergan, Inc. 100 6,088
ALZA Corp.* 100 5,225
American Home Products Corp. 1,600 85,200
Amerisource Health Corp. - Class A * 100 6,400
Amgen, Inc.* 300 22,575
Arrow International, Inc. 100 2,850
Arterial Vascular Engineering, Inc.* 100 4,887
Ballard Medical Products* 100 2,175
Bard, C.R., Inc. 100 4,581
Barr Laboratories, Inc.* 100 4,225
Bausch & Lomb, Inc. 100 5,550
Baxter International, Inc. 400 25,425
Beckman Coulter 100 4,825
Becton, Dickinson & Co. 300 12,750
Bergen Brunswig Corp. 200 12,450
Beverly Enterprises, Inc.* 100 575
Biogen, Inc.* 100 7,588
Biomet, Inc.* 100 3,825
Boston Scientific Corp.* 200 9,900
Bristol-Myers Squibb Co. 1,200 147,075
Cardinal Health, Inc. 300 20,587
Carematrix, Inc.* 200 5,600
Carter-Wallace, Inc. 300 5,325
Centocor, Inc.* 100 4,050
Chiron Corp.* 200 4,525
Columbia/HCA Healthcare 800 19,700
Coulter Pharmaceutical, Inc.* 200 5,675
Covance, Inc. * 100 2,500
D & K Healthcare Resources* 100 1,975
Dentsply International* 100 2,688
Eli Lilly & Co. 1,400 125,562
First Health Group Corp.* 400 6,375
Forest Laboratories, Inc.* 100 4,663
Foundation Health Systems, Inc. * 200 2,762
Geltex Pharmaceuticals, Inc. * 100 2,387
Market
Shares Value
------ ------
Drugs and Medicine -- continued
Genetech, Inc.* 200 $ 14,012
Genzyme Corp.* 100 4,206
Genzyme-Molecular Oncology* 10 35
Guidant Corp. 200 17,162
HCR Manor Care * 200 6,350
Health Management Associates, Inc.* 350 7,591
Healthsouth Corp.* 500 6,719
Herbalife International, Inc. - Class A 200 2,362
Humana, Inc. 200 3,962
ICN Pharmaceuticals, Inc. 200 5,050
Impath, Inc. * 100 3,831
Inhale Therapeutic Systems* 100 3,237
Invacare Corp. 100 2,394
Ivax Corporation 100 950
Johnson & Johnson 1,700 138,125
K-V Pharmaceutical Co. - Class A* 100 2,125
Linc.are Holdings, Inc. 100 3,450
Mallinc.krodt Group, Inc. 100 3,231
McKesson Corp. 100 7,119
Medtronic, Inc. 600 40,612
Merck & Co., Inc. 1,500 232,312
Mylan Laboratories 200 6,637
NBTY, Inc. * 200 1,225
North American Vaccine, Inc.* 200 1,925
Oakley Incorporated* 200 1,950
Omnicare, Inc. 100 2,863
Oxford Health Plan* 100 1,106
Pacificare Health Systems, Inc. * 100 7,531
Parexel International Corp.* 100 2,606
Penwest Pharmaceuticals Co.* 150 1,275
Perrigo* 100 838
Pfizer, Inc. 1,600 178,600
PSS World Medical, Inc.* 200 4,150
Quintiles Transnational Corp.* 100 4,987
Quorum Health Group, Inc.* 100 1,663
Sangstat Medical Corp.* 100 2,400
Schein (Henry), Inc.* 100 3,550
Schering-Plough Corp. 900 95,737
Scios, Inc.* 100 756
Sola International, Inc.* 200 3,175
Specialty Care Network, Inc.* 100 169
St. Jude Medical, Inc. 100 2,906
Sterigenics Intl, Inc.* 200 5,050
STERIS Corp.* 100 2,681
Stryker Corp. 100 4,225
Sun Healthcare Group, Inc.* 300 1,575
Sunrise Assisted Living, Inc.* 100 4,312
10
<PAGE>
November 30, 1998
Market
Shares Value
------ ------
ISI Strategy Fund, Inc.
Statement of Net Assets (continued)
(Unaudited)
Common Stock -- continued
Drugs and Medicine -- continued
Sybron International Corporation* 200 $ 4,975
Tenet Healthcare* 400 11,825
Total Renal Care Hldgs.* 200 5,312
United Healthcare Corp. 200 9,025
Urocor, Inc.* 100 550
Ventas, Inc.* 300 3,600
Warner Lambert Co. 1,000 75,500
Watson Pharmaceuticals* 100 5,387
Wellpoint Health Networks, Inc.* 100 8,206
Zonagen, Inc.* 200 3,850
----------
1,680,224
----------
Electronics -- 4.1%
Acxiom Corp.* 100 2,363
ADC Telecommunications, Inc.* 200 5,975
Advanced Fibre Communications* 100 878
Advanced Micro Devices, Inc.* 200 5,537
Allen Telecom, Inc. 100 694
Alliant Techsystems, Inc.* 100 7,619
Altera Corp.* 100 4,906
American Power Conversion Corp.* 100 4,137
American Tower Corp. 200 4,625
AMP 300 14,512
Analog Devices, Inc.* 200 4,087
Andrew Corp.* 200 3,200
Applied Materials, Inc.* 500 19,375
Arrow Electronics, Inc. 200 4,350
Ascend Communications, Inc.* 300 16,856
Atmel Corp. * 100 1,213
AVX Corporation 200 3,887
Barnett, Inc. * 100 1,250
Bell Industries, Inc. 100 1,044
Blonder Tongue Laboratories, Inc.* 100 787
Cadence Design Systems, Inc.* 300 8,437
Checkpoint System, Inc.* 200 2,687
CIENA Corp. * 200 3,400
Cypress Semiconductor Corp.* 100 1,019
Electro Scientific Industries, Inc.* 100 2,994
Electronic Data Systems Corp. 600 23,400
EMC Corp. * 600 43,500
Energy Research Corp.* 100 1,325
Excel Technology, Inc.* 100 1,000
General Instrument Corporation* 300 8,437
General Semiconductor, Inc. 700 7,087
Genrad, Inc. 200 3,250
Gentex Corp.* 100 1,838
Market
Shares Value
------ ------
Electronics -- continued
Geotel Communications Corp.* 200 $ 5,500
Glenayre Technologies, Inc.* 600 3,712
Harris Corp. 200 7,587
Hearst-Argyle Television* 100 2,631
Hewlett-Packard Co. 1,300 81,575
Innovex, Inc. 100 1,600
Intel Corp. 2,100 226,012
Itron, Inc. * 300 2,006
ITT Industries* 100 3,600
KLA Instruments Corp.* 100 3,406
Level One Communications, Inc.* 100 3,094
Linear Technology Corp. 100 7,006
Loral Space and Communications Ltd.* 400 7,350
LSI Logic Corp.* 200 3,100
Lucent Technologies, Inc. 1,600 137,700
Maxim Integrated Products, Inc.* 200 7,850
Methode Electronics, Inc. - Class A 200 2,725
Micron Technology, Inc. 300 12,394
MMC Networks, Inc. * 200 2,612
Molex, Inc. 200 7,212
Motorola, Inc. 700 43,400
MRV Communications, Inc.* 200 1,312
National Semiconductor Corp.* 200 2,875
Netscape Communications Corp.* 100 3,700
Nextel Communications, Inc. - Class A* 400 8,600
Omnipoint Corp. 100 887
Onix Systems, Inc.* 100 525
Perkin Elmer Corp. 100 9,325
Plantronics, Inc. * 100 6,575
Qualcomm, Inc.* 100 5,487
Rambus, Inc. 100 8,856
Rational Software* 200 4,537
Reltec Corp.* 100 2,275
SCI Systems, Inc.* 100 4,862
Scientific-Atlanta, Inc. 100 1,938
Sensormatic Electronics Corp. 100 812
Sequent Computer Systems, Inc.* 100 1,275
Snyder Communications, Inc. 100 3,556
Solectron Corp.* 100 6,619
Speedfam International, Inc.* 100 1,519
Symbol Technologies, Inc.* 100 4,875
Tellabs, Inc.* 200 10,812
Teradyne, Inc. * 100 3,206
Texas Instruments, Inc. 500 38,187
Thermo Electron Corp.* 200 3,375
Thermoquest Corporation* 100 1,019
Thomas & Betts Corp. 100 4,331
11
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Electronics -- continued
Transaction Network Services, Inc.* 100 $ 2,412
United States Satellite Broadcasting Company, Inc.* 100 775
Vicor Corp.* 100 888
Vishay Intertechnology, Inc.* 105 1,490
VLSI Technology, Inc.* 100 1,144
Watkins-Johnson Co. 100 1,825
Western Digital Corp.* 200 2,612
Western Wireless Corporation* 200 3,625
Xilinx, Inc.* 100 5,075
Zenith Electronics Corp. 100 41
--------
948,968
--------
Energy and Utilities -- 2.4%
AES Corp. 200 9,150
AGL Resources, Inc. 200 4,312
Allegheny Energy, Inc. 200 6,750
Ameren Corp.* 200 8,237
American Electric Power Co., Inc. 200 9,275
American Water Works Co., Inc. 100 3,094
Artesian Resources Corp. - Class A 100 2,350
Atrion Corp. 300 2,588
Baltimore Gas & Electric Co. 200 6,137
BEC Energy 100 4,125
Calenergy Co., Inc.* 100 3,131
California Water Service Group 100 2,606
Carolina Power & Light Co. 200 9,275
Cascade Natural Gas Corp.* 200 3,662
Central & South West Corp. 300 8,250
Central Hudson Gas & Electric Corp. 100 4,044
Cinergy 200 6,912
CMS Energy Corp. 100 4,875
Coastal Corp. 300 10,462
Columbia Energy Group 150 8,512
Commonwealth Energy System 100 3,850
Conectiv, Inc. 175 4,025
Consolidated Edison 400 20,325
Consolidated Natural Gas Co. 100 5,431
Dominion Resources, Inc. 200 9,238
DQE, Inc. 100 4,106
DTE Energy Co. 300 13,087
Duke Power Co. 400 25,025
Edison International, Inc. 400 11,000
El Paso Energy Corp. 100 3,412
Energy East Corp. 100 5,306
Enron Corp. 400 21,025
Market
Shares Value
------ ------
Energy and Utilities -- continued
Entergy 300 $ 8,794
First Energy Corp. 300 9,281
Florida Progress Corp. 100 4,275
FPL Group, Inc. 200 12,250
Global Industrial Technologies, Inc.* 100 837
GPU, Inc. 200 8,762
Houston Industries, Inc. 400 12,650
Illinova Corp. 100 2,706
Interstate Energy Corp. 100 3,037
Ipalco Enterprises, Inc. 100 5,012
Kansas City Power & Light Co. 100 2,969
Keyspan Energy Corp. 188 5,581
KN Energy, Inc. 100 4,375
LG&E Corporation 200 5,600
MCN Corp. 200 3,787
MDU Resources Group, Inc. 150 3,797
Midamerican Energy Co. 100 2,600
Middlesex Water Co. 100 2,500
Montana Power Co 100 5,069
New Century Energies, Inc. 100 4,806
New England Electric System 100 4,175
Niagara Mohawk Power Corp. 200 3,075
Nicor 100 4,206
Nipsco Industries, Inc. 100 2,931
Northeast Utilities 200 3,150
Northern States Power Co. (Minn.) 200 5,437
Northwestern Corporation 100 2,362
Oklahoma Gas & Electric Co. 100 2,794
Orange & Rockland Utilities, Inc. 100 5,625
PECO Energy 300 12,037
PG & E Corp. 500 15,469
Pinnacle West Capital Corporation 100 4,556
Public Service Enterprise Group 300 11,700
Puget Sound Power & Light Co. 100 2,712
Questar Corp. 200 3,837
Republic Services* 200 3,725
Scana Corp. 100 3,263
Seagull Energy Corp.* 200 1,637
Sempra Energy 250 6,266
Sierra Pacific Resources 100 3,600
Sonat, Inc. 100 2,969
Southern Co. 900 26,550
TECO Energy, Inc. 200 5,375
Texas Utilities Co. 300 13,369
Unicom 300 11,306
Utilicorp. United, Inc. 100 3,519
Washington Gas Light Corp. 100 2,550
12
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Energy and Utilities-- continued
Washington Water Power Co. 100 $ 1,831
Western Resources, Inc. 100 3,494
Wicor, Inc. 200 4,375
Williams Cos. Inc. 600 17,287
Wisconsin Energy Corp. 100 3,094
WPS Resources Corp. 100 3,375
--------
553,916
--------
Energy - Raw Materials -- 0.6%
Anadarko Petroleum Corp. 200 5,637
Apache Corp. 200 4,600
Arabian Shield Development Co.* 100 150
Baker Hughes, Inc. 470 8,607
BJ Services Co.* 200 2,762
Burlington Resources, Inc. 200 7,125
Dawson Geophysical Co.* 100 912
Denbury Resources, Inc. * 100 375
Dynegy, Inc. 200 2,600
Ensco International, Inc. 200 1,912
Halliburton Company 500 14,687
Halter Marine Group, Inc.* 100 694
Helmerich and Payne 200 3,450
Key Energy Group, Inc.* 100 625
Louis Dreyfus Natural Gas Corp.* 200 2,587
Maxxam, Inc.* 100 4,881
McDermott International, Inc. 100 2,681
Mitchell Energy & Development Corp. -
Class A 200 2,600
Nabors Industries, Inc.* 200 2,650
Newpark Resources, Inc. * 100 737
Noble Affiliates, Inc. 100 2,531
Noble Drilling Corp.* 200 2,312
Occidental Petroleum Corp. 400 8,100
Prima Energy Corp.* 100 1,387
Schlumberger Ltd. 700 31,281
Seitel, Inc. 100 1,337
Smith International, Inc. 100 2,412
Trico Marine Services, Inc.* 100 550
USEC 100 1,356
Valero Energy New 200 4,200
Varco International, Inc. 200 1,362
Vastar Resources, Inc. 200 8,112
Weatherford International* 100 1,825
XCL Ltd.* 100 275
--------
137,312
--------
Market
Shares Value
------ ------
Food and Agriculture -- 2.8%
Archer-Daniels-Midland Co. 725 $ 13,322
Bestfoods 400 23,250
Bob Evans Farms, Inc. 200 4,838
Campbell Soup 600 34,275
Chiquita Brands International, Inc. 100 1,125
Coca-Cola Co. 3,000 210,188
Coca-Cola Enterprises, Inc. 500 18,906
Conagra, Inc. 600 18,863
Dean Foods Corp. 100 4,550
Dole Food, Inc. 100 3,163
Flowers Industries, Inc. 200 4,563
General Mills, Inc. 200 15,100
Heinz, (H.J.) Co. 400 23,325
Hershey Foods Corp. 200 13,450
Hormel Foods Corp. 100 2,956
IBP, Inc. 100 2,537
IMC Fertilizer Group, Inc. 100 2,288
Ingles Market, Inc. - Class A 100 1,200
International Home Foods, Inc.* 200 3,925
Interstate Bakeries 100 2,625
Keebler Foods Co.* 100 3,369
Kellogg Co. 500 18,313
Lance, Inc. 100 1,969
Lindsay Manufacturer Co.* 150 2,250
McCormick & Co., Inc. 100 3,338
Mississippi Chemical Corp. 100 1,575
Nabisco Holdings Corp. - Class A 200 7,975
Nash Finc.h Co. 300 4,369
Northland Cranberries, Inc. - Class A 100 1,400
Pepsico, Inc. 1,800 69,638
Pioneer Hi Bred International 300 8,981
Quaker Oats Co. 200 12,275
Ralston Purina Group 400 13,925
Rexall Sundown, Inc.* 200 2,675
Sara Lee Corp. 600 35,025
Smithfield Foods, Inc.* 100 2,644
Suiza Foods Corp.* 200 9,475
SuperValu, Inc. 200 5,163
Sysco Corporation 500 13,469
Tyson Foods, Inc. 200 4,138
Vlasic Foods International* 40 865
Whitman Corp. 100 2,263
Wm. Wrigley, Jr. Co. 100 8,813
--------
638,356
--------
13
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Gold -- 0.1%
Getchell Gold Corp.* 100 $ 1,638
Homestake Mining Co. 300 3,225
Newmont Mining Corp. 405 8,049
--------
12,912
--------
Insurance -- 2.5%
20th Century Industries 100 2,431
Acceptance Insurance Companies, Inc. 100 1,969
Aflac, Inc. 300 11,063
Allmerica Financial Corp. 100 5,519
Allstate Corp. 1,000 40,750
AMBAC, Inc. 100 6,100
American Bankers Insurance Group 100 4,538
American Financial Group, Inc. 100 3,931
American General Corp. 300 21,131
American International Group, Inc. 1,250 117,500
Amerin Corporation 200 4,938
AON Corp. 200 11,525
Argonaut Group, Inc. 100 2,500
Chubb Corp. 200 14,013
Cigna Corp. 300 23,344
Cinc.innati Financial Corp. 300 11,719
CNA Financial Corp.* 300 12,825
Conseco, Inc. 383 12,687
Equitable Companies, Inc. 300 16,575
Erie Indemnity Company 100 2,650
FBL Financial Group, Inc. - Class A 100 2,450
First American Financial Corp. 100 3,063
General Re Corp. 100 23,350
Hartford Financial Services Group, Inc. 400 22,075
Jefferson-Pilot Corp. 150 10,237
Life Re Corp. 100 9,419
Linc.oln National Corp. 100 8,369
Marsh and McLennan 300 17,456
MBIA, Inc. 100 6,475
Mercury General Corp. 100 4,188
MGIC Investment Corp. 100 4,394
PMI Group 100 5,469
Progressive Corporation of Ohio 100 14,837
Protective Life Corp. 100 3,894
Provident Companies, Inc. 200 7,688
Reliance Group Holdings 200 2,788
Reliastar Financial Corp. 100 4,700
Risk Capital Holdings, Inc.* 100 2,150
RLI Corp. 250 9,047
Safeco 200 8,588
Market
Shares Value
------ ------
Insurance -- continued
SCPIE Holdings, Inc. 100 $ 3,062
Selective Insurance Group, Inc. 200 3,775
St. Paul Cos., Inc. 300 10,575
SunAmerica, Inc. 300 23,775
Torchmark Corp. 200 7,600
Transamerica Corp. 100 10,625
Travelers Property Casualty Corp. 100 3,444
United Companies Financial Corp. 200 813
Unitrin, Inc. 100 7,075
UNUM Corp. 200 10,775
--------
579,864
--------
International Oil -- 2.1%
Amoco Corp. 1,200 70,725
Aviva Petroleum, Inc.* 500 78
Chevron Corp. 800 66,900
Exxon Corp. 3,000 225,188
Mobil Corp. 1,000 86,188
Sante Fe International Corp. 100 1,244
Texaco, Inc. 700 40,294
--------
490,617
--------
Liquor -- 0.2%
Anheuser Busch 600 36,375
Brown-Forman Corp. - Class B 100 7,275
Mondavi (Robert) Corp. - Class A* 100 3,662
--------
47,312
--------
Media -- 1.8%
Ackerley Group, Inc. 100 1,781
AMC Entertainment, Inc. 300 5,025
Antec Corp.* 200 3,700
B I, Inc.* 100 725
Belo, (A.H.) Corp. 200 3,775
Cablevision Systems Corp. - Class B* 100 4,138
CBS Corp. 900 26,831
Century Communications Corp. - Class A* 100 2,444
Chancellor Media Corp.* 300 11,306
Chris-Craft Industries, Inc.* 100 4,625
Clear Channel Communications, Inc. * 300 14,025
CNET, Inc. * 100 5,306
Comcast Corp. 500 24,313
Consolidated Graphics, Inc.* 100 5,756
Cox Communications* 300 15,806
14
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Media-- continued
Cymer, Inc.* 300 $ 4,500
Donnelley R.R. & Sons Co. 200 8,488
Dow Jones & Co., Inc. 100 4,781
Gannett Company, Inc. 300 19,369
Gartner Group, - Class A* 100 2,163
Gaylord Entertainment Company 100 2,931
Harte-Hanks Communications, Inc. 100 2,363
Hollinger International 200 2,588
Jones Intercable, Inc. - Class A* 100 3,106
King World Productions, Inc.* 100 2,725
Knight-Ridder, Inc. 100 5,144
Liberty Media Group* 58 2,338
Maxwell Technologies, Inc. 200 5,325
McClatchy Newspapers, Inc. 100 3,288
McGraw-Hill, Inc. 100 8,950
Medialink Worldwide 100 2,175
Meredith Corp. 100 3,881
Merrimac Industries, Inc. 10 68
Metro Networks, Inc.* 100 3,800
Metro-Goldwyn-Mayer, Inc.* 200 2,538
Nelson (Thomas), Inc. 100 1,319
New York Times Co. - Class A 200 6,212
Newsedge Corporation* 100 850
Outdoor Systems, Inc. * 250 6,750
Price Communications Corp.* 200 1,988
Primedia, Inc.* 300 3,225
Reader's Digest Assn., Inc. 100 2,406
Scripps (E.W.) Co. 100 5,144
Spelling Entertainment Group, Inc. 100 731
Tele-Communications Incorporated - Class A* 700 29,575
Tele-Communications TCI Ventures Group* 500 9,906
Time Warner, Inc. 700 74,025
Times Mirror Co. - Class A 100 5,863
Tribune Co. 100 6,413
United Video Satellite Group, Inc. - Class A* 200 3,700
USA Networks, Inc.* 200 6,313
Viacom, Inc. - Class B* 400 26,625
Westwood One, Inc. 200 5,300
Wiley (John) & Sons, Inc. - Class A 200 6,913
Workflow Management, Inc.* 13 94
--------
423,429
--------
Miscellaneous Finance -- 4.5%
Aames Financial Corp. 300 562
Affiliated Managers Group, Inc.* 200 5,362
Airlease Ltd. 100 1,281
Market
Shares Value
------ ------
Miscellaneous Finance -- continued
Alliance Capital Management LP 200 $ 5,387
Allied Capital Corp. 200 3,600
AMB Property Corp. 100 2,225
Amcore Financial, Inc. 100 2,356
American Express Co. 600 60,037
Apartment Investment & Management Co. 200 6,850
Archstone Communities Trust 300 6,262
Arden Realty Group 100 2,300
Area Bankshares Corp. 200 5,450
Associated Estates Realty Corp. 200 2,525
Associates First Capital Corp. 462 35,978
Avalonbay Communities, Inc. 100 3,387
Bear Stearns Co., Inc. 100 4,200
Berkshire Hathaway* 1 67,900
Cabot Industrial Trust 100 2,094
Capital Factors Holdings, Inc. * 300 5,175
Capital One Financial Corp. 100 11,000
Carramerica Realty Corp. 100 2,425
Cascade Financial Corp.* 100 1,200
Charles Schwab Corporation 300 16,912
Charter One Financial 210 6,234
CIT Group, Inc. - Class A 200 5,612
Citigroup 2,939 147,501
Citizens First Financial Corp.* 200 3,150
Colonial Properties Trust 100 2,706
Commercial Federal Corp.* 200 4,587
Commercial Net Lease Realty 200 2,850
Conning Corp. 200 3,425
Countrywide Credit Industries, Inc. 100 4,950
CPB, Inc. 300 5,137
Crescent Real Estate Co. 200 4,963
Dain Rauscher Corp. 100 3,725
Dime Bancorp, Inc. 100 2,656
Donaldson, Lufkin & Jenrette, Inc. 200 8,038
Edwards (A.G.) & Sons, Inc. 100 3,688
Equity Office Properties Trust 300 7,538
Equity Residential Properties Trust 100 4,231
Everest Reinsurance Holdings, Inc. 200 7,513
Fannie Mae 1,300 94,575
Federated Investors, Inc. 200 3,363
Financial Bancorp, Inc. 100 3,913
Financial Security Assurance Holdings, Ltd. 200 10,975
Finova Group, Inc. 100 5,281
First Financial Corp., RI 100 1,350
First Washington Realty Trust 300 6,900
Firstplus Financial Group, Inc.* 200 500
Flushing Financial Corp. 150 2,344
15
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Miscellaneous Finance -- continued
Franklin Resources, Inc. 300 $ 12,825
Freddie Mac 800 48,400
Giant Industries, Inc. 200 2,388
Glacier Bancorp 110 2,365
Golden State Bancorp, Inc. 200 3,850
Golden State Bancorp-Litigation Warr* 100 456
Golden West Financial Corp. 100 9,469
Healthplan Services Corp. 300 3,000
Highwoods Properties, Inc. 100 2,719
Horizon Group Properties, Inc.* 20 78
Household International, Inc. 606 23,710
HRPT Properties Trust 200 2,988
Independent Bank Corp. 157 3,336
Indymac Mortgage Holdings, Inc. 100 963
Interpool, Inc. 200 2,900
IRT Property Co. 100 1,000
Kimco Realty Corp. 100 3,869
Klamath First Bancorp, Inc. 200 3,563
Legg Mason, Inc. 400 11,925
Lehman Brothers, Inc. 100 4,994
Leucadia National Corp. 100 3,075
Liberty Financial Companies, Inc. 200 5,813
Liberty Property Trust 100 2,463
Logansport Financial Corp. 100 1,500
Mack-Cali Realty Corp. 100 2,969
Mail-Well, Inc.* 100 1,294
MBNA Corp. 900 20,419
MDC Holdings, Inc. 100 1,838
Mech Financial, Inc. 300 8,325
Meditrust 155 2,354
Meristar Hospitality Corp. 100 1,944
Merrill Lynch & Co., Inc. 400 30,000
Morgan Stanley Dean Witter 700 48,825
MSB Financial 200 2,625
Mystic Financial 100 1,213
National Golf Properties 100 2,888
New Plan Excel Realty Trust, Inc. 100 2,188
North Central Bancshares, Inc. 100 1,750
Northwest Bancorp, Inc. 200 1,975
Ocwen Asset Investment Corp. 200 1,100
Ocwen Financial Corp. 200 2,600
Pacificamerica Money Center, Inc.* 200 119
PaineWebber Group, Inc. 200 8,175
Patriot American Hospitality, Inc. 300 2,213
Penford Corp. 200 3,013
Pennsylvania Real Estate Investment Trust 100 2,000
Prime Retail, Inc. 400 4,225
Miscellaneous Finance -- continued
Prologos Trust 200 $ 4,425
Providian Financial Corp. 100 9,181
Public Storage, Inc. 100 2,656
PVF Capital* 100 1,300
R&G Financial Corporation 200 3,475
Sabre Group Holdings, Inc.* 100 3,969
SLM Holding Corp. 250 11,000
Southern Banc Company 100 1,256
Sovereign Bancorp, Inc. 160 2,050
Spieker Properties, Inc. 100 3,613
Starwood Financial Trust 100 8,025
Storage Trust Realty 100 2,244
T. Rowe Price 100 3,575
TCF Financial Corp. 100 2,419
United Asset Management Co. 100 2,531
United Dominion Realty Trust, Inc. 200 2,163
Unity Bancorp 100 1,175
Vision Twenty-One, Inc.* 500 2,188
Vornado Operating, Inc. 7 45
Washington Mutual, Inc. 786 30,458
Wells Financial Corp. 100 1,550
Westfield America, Inc. 200 3,500
Wilshire Financial Services Group, Inc.* 200 194
----------
1,026,866
----------
Motor Vehicles -- 1.0%
Aftermarket Technology* 100 575
Automobile Protection Corp.* 100 913
Cascade Corp. 400 5,600
Dana Corp. 185 7,215
Eaton Corp. 100 6,831
Excel Industries, Inc.* 100 1,775
Excelsior-Henderson Motorcycle* 100 788
Federal-Mogul Corp. 200 11,350
Ford Motor 1,500 82,875
General Motors Corp. 800 56,000
General Motors Corp. - Class H 100 3,800
Harley-Davidson, Inc. 100 4,181
Hayes Lemmerz International, Inc.* 100 3,150
Lear Corp.* 100 3,863
Meritor Automotive, Inc. 100 1,769
Myers Industries, Inc. 100 2,250
Navistar Intl Corp. 100 2,588
Penske Motorsports, Inc.* 100 2,325
Safety Components International, Inc.* 100 1,325
Smith (A.O.) Corp. 150 3,731
16
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Motor Vehicles -- continued
Sonic Automotive, Inc.* 100 $ 2,694
SPX Corp. 68 3,944
Stoneridge, Inc. 100 1,800
Superior Industries International, Inc. 100 2,600
Titan International, Inc. 100 994
United Auto Group, Inc.* 100 1,344
United Rentals, Inc.* 96 2,520
Wynns International, Inc. 100 2,219
--------
221,019
--------
Non - Durables and Entertainment -- 0.9%
@entertainment, Inc.* 100 725
American Greetings Corp. - Class A 100 4,231
AMF Bowling, Inc.* 200 1,088
Applebee's International, Inc. 100 2,056
Brinker International, Inc.* 100 2,544
Cheesecake Factory, Inc.* 50 1,300
CKE Restaurants, Inc. 100 2,444
Concepts Direct, Inc. * 100 925
Consolidated Products, Inc. 100 2,069
Cracker Barrel Old Country Stores, Inc. 100 2,325
Cross (A.T.) Co. - Class A 100 713
Cytyc Corp.* 100 1,981
Darden Restaurants, Inc. 200 3,163
Electronic Arts* 100 4,213
Foodmaker* 200 3,875
Fortune Brands, Inc. 200 6,813
Frisch's Restaurants, Inc. 100 1,125
Harcourt General, Inc. 100 5,175
Hasbro, Inc. 200 7,013
Il Fornaio (America) Corp.* 300 2,288
International Game Technology 100 2,306
Lancaster Colony Corp. 100 2,750
Landry's Seafood Restaurants, Inc.* 300 2,438
Mattel, Inc. 400 13,825
McDonald's Corp. 800 56,050
Ohio Art Co. 100 3,313
On Command Corporation* 300 2,550
Orphan Medical, Inc. * 100 650
Papa John's International* 100 4,194
Pizza Inn, Inc. 100 475
Premark International 100 3,356
Rainforest Cafe, Inc.* 100 694
Rubbermaid, Inc. 300 9,919
Ryans Family Steak Houses, Inc.* 200 2,275
Service Corp. International 400 14,950
Market
Shares Value
------ ------
Non - Durables and Entertainment -- continued
Sotheby's Holdings - Class A 100 $ 2,800
Starbucks Corp.* 100 4,613
Taco Cabana, Inc.* 100 694
Triarc Companies, Inc. - Class A* 200 3,225
Tricon Global Restaurants, Inc. * 140 6,379
Tupperware Corp. 100 1,744
U.S. Foodservice* 100 4,594
Wendys International, Inc. 200 4,000
--------
203,860
--------
Non - Ferrous Metals -- 0.2%
AFC Cable Systems, Inc.* 100 2,963
Aluminum Co. of America 230 17,049
Brush Wellman, Inc. 100 1,613
Cyprus AMAX Minerals 300 3,413
Engelhard Corp. 100 1,931
Freeport-McMoran Copper & Gold, - Class B 2002,613
Howmet International, Inc. * 100 1,537
Kaiser Aluminum & Chemical Corp. 100 656
Minerals Technologies, Inc. 100 4,388
Phelps Dodge Corp. 100 5,669
Reynolds Metals Co. 100 5,488
Titanium Metals Corp. 100 994
--------
48,314
--------
Optical and Photo -- 0.2%
Corning, Inc. 200 8,025
CPI Corp. 100 2,138
Eastman Kodak Co. 400 29,025
Meade Instruments Corp.* 100 1,062
Perceptron, Inc.* 300 2,250
Photronics, Inc.* 200 4,000
Polaroid Corp. 200 4,250
Todd-AO Corp. - Class A 100 837
--------
51,587
--------
Paper and Forest Products -- 0.6%
Boise Cascade Corp. 100 3,169
Bowater, Inc. 200 7,900
Buckeye Technology, Inc.* 100 1,950
Caraustar Industries, Inc. 100 2,656
Champion International Corp. 200 8,313
Chesapeake Corp. 100 3,469
Consolidated Papers, Inc. 100 2,556
17
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Paper and Forest Products -- continued
Georgia Pacific Timber Group 100 $ 2,300
Georgia-Pacific Corp. 100 5,675
Glatfelter (P.H.) Co. 100 1,288
International Paper Co. 400 17,375
Kimberly Clark Corp. 700 36,838
Longview Fibre Co. 100 1,131
Louisiana-Pacific Corp. 100 1,700
Smurfit-Stone Container Corp.* 597 8,395
Temple Inland, Inc. 100 5,369
Thermo Fibertek, Inc.* 100 563
Union Camp Corp. 100 6,469
Wausau-Mosinee Paper Corp. 100 1,688
Westvaco Corp. 100 2,812
Weyerhaeuser Co. 300 15,038
Willamette Industries, Inc. 200 6,988
--------
143,642
--------
Producer Goods -- 3.0%
Aeroquip-Vickers, Inc. 100 3,638
AGCO Corp. 100 819
Albany International Corp. - Class A 200 3,800
Allied Products Corp.* 200 1,475
Allied-Signal, Inc. 700 30,800
American Standard Co, Inc.* 100 3,425
Avery Dennison 100 4,794
Aztec Technology Partners* 20 76
Blount International, Inc. - Class A 100 2,313
Boise Cascade Office Products Corp.* 200 2,225
Case Corp. 100 2,425
Caterpillar, Inc. 400 19,775
Columbus McKinnon Corp. 100 1,819
Comfort Systems USA, Inc.* 200 3,750
Cooper Industries, Inc. 100 4,913
Corp.orate Express, Inc.* 200 1,175
Culp, Inc. 100 875
Daisytek International Corp.* 200 3,100
Deere & Co. 300 10,481
Donnelly Corp. - Class A 200 3,025
Dover Corporation 300 10,688
Emerson Electric Co. 500 32,500
Foster Wheeler Corp. 200 3,425
General Electric Co. 4,000 362,000
Graco, Inc. 100 2,775
Grainger (W.W.), Inc. 100 4,225
Harnischfeger Industries, Inc. 200 2,000
Harsco Corp. 100 3,238
Market
Shares Value
------ ------
Producer Goods -- continued
Haskel International, Inc. 100 $ 1,150
Helix Technology Corp. 200 2,450
Herman Miller, Inc. 100 2,125
Hexcel Corp. 300 2,756
Hon Industries, Inc. 100 2,375
Hubbell, Inc. - Class B 100 4,031
Illinois Tool Works, Inc. 400 25,425
Ingersoll-Rand Co. 200 9,363
Jabil Circuit, Inc.* 100 5,800
JLG Industries, Inc. 100 1,644
Johnson Controls, Inc. 100 5,788
Kollmorgen Corp. 200 3,800
Kuhlman Corp. 100 2,788
Learonal, Inc. 100 2,263
Manitowoc Co., Inc. 100 3,975
Marine Drilling Companies, Inc.* 200 1,738
Mark IV Industries, Inc. 200 3,375
Maverick Tube Corp.* 100 569
Oceaneering International, Inc.* 100 1,244
Pall Corp. 100 2,325
Pameco Corp.* 200 2,763
Parker-Hannifin Corp. 100 3,475
Penn Engineering & Manufacturing Corp. 100 2,288
Raychem Corp. 100 3,406
Roper Industries, Inc. 200 3,713
Sauer, Inc. 200 1,875
Snap-On Tools Corp. 100 3,400
Tecumseh Products - Class A 100 4,950
Tenneco, Inc. 200 7,125
Thermo Instrument Systems, Inc.* 100 1,356
Thermo Optek Corporation* 100 1,088
Timken Company 200 3,850
Tokheim Corp. 500 4,313
Trinity Industries, Inc. 100 3,869
U.S. Filter Corp.* 200 4,425
U.S. Industries, Inc. 200 3,500
U.S.A. Floral Products, Inc.* 300 3,488
UCAR International, Inc.* 200 3,638
Valhi, Inc. 200 2,200
Woodward Governor Co. 100 2,500
York International Corp. 100 4,200
--------
681,960
--------
Railroad and Shipping -- 0.4%
Avondale Industries, Inc. 100 2,763
Burlington Northern Corp. 600 20,400
18
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Railroad and Shipping -- continued
CSX Corp. 200 $ 8,338
GATX Corp. 100 3,781
Homegold Financial* 100 91
Hyide Marine, Inc. - Class A* 100 600
Johnstown American Industries, Inc. 100 1,544
Kansas City Southern Industries 100 4,269
Marine Transport Corp. 10 21
Motivepower Industries, Inc. 100 3,044
Norfolk Southern Corp. 500 15,188
Overseas Shipholding Group, Inc. 100 1,581
Spinnaker Industries, Inc. 100 1,863
Union Pacific Corp. 300 14,588
Westinghouse Air Brake Co. 100 2,200
-------
80,271
-------
Real Property -- 0.2%
American Retirement Corp.* 100 1,569
Boston Properties, Inc.* 100 3,156
Burnham Pacific Properties, Inc. 100 1,288
Catellus Development Corp.* 200 2,813
Cornerstone Properties, Inc. 200 3,138
Duke Realty Investments, Inc. 100 2,269
Felcor Lodging Trust, Inc. 168 4,001
Hallwood Group, Inc. 200 4,063
Insignia Financial Group* 133 1,804
Kennedy-Wilson, Inc.* 100 1,275
Kilroy Realty Corp. 100 2,238
Rouse Company 100 2,731
Simon Property Group, Inc. 200 5,925
Starwood Hotels & Resorts 191 5,802
Vornado Realty Trust 143 5,434
-------
47,506
-------
Retail -- 3.8%
Albertson's, Inc. 300 17,119
Amazon.com, Inc.* 100 19,200
American Stores Co. 300 10,069
Authentic Fitness Corp. 100 1,600
Autozone, Inc.* 300 9,038
Barnes & Noble, Inc.* 100 3,313
Bed, Bath & Beyond, Inc.* 200 6,238
Best Buy Co., Inc.* 100 5,763
Borders Group, Inc.* 100 2,425
Casey's General Stores, Inc. 100 1,388
Cendant Corp.* 1,040 19,760
Market
Shares Value
------ ------
Retail -- continued
Circuit City Stores, Inc. 100 $ 3,619
Claire's Stores, Inc. 100 1,700
CompUSA, Inc.* 200 2,963
Consolidated Stores Corp.* 182 3,913
Costco Companies, Inc.* 300 18,825
CVS Corp. 462 22,811
Dayton Hudson Corp. 500 22,500
Delia's, Inc.* 100 819
Dillards, Inc. - Class A 100 3,438
Dollar General Corp. 281 6,691
Dollar Tree Stores, Inc.* 100 4,538
Family Dollar Stores, Inc. 300 6,019
Federated Department Stores* 300 12,506
Fingerhut Companies, Inc. 100 1,113
Fred Meyer, Inc.* 200 10,175
Friedmans, Inc. - Class A* 100 1,000
Gap, Inc. 500 36,781
General Nutrition Companies, Inc.* 100 1,775
Great Atlantic & Pacific Tea Co., Inc. 100 2,731
Hannaford Brothers, Co. 100 4,675
Heilig-Meyers Co. 400 2,800
Home Depot, Inc. 1,800 89,550
Intimate Brands 300 8,644
J.C. Penney Co., Inc. 300 16,500
Kmart Corp. 100 1,525
Kohls Corp.* 200 9,838
Kroger Co. 300 15,919
Limited, Inc. 300 8,681
Lowe's Cos., Inc. 400 16,900
May Department Stores Co. 300 18,094
Neiman Marcus Group, Inc. 100 2,681
Nordstrom, Inc. 200 7,450
Office Depot, Inc. * 400 13,000
Officemax* 300 3,188
PC Connection, Inc.* 100 1,625
Pep Boys (Manny Moe & Jack) 100 1,413
PETsMART, Inc.* 100 856
Pier 1 Imports, Inc. 150 1,613
Rite Aid Corp. 300 13,913
Ross Stores, Inc.* 200 7,275
Ruddick Corp. 100 1,956
Safeway, Inc.* 600 31,688
Saks Incorporated* 282 7,755
School Speciality, Inc.* 11 186
Sears, Roebuck & Co. 500 23,719
Shopko Stores, Inc. 200 6,450
Stage Stores, Inc.* 100 1,150
19
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (continued) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- continued
Retail -- continued
Staples, Inc.* 400 $ 13,975
Tandy Corp. 100 4,506
TJX Companies, Inc. 400 10,250
Toys 'R' Us, Inc.* 300 5,925
U S Office Prods Co.* 25 138
Venator Group 100 788
Walgreen Co. 600 32,213
Wal-Mart Stores, Inc. 2,800 210,875
Weis Markets, Inc. 100 3,813
West Marine, Inc.* 100 1,138
Williams-Sonoma, Inc.* 100 2,956
Winn Dixie Stores, Inc. 300 12,094
----------
877,545
----------
Steel -- 0.1%
AK Steel Holding Corp. 100 1,919
Allegheny Teledyne, Inc. 200 4,113
Bethlehem Steel Corp. 100 825
Citation Corp.* 100 1,388
LTV Corp. 100 550
National Steel Corp. - Class B 400 2,925
Nucor Corp. 100 4,200
Oregon Steel Mills, Inc. 400 5,075
Roanoke Electric Steel Corp. 100 1,450
Steel Dynamics, Inc.* 100 1,363
USX-U.S. Steel Group 100 2,444
Worthington Industries, Inc. 100 1,219
----------
27,471
----------
Telephone -- 4.5%
Airtouch Communications, Inc.* 700 40,031
ALLTEL Corp. 300 15,900
Ameritech Corp. 1,400 75,775
AT&T Corp. 2,294 142,945
Bell Atlantic Corp. 1,900 105,688
BellSouth Corp. 1,200 104,700
Brightpoint, Inc.* 300 4,500
Century Telephone Enterprises, Inc. 150 8,550
Cincinnati Bell, Inc. 200 6,300
Comsat 100 3,563
Davel Communications Group, Inc.* 100 1,925
Emmis Broadcasting Corp. - Class A* 100 3,444
GTE Corp. 1,200 74,400
Hector Communications Corp.* 200 1,625
ICG Communications, Inc.* 31 713
Market
Shares Value
------ ------
Telephone -- continued
Intermedia Communications of Florida, Inc.* 200 $ 3,450
Jacor Communications, Inc.* 200 11,638
Leap Wireless Intl.* 25 144
Level 3 Communications, Inc.* 400 13,800
MCI Worldcom, Inc. 2,229 131,511
McLeod, Inc.* 200 6,188
Mediaone Group* 700 28,350
Melita International Corp.* 100 1,500
Nextlink Communications, Inc. * 300 9,075
NTL, Inc.* 100 5,569
Optical Cable Corp.* 100 1,388
Paging Network, Inc. .* 100 619
Pairgain Technologies, Inc. * 100 1,013
Primus Telecommunications Group, Inc.* 61 778
Qwest Communications International, Inc.* 416 16,640
RCN Corporation* 100 1,700
SBC Communications, Inc. 2,375 113,852
Skytel Communications* 100 2,088
Sprint Corp. (Fon Group) 500 36,375
Sprint Corp. (Pcs Group)* 250 4,000
Telephone & Data Systems, Inc. 100 4,275
Tel-Save Holdings, Inc.* 100 1,194
U.S. West Incorporated 608 37,848
World Access, Inc.* 100 2,031
----------
1,025,085
----------
Tire and Rubber Goods -- 0.1%
American Biltrite, Inc. 100 2,369
Cooper Tire & Rubber Co. 100 1,956
Danaher Corporation 200 9,125
Goodyear Tire & Rubber Co. 200 11,350
TBC Corp.* 100 700
----------
25,500
----------
Tobacco -- 0.9%
General Cigar Holdings, Inc.* 100 981
Loews Corporation 200 20,000
Philip Morris Companies 3,000 167,813
RJR Nabisco Holdings Corp. 400 11,525
UST, Inc. 200 6,950
----------
207,269
----------
Travel and Recreation -- 0.8%
Amerco* 100 2,300
American - Classic Voyages Co. 100 1,450
20
<PAGE>
ISI Strategy Fund, Inc.
Statement of Net Assets (concluded) November 30, 1998
(Unaudited)
Market
Shares Value
------ ------
Common Stock -- concluded
Travel and Recreation -- continued
American Skiing Co.* 100 $ 906
Avis Rent A Car, Inc. * 100 2,106
Bristol Hotel & Resorts, Inc.* 50 297
Brunswick Corp. 200 4,400
Callaway Golf Co. 100 1,338
Carnival Corp. - Class A 700 24,150
Choice Hotels Corp., Inc.* 100 1,144
Circus Circus Enterprises, Inc. * 300 3,469
Extended Stay America, Inc.* 100 1,000
Fountain Powerboat Industries, Inc.* 100 487
Harrah's Entertainment* 200 3,113
Hilton Hotels Corp. 300 6,525
Hollywood Park, Inc. 100 956
Host Marriott Corp. 400 5,875
Marriott International - Class A 300 8,813
Meristar Hotels & Resorts, Inc. 100 269
MGM Grand, Inc.* 100 2,569
Mirage Resorts, Inc.* 200 2,975
Navigant International, Inc. * 10 64
Powerhouse Technologies, Inc.* 400 4,750
Premier Parks, Inc.* 100 2,713
Primadonna Resorts, Inc. * 100 750
Promus Hotel Corp.* 100 3,338
Royal Caribbean Cruises Ltd. 200 6,075
Shuffle Master, Inc.* 100 700
Sodexho Marriott Services 125 3,438
Trendwest Resorts, Inc. * 100 1,438
Walt Disney Co. 2,500 80,469
----------
177,877
----------
Trucking and Freight -- 0.1%
Alphanet Solutions, Inc. * 100 450
Arnold Industries, Inc. 100 1,425
CH Robinson Worldwide 100 2,256
CNF Transportation 100 3,569
Covenant Transport, Inc. - Class A* 100 1,738
Expeditors International of Washington 100 3,850
Heartland Express, Inc.* 300 5,138
Matlack Systems, Inc. * 100 775
Paccar, Inc. 100 4,550
PAM Transportation Services, Inc.* 100 706
Rollins Truck Leasing Corp. 50 600
Shurgard Storage Centers - Class A 100 2,631
U.S. Freightways Corp. 100 2,688
----------
30,376
----------
Total Common Stock
(Cost $13,411,876) 14,704,998
----------
Shares/
Principal Market
Value (000) Value
------ ------
Preferred Stock -- 0.0%
Apartment Investment & Management 52 $ 2,041
----------
Total Preferred Stock
(Cost $2,265) 2,041
----------
U.S. Treasury Bonds-- 29.4%
0.000%,05/15/20 1,000 310,246
7.875%, 2/15/21 2,600 3,450,281
8.125%, 8/15/21 1,425 1,942,899
10.375%, 11/15/12 750 1,038,164
-----------
Total U.S. Treasury Bonds
(Cost $6,296,249) 6,741,590
-----------
U.S. Treasury Bill -- 4.6%
3.78%, 1/14/99 1,050 1,045,143
-----------
Total U.S. Treasury Bill
(Cost $1,045,143) 1,045,143
-----------
Repurchase Agreement -- 1.2%
Goldman Sachs & Co., 5.15%
dated 11/30/98, to be repurchased
on 12/01/98, collateralized
by U.S. Treasury Bond with a
market value of $285,3712
(Cost $280,000) 280 280,000
===========
Total Investments -- 99.3%
(Cost $21,035,533)** 22,773,772
-----------
Other Assets in Excess of
Liabilities, Net -- 0.7% 163,007
-----------
Net Assets -- 100.0% $22,936,779
===========
Net Asset Value and Redemption
Price Per Share
($22,936,779 divided by 2,031,169) $11.29
======
Maximum Offering Price Per Share
($11.29 divided by 0.955) $11.82
======
- --------------------------------------------------------------------------------
* Non-income producing security.
** Also aggregate cost for federal tax purposes.
21
<PAGE>
ISI Strategy Fund, Inc.
Statement of Operations
(Unaudited)
For the Six
Months Ended
November 30, 1998
-----------------
INVESTMENT INCOME:
Interest $ 230,762
Dividends 83,957
-----------
Total income 314,719
-----------
EXPENSES:
Investment advisory fee 41,459
Legal fee 33,144
Registration fees 26,813
Distribution fee 25,386
Administration fee 19,613
Audit fee 10,000
Accounting fee 11,592
Transfer agent fee 4,548
Custodian fee 3,642
Miscellaneous 2,038
Printing and postage 500
-----------
Total expenses 178,735
Less: Fees waived and expenses reimbursed (82,755)
-----------
Net expenses 95,980
-----------
Net investment income 218,739
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from security transactions 159,129
Change in unrealized appreciation
of investments 853,962
-----------
Net gain on investments 1,013,091
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,231,830
===========
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
22
<PAGE>
ISI Strategy Fund, Inc.
Statement of Changes in Net Assets
(Unaudited)
For the
For the Period
Six September 16,
Months 1997(1)
Ended through
November 30, May 31,
1998 1998
------------ ------------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 218,739 $ 166,743
Net realized gain from security transactions 159,129 198,062
Change in unrealized appreciation
of investments 853,962 884,277
------------ ------------
Net increase in net assets
resulting from operations 1,231,830 1,249,082
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
ISI Class (180,316) (105,433)
Institutional Class (1) --
Net realized long-term and short-term gains:
ISI Class (375,474) --
Institutional Class (2) --
------------ ------------
Total Distributions (555,793) (105,433)
CAPITAL SHARE TRANSACTIONS (NOTE B):
Proceeds from sale of shares 4,356,184 18,021,106
Value of shares issued in reinvestment
of dividends 492,232 99,815
Cost of shares repurchased (807,413) 1,044,831
------------ ------------
Increase in net assets derived from capital
share transactions 4,041,003 17,076,090
------------ ------------
Total increase in net assets 4,717,040 18,219,739
NET ASSETS:
Beginning of period 18,219,739 --
------------ ------------
End of period $ 22,936,779 $ 18,219,739
============ ============
- -------------------------------------------------------------------------------
(1) Commencement of operations.
See Notes to Financial Statements.
23
<PAGE>
ISI Strategy Fund, Inc.
Financial Highlights (For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the For the Period
Six Months September 16, 1997(2)
June 1, 1998 through through
November 30, 1998(1) May 31, 1998
------------------- -------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value at beginning of period $ 11.00 $ 10.00
---------- ----------
Income from Investment Operations:
Net investment income 0.15 0.13
Net realized and unrealized gain on investments 0.43 0.96
---------- ----------
Total from Investment Operations 0.58 1.09
---------- ----------
Less Distributions:
Distributions from net investment income (0.10) (0.09)
Distributions from short-term and long-term gains (0.19) --
---------- ----------
Total distributions (0.29) (0.09)
---------- ----------
Net asset value at end of period $ 11.29 $ 11.00
========== =============
Total Return 5.36% 10.94%
Ratios to Average Daily Net Assets:
Expenses(3) 1.00%(5) 1.00%(5)
Net investment income(4) 2.15%(5) 2.03%(5)
Supplemental Data:
Net assets at end of period (000) $ 22,937 $ 18,220
Portfolio turnover rate 16.47% 20.08%
</TABLE>
- --------------------------------------------------------------------------------
(1) Unaudited.
(2) Commencement of operations.
(3) Ratio of expenses to average net assets prior to fee waiver and expense
reimbursement was 1.76% and 2.25% for the periods ended November 30, 1998
and May 31, 1998, respectively.
(4) Ratio of net investment income to average net assets prior to fee waiver and
expense reimbursement was 1.38% and .775% for the periods ended November 30,
1998 and May 31, 1998, respectively.
(5) Annualized.
See Notes to Financial Statements.
24
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies -- ISI Strategy Fund, Inc. (the "Fund"),
which was organized as a Maryland Corporation on June 12, 1997 and
commenced operations September 16, 1997, is registered under the Investment
Company Act of 1940 as a diversified, open-end investment management
company. It seeks to maximize total return through a combination of
long-term growth of capital and current income by actively apportioning the
Funds' assets between diversified investments in U.S. equity securities and
U.S. Treasury Securities.
The Fund consists of one share class, ISI Shares, which has a 4.45% maximum
sales charge and a 0.25% distribution fee.
When preparing the Fund's financial statements, management makes estimates
and assumptions to comply with generally accepted accounting principles.
These estimates affect 1) the assets and liabilities that we report at the
date of the financial statements; 2) the contingent assets and liabilities
that we disclose at the date of the financial statements, and 3) the
revenues and expenses that we report for the period. Our estimates could be
different from the actual results. The Fund's significant accounting
policies are:
Security Valuation -- The Fund values a portfolio security that is
primarily traded on a national exchange by using the last sales price
reported for the day. If there are no sales or the security is not traded
on a listed exchange, the Fund values the security at the average of the
last bid and asked prices in the over-the-counter market. When a market
quotation is not readily available, the Investment Advisor under the
direction of the Board of Directors determines a fair value using the
policies and procedures that the Board of Directors establishes and
monitors. The Fund values short-term obligations with maturities of 60 days
or less at amortized cost.
Repurchase Agreements -- The Fund may enter into tri-party repurchase
agreements with broker-dealers and domestic banks. A repurchase agreement
is a short-term investment in which the Fund buys a debt security that the
broker agrees to repurchase at a set time and price. The third party, which
is the broker's custodial bank, holds the collateral in a separate account
until the repurchase agreement matures. The agreement ensures that the
collateral's market value, including any accrued interest, is sufficient if
the broker defaults. The Fund's access to the collateral may be delayed or
limited if the broker defaults and the value of the collateral declines or
if the broker enters into an insolvency proceeding.
Federal Income Taxes -- The Fund determines its distributions according to
income tax regulations, which may be different from generally accepted
accounting principles. As a result, the Fund occasionally makes
reclassifications within its capital accounts to reflect income and gains
that are available for distribution under income tax regulations.
The Fund is organized as a regulated investment company. As long as it
maintains this status and distributes to its shareholders substantially all
of its taxable net investment income and net realized capital gains, it
will be exempt from most, if not all, federal income and excise tax.
As a result, the Fund has made no provision for federal income taxes.
Security Transactions, Investment Income, Distributions and Other -- The
Fund uses the trade date to account for security transactions and the
specific identification method for financial reporting and income tax
purposes to determine the cost of investments sold or redeemed. Interest
income is recorded on an accrual basis and includes the pro rata scientific
method for
25
<PAGE>
Notes to Financial Statements (continued)
amortization of premiums and accretion of discounts when appropriate.
Expenses are recorded as incurred. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. The Fund has deferred
the costs incurred by its organization and the initial public offering of
shares. These costs are being amortized on the straight-line method over a
five-year period, except for registration fees which are amortized over a
three-year period, which began when the Fund commenced investment
activities.
B. Investment Advisory Fees, Transactions with Affiliates and Other Fees --
International Strategy and Investment Inc. ("ISI") is the Fund's investment
advisor. As compensation for its advisory services, the Fund pays ISI an
annual fee based on the Fund's average daily net assets. This fee is
calculated daily and paid monthly at the annual rate of 0.40%. ISI has
agreed to waive a portion of its fee and reimburse expenses so thammt the
Fund's total operating expenses for any fiscal year do not exceed 1.00% of
the Fund's average daily net assets. For the six month period ended
November 30, 1998 ISI waived all of its fees and reimbursed the Fund for
expenses in the amount of $27,160 of which $1,470 was payable at the end of
the period.
Wilshire Associates Incorporated ("Wilshire") is the Fund's sub-advisor. As
compensation for its sub-advisory services, ISI pays Wilshire an annual fee
based on the Fund's average daily net assets. This fee is calculated daily
and paid monthly at the annual rate of 0.16%. Wilshire has agreed to waive
its annual fees and reimburse Fund expenses in proportion to the fees
waived and expenses reimbursed by ISI.
Investment Company Capital Corp. ("ICC"), a subsidiary of Bankers Trust
Corporation, is the Fund's administrator. As compensation for its
administrative services, the Fund pays ICC an annual fee based on the
Fund's average daily net assets. This fee is calculated daily and paid
monthly at the annual rate of 0.12%. ICC agreed to waive its fee for
administrative services for the first year of the Fund's operations. For
the six month period ended November 30, 1998, ICC's fee was $5,477 (net of
fee waivers of $14,136) of which $2,211 was payable at the end of the
period.
Certain officers and directors of the Fund are also officers or directors
of ISI, Wilshire or ICC.
ICC also provides accounting services, to the Fund for which the Fund pays
ICC an annual fee that is calculated daily and paid monthly based on the
Fund's average daily net assets.For the six-months ended November 30, 1998,
ICC's fee was $11,592 of which $2,050 was payable at the end of the period.
ICCalso provides transfer agent services to the Fund for which the Fund
pays ICC a per account fee that is calculated and paid monthly. For the
six-month period ended November 30, 1998, ICC's fee was $4,458, of which
$1,800 was payable at the end of the period.
ISI Group, Inc., an affiliate of ISI, provides distribution services to the
Fund for which the Fund pays ISI Group Inc., an annual fee that is
calculated daily and paid monthly. This fee is paid at an annual rate equal
to 0.25% of the Fund's average daily net assets. For the six-month period
ended November 30, 1998, ISI Group's fee was $25,386, of which $4,607 was
payable at the end of the period.
The Fund's complex offers a retirement plan for eligible Directors. The
actuarially computed pension expense allocated to the Fund for the
six-months ended November 30, 1998 was $534, and the accrued liability was
$1,262.
C. Capital Share Transactions -- The Fund is authorized to issue up to 25
million shares of $.001 par value capital stock (20 million ISI Class, 5
million Wilshire Institutional Class). Transactions in shares of the Fund
were as follows:
26
<PAGE>
Notes to Financial Statements (concluded)
<TABLE>
<CAPTION>
For the
For the Period
Six Months Sept. 16, 1997(1)
Ended through
Nov. 30, 1998(2) May 31, 1998
-------------- ---------------
<S> <C> <C>
Shares sold 403,243 1,744,374
Shares issued to share-
holders on reinvest-
ment of dividends 44,753 9,391
Shares redeemed (73,643) (96,939)
------------ ------------
Net increase in shares
outstanding 374,353 1,656,826
============ ============
Proceeds from sales
of shares $ 4,356,184 $ 18,021,106
Value of reinvested
dividends 492,232 99,815
Cost of shares
redeemed (807,413) (1,044,831)
------------ ------------
Net increase from capital
share transactions $ 4,041,003 $ 17,076,090
============ ============
</TABLE>
- -----------------
(1) Commencement of operations.
(2) Unaudited.
D. Investment Transactions -- Excluding short-term and U.S. government
obligations, purchases of investment securities aggregated $4,451,909 and
sales of investment securities aggregated $1,018,817 for the period ended
November 30, 1998. Purchases of U.S. government obligations aggregated
$2,168,009 and sales of U.S. government obligations aggregated $2,039,455.
On November 30, 1998, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was
$2,580,482 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over value was $842,243.
E. Net Assets -- On November 30, 1998, net assets consisted of:
Paid-in capital $ 21,117,093
Accumulated net realized loss
from security transactions (18,285)
Unrealized appreciation
of investments 1,738,239
Undistributed net investment
income 99,732
------------
$ 22,936,779
============
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by an effective prospectus.
For more complete information regarding any of the ISI Funds, including
charges and expenses, obtain a prospectus from your investment representative or
directly from the Fund at 1-800-955-7175. Read it carefully before you invest.
27
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