◆ SpookStack

which market quotations are readily available in New York minimizes such risks. (ADR’s are certificates issued by a United States bank representing the right to receive securities of a foreign issuer deposited in that bank or a correspondent bank.} However, the Fund may purchase the securities of foreign issuers directly in foreign markets so long as in management's judgment an established trading market exists. The Fund will purchase only those foreign securities which are listed on domestic or foreign securities exchanges. In addition, issuers of foreign securities are subject to different, and in some cases less comprehensive, accounting, reporting and disclosure requirements than domestic issuers. As a result, the selection of investments in foreign issuers may be more difficult and subject to greater risks than investments in domestic issuers. . In addition, the production and marketing of gold and other precious metals may be affected by the actions of certain governmenis and changes in existing governments. In current order of magnitude of production of gold bullion, the four largest producers of gold are the Republic of South Africa, the Union of Soviet Socialist Republics, Canada and the United States. Economic and political conditions and objectives prevailing in these countries may have direct effects on the production and marketing of newly produced gold and sales of central bank gold holdings. Political and social conditions in South Africa, due to the apartheid policies of the South African government and unsettled political conditions prevailing in neighboring countries, may pose certain risks to the Fund’s investments in South African issuers. The ability of the Fund to invest in South African companies may also be affected by changes in American laws or regufations relating to foreign investments. In addition, the price of gold and other precious metals is affected by factors such as cylical economic conditions, political events and monetary policies of various countries. Gold and other precious metals are also subject to governmental action for political reasons. Markets are, therefore, at times volatile and there may be sharp fluctuations in prices even during periods of rising prices. to While every effort will be made to achieve the Company's objectives, there can be no assurance that such objectives wil! be achieved: . 4 me SEC Investigation As a result of an investigation commenced in 1987 by the Securities and Exchange Commission ("SEC"), the staff of the SEC has informed the Strategic Family-of Funds (“Funds”) and Strategic Management, Inc., the Investment Adviser to the Funds (the “Investment Acviser”) through their respective counsel that at the present time the staff intends to recommend that the SEC initiate an enforcement action against the Funds’ Investment Adviser, and certain of its officers and directors and certain Funds’ officers and directors, including, possibly certain of the Funds’ disinterested directors. The staff's recommendation could allege violations of the federal securities laws, including the anti-fraud provisions of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Securities Act of 1933 (the “Securities Act’); and violations of the investment Company Act of 1940 (the “Investment Act”) and the Investment Advisors Act of 1940 (the “Advisors Act”) and rules and regulations thereunder. In particular, the staff's recommendation may aliege inaccurate or incomplete disclosure, violation of certain of the Funds’ investment policies, inaccurate filings invelving proxies and periodic reports, affiliated transactions, inaccurate securities ownership reports with the SEC, breach of fiduciary duty, and record keeping violations. lf the recommendation for enforcement action is approved by the SEC and such fs successiul, the action could result in the suspension or revocation of the Investment Adviser’s registration with the SEC, the disqualification or suspension of certain officers of the Investment Adviser and the suspension or disqualification of certain officers of the Funds and certain disinterested directors from associating with any entity regulated by the SEC. The Funds 5 3 i