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rtificates osited in n issuers dsts. The securities sses less asult, the sks than ‘d by the nitude of Union of *bjectives woduced te to the ‘ailing in lers, The can laws conomic retals are ind there ince that ("SEC"), ent, Inc., rat at the 1i¢ Funds’ iirectors, Id allege ange Act 1s of the 940 (the. ay aliege te filings orts with weement nsion or nsion of rs of the 1@ Funds 4 au ma nan YEE Ke me “88 See : et and the employees, officers and directors of the investment Adviser have voluntarily produced documents and given testimony pursuant to an order of formal investigation and continue to cooperate with the SEC staff. Presently, counsel for the Funds and Investment Adviser is exploring the possibility of achieving a settlement arrangement with the SEC; however, no assurances can be made that counsel will be successful in this matter. ‘ 7 Obviously, the results of any SEC action described above may have an adverse effect on each of the Funds as well as on the Strategic Family of Funds and may necessitate the appointment of a new Investment Adviser. See “Other Matters." INVESTMENT RESTRICTIONS In addition to the Fund’s fundamental policies relating to the concentration of its investments in a particular industry (i.e, gold and other precious metais mining, oil, etc.), the following investment restrictions are deemed fundamental policies and may be changed only by a vote of a “majority” of the Fund's outstanding shares, which as used in this Prospectus means the lesser of (1) 67% or more of the Fund’s outstanding shares present at a meeting of the shareholders if the holders of more than 50% of the outstanding shares are present in person or by proxy, or (2} more than 50% of the Fund’s outstanding shares. The Fund will not (1) invest more than 5% of its total assets in the securities of any one issuer (other than the U.S. Government obligations or cash) or hold more than 10% of the outstanding voting securites of any such issuer; {2) invest in the securities of any investment company except when such purchases are part of a pian of merger or consolidation; (3} invest more than 5% of total assets in the securities of an ich have a record of Jess than three years’ continuous operation (inctuding the simitar Operations of predecessors or parents). For additional investment restrictions, see “Additional Investment Restrictions” in the Statement of Additional Information. a . . MANAGEMENT OF THE FUND The Board of Directors of the Fund has the responsibility for the overall management of the Fund, including general supervision and review of its investment activities. The Board of Directors of the Fund is elected annually by the shareholders. The Directors, in turn, elect the officers of the Fund who are responsible for administering the day-to-day operations of the Fund. Strategic Management, Inc. (the “Investment Adviser"), The Strategic Building, 2030 Royal Lane, Dallas, Texas 75229, has provided the Fund with a continuous investment program for over nine years. The Invesiment Adviser was organized in 1974 and manages the other investment companies which comprise the Strategic Family of Funds. The Investment Adviser supervises and assists in the overall management of the Fund’s affairs subject to the authority of the Fund’s Board of Directors. Dr. Leroy S. Brenna is Chairman of the Board of Directors of the Fund and of Strategic Management, Inc. and he owns the majority of the outstanding voting securities of Strategic Management, inc. Under the Advisory Agreement, Strategic Management, Inc. provides the Fund with an investment program complying with the objectives, policies and restrictions of the Fund. it will participate with the Distributor in bearing the costs of foreign travel required to advise the Fund. Such foreign travel will be to better advise the Fund regarding important developments in the leading capitals and money markets of the world and in the changing economic and political conditions of foreign countries that might affect the Fund's portfolio. The Investment Adviser will perform and bear the cost of research, statistical analysis and supervison of the investment portfolio of the Fund. The Investment Adviser will also furnish, at its expense, office space and all ordinary and necessary office facilities, equipment and personnel for managing the 6