◆ SpookStack

affairs of the Fund. The Investment Adviser bears the cost of fees, salaries and other remunerations of all Officers and agents of the Fund who are affiliated with the Investment Adviser. The Investment Adviser does not maintain a trading department and does not bear the costs of porifolic execuiions. The Fund’s officers are responsible for day-to-day portfolio decisions, the placing of orders and allocation of brokerage. In selecting brokers or dealers to effect portfolio transactions, it is the policy of the Fund to seek the best execution of orders and the most favorable net transacting prices, consistent with the Fund’s judgment as to the business qualifications of the various broker or dealer firms. (For additional information, see “Brokerage”, in the StatementoLAdciti ; ; State Street Bank and Trust Company, P. ©. Box 26070, Kansas City, Missouri 64196, is the Fund's Custodian and Transfer and Dividend Disbursing Agent. For its services the Fund pays Strategic Management, inc. an annual fee, payabie monthly, equal to 1% of the fi & million dollars for neta annuai fee equal to 3/4 of 1% on all net assets of the Fund in excess of 30 million dollars. The total Advisory Agreement also provides that should the Fund’s _jotal_annual expenses (including advisory fees but excluding brokerage commissions, interest _and extraordinary expenses}. exceed 144% of annual average nel assets. payment to Strategic Management, Ine. willbe reduced by the amount of such excess. Additionally, should the Fund’s annuai expenses exceed thé Maximum amounts ser forth above, such excess expense shall be borne by the Investment Adviser. In addition to the advisory fee, the Fund pays certain of its own expenses including custodian, accounting, legal] and sharehoider services fees, brokerage commissions, and the costs of reports to shareholders. THE FEE PAYABLE BY THE FUND [S AT A HIGHER RATE THAN THAT PAID BY MANY OTHER MUTUAL FUNDS. For the fiscal year ending June 30, 1987, the gross amount paid to the Investme iser-was. . $794,052. Far the fiscal year ending Ju i "ona bald $744 510 of which $42 506 was payable at } June 30, 1988. For the fiscal year ending June 301989, the Fund paid $427,621 and the Investment Adviser reimbursed the Fund $83,345 of which $78,373 was due at June 30, 1989. The ratio of operating expenses to average net assets of the Funid Tor fiscal year 1988-1 989 was_1.62%. . FEDERAL TAXES AND DISTRIBUTIONS The Fund intends to qualify as a “regulated investment company” under the Internal Revenue Code {the “Code”) and will not pay income or excise taxes to the extent that it distributes its net taxable investment income and capital gains. See “Taxes” in the Statement of Additional Information. Notice as to the tax status of the shareholder's dividends and distributions will be mailed to shareholders annually. Income from dividends and distributions is normally taxable whether or not reinvested. Distribu- tions of net investment income and short-term capital gains will be taxed as ordinary income. Distributions of long term capital gains will be taxed at capital gains rates. Recent amendments to the Cade eliminate the preferential taxation of long-term capital gains effective for taxable years beginning after December 31, 1986, with the result that long-term capital gains of individuals and corporations will be taxed at the same rates as other income. Dividends or distributions declared in December but paid in January of the following year are includabie in a shareholder's income as of the record date of such dividends or distributions. Only a portion of the dividends of the Fund are likely to qualify for the 70% dividends received deduction allowable to corporations. if the Fund fulfills certain requirements, shareholders may be able to claim a foreign tax credit or deduction on taxes paid to foreign governments during the year other than those received on South African shares. : . : v4