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As filed with the Securities and Exchange Commission on April 6, 1999
File No. 333-69365
File No. 811-9165
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. 2 [ X ]
Post-Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 2 [ X ]
KELMOORE STRATEGIC TRUST
(Exact Name of Registrant as Specified on Charter)
2471 E. Bayshore Road, Suite 501
Palo Alto, California 94303
(Address of Principal Executive Offices)
(800) 486-3717
(Registrant's Telephone Number)
Matthew Kelmon, President
Kelmoore Strategic Trust
2471 E. Bayshore Road, Suite 501
Palo Alto, California 94303
(Name and Address of Agent for Service)
Copies to:
Andre W. Brewster, Esq. Ms. Sandra L. Adams
Howard Rice Nemerovski Canady Falk & Rabkin First Data Investor Services Group
Three Embarcadero Center, 7th Floor 3200 Horizon Drive
San Francisco, CA 94111-4065 King of Prussia, PA 19406-0903
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered: Shares of Beneficial Interest of the
Kelmoore Strategic Trust.
Registrant has previously registered an indefinite number of shares of
beneficial interest of Kelmoore Strategic Trust pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. Registrant will file a notice
pursuant to Rule 24f-2 within ninety days after its fiscal year end.
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[OUTSIDE FRONT COVER]
PROSPECTUS
April 7, 1999
KELMOORE STRATEGY COVERED OPTION FUND
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
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CONTENTS
SUMMARY
What is the Fund? 1
What is the Fund's Primary Goal? 1
What is the Fund's Main Strategy? 1
What are the Fund's Main Risks? 2
Who may want to invest in the Fund? 2
Risk/Return Bar Chart and Table 2
FEES AND EXPENSES OF THE FUND
Shareholder Fees 3
Annual Fund Operating Expenses 3
Example 3
MAIN STRATEGY 4
OTHER STRATEGIES
MAIN RISKS 5
MANAGEMENT OF THE FUND
Investment Adviser 6
Portfolio Manager 6
Distribution Plan 6
YOUR INVESTMENT
How to Buy Shares 7
How to Sell Shares 8
Transaction Policies 9
SHAREHOLDER SERVICES 10
DISTRIBUTIONS AND TAXES 11
FOR MORE INFORMATION
Shareholder Reports Back Cover
Statement of Additional Information Back Cover
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KELMOORE STRATEGY COVERED OPTION FUND
SUMMARY
WHAT IS THE FUND?
Kelmoore Strategy Covered Option Fund (the "Fund") is a diversified series of
Kelmoore Strategic Trust, an open-end management investment company, commonly
known as a mutual fund.
WHAT IS THE FUND'S PRIMARY GOAL?
The Fund's primary goal is to maximize realized gains from writing covered
options on common stocks. As with any mutual fund, there is no guarantee that
the Fund will achieve its goal.
WHAT IS THE FUND'S MAIN STRATEGY?
The Fund's main strategy is to purchase the common stocks of a limited number of
large companies and to continually sell or "write" the related covered call
options against substantially all the shares of stock it owns.
When the Fund purchases a stock, it simultaneously writes covered call options
on the stock. The options written by the Fund are considered "covered" because
the Fund owns the stock against which the options are written. As a result, the
number of covered call options the Fund can write against any particular stock
is limited by the number of shares of that stock the Fund holds.
To maximize premiums generated, Kelmoore Investment Company, Inc. (the
"Adviser") writes as many covered call options on the stocks the Fund owns as it
can. The Adviser writes options of the duration and exercise price which provide
the Fund with the highest expected return. To assist the Adviser in selecting
which options to write, the Adviser utilizes an in-house computer program called
"OPTRACKER(TM)".
The Options Clearing Corporation (the "OCC") sets option expiration dates and
exercise prices, which depend on the range of prices in the underlying stock's
recent trading history. Option periods usually range from 30 days to 120 days
but can have longer durations. Exercise prices are set below, equal to or above
the current market price of the underlying stock. The premium the Fund receives
for writing an option will reflect, among other things, the current market price
of the underlying security, the relationship of the exercise price to the market
price, the historical price volatility of the underlying security, the option
period, supply and demand and interest rates.
The Fund will typically hold no more than forty common stocks, though this
number may fluctuate at the discretion of the Adviser. The issuers of stocks
selected for investment by the Fund will tend to have most of the following
characteristics:
- - - Considered to be industry leaders
- - - Have strong financial fundamentals
- - - Are widely-held and have a high daily trading volume
- - - Are multi-national corporations
- - Have relatively stable prices and dividends
The stocks selected will also usually fall into one of the following five
industry sectors:
SECTOR EXAMPLES
- ----------------------------- -----------------------------------------
Advanced Manufacturing Boeing, General Motors, Kodak
Consumer Goods Gillette, Home Depot, Merck
Finance Allstate, American Express, Merrill Lynch
Resources Amoco, Exxon, Mobil
Technology Hewlett-Packard, IBM, Intel, Microsoft
The Adviser generally seeks over time to maintain a balance of the Fund's assets
invested among the five sectors. The specific companies mentioned above are
examples only and may or may not be included in the Fund's portfolio.
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WHAT ARE THE FUND'S MAIN RISKS?
As with any mutual fund, the value of the Fund's investments, and therefore the
value of the Fund's shares, will fluctuate. If the net asset value of your
shares declines below the price you paid, you will lose money. The performance
of the Fund may also vary substantially from year to year. The principal risks
associated with an investment in the Fund include:
Risks of investing in stocks:
- stock market risk, or the risk that the price of the
securities owned by the Fund may fall due to changing
economic, political or market conditions
- selection risk, or the risk that the stocks or sectors
selected by the Fund will underperform the stock market as a
whole or certain sectors of the stock market
- risk of reduction in the amount of dividends a stock pays
Risks of writing covered call options:
- risk of limiting gains on stocks in a rising market
- risk of unanticipated exercise of the option
- lack of liquid options market
- decreases in option premiums
Other risks:
- lack of liquidity in connection with purchases and sales of
portfolio securities
- payment to the Adviser of brokerage commissions on stocks and
options
- relatively higher cost of options trades
- taxable income to the investor
- forced liquidation of securities underlying the options
- lack of prior operating history of the Fund, and of the
Adviser as a fund adviser
- adverse effects of year 2000 issues on the Fund
WHO MAY WANT TO INVEST IN THE FUND?
The Fund may be appropriate for you if you:
- are seeking to maximize short-term capital gains and are
willing to assume more risk to increase the level of those
gains
- can accept the risks of investing in a portfolio of common
stocks and their related options
- are seeking a disciplined and continual reinvestment of
premiums generated from writing options
- can tolerate performance which can vary substantially from
year to year
- are prepared to receive taxable distributions of income
- have a longer-term investment horizon
YOU SHOULD NOT INVEST IN THIS FUND IF YOU ARE SEEKING CAPITAL APPRECIATION OR
PREDICTABLE LEVELS OF INCOME OR ARE INVESTING FOR A SHORT PERIOD OF TIME.
RISK/RETURN BAR CHART AND TABLE
Although past performance of a fund is no guarantee of how it will perform in
the future, historical performance may give you some indication of the risks of
investing in a mutual fund. Performance demonstrates how a mutual fund's returns
have varied over time. The Fund is recently organized and therefore has no
performance history. Once the Fund has performance for at least one calendar
year, a Bar Chart and Performance Table will be included in the prospectus. The
Fund's annual returns will also be compared to the returns of a benchmark index.
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FEES AND EXPENSES OF THE FUND
THE TABLES BELOW DESCRIBE THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
SHAREHOLDER FEES
(fees paid directly from your investment):
Maximum Sales Charge (Load) imposed on Purchases ................None
Maximum Deferred Sales Charge (Load).............................None
Maximum Sales Charge (Load) imposed on Reinvested Dividends .....None
Redemption Fees (as a percentage of amount redeemed).............None*
*If you redeem your shares by wire transfer, the Fund's transfer agent charges a
fee (currently $9.00) for each wire redemption. Purchases and redemptions not
made directly through the Fund's principal distributor may be made through
broker-dealers, financial advisors or other nominees who may charge a commission
or other transaction fee for their services.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees .........................................................1.00%
Distribution and Service (12b-1) Fees....................................1.00
Other Expenses...........................................................1.00*
----
Total Annual Fund Operating Expenses.....................................3.00%
====
* "Other Expenses" are based on the estimated expenses that the Fund
expects to incur in its initial fiscal year.
EXAMPLE
This example is designed so that you may compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The example assumes that:
- YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED;
- YOU REDEEM ALL OF YOUR SHARES AT THE END OF THE TIME PERIODS;
- YOUR INVESTMENT HAS A HYPOTHETICAL 5% RETURN EACH YEAR;
- ALL DISTRIBUTIONS ARE REINVESTED; AND
- THE FUND'S OPERATING EXPENSES REMAIN THE SAME.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS
$302 $927
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MAIN STRATEGY
To generate option premiums, the Fund purchases the common stocks of a limited
number of large companies and simultaneously writes covered call options on
these stocks. As the options the Fund writes are exercised or expire, and the
proceeds or underlying stock become available for reinvestment or cover, the
Fund repeats the process. The fundamentals of selling covered call options
are as follows:
The Fund Sells the Option
Selling a call option is selling the right to an option buyer to purchase a
specified number of shares (100 shares equals one option contract) from the
Fund, at a specified price (the "exercise price") on or before a specified date
(the "expiration date"). The call option is covered because the Fund owns, and
has segregated, the shares of stock on which the option is based. This
eliminates certain risks associated with selling uncovered, or "naked," options.
The Fund Collects a Premium
For the right to purchase the underlying stock, the buyer of a call option pays
a fee or "premium" to the Fund. The premium is paid at the time the option is
purchased, and is not refundable to the buyer, regardless of what happens to the
stock price.
If the Option is Exercised
The buyer of the option may elect to purchase the stock (exercise, or "call",
the option) at the exercise price at any time before the option expires. The
Fund is then obligated to deliver the shares at that price. Options are normally
exercised on or before the expiration date if the market price of the stock
exceeds the exercise price of the option. Generally, if the exercise price plus
the option premium are higher than the price the Fund originally paid to
purchase the stock, the Fund will realize a gain on the sale of the stock; if
the exercise price and premium are lower, the Fund will realize a loss. By
selling a covered call option, the Fund foregoes the opportunity to benefit from
an increase in price of the underlying stock above the exercise price.
If the Option Expires
If the market price of the stock does not exceed the exercise price, the call
option will likely expire without being exercised. The Fund keeps the premium
and the stock. The Fund then expects to sell new call options against those same
shares of stock. This process is repeated until: a) an option is exercised, or
b) the stock is sold because it no longer meets the Adviser's investment
criteria, a corporate event such as a merger or reorganization has occurred or
it is used to fund redemptions.
Other Features
The Fund generally will not sell naked call options. The call options written by
the Fund are listed for trading on one or more domestic securities exchanges and
are issued by the OCC. If a dividend is declared on stock underlying a covered
call option written by the Fund, the dividend is paid to the Fund and not the
owner of the covered call option.
To decrease the risks of volatile or reduced premiums, the Adviser seeks to
select underlying common stocks of larger companies which have high trading
volumes and relatively stable prices and dividends. To reduce stock selection
risk, the companies the Adviser selects generally are considered to be industry
leaders and to have strong financial fundamentals. In addition, to reduce
overall market risk, the Adviser normally invests across five industry sectors.
To reduce transaction costs and to avoid realizing capital gains or losses on
portfolio stocks, the Adviser seeks, when practical, to hold portfolio stocks
and to enter into closing purchase transactions before call options the Fund
writes are exercised. It may be impractical in certain circumstances to effect
such closing purchase transactions in a timely or advantageous manner, for
example, if the option is exercised unexpectedly or if the market for the option
is illiquid.
TEMPORARY DEFENSIVE POSITION
The Fund may, from time to time, take a temporary defensive position that is
inconsistent with the Fund's principal investment strategies in attempting to
respond to adverse market, economic, political or other conditions. When the
Fund takes a temporary defensive position, it may not achieve its stated
investment objective. A principal defensive investment position would be the
purchase of cash equivalents.
OTHER STRATEGIES
SECURED PUT OPTIONS
The Fund may also write secured put options either to earn additional option
premiums (anticipating that the price of the underlying security will remain
stable or rise during the option period and the option will therefore not be
exercised) or to acquire the underlying security at a net cost below the current
value. Secured put option writing entails the Fund's sale of a put option to a
third party for a premium and the Fund's concurrent deposit of liquid assets
into a segregated account equal to the option's exercise price. A put option
gives the buyer the right to put (sell) the stock underlying the option to the
Fund at the exercise price at any time during a specified time period.
The Fund will generally not sell naked put options. The Fund will only write
secured put options in circumstances where it desires to acquire the security
underlying the option at the exercise price specified in the option. Put options
written by the Fund are listed for trading on one or more domestic securities
exchanges and are issued by the OCC.
When the Fund writes secured put options, it bears the risk of loss if the value
of the underlying stock declines below the exercise price. If the option is
exercised, the Fund could incur a loss if it is required to purchase the stock
underlying the put option at a price significantly greater than the current
market price of the stock. While the Fund's gain on a put option is limited to
the interest earned on the liquid assets securing the put option plus the
premium received from the purchaser of the put option, the Fund risks the entire
loss in the value of the stock, potentially to zero.
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INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of other investment companies, including
money market mutual funds. In making such investments, the Fund seeks to acquire
interests in portfolios of securities that are more diversified or with more
specialized characteristics than in those that could be efficiently acquired
directly by the Fund. By investing in shares of other investment companies, the
Fund indirectly pays a portion of the operating expenses and brokerage costs of
such companies as well as its own operating expenses.
MAIN RISKS
INVESTING IN EQUITY SECURITIES
Investing in equity securities includes the risks inherent in investing in
stocks and the stock market generally. The value of securities in which the Fund
invests, and therefore the Fund's net asset value, will fluctuate due to
economic, political and market conditions. As with any mutual fund which invests
in equity securities, there is also the risk that the securities or sectors
selected by the Fund will underperform the stock market or certain sectors of
the market or that the amount of any dividends paid on the securities will be
reduced.
WRITING COVERED CALL OPTIONS
When the Fund writes covered call options, it foregoes the opportunity to
benefit from an increase in the value of the underlying stock above the exercise
price, but continues to bear the risk of a decline in the value of the
underlying stock. While the Fund receives a premium for writing the call option,
the price the Fund realizes from the sale of the stock upon exercise of the
option could be substantially below its prevailing market price. The purchaser
of the call option may exercise the call at any time during the option period
(the time between when the call is written and when it expires). Alternatively,
if the value of the stock underlying the call option is below the exercise
price, the call is not likely to be exercised, and the Fund could have an
unrealized loss on the stock, offset by the amount of the premium received by
the Fund when it wrote the option.
There is no assurance that a liquid market will be available at all times for
the Fund to write call options or to enter into closing purchase transactions.
In addition, the premiums the Fund receives for writing call options may
decrease as a result of a number of factors, including a reduction in interest
rates generally, a decline in stock market volumes or a decrease in the price
volatility of the underlying securities.
LACK OF LIQUIDITY
The Fund's investment strategy may result in a lack of liquidity in connection
with purchases and sales of portfolio securities. Because the Adviser will seek
generally to hold the underlying stocks in the Fund's portfolio, the Fund may be
less likely to sell the existing stocks in its portfolio to take advantage of
new investment opportunities, and the cash available to the Fund to purchase new
stocks may consist primarily of proceeds received from the sale of new Fund
shares.
BROKERAGE COMMISSIONS
It is anticipated that the Fund will place substantially all of its
transactions, both in stocks and options, with the Adviser in its capacity as a
broker-dealer. As the level of option writing increases, the level of
commissions paid by the Fund to the Adviser increases. Because the Adviser
receives compensation based on the amount of transactions completed, there is an
incentive on the part of the Adviser to effect as many transactions as possible.
While the Fund does not intend to trade the stocks in its portfolio actively, it
is in the interest of the Fund to write as many options as possible, thereby
maximizing the premiums it receives. In practice, the number of options written
at any time will be limited to the value of the stocks and other assets in the
Fund's portfolio used to cover or secure those options. Brokerage commissions
are often greater in relation to options premiums than in relation to the price
of the underlying stocks.
TAX CONSEQUENCES
The Fund expects to generate a high level of premiums. Income from these
premiums is typically in the form of short-term capital gains and will usually
be taxable as ordinary income to the investor. Because the Fund will have no
control over the exercise of options, shareholder redemptions and corporate
events (such as mergers or reorganizations), it may be forced to realize capital
gains or losses at inopportune times.
LACK OF OPERATING HISTORY
The Fund has no operating history, and the Adviser has not previously acted as
an investment adviser for a mutual fund.
YEAR 2000 ISSUES
Like all mutual funds, the Fund's operations depend heavily on the functioning
of computer systems, including those used by its Adviser, custodian, fund
accounting agent, and transfer agent. The failure of these computer systems to
properly process data containing dates occurring after December 31, 1999 (the
"Year 2000 problem") could adversely affect the Fund. While the Adviser and
other service providers have advised the Fund that they are taking steps they
believe are reasonably designed to address the Year 2000 problem, there is no
assurance that these steps will be sufficient. In
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addition, there is no assurance that the Year 2000 problem will not have an
adverse effect on the companies whose securities are held by the Fund or the
securities markets and their participants generally.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
Kelmoore Investment Company, Inc. serves as the investment adviser to the Fund
and is responsible for the selection and ongoing monitoring of the securities in
the Fund's investment portfolio and for the management of the Fund's business
affairs. The Adviser is a registered investment adviser and broker-dealer that
was established in 1992 by Ralph M. Kelmon, Jr., who is the principal
shareholder. The Adviser offers investment advisory and brokerage services to
individual clients, trusts, corporations, institutions and private investment
funds using the same investment strategy that the Fund employs. The Adviser has
not previously advised or managed a mutual fund. The Adviser's principal address
is 2471 East Bayshore Road, Suite 501, Palo Alto, California 94303.
The Fund pays the Adviser a monthly fee at the annual rate of 1.00% of the
Fund's average daily net assets. The Adviser has voluntarily undertaken to waive
all or a portion of its fee and to reimburse certain expenses of the Fund so
that the total operating expenses of the Fund for the initial fiscal year will
not exceed 3.00%. The Adviser reserves the right to terminate this undertaking
at any time, in its sole discretion. Any waiver or reimbursement by the Adviser
is subject to reimbursement by the Fund within the following three years, to the
extent such reimbursement by the Fund would not cause total operating expenses
to exceed any current expense limitation.
PORTFOLIO MANAGER
The primary portfolio manager for the Fund is Matthew Kelmon. Mr. Kelmon has
been Vice President of Trading for the Adviser from 1994 to present. Mr. Kelmon
manages the day-to-day trading activities of the Adviser and is responsible for
designing and implementing the in-house software system (OPTRACKER(TM)) used in
the investment process. Mr. Kelmon has been responsible for the day-to-day
management and implementation of the Kelmoore Strategy for private accounts and
limited partnerships from 1994 to present. Mr. Kelmon also heads up the equity
selection committee of the Adviser. Previously, Mr. Kelmon was an account
executive with M.L. Stern & Co., Inc., a bond dealer, from 1993 to 1994.
DISTRIBUTION PLAN
The Fund has adopted a plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended, that allows the Fund to pay distribution and service
fees for the sale and distribution of its shares and for services provided to
shareholders. Because these fees are paid out of the Fund's assets on an ongoing
basis, over time, these fees will increase the cost of your investment and may
cost more than paying other types of sales charges. The distribution plan
permits the Fund to reimburse the Adviser, as the Fund's distributor, an annual
fee not to exceed 0.75% of the average daily net assets of the Fund. In
addition, the distribution plan permits the Fund to reimburse the Adviser, as
the Fund's distributor, for payments to dealers or others, an annual service fee
not to exceed 0.25% of the average daily net assets of the Fund.
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YOUR INVESTMENT
HOW TO BUY SHARES
You can purchase shares of the Fund through broker-dealers or directly through
the Adviser. Shares of the Fund are offered only to residents of states in which
the shares are registered or qualified. No share certificates will be issued in
connection with the purchase of Fund shares.
PURCHASE AMOUNTS
MINIMUM INITIAL INVESTMENT: $1,000
MINIMUM ADDITIONAL INVESTMENTS: $1,000
TO OPEN AN ACCOUNT
BY MAIL
Complete the application. Mail the application and your check to:
First Data Investor Services Group
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Please make check payable to "Kelmoore Strategy Covered Option Fund."
Please make sure your check is for at least $1,000.
BY WIRE
To make a same-day wire investment, call toll-free (877) 328-9456 by 4:00 p.m.
Eastern time. An account number will be assigned to you.
Call your bank with instructions to transmit funds to:
UMB Bank, NA, ABA #10-10-00695
For: First Data Investor Services Group
Account #98-7037-071-9
Fund - Kelmoore Strategy Covered Option Fund
Name(s) of account registration
Your bank may charge a wire fee. Please make sure your wire is for at least
$1,000. Male your completed application to First Data Investor Services Group at
the address under "To Open an Account - By Mail".
TO ADD TO AN ACCOUNT
BY MAIL
Fill out an investment slip from a previous confirmation and write your account
number on your check. Mail the slip and your check to:
First Data Investor Services Group
P.O. Box 412797
Kansas City, Missouri 64141-2797
Please make check payable to "Kelmoore Strategy Covered Option Fund."
Please make sure your additional investment is for at least $1,000.
BY WIRE
Call toll-free (877) 328-9456. The wire must be received by 4:00 p.m. Eastern
time for same day processing.
Follow the instructions under "To Open an Account - By Wire." Your bank may
charge a wire fee. Please make sure your wire is for at least $1,000.
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PURCHASE PRICE
You pay no sales charge to invest in the Fund. Shares of the Fund are sold at
the net asset value per share ("NAV") next determined after receipt of the
request in good order by First Data Investor Services Group ("Investor Services
Group"). The NAV multiplied by the number of Fund shares you own equals the
value of your investment.
RIGHTS RESERVED BY THE FUND
The Fund reserves the right to:
- reject any purchase order
- suspend the offering of shares
- vary the initial and subsequent investment minimums
- waive the minimum investment requirement for any investor
HOW TO SELL SHARES
GENERAL
You may "redeem", that is, sell your shares on any day the New York Stock
Exchange is open, either directly through the Adviser or through your
broker-dealer. The price you receive will be the NAV next calculated after
receipt of the request in good order by Investor Services Group.
BY MAIL
To redeem your shares by mail, write a letter of instruction that includes:
- The name of the Fund, your account number, the name(s) in
which the account is registered and the dollar value or number
of shares you wish to sell.
- Include all signatures and any additional documents that may
be required.
- Mail your request to:
First Data Investor Services Group
P.O. Box 61503
King of Prussia, PA 19406-0903
- A check will be mailed to the name(s) and address in which the
account is registered within seven days.
BY TELEPHONE
Call toll-free (877) 328-9456. The proceeds will be paid to the registered
owner: (1) by mail at the address on the account, or (2) by wire to the bank
account designated on the form. To use the telephone redemption privilege, you
must have selected this service on your original account application or
submitted a subsequent request in writing to add this service to your account.
The Fund and Investor Services Group reserve the right to refuse any telephone
transaction when they are unable to confirm to their satisfaction that a caller
is the account owner or a person preauthorized by the account owner. Investor
Services Group has established security procedures to prevent unauthorized
account access. The telephone transaction privilege may be suspended, limited,
modified or terminated at any time without prior notice by the Fund or Investor
Services Group. Neither the Fund nor any of its service contractors will be
liable for any loss or expense in acting upon telephone instructions that are
reasonably believed to be genuine.
BY WIRE
In the case of redemption proceeds that are wired to a bank, the Fund will
transmit the payment only on days that commercial banks are open for business
and only to the bank and account previously authorized on your application or
your signature-guaranteed letter of instruction. The Fund and Investor Services
Group will not be responsible for any delays in wired redemption proceeds due to
heavy wire traffic over the Federal Reserve System. The Fund reserves the right
to refuse a wire redemption if it is believed advisable to do so. If you redeem
your shares by wire transfer, Investor Services Group charges a fee (currently
$9.00) for each wire redemption.
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SELLING RECENTLY PURCHASED SHARES
If you wish to sell shares that were recently purchased by check, the Fund may
delay mailing your redemption check for up to 15 business days after your
redemption request to allow the purchase check to clear.
TRANSACTION POLICIES
TIMING OF PURCHASE OR SALE REQUESTS
All requests received in good order by Investor Services Group before the close
of the New York Stock Exchange ("NYSE"), typically 4:00 p.m. Eastern Time, will
be executed the same day, at that day's NAV. Orders received after the close of
the NYSE will be executed the following day, at that day's NAV. All investments
must be in U.S. dollars. Purchase and redemption orders are executed only on
days when the NYSE is open for trading. If the NYSE closes early, the deadlines
for purchase and redemption orders will be accelerated to the earlier closing
time.
STOCK EXCHANGE CLOSINGS
The NYSE is typically closed for trading on New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
DETERMINATION OF NAV
The NAV for the Fund is calculated at the close of regular trading hours of the
NYSE, which is normally 4:00 p.m. Eastern time. The Fund calculates NAV by
adding up the total value of the Fund's investments and other assets,
subtracting liabilities, and then dividing that figure by the number of the
Fund's outstanding shares. The Fund's investments are valued based on market
value, or where market quotations are not readily available, on fair value as
determined in good faith by or at the direction of the Fund's Trustees.
INVESTMENTS THROUGH NOMINEES
If you invest through a nominee, such as a broker-dealer or financial advisor
(rather than directly), the policies and fees may be different than those
described here. Nominees may charge transaction fees and set different minimum
investments or limitations on buying or selling shares. It is the responsibility
of the nominee to promptly forward purchase or redemption orders and payments to
the Fund. You will not be charged fees if you purchase or redeem shares of the
Fund directly through the Fund's principal distributor.
REDEMPTION POLICIES
Payment for redemptions of Fund shares is usually made within one business day,
but not later than seven calendar days after receipt of your redemption request,
unless the check used to purchase the shares has not yet cleared. The Fund may
suspend the right of redemption or postpone the date of payment for more than
seven days during any period when (1) trading on the NYSE is restricted or the
NYSE is closed for other than customary weekends and holidays, (2) the
Securities and Exchange Commission ("SEC") has by order permitted such
suspension for the protection of the Fund's shareholders, or (3) an emergency
exists making disposal of portfolio securities or valuation of net assets of the
Fund not reasonably practicable. The Fund will automatically redeem shares if a
purchase check is returned for insufficient funds. The Fund reserves the right
to reject any third party check. The Fund reserves the right to make a
"redemption in kind" payment in portfolio securities rather than cash if the
amount you are redeeming is large enough to affect fund operations. Large
redemptions are considered to exceed $250,000 or 1% of the Fund's assets.
ACCOUNT MINIMUM
You must keep at least $1,000 worth of shares in your account to keep the
account open. If, after giving you thirty days prior written notice, your
account value is still below $1,000 we may redeem your shares and send you a
check for the redemption proceeds.
SIGNATURE GUARANTEES
The Fund may require additional documentation, or signature guarantees, on any
redemption over $10,000 in value or for the redemption of corporate, partnership
or fiduciary accounts, or for certain types of transfer requests or account
registration changes. A signature guarantee helps protect against fraud. You can
obtain one from most banks or
9
<PAGE> 13
securities dealers, but not from a notary public. Please call toll-free (877)
328-9456 for information on obtaining a signature guarantee.
OTHER DOCUMENTS
Additional documents may be required for purchases and redemptions when shares
are registered in the name of a corporation, partnership, association, agent,
fiduciary, trust, estate or other organization. For further information, please
call Investor Services Group toll-free at (877) 328-9456.
SHAREHOLDER SERVICES
TELEPHONE INFORMATION
Your Account: If you have questions about your account, including
purchases, redemptions and distributions, call
Investor Services Group from Monday through Friday,
9:00 a.m. to 7:00 p.m., Eastern time. Call toll-free
(877) 328-9456.
The Fund: If you have questions about the Fund, call the Fund's
telephone representatives Monday through Friday, 9:00
a.m. to 5:00 p.m., Pacific time. Call toll-free (877)
328-9456.
ACCOUNT STATEMENTS
The Fund provides you with these helpful services and information about your
account:
- a statement after every transaction;
- an annual account statement reflecting all transactions for
the year;
- tax information which will be mailed by January 31 of each
year, a copy of which will also be filed with the Internal
Revenue Service, if necessary; and
- financial statements with a summary of portfolio composition
and performance will be mailed at least twice a year.
The Fund provides the above shareholder services without charge, but may charge
for special services such as requests for historical transcripts of accounts.
INTEGRATED VOICE RESPONSE SYSTEM
You may obtain access to account information by calling toll-free (877)
328-9456. The system provides share price and price change information for the
Fund and gives account balances and information on the most recent transactions
and allows sales of shares.
SYSTEMATIC WITHDRAWAL PLAN
Once you have established an account with $5,000 or more, you may automatically
receive funds from your account on a monthly, quarterly or semi-annual basis
(minimum withdrawal of $100). Call toll-free (877) 328-9456 to request a form to
start the Systematic Withdrawal Plan.
RETIREMENT PLANS
Shares of the Fund are available for purchase through individual retirement
accounts ("IRAs") and other retirement plans. An IRA application and further
details about the procedures to be followed by IRAs and other retirement plans
are available by calling toll-free (877) 328-9456.
10
<PAGE> 14
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
The Fund passes along to your account your share of investment earnings in the
form of dividends and distributions. The Fund will distribute at least annually
any net realized long-term capital gains obtained through Fund investment
transactions. The Fund will pay quarterly distributions from net investment
income and any net realized short-term capital gain. Net investment income
consists of dividend and interest accrued on portfolio investments less accrued
expenses. Interest and dividend payments will normally be distributed as income
dividends on a quarterly basis.
Under limited circumstances, certain distributions from the Fund may be treated
as a return of capital. If your distributions are reinvested, you are largely
unaffected by such returns of capital. If you received your distributions in
cash, a return of capital is equivalent to a partial redemption of your
investment.
Unless you elect otherwise, all dividends and distributions paid by the Fund
will be reinvested in additional shares of the Fund. They will be credited to
your account in the Fund at the same NAV per share as would apply to cash
purchases on the applicable dividend payment date. All distributions the Fund
pays to you will be taxable when paid, regardless of whether they are taken in
cash or reinvested in shares of the Fund. To change your dividend election, you
must notify Investor Services Group in writing at least fifteen days prior to
the applicable dividend record date.
TAXES
The Fund intends to qualify as a regulated investment company. This status
exempts the Fund from paying federal income tax on the income or capital gains
it distributes to its shareholders.
Your investment in the Fund will be subject to the following tax consequences:
- Dividends from net investment income and distributions from
short-term capital gains are taxable as ordinary income
- Distributions from long-term capital gains, if any, are
taxable as long-term capital gain
- Dividends and distributions may also be subject to state and
local taxes
- Certain dividends paid to you in January will be taxable as if
they had been paid the previous December
If you purchase shares shortly before a record date for a dividend or
distribution, a portion of your investment will be returned as a taxable
distribution.
Due to the nature of the Fund's principal investment strategy, the Fund
anticipates that a majority of its distributions will be in the form of ordinary
income. The Fund may at times realize short-term capital gains on some portfolio
securities, while at the same time seeking to avoid realizing losses on other
securities held in the portfolio. As a result, the Fund's shareholders may
receive taxable distributions from a net realized short-term capital gain at
times when the Fund has unrealized losses in its portfolio which could have been
used to offset such gain. Similarly, the Fund may at times continue to pay
taxable distributions from a new realized short-term gain which could have been
retained by the Fund and offset by a capital loss carryforward available to the
Fund.
The Fund will generally realize short-term capital gain (or loss) on a closing
purchase transaction with respect to a call or put previously written by the
Fund if the premium, plus commission costs, paid to purchase the call or put is
less (or greater) than the premium, less commission costs, received on the sale
of the call or put. A short-term capital gain also will be realized if a call or
put which the Fund has written lapses unexercised, because the Fund would retain
the premium. If a call option which the Fund has written on any equity security
is exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. If a put option which the Fund has written on an equity
security is exercised, the amount of the premium originally received will reduce
the cost of the security which the Fund purchases upon exercise of the option.
You must provide the Fund with your correct taxpayer identification number and
certify that you are not subject to backup withholding. If you do not, the Fund
will be required to withhold 31% of your taxable distributions and redemptions.
After the end of each calendar year, you will receive a statement (Form 1099) of
the federal income tax status of the Fund's dividends and other distributions
paid during the year. You should keep all of your Fund statements for accurate
tax-accounting purposes.
You should consult your tax advisor concerning federal, state and local taxation
of Fund dividends and distributions in your particular circumstances.
11
<PAGE> 15
[OUTSIDE BACK COVER]
ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTING AGENT
First Data Investor Services Group, Inc.
3200 Horizon Drive
King of Prussia, PA 19406
(877) 328-9456
CUSTODIAN
The Bank of New York
48 Wall Street
New York, NY 10286
COUNSEL
Howard Rice Nemerovski Canady Falk & Rabkin, A Professional Corporation
Three Embarcadero Center
Seventh Floor
San Francisco, CA 94111-4065
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
333 Market Street
San Francisco, CA 94105
ADDITIONAL INFORMATION
Shareholder Reports:
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report, a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year will
be included.
Statement of Additional Information (SAI):
The SAI contains additional information about the Fund. It is incorporated by
reference into this prospectus.
To request a free copy of the current annual report, semi-annual report or SAI,
or to request other information about the Fund, please write or call:
Kelmoore Investment Company, Inc.
2471 E. Bayshore Road, Suite 501
Palo Alto, CA 94303
(877) 328-9456
Information about the Fund (including the SAI) may be obtained in person at the
SEC's Public Reference Room in Washington, DC. Call (800) SEC-0330 for
information on the operation of the Public Reference Room. You may also request
copies by mail by sending your request, along with a duplicating fee, to the
SEC's Public Reference Room, Washington, DC 20549-6009. You may also visit the
SEC's Internet site (www.sec.gov) to view reports and other information about
the Fund.
The Trust's SEC file number: 811-9165.
12
<PAGE> 16
STATEMENT OF ADDITIONAL INFORMATION
KELMOORE STRATEGIC TRUST
KELMOORE STRATEGY COVERED OPTION FUND
April 7, 1999
Principal Distributor:
Kelmoore Investment Company, Inc.
2471 East Bayshore Road
Suite 501
Palo Alto, CA 94303
Toll-free (877) 328-9456
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Fund's Prospectus dated April 7, 1999. The information
in this Statement of Additional Information expands on information contained in
the Prospectus. The Prospectus can be obtained without charge by contacting
either the dealer through whom you purchased shares or the Distributor at the
telephone number or address above.
13
<PAGE> 17
TABLE OF CONTENTS
PAGE
Kelmoore Strategy Covered Option Fund......................................... 1
Investment Strategies and Related Risks ...................................... 1
Investment Restrictions ...................................................... 3
Portfolio Turnover............................................................ 4
Management of the Fund........................................................ 4
Trustees and Officers................................................ 4
Investment Adviser................................................... 6
Other Services................................................................ 6
Purchases and Redemptions .................................................... 8
Valuation..................................................................... 8
Taxes......................................................................... 9
Brokerage ....................................................................11
Shares of Beneficial Interest.................................................11
Calculation of Performance ...................................................12
Financial Statements .........................................................13
14
<PAGE> 18
KELMOORE STRATEGY COVERED OPTION FUND
Kelmoore Strategy Covered Option Fund (the "Fund") is a diversified series of
Kelmoore Strategic Trust (the "Trust"), a Delaware business trust organized on
December 1, 1998 as an open-end management investment company. The Fund has
employed Kelmoore Investment Company, Inc. as its investment adviser (the
"Adviser").
INVESTMENT STRATEGIES AND RELATED RISKS
The following describes certain attributes of particular types of securities in
which the Fund invests and supplements and should be read in conjunction with
sections of the Prospectus entitled "Summary", "Main Strategy", "Other
Strategies" and "Main Risks."
Common Stock. Common stock represents an equity (ownership) interest in a
company or other entity. This ownership interest often gives the Fund the right
to vote on measures affecting the company's organization and operations.
Although common stocks generally have had a history of long-term growth in
value, their prices are often volatile in the short-term and can be influenced
by not only general market risk but specific corporate risks as well.
Options on Securities. The writing and purchase of options is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. The
successful use of options depends in part on the ability of the Adviser to
predict future price fluctuations.
The Fund may write (sell) call and put options on any security in which it may
invest. These options will be listed on securities exchanges. Exchange-traded
options in the United States are issued by the Options Clearing Corporation (the
"OCC"), a clearing organization affiliated with the exchanges on which options
are listed. The OCC, in effect, gives its guarantee to every exchange-traded
option transaction.
The Fund receives a premium for each option it writes. The premium received
will reflect, among other things, the current market price of the underlying
security, the relationship of the exercise price to the market price, the
historical price volatility of the underlying security, the option period,
supply and demand and interest rates.
All call and put options written by the Fund are covered (or secured). A written
call option is typically covered by maintaining the securities subject to the
option in a segregated account. A written call option may also be covered by (i)
maintaining cash or liquid securities in a segregated account with a value at
least equal to the Fund's obligation under the option, (ii) entering into an
offsetting forward commitment and/or (iii) purchasing an offsetting option or
any other option which, by virtue of its exercise price or otherwise, reduces
the Fund's net exposure on its written option position.
Put options written by the Fund will be secured by (i) maintaining cash or
liquid securities in a segregated account with a value at least equal to the
Fund's obligation under the option, (ii) entering into an offsetting forward
commitment and/or (iii) purchasing an offsetting option or any other option
which, by virtue of its exercise price or otherwise, reduces the Fund's net
exposure on its written option position.
The obligation of an option writer is terminated upon the exercise of the
option, the option's expiration or by effecting a closing purchase transaction.
Additional Risks Associated with Options Transactions. There is no assurance a
liquid secondary market will exist for any particular exchange-traded option or
at any particular time. If the Fund is unable to effect a closing purchase
transaction with respect to options it has written, the Fund will not be able to
sell the underlying securities or dispose of assets held in a segregated account
until the options expire or are exercised.
15
<PAGE> 19
Reasons for the absence of a liquid secondary market include the following: (i)
there may be insufficient trading interest in certain options; (ii) restrictions
may be imposed by an exchange on opening transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or the OCC may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options). If trading were
discontinued, the secondary market on that exchange (or in that class or series
of options) would cease to exist. However, outstanding options on that exchange
that had been issued by the OCC as a result of trades on that exchange would
normally continue to be exercisable or expire in accordance with their terms.
There can be no assurance that higher trading activity or order flow or other
unforeseen events might not, at times, render certain of the facilities of the
OCC or various exchanges inadequate. Such events have, in the past, resulted in
the institution by an exchange of special procedures, such as trading rotations,
restrictions on certain types of orders, or trading halts or suspensions, with
respect to one or more options, or may otherwise interfere with the timely
execution of customers' orders.
The writer of an option lacks the ability to control when an option will be
exercised. Although the Fund will generally only write options whose expiration
dates are between one and four months from the date the option is written, it is
not possible for the Fund to time the receipt of exercise notices. This prevents
the Fund from receiving income on a scheduled basis and may inhibit the Fund
from fully utilizing other investment opportunities.
Written options have predetermined exercise prices set below, equal to or above
the current market price of the underlying stock. The Fund's overall return
will, in part, depend on the ability of the Adviser to accurately predict price
fluctuations in underlying securities in addition to the effectiveness of the
Adviser's strategy in terms of stock selection.
The size of the premiums the Fund receives for writing options may be adversely
affected as new or existing institutions, including other investment companies,
engage in or increase their option writing activities.
Each securities exchange on which options trade has established limitations
governing the maximum number of puts and calls in each class (whether or not
covered or secured) which may be written by a single investor, or group of
investors, acting in concert (regardless of whether the options are written on
the same or different exchanges or are held or written in one or more accounts
or through one or more brokers). It is possible that the Fund and other clients
advised by the Adviser may constitute such a group. These position limits may
limit the number of options the Fund may write on a particular security. An
exchange may order the liquidation of positions found to be above such limits or
impose other sanctions.
Repurchase Agreements. The Fund may enter into repurchase agreements with
approved banks and broker-dealers. In a repurchase agreement, the Fund purchases
securities with the understanding they will be repurchased by the seller at a
set price on a set date. This allows the Fund to keep its assets at work but
retain flexibility to pursue longer term investments upon repurchase.
Repurchase agreements involve risks. For example, if a seller defaults, the
Fund will suffer a loss if the proceeds from the sale of the collateral is below
the repurchase price. If the seller becomes bankrupt, the Fund may be delayed or
incur additional costs in selling the collateral. To help minimize risk,
collateral must be held with the Fund's custodian at least equal to the
repurchase price, including accrued interest.
Illiquid Securities: The Fund may invest up to 15% of its net assets in illiquid
securities. Illiquid securities will generally include securities that cannot
readily be sold within seven days in the ordinary course of business at
approximately the price at which the Fund has valued the securities (e.g., when
trading in the security is suspended or repurchase agreements not terminable
within seven days).
Temporary Investments. To maintain cash for redemptions and distributions and
for temporary defensive purposes, the Fund may invest in money market mutual
funds and in investment grade short-term fixed income securities, including
short-term U.S. government securities, negotiable certificates of deposit,
commercial paper, banker's acceptances, and repurchase agreements.
16
<PAGE> 20
Other Investments. Subject to prior disclosure to shareholders, the Trustees
may, in the future, authorize the Fund to invest in securities other than those
listed here and in the Prospectus, provided that such investment would be
consistent with the Fund's investment objective and that it would not violate
any fundamental investment policies or restrictions applicable to the Fund.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions The following investment restrictions are
considered fundamental, which means they may be changed only by approval of the
holders of a majority of the Fund's outstanding shares, defined in the 1940 Act
as the lesser of: (1) 67% or more of the Fund's outstanding shares present at a
meeting, if the holders of more than 50% of the Fund's outstanding shares are
present in person or represented by proxy, or (2) more than 50% of such Fund's
outstanding shares.
1. The Fund may not purchase securities that would cause more than 25% of
the value of the Fund's total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their
principal activities in the same industry. For purposes of this
limitation, U.S. government securities are not considered part of any
industry.
2. The Fund may not borrow money or issue senior securities, except to the
extent provided by the 1940 Act.
3. The Fund may not make loans to other persons, except loans of
securities not exceeding one-third of the Fund's total assets. For
purposes of this limitation, investments in debt obligations and
transactions in repurchase agreements shall not be treated as loans.
4. The Fund may not purchase, sell or invest in real estate, real estate
investment trust securities, real estate limited partnership interests,
or oil, gas or other mineral leases or exploration or development
programs, but the Fund may purchase and sell securities that are
secured by real estate and may purchase and sell securities issued by
companies that invest or deal in real estate.
5. The Fund may not invest in commodities or commodity futures contracts.
6. The Fund may not underwrite securities of other issuers, except insofar
as the Fund may be deemed an underwriter under the Securities Act of
1933 when selling portfolio securities.
7. The Fund, with respect to 75% of its total assets, will not invest more
than 5% of its total assets in the securities of any single issuer, or
own more than 10% of the outstanding voting securities of any one
issuer, in each case other than (1) securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities or (2)
securities of other investment companies.
Non-Fundamental Investment Restrictions The following restrictions are imposed
by management of the Fund and may be modified by the Trustees without
shareholder approval.
1. The Fund may not borrow money, except that the Fund may borrow money
from banks for temporary or emergency purposes only, including the
meeting of redemption requests which might require the untimely
disposition of securities, and may use collateral for such borrowing.
Such temporary borrowing may not exceed 10% of the value of the total
assets of the Fund at the time of borrowing. In the event asset
coverage for such borrowings falls below 300%, the Fund will reduce,
within three days, the amount of its borrowing in order to provide for
300% asset coverage.
2. The Fund may not invest more than 15% of its net assets in illiquid
securities. A security is illiquid if it cannot be disposed of in seven
days at a price approximately equal to the price at which the Fund is
valuing the security. Repurchase agreements with deemed maturities in
excess of seven days are subject to this 15% limit.
3. The Fund may not invest in a company for the purpose of exercising
control or management of the company.
4. The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance
of transactions and provided that margin payments in connection with
options will not constitute purchasing securities on margin.
5. The Fund may not invest its assets in securities of any other
investment company, except as permitted by the 1940 Act. Under the 1940
Act, the Fund may acquire securities of other investment companies if,
immediately after such acquisition, the Fund does not own in the
aggregate (1) more than 3% of the total outstanding voting stock of
such other investment company, (2) more than 5% of the value of the
Fund's total assets of any one investment company, or (3) securities
issued by such other investment company and all other investment
companies having an aggregate value in excess of 10% of the value of
the Fund's total assets.
Shareholders should understand that all investments involve risks and there can
be no guarantee against loss resulting from an investment in the Fund. Unless
otherwise indicated, all percentage limitations governing the investments of the
Fund apply only at the time of the investment.
17
<PAGE> 21
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate is calculated by dividing the lesser of the
purchases or sales of portfolio investments for the reporting period by the
monthly average value of the portfolio investments owned during the reporting
period. The calculation excludes all options written by the Fund which expire in
less than one year.
Under certain market conditions, the Fund's portfolio turnover rate may be
higher than that of other mutual funds. This would be the case, for example, if
the Fund writes a substantial number of call options and the market prices of
the underlying securities appreciates, causing the options to be exercised. The
Fund may also engage in short-term trading (purchase and sale of security in a
relatively brief period of time) in response to stock market conditions or
changes in economic trends and developments. Although the Fund's annual turnover
rate cannot be accurately predicted, it is estimated this rate will not exceed
approximately 100% for the current fiscal year assuming normal market
conditions. A 100% annual turnover rate would occur if all of the Fund's
securities were replaced one time during a one-year period.
High rates of portfolio turnover (100% or more) entail certain costs, including
increased taxable income for the Fund's shareholders. Also, the higher the
turnover, the higher the overall brokerage commissions, dealer mark-ups and
mark-downs, and other transaction costs incurred. The Adviser takes these costs
into account, since they affect the Fund's overall investment performance and
reduce shareholders' return.
MANAGEMENT OF THE FUND
Trustees and Officers. The operations of the Fund are conducted under the
direction of the Trustees. The Trustees establish the Fund's policies and
oversee the management of the Fund. The Trustees meet regularly to review the
activities of the officers, who are responsible for day-to-day operations of the
Fund.
The Trustees and officers of the Fund and their principal occupations during the
past five years are set forth below.
<TABLE>
<CAPTION>
- ---------------------------------------- --------------------------- -------------------------------------------------
POSITION WITH
NAME, ADDRESS AND AGE THE FUND PRINCIPAL OCCUPATION DURING THE PAST 5 YEARS
- ---------------------------------------- --------------------------- -------------------------------------------------
<S> <C> <C>
*Matthew Kelmon, Age 30 President, Chief Vice President of Trading for the Adviser from
2471 East Bayshore Road, Suite 501 Executive Officer and 1994 to present. Formerly, an Account
Palo Alto, California 94303 Trustee Executive with M.L. Stern & Co., Inc., a bond
dealer, from 1993 to 1994.
- ---------------------------------------- --------------------------- -------------------------------------------------
*Richard D. Stanley, Age 66 Chairman and Trustee President of Naranja, Inc., an investment and
2471 East Bayshore Road, Suite 501 consulting corporation, from 1994 to present.
Palo Alto, California 94303
- ---------------------------------------- --------------------------- -------------------------------------------------
*William H. Barnes, Age 66 Trustee President, Barnes, Stork & Associates, a
932-A Santa Cruz Avenue registered investment adviser, from 1975 to
Menlo Park, CA 94025 present. President and Director, Trinity
Guardian Foundation, a firm which manages
assets in support of local charities, from 1996
to present. Director, Church of the Pioneers
Foundation, from 1985 to present.
- ---------------------------------------- --------------------------- --------------------------------------------------
*Wayne E. Edgerton, Age 56 Trustee Retired. Employed by Mid-Continent Bottlers,
13682 Lakeshore Drive Inc., manufacturer and distributor of national
Clive, Iowa 50325 brand soft drinks, from 1975 through 1997, most
recently as Executive Vice President/Partner.
- ---------------------------------------- --------------------------- -------------------------------------------------
Kenneth D. Treece, Age 54 Trustee Chief Executive Officer of SBMC Corp. a
2960 Copper Rd precision sheet metal producer, from 1996 to
Santa Clara, CA 95051 present. From 1988 to 1997, Chief Executive
Officer of The Gluers, a trade bindery.
- ---------------------------------------- --------------------------- -------------------------------------------------
Ignatius J. Panzica, Age 55 Trustee Self-employed; formerly, President and Chief
16280 Oak Glen Ave Executive Officer of Custom Chrome, Inc., a
Morgan Hill, CA 95037 supplier of motorcar parts and accessories, from
1969 to 1997.
- ---------------------------------------- --------------------------- -------------------------------------------------
</TABLE>
18
<PAGE> 22
<TABLE>
<CAPTION>
- ---------------------------------------- --------------------------- --------------------------------------------------
<S> <C> <C>
Stephen W. Player, Age 57 Trustee Attorney, Law Offices of Stephen W. Player, from
2600 El Camino Real, Suite 410 1994 to present.
Palo Alto, CA 94306
- ---------------------------------------- --------------------------- --------------------------------------------------
Lisa Ann McCarthy, Age 39 Trustee President, Crossing Main, a retail women's
5 Main Street clothing company, from 1992 to present.
Hingham, MA 02043
- ---------------------------------------- --------------------------- --------------------------------------------------
Jeffrey Ira, Age 44 Trustee Certified Public Accountant and Partner with C.G.
647 Veterans Boulevard Uhlonberg & Company, from 1984 to present. City
Redwood City, CA 94063 Councilman, Redwood City, CA from 1997 to present.
- ---------------------------------------- --------------------------- --------------------------------------------------
Norman H. Moore, Jr., Age 43 Secretary and Treasurer Vice President of Compliance for the Adviser from
2471 East Bayshore Road, Suite 501 1994 to present.
Palo Alto, California 94303
- ---------------------------------------- --------------------------- --------------------------------------------------
</TABLE>
*An asterisk indicates a Trustee who may be deemed to be an "interested person"
of the Fund (as that term is defined in the 1940 Act). Messrs. Kelmon and
Stanley are considered "interested persons" of the Fund due to their affiliation
with the Adviser. Messrs. Stanley, Barnes and Edgerton are considered
"interested persons" of the Fund because they own shares of the Adviser.
Members of the Audit Committee of the Trustees are Messrs. Ira, Panzica and
Treece. The Audit Committee members make recommendations to the Trustees
regarding the selection of auditors and confer with the auditors regarding the
scope and results of the audit.
Members of the Nominating Committee of the Trustees are Messrs. Barnes and
Player and Ms. McCarthy. The Nominating Committee of the Trustees is responsible
for the selection and nomination of disinterested Trustees.
Members of the Valuation Committee of the Trustees are Messrs. Kelmon, Stanley
and Treece. The Valuation Committee of the Trustees is responsible for fair
value pricing of the Fund's portfolio securities.
Each Trustee of the Fund who is not an affiliated person of the Adviser, as
defined in the 1940 Act, receives an annual retainer of $4,000 per year; payable
in equal installments at the end of each quarter, and reimbursement for
expenses. The following table sets forth the compensation expected to be paid by
the Trust to the non-interested Trustees during the Fund's fiscal year ending
March 31, 2000.
<TABLE>
<CAPTION>
- --------------------------------- ---------------------------------------- ---------------------------------------
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
NAME OF TRUSTEE FROM THE TRUST THE TRUST PAID TO TRUSTEE
- --------------------------------- ---------------------------------------- ---------------------------------------
<S> <C> <C>
Matthew Kelmon $ 0 $ 0
Richard D. Stanley 0 0
William H. Barnes 0 0
Wayne E. Edgerton 0 0
Kenneth D. Treece 4,000 4,000
Ignatius J. Panzica 4,000 4,000
Stephen W. Player 4,000 4,000
Lisa Ann McCarthy 4,000 4,000
Jeffrey Ira 4,000 4,000
- ---------------
</TABLE>
19
<PAGE> 23
The Trustees and officers affiliated with the Adviser are not compensated by the
Trust for their services. The Fund does not have any retirement plan for its
Trustees.
Investment Adviser. The Fund has employed Kelmoore Investment Company, Inc. as
its investment adviser. As of February 28, 1999, the Adviser managed
approximately $100 million of assets, consisting primarily of discretionary
brokerage accounts. Through his ownership and voting control of more than 25% of
the outstanding shares of the Adviser, Ralph M. Kelmon, Jr. is considered to
control the Adviser. Mr. Kelmon is the father of Matthew Kelmon, the President
and primary portfolio manager for the Fund.
In addition to managing the Fund's investments consistent with its investment
objectives, policies and limitations, the Adviser makes recommendations with
respect to other aspects and affairs of the Fund. The Adviser also furnishes the
Fund with certain administrative services, office space and equipment. All other
expenses incurred in the operation of the Fund are borne by the Fund. Under the
Investment Advisory Agreement, the Adviser will not be liable for any error of
judgment or mistake of fact or law or for any loss by the Fund in connection
with the performance of the Investment Advisory Agreement, except a loss from a
breach of a fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties under the Investment Advisory Agreement.
For providing investment advisory and other services and assuming certain Fund
expenses, the Fund pays the Adviser a monthly fee at the annual rate of 1.00% of
the value of the Fund's average daily net assets. For the Fund's initial fiscal
year ending March 31, 2000, the Adviser has voluntarily agreed to waive its fees
and reimburse expenses so that the Fund's annual operating expenses will not
exceed 3.00%. The Adviser may terminate this waiver at any time. Any waiver or
reimbursement by the Adviser is subject to reimbursement by the Fund within the
following three years, to the extent such reimbursement by the Fund would not
cause total operating expenses to exceed any current expense limitation.
Additionally, the Adviser has agreed to reimburse all expenses incurred in
connection with the organization of the Fund, subject to recoupment described
above. At March 24, 1999, the Adviser has reimbursed $70,446 in Fund expenses
that it can recoup until March 24, 2002.
As part of the Fund's organization, the Fund has issued to the Adviser 10,000
shares of beneficial interest at $10.00 per share in a private placement.
The Investment Advisory Agreement was approved by the Trustees, including a
majority of the Trustees who are not "interested persons" of the Fund, on
March 22, 1999 and by the initial shareholder of the Fund on March 25, 1999. The
Investment Advisory Agreement is for an initial term of two years and continues
in effect from year to year thereafter if such continuance is approved annually
by the Trustees or by a vote of a majority of the outstanding shares of the
Fund, and, in either case, by the vote of a majority of the Trustees who are not
parties to the Investment Advisory Agreement or "interested persons" of any
party to the Investment Advisory Agreement, voting in person at a meeting called
for the purpose of voting on such approval. The Investment Advisory Agreement
may be terminated at any time without penalty by the Trustees, by vote of a
majority of the outstanding shares of the Fund or by the Adviser, upon sixty
days' written notice. The Investment Advisory Agreement terminates automatically
if assigned.
Expenses. The Fund pays all expenses not assumed by the Adviser, including, but
not limited to: Trustees' expenses, audit fees, legal fees, interest expenses,
brokerage commissions, fees for registration and notification of shares for sale
with the SEC and various state securities commissions, taxes, insurance
premiums, fees of the Fund's administrator, transfer agent, fund accounting
agent or other service providers, and costs of obtaining quotations for
portfolio securities and the pricing of Fund shares.
Name. The word "Kelmoore" is used by the Trust with the Adviser's consent and
the Trust has a non-exclusive license to use the name "Kelmoore Strategic Trust"
and the word "Kelmoore" in the name of any Fund. If the Adviser ceases to be the
investment adviser of the Fund, the Adviser may require the Trust and the Fund
to delete the word "Kelmoore" from their names and cease to otherwise use the
word "Kelmoore."
OTHER SERVICES
The Distributor. Kelmoore Investment Company, Inc., 2471 East Bayshore Road,
Suite 501, Palo Alto, CA 94303 (the "Distributor") also acts as the primary and
exclusive distributor of the Fund's shares, which are offered on a continuous
basis. The Distributor serves as the principal distributor of the Fund's shares
pursuant to a Distribution Agreement with the Fund. The Distribution Agreement
is renewable annually provided its renewal is approved by a majority of the
Trustees who are not parties to the Distribution Agreement or interested persons
of parties to the Distribution Agreement and who have no direct or indirect
financial interest in the Distribution Agreement or any related distribution
plan. The Distribution Agreement may be terminated at any time, without the
payment
20
<PAGE> 24
of a penalty, on sixty days' written notice by the Distributor, by the
non-interested Trustees or by the vote of the holders of the lesser of: (a) 67%
of the Trust's shares present at a meeting if the holders of more than 50% of
the outstanding shares are present in person or by proxy, or (b) more than 50%
of the outstanding shares of the Trust. The Distribution Agreement automatically
terminates if it is assigned. The Distributor does not receive any fee or other
compensation under the Distribution Agreement other than fees it receives in
accordance with the Distribution Plan described below.
Shares of the Fund may also be sold by selected broker-dealers which have
entered into selling agency agreements with the Distributor. The Distributor
accepts orders for the purchase of the shares of the Fund which are continually
offered at net asset value next determined. The Distributor may pay extra
compensation to financial services firms selling large amounts of Fund shares.
This compensation is calculated as a percentage of Fund shares sold by the firm.
Distribution Plan. The Trust has adopted a distribution plan in accordance with
Rule 12b-1 under the 1940 Act for the Fund (the "Plan"). The Plan permits the
Fund to pay the Distributor for its services related to sales and distribution
of shares and provision of ongoing services to Fund shareholders.
Under the Plan, (a) the Fund shall reimburse the Distributor a monthly fee not
to exceed 0.75% per annum of the average daily net assets of the Fund; and (b)
in addition to the amounts described in (a) above, the Fund shall reimburse the
Distributor for payments to dealers or others, a monthly fee not to exceed
0.25% per annum of the average daily net assets of the Fund, as a service fee.
The fees payable under section (a) of the Plan shall be used to reimburse the
Distributor for any expenses primarily intended to result in the sale of the
Fund's shares, including, but not limited to: payments the Distributor makes to
broker-dealers or other financial institutions and industry professionals for
providing distribution assistance, payments made for the preparation, printing
and distribution of advertisements and sales literature, and payments made for
printing and distributing prospectuses and shareholder reports to other than
existing shareholders of the Fund.
The fees payable under section (b) of the Plan shall be used to reimburse the
Distributor for any expenses for personal service and/or the maintenance of
shareholder accounts, including, but not limited to: payments made to
broker-dealers or other financial institutions and industry professionals for
providing administrative support services to the holders of the Fund's shares.
All such expenses covered by the Plan shall be deemed incurred whether paid
directly by the Distributor or by a third party to the extent reimbursed
therefor by the Distributor.
The Distributor provides the Trustees for their review, on a quarterly basis, a
written report of the amounts expended under the Plan.
The Plan is subject to annual approval by the Trustees. The Plan is terminable
at any time by vote of a majority of the non-interested Trustees or by vote of a
majority of the outstanding shares of the Fund. Pursuant to the Plan, a new
Trustee who is not an interested person (as defined in the 1940 Act) must be
nominated by existing Trustees who are not interested persons. Any change in the
Plan that would materially increase the cost of the Plan to the Fund requires
shareholder approval; otherwise, the Plan may be amended in a material way by
Trustees and the non-interested Trustees at a meeting called for the purpose of
voting on any amendment.
Although there is no obligation for the Fund to pay expenses incurred by the
Distributor in excess of payments made to the Distributor under the Plan, if the
Plan is terminated, the Trustees will consider how to treat such expenses. All
distribution expenses in excess of the fee rates provided for in this Plan may
be carried forward and resubmitted in a subsequent fiscal year provided that (i)
distribution expenses cannot be carried forward for more than three years
following initial submission; and (ii) the non-interested Trustees determine at
the time of initial submission that the distribution expenses are appropriate to
be reimbursed. Distribution expenses will be paid on a first-in, first-out
basis.
Because amounts paid pursuant to the Plan are paid to the Distributor, the
Distributor and its officers, directors and employees may be deemed to have a
financial interest in the operation of the Plan. None of the non-interested
Trustees
21
<PAGE> 25
has a financial interest in the operation of the Plan.
The Plan was adopted because of its anticipated benefit to the Fund. These
anticipated benefits include: increased promotion and distribution of the Fund's
shares, an enhancement in the Fund's ability to maintain accounts and improve
asset retention, increased stability of net assets for the Fund, increased
stability in the Fund's positions, and greater flexibility in achieving
investment objectives.
Transfer Agent. First Data Investor Services Group, Inc. ("Investor Services
Group"), a wholly-owned subsidiary of First Data Corporation, which has its
principal business address at 4400 Computer Drive, Westborough, MA 01581,
provides transfer agency and dividend disbursing agent services for the Fund. As
part of these services, Investor Services Group maintains records pertaining to
the sale and redemption of Fund shares and will distribute the Fund's cash
dividends to shareholders. In consideration for such services, the Fund has
agreed to pay Investor Services Group a basic fee of $20.00 per account subject
to a minimum of $24,000 per year. The fee will be paid monthly.
Administrative Services. Investor Services Group also serves as the
administrator for the Fund. The services include the day-to-day administration
of matters necessary to the Fund's operations, maintenance of its records and
books, preparation of reports, and compliance monitoring of its activities. For
providing administrative services to the Fund, Investor Services Group receives
from the Fund a basic fee, computed daily and paid monthly, at the annual rate
of 0.15% of the first $50 million of average daily net assets of the Fund, 0.10%
of the next $50 million of average daily net assets, and 0.05% of average daily
net assets over $100 million (with a minimum annual fee of $55,000).
Accounting Services. Investor Services Group also serves as the accounting agent
for the Fund and maintains the accounting books and records of the Fund,
calculates the Fund's net asset value in accordance with the provisions of the
Fund's current Prospectus and prepares for Fund approval and use various
government reports, tax returns, and proxy materials. For providing accounting
services to the Fund, Investor Services Group receives from the Fund an annual
fee, computed daily and paid monthly, based on a minimum of $30,000 for the
first $20 million of average daily net assets, 0.03% of the next $30 million of
average daily net assets, 0.02% of the next $50 million of average daily net
assets, and 0.01% of average daily net assets over $100 million.
Custodian and Custody Administrator. The Bank of New York, 48 Wall Street, New
York, New York 10286, is custodian of the Fund's assets pursuant to a custodian
agreement. Under the custodian agreement, The Bank of New York (i) maintains a
separate account or accounts in the name of the Fund (ii) holds and transfers
portfolio securities on account of the Fund, (iii) accepts receipts and make
disbursements of money on behalf of the Fund, (iv) collects and receives all
income and other payments and distributions on account of the Fund's securities
and (v) makes periodic reports to the Trustees concerning the Fund's operations.
Investor Services Group will act as custody administrator and has agreed to pay
the fees and expenses of the custodian. For those services, Investor Services
Group receives from the Fund a basic fee of 0.02% of the first $50 million of
average net assets, 0.015% of the next $150 million of average net assets, and
0.0125% of average net assets over $200 million. The minimum monthly fee charged
is $500. Certain transaction fees and out-of-pocket expenses may also be
charged.
Independent Accountants. The accounting firm of PricewaterhouseCoopers LLP, 333
Market Street, San Francisco, CA 94105, has been designated as independent
accountants for the Fund. PricewaterhouseCoopers LLP performs annual audits of
the Fund and is periodically called upon to provide accounting and tax advice.
Legal Counsel. Howard Rice Nemerovski Canady Falk & Rabkin, A Professional
Corporation, Three Embarcadero Center, Seventh Floor, San Francisco, CA
94111-4065 serves as legal counsel for the Trust and the Adviser and
Distributor.
PURCHASES AND REDEMPTIONS
Redemptions in Kind. In accordance with its election pursuant to Rule 18f-1
under the 1940 Act, the Fund may limit redemptions in cash with respect to each
shareholder during any ninety-day period to the lesser of (i) $250,000 or (ii)
1% of the net asset value of the Fund at the beginning of such period. In the
case of requests for redemptions in excess of such amount, the Trustees reserve
the right to make payments in whole or in part in securities or other assets in
case of an emergency, or any time a cash distribution would impair the liquidity
of the Fund to the detriment of existing shareholders. If the recipient sold
such securities, a brokerage charge might be incurred.
Telephone Instructions. Neither the Fund nor Investor Services Group will be
liable for any loss or expense in acting upon telephone instructions that are
reasonably believed to be genuine. In attempting to confirm that telephone
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<PAGE> 26
instructions are genuine, Investor Services Group will use procedures that are
considered reasonable. Shareholders assume the risk to the full extent of their
accounts that telephone requests may be unauthorized. All telephone
conversations with Investor Services Group will be recorded.
Systematic Withdrawal Plan. Shareholders who own $5,000 or more of Fund shares,
valued at the Fund's current net asset value, and who wish to receive periodic
payments from their account(s) may establish a Systematic Withdrawal Plan by
completing an application provided for this purpose. Participants in this plan
will receive monthly, quarterly, semi-annual or annual checks in the amount
designated. The minimum withdrawal amount is $100. This amount may be changed at
any time. Dividends and capital gains distributions on the Fund's shares in the
Systematic Withdrawal Plan are automatically reinvested in additional shares at
net asset value. Payments are made from proceeds derived from the redemption of
Fund shares owned by the participant. The redemption of shares will result in a
gain or loss that is reportable by the participant on its income tax return, if
the participant is a taxable entity.
Redemptions required for payments may reduce or use up the participant's
investment, depending upon the size and frequency of withdrawal payments and
market fluctuations. Accordingly, Systematic Withdrawal Plan payments cannot be
considered as yield or income on the investment.
Investor Services Group, as agent for the participant, may charge for services
rendered to participants. No such charge is currently assessed, but such a
charge may be instituted by Investor Services Group upon written notice to
participants. The plan may be terminated at any time without penalty upon
written notice by the participants, the Fund, or Investor Services Group.
VALUATION
The Fund's securities are valued based on market value or, where market
quotations are not readily available, based on fair value as determined in good
faith by or at the direction of the Trustees. Equity securities traded on an
exchange or on the NASDAQ National Market System (the "NASDAQ"), will be valued
at the last sale price on the exchange or system in which they are principally
traded on the valuation date. If there is no sale on the valuation date,
securities traded principally on a U.S. exchange or the NASDAQ will be valued at
the mean between the closing bid and asked prices or on a foreign exchange at
the most recent closing price. Equity securities which are traded in the
over-the-counter market only, but which are not included in the NASDAQ, will be
valued at the last sale price on the valuation day or, if no sale occurs, at the
mean between the last bid and asked prices. Exchange traded options will be
valued at the last sale price in the market where such options are principally
traded or, if no sale occurs, at the mean between the last bid and asked price.
Debt securities with a remaining maturity of sixty days or more will be valued
using a pricing service if such prices are believed to accurately represent
market value. Debt securities and money market instruments with a remaining
maturity of less than sixty days will be valued at amortized cost. Valuations
may be obtained from independent pricing services approved by the Trustees.
When the Fund writes a put or call option, it records the premium received as an
asset and equivalent liability, and thereafter adjusts the liability to the
market value of the option determined in accordance with the preceding
paragraph.
TAXES
Below is a discussion of certain U.S. federal income tax issues concerning the
Fund and the purchase, ownership, and disposition of Fund shares. This
discussion does not purport to deal with all aspects of federal income taxation
relevant to shareholders in light of their particular circumstances. This
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder, and judicial and administrative
ruling authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax advisers with
regard to the federal tax consequences of the purchase, ownership, or
disposition of Fund shares, as well as the tax consequences arising under the
laws of any state, foreign country, or other taxing jurisdiction.
Tax Status of the Fund. The Fund intends to be taxed as a regulated investment
company under Subchapter M of the Code. Accordingly, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income derived with respect to its business of investing in
such stock,
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<PAGE> 27
securities or currencies; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the value of the Fund's total assets is
represented by cash and cash items, U.S. Government securities, the securities
of other regulated investment companies and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
Government securities and the securities of other regulated investment
companies). If the Fund fails to qualify as a regulated investment company, the
Fund will be subject to U.S. federal income tax.
As a regulated investment company, the Fund generally is not subject to U.S.
federal income tax on income and gains that it distributes to shareholders, if
at least 90% of the Fund's investment company taxable income (which includes,
among other items, dividends, interest and the excess of any net short-term
capital gains over net long-term capital losses) for the taxable year is
distributed to shareholders. The Fund intends to distribute substantially all of
such income.
Amounts not distributed in accordance with certain requirement are subject to a
nondeductible 4% excise tax at the Fund level. To avoid the tax, the Fund must
distribute during each calendar year an amount equal to the sum of (1) at least
98% of its ordinary income (not taking into account any capital gains or losses)
for the calendar year, (2) at least 98% of its capital gains in excess of its
capital losses (adjusted for certain ordinary losses) for a one-year period
generally ending on October 31 of the calendar year, and (3) all ordinary income
and capital gains for previous years that were not distributed during such
years. The Fund intends to avoid application of the excise tax.
A distribution will be treated as paid on December 31 of a calendar year if it
is declared by the Fund in October, November or December of that year with a
record date in such a month and paid by the Fund during January of the following
year. Such distributions will be taxable to shareholders in the calendar year in
which the distributions are declared, rather than the calendar year in which the
distributions are received.
Options. When the Fund writes an option, there is no taxable event and an amount
equal to the premium received is recorded by the Fund as an asset and an
equivalent liability. The liability is thereafter valued to reflect the current
value of the option. If the option is not exercised and expires, or if the Fund
effects a closing purchase transaction, the Fund will realize a gain (or a loss
in the case of a closing purchase transaction where the cost exceeds the
original premium received) and the liability related to the option will be
extinguished. Any such gain or loss is a short-term capital gain or loss for
federal income tax purposes, except that any loss realized when the Fund closes
certain covered call options whose underlying security is trading above the
exercise price of the option will be long-term capital loss if the hypothetical
sale of the underlying security on the date of such transaction would have given
rise to a long-term capital gain. If a call option which the Fund has written on
any equity security is exercised, the Fund realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from such
sale are increased by the premium originally received. If a put option which the
Fund has written on an equity security is exercised, the amount of the premium
originally received will reduce the cost of the security which the Fund
purchases upon exercise of the option.
Distributions. Distributions of investment company taxable income are taxable to
a U.S. shareholder as ordinary income, whether paid in cash or shares. Dividends
paid by the Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received by the Fund from U.S. corporations, may,
subject to limitation, be eligible for the dividends received deduction.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.
The excess of net long-term capital gains over the short-term capital losses
realized and distributed by the Fund, whether paid in cash or reinvested in Fund
shares, will generally be taxable to shareholders as long-term gain, regardless
of how long a shareholder has held Fund shares. Net capital gains from assets
held for one year or less will be taxed as ordinary income.
Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of newly
issued shares will receive a report as to the net asset value of the shares
received.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by the Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful
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<PAGE> 28
to consider the tax implications of buying shares of the Fund just prior to a
distribution. The price of shares purchased at this time will include the amount
of the forthcoming distribution, but the distribution will generally be taxable
to the shareholder.
Dispositions. Upon a redemption or sale of shares of the Fund, a shareholder
will realize a taxable gain or loss depending upon his or her basis in the
shares. A gain or loss will be treated as capital gain or loss if the shares are
capital assets in the shareholder's hands, and the rate of tax will depend upon
the shareholder's holding period for the shares. Any loss realized on a
redemption, sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including through reinvestment of dividends) within a
period of 61 days, beginning 30 days before and ending 30 days after the shares
are disposed of. In such a case the basis of the shares acquired will be
adjusted to reflect the disallowed loss. If a shareholder holds Fund shares for
six months or less and during that period receives a distribution taxable to the
shareholder as long-term capital gain, any loss realized on the sale of such
shares during such six-month period would be a long-term loss to the extent of
such distribution.
Backup Withholding. The Fund generally will be required to withhold federal
income tax at a rate of 31% ("backup withholding") from dividends paid, capital
gain distributions, and redemption proceeds to shareholders if (1) the
shareholder fails to furnish the Fund with the shareholder's correct taxpayer
identification number or social security number, (2) the IRS notifies the
shareholder or the Fund that the shareholder has failed to report properly
certain interest and dividend income to the IRS and to respond to notices to
that effect, or (3) when required to do so, the shareholder fails to certify
that he or she is not subject to backup withholding. Any amounts withheld may be
credited against the shareholder's federal income tax liability.
Other Taxation. Distributions may be subject to additional state, local and
foreign taxes, depending on each shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that differ significantly from
those summarized above, including the likelihood that ordinary income dividends
to them would be subject to withholding of U.S. tax at a rate of 30% (or a lower
treaty rate, if applicable).
BROKERAGE
The Fund intends to place substantially all its securities transactions,
including transactions involving options, through the Adviser in accordance with
procedures set forth in Rule 17e-1 under the 1940 Act. These procedures, which
have been adopted by the Trustees, including a majority of the non-interested
Trustees, are reasonably designed to provide that any commissions, fees or other
compensation paid to the Adviser (or any affiliate) are fair and reasonable when
compared to commissions, fees and other compensation received from other firms
who engage in comparable transactions. The Fund will not deal with the Adviser
(or any affiliate) in any transaction in which the Adviser (or any affiliate)
acts as principal, except in accordance with rules promulgated by the Securities
and Exchange Commission.
The Adviser may utilize non-affiliated brokers, dealers or members of a
securities exchange to execute portfolio transactions on behalf of the Fund and,
like the Adviser, such firms may receive commissions for executing the Fund's
securities transactions. In effecting the purchase or sale of portfolio
securities from non-affiliated brokers, dealers or members of an exchange, the
Adviser will seek execution of trades either (1) at the most favorable and
competitive rate of commission charged by any broker, dealer or member of an
exchange, or (2) at a higher rate of commission charged, if reasonable in
relation to brokerage and research services provided to the Trust or the Adviser
by such member, broker or dealer. Such services may include, but are not limited
to, information as to the availability of securities for purchase or sale and
statistical or factual information or opinions pertaining to investments. The
Adviser may use brokerage and research services provided to it by brokers and
dealers in servicing all its clients.
The Adviser currently manages separate accounts that employ investment
strategies similar to those used by the Fund. At times, investment decisions may
be made to purchase or sell the same security for the Fund and one or more of
the other clients advised by the Adviser. When two or more of such clients are
simultaneously engaged in the purchase or sale of the same security, the
transactions will be allocated as to amount and price in a manner considered
equitable to each so that each receives, to the extent practicable, the average
price for such transaction. There may be circumstances in which such
simultaneous transactions would be disadvantageous to the Fund with respect to
price and availability of securities. In other cases, however, it is believed
that transactions would be advantageous to the Fund.
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<PAGE> 29
SHARES OF BENEFICIAL INTEREST
There are no conversion or preemptive rights in connection with any shares of
the Fund, nor are there cumulative voting rights. The Fund's shares have equal
voting rights. As a shareholder, you receive one vote for each share of the Fund
you own and each fractional share you own shall be entitled to a proportionate
fractional vote. Each issued and outstanding share of the Fund is entitled to
participate equally in dividends and distributions declared and in the net
assets of the Fund upon liquidation or dissolution remaining after satisfaction
of outstanding liabilities. Under Delaware law, shareholders will be liable for
the obligations of the Fund only to the extent of their investment in the Fund.
All issued and outstanding shares of the Fund will be fully paid and
non-assessable and will be redeemable at net asset value per share, subject to
any applicable redemption fee. The interests of shareholders in the Fund will
not be evidenced by a certificate or certificates representing shares of the
Fund.
The authorized capitalization of the Fund consists of an unlimited number of
shares having a par value of $0.001 per share. The Trustees have authorized one
series with one class of shares issued currently. The Trustees have authority,
without necessity of a shareholder vote, to create any number of new series or
classes of shares.
Unless otherwise required by the 1940 Act, ordinarily it will not be necessary
for the Trust to hold annual meetings of shareholders. As a result, shareholders
may not consider each year the election of Trustees or the appointment of
auditors. However, the holders of at least 10% of the shares outstanding and
entitled to vote may require the Fund to hold a special meeting of shareholders
for purposes of removing a Trustee. Shareholders may remove a Trustee by the
affirmative vote of two-thirds of the Fund's outstanding shares. In addition,
the Trustees will call a meeting of shareholders for the purpose of electing
Trustees if, at any time, less than a majority of the Trustees then holding
office have been elected by shareholders. Special shareholder meetings may also
be called for certain purposes such as electing Trustees, changing fundamental
policies, or approving a management contract.
As of April 1, 1999, the date on which the Fund commenced operations, the
Adviser owned all the shares of the Fund, representing $100,000 in seed capital
contributed by the Adviser to the Fund. As a result of its share ownership, the
Adviser, and its principal shareholder, Ralph M. Kelmon, Jr., will initially be
deemed to control the Fund, including the outcome of any shareholder vote. The
percentage ownership of the Adviser will be reduced as shares of the Fund are
sold to the public.
CALCULATION OF PERFORMANCE
Total Percentage Increase. Total percentage increase is calculated for the
specified periods of time by assuming a hypothetical investment of $1,000 in the
Fund's shares. Each dividend or other distribution is treated as having been
reinvested at net asset value on the payment date. The percentage increases
stated are the percent that an original investment would have increased during
the applicable period.
Average Annual Total Return. The Fund computes its average annual total return
by determining the average annual compounded rates of return during specified
periods that equate the initial amount invested to the ending redeemable value
of such investment. This is done by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
1/n
(ERV)
Average Annual Total Return = ---------- -1
P
Where: ERV = ending redeemable value at the end of the period covered by
the computation of a hypothetical $1,000 payment made at
the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of
years.
The Funds that compute their aggregate total returns over a specified period do
so by determining the aggregate compounded rate of return during such specified
period that likewise equates over a specified period the initial amount invested
to the ending redeemable value of such investment. The formula for calculating
aggregate total return is as
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<PAGE> 30
follows:
(ERV-P)
Average Total Return = -------
P
Where: ERV = ending redeemable value at the end of the period covered by
the computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
payment dates during the period. The ending redeemable value (variable "ERV" in
each formula) is determined by assuming complete redemption of the hypothetical
investment and the deduction of all nonrecurring charges at the end of the
period covered by the computations. Such calculations are not indicative of
future results and do not take into account Federal, state and local taxes, if
any, that shareholders must pay on a current basis.
Since performance will fluctuate, performance data for the Fund should not be
used to compare an investment in a Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders should remember
that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
Comparing Performance. Performance information for the Fund may be compared, in
reports and promotional literature, to indices including, but not limited to:
(i) the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, or other appropriate unmanaged domestic or foreign indices
of performance of various types of investments so that investors may compare the
Fund's results with those of indices widely regarded by investors as
representative of the securities markets in general; (ii) Lehman Brothers
Corporate Bond Index; (iii) other groups of mutual funds tracked by Lipper
Analytical Services, Inc., a widely-used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, or
tracked by other services, companies, publications, or persons who rank mutual
Fund on overall performance or other criteria; (iv) the Consumer Price Index (a
measure of inflation) to assess the real rate of return from an investment in
the Fund; and (v) products managed by a universe of money managers with similar
performance objectives. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions or administrative and
management costs and expenses.
FINANCIAL STATEMENTS
Reports to Shareholders Shareholders will receive unaudited semi-annual reports
describing the Fund's investment operations and annual financial statements
audited by independent certified public accountants.
27
<PAGE> 31
KELMOORE STRATEGIC TRUST
KELMOORE STRATEGY COVERED OPTION FUND
STATEMENT OF ASSETS AND LIABILITIES
24-MAR-99
<TABLE>
<S> <C>
ASSETS
Cash $100,000
Receivable from Adviser 70,446
Deferred Offering Costs (see note 2) 92,090
--------
Total Assets 262,536
--------
LIABILITIES
Payable to Adviser 162,536
--------
Total Liabilities 162,536
--------
NET ASSETS $100,000
========
Net assets consist of :
Paid in capital $100,000
========
Shares of Beneficial Interest ( $.001 Par Value) 10,000
Net Asset Value, offering and redemption
price per share ($100,000/ 10,000 Shares Outstanding) $ 10.00
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 32
KELMOORE STRATEGIC TRUST
KELMOORE STRATEGY COVERED OPTION FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 24, 1999
<TABLE>
<S> <C>
INCOME
Investment Income $ --
----------
EXPENSES
Organizational Costs
Audit 2,500
Legal 25,000
Administrative Fee (see note 3e) 42,250
Other 696
----------
Total Expenses 70,446
\ Reimbursement from Adviser (see note 3a) (70,446)
----------
Net Expenses after reimbursement --
----------
Net Income and net increase in assets resulting
from operations. $ --
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 33
KELMOORE STRATEGIC TRUST
KELMOORE STRATEGY COVERED OPTION FUND
NOTES TO THE STATEMENT OF ASSETS AND LIABILITIES AND STATEMENT OF OPERATIONS
MARCH 24, 1999
NOTE 1: ORGANIZATION
Kelmoore Strategic Trust (the "Trust"), an open-end, diversified management
investment company was organized as a Delaware business trust on November 30,
1998. It currently consists of one investment fund, Kelmoore Strategy Covered
Option Fund (the "Fund"). The Trust's authorized capital consists of an
unlimited number of shares of beneficial interest of $0.001 par value. The
Fund's investment adviser is Kelmoore Investment Company, Inc. (the "Adviser").
The Fund currently offers one class of shares.
The objective of the Fund is to maximize realized gains from writing covered
options on common stocks. The Funds seeks to achieve this goal by taking long
positions in a limited universe of equity securities principally traded in the
markets of the United States with large market capitalization, and
simultaneously writing covered call options on these securities to maximize the
premiums received.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES: Estimates and assumptions are required to be made regarding
assets and liabilities when financial statements are prepared. Changes in the
economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ from the
amounts recorded.
FEDERAL INCOME TAXES: The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company and
to make the requisite distributions of taxable income and gains to its
shareholders which will be sufficient to relieve it from all or substantially
all federal income taxes. Therefore, no provision for federal income tax
provision has been made.
DEFERRED OFFERING COSTS: The Fund has deferred initial offering costs of
$92,090. These costs will be amortized by the Fund over the period of benefit,
not to exceed 12 months from the date the Fund commences operations.
DISTRIBUTIONS: Dividends from net investment income and net realized short term
capital gains are declared and paid quarterly. Distributions from net realized
long term capital gains are paid at least annually. Additional distributions of
net investment income and net realized capital gains may be made in order to
avoid the application of an excise tax on certain undistributed amounts. Income
dividends and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles.
NOTE 3: INVESTMENT ADVISORY AND OTHER AGREEMENTS
a. The Fund has entered into an Investment Advisory Agreement with the Adviser.
Under the Agreement, the Adviser is responsible for the selection and ongoing
monitoring of the securities in the Fund's investment portfolio and for the
management of the Fund's business affairs. The Fund pays the Adviser a monthly
fee at the annual rate of 1.00% of the Fund's average daily net assets.
The Adviser has voluntarily undertaken to waive all or a portion of its fees and
to reimburse certain expenses of the Fund so that the total operating expenses
for the first year of operations will not exceed 3.00%. The Adviser reserves the
right to terminate this undertaking at any time, in its sole discretion. Any
waiver or reimbursement by the Adviser is subject to recoupment from the Fund
within the following three years, to the extent such recoupment would not cause
total operating expenses to exceed any current
<PAGE> 34
expense limitation At March 24, 1999, the Adviser has reimbursed $70,446 in Fund
expenses that it can recoup until March 24, 2002.
As part of the Fund's organization, the Fund has issued to the Adviser 10,000
shares of beneficial interest at $10.00 per share in a private placement.
b. The Fund has adopted a plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"), that allows the Fund to pay
distribution and service fees for the sale and distribution of its shares and
for services provided to shareholders. The plan permits the Fund to reimburse
the Adviser, as principal distributor, a monthly distribution fee not to exceed
0.75% per annum of the average daily net assets of the Fund. In addition, the
plan permits the Fund to reimburse the Adviser for payments to dealers or
others, a monthly service fee not to exceed 0.25% per annum of the average daily
net assets of the Fund.
c. The Fund has entered into a Distribution Agreement with Kelmoore Investment
Company, Inc. (the "Distributor") to serve as the principal distributor of the
Fund's shares. The Distributor does not receive any fee or other compensation
under the Distribution Agreement other than fees it receives in accordance with
the distribution plan described above.
d. The Fund has entered into a Services Agreement with First Data Investor
Services Group, Inc. ("Investor Services Group"). Under the Services Agreement,
Investor Services Group provides certain transfer agency, administrative,
accounting and custody administration services.
e. Certain officers and Trustees of the Trust are affiliated with the Adviser.
Such persons are not paid directly by the Trust for serving in those capacities.
f. The Fund intends to place substantially all of its securities transactions,
including transactions involving stocks and options, through the Adviser in
accordance with rules set forth under the 1940 Act. There were no such
transactions for the period ended March 24, 1999.
<PAGE> 35
Report of Independent Accountants
To the Shareholder and Board of Trustees
of Kelmoore Strategy Covered Option Fund
In our opinion, the accompanying statement of assets and liabilities and
statement of operations present fairly, in all material respects, the financial
position of Kelmoore Strategy Covered Option Fund (the "Fund") at March 24, 1999
and the results of its operations for the period then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, Ca
March 24, 1999
<PAGE> 36
KELMOORE STRATEGIC TRUST
PART C - OTHER INFORMATION
Item 23. EXHIBITS:
(a)(1) Certificate of Trust -- Incorporated by reference to the Initial
Registration Statement as filed with the SEC on December 21,
1998.
(a)(2) Agreement and Declaration of Trust -- Incorporated by reference
to the Initial Registration Statement as filed with the SEC on
December 21, 1998.
(a)(3) Agreement and Declaration of Trust as amended March 22, 1999 is
filed herewith.
(b) By-Laws -- Incorporated by reference to the Initial Registration
Statement as filed with the SEC on December 21, 1998.
(b)(1) By-laws as amended March 22, 1999 are filed herewith.
(c) Instruments Defining Rights of Security Holders -- not
applicable.
(d) Investment Advisory Agreement -- filed herewith.
(e) Distribution Agreement -- filed herewith.
(f) Bonus or Profit Sharing Contracts -- none.
(g)(1) Custodian Agreement -- filed herewith.
(g)(2) Special Custody Account Agreement -- Form of Special Custody
Agreement Incorporated by reference to Pre-Effective Amendment
No. 1 to the Registration Statement as filed with the SEC on
February 25, 1999.
(h) Other Material Contracts (i) Services Agreement -- Form of
Service Agreement Incorporated by reference to Pre-Effective
Amendment No. 1 to the Registration Statement as filed with the
SEC on February 25, 1999.
(i) Legal Opinion -- filed herewith.
(j) Consent of Independent Accountants -- filed herewith.
(k) Omitted Financial Statements -- none.
(l) Initial Capital Agreements -- filed herewith.
(m) Rule 12b-1 Plan -- filed herewith.
(n) Financial Data Schedule -- to be filed by Amendment.
(o) Rule 18f-3 Plan -- none.
(p) Powers of Attorney -- filed herewith.
Item 24. Persons Controlled by or under Common Control with Registrant.
The Registrant may be deemed to be under common control with the
Adviser. The Adviser owned 100% of the shares of the Fund at
March 24, 1999. The Adviser also acts as the general partner to
K2, a California limited partnership. As a result, the Registrant
may be deemed to be under common control with K2.
Item 25. Indemnification.
The Agreement and Declaration of Trust (Article IV, Section 3) of
the Trust provides that, in the event a Trustee, officer,
employee or agent of the Trust is sued for his or her activities
concerning the Trust, the Trust will indemnify that person to the
fullest extent permitted by law except if that person has been
found by a court or body before which the proceeding was brought
to have acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office or not to have acted in good faith
in the reasonable belief that his action was in the best interest
of the Trust.
The Registrant intends to purchase Errors and Omissions insurance
with Directors and Officers liability coverage.
28
<PAGE> 37
Item 26. Business and Other Connections of the Investment Adviser.
Kelmoore Investment Company, Inc. (the "Adviser"), is primarily
engaged in the brokerage and investment advisory business. The
Fund is the only registered investment company to which the
Adviser serves as investment adviser. Information as to the
officers and directors of the Adviser is included in its Form ADV
filed February 12, 1999 with the Securities and Exchange
Commission (Registration Number 801-53123) and is incorporated
herein by reference.
Item 27. Principal Underwriters.
(a) The Adviser also serves as distributor of the shares of the
Fund. The Adviser currently acts as principal underwriter for
Kelmoore Covered Writing Fund, K2 LP, a California Limited
Partnership.
(b) The following table sets forth information concerning each
director and officer of the Adviser.
<TABLE>
<S> <C> <C> <C>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
--------------------- ------------------------ ---------------------
Ralph M. Kelmon, Jr.* Chairman of the Board, None
Chief Executive Officer,
and Treasurer
Michael Romanchak* Director and President None
David R. Moore* Director None
A. Duncan King* Director None
Norman H. Moore, Jr.* Vice President- None
Admin: Corporate
Secretary and Chief
Compliance Officer
Norman H. Moore* Director/Stockholder None
Cece G. Montgomery* Chief Financial Officer None
Matthew Kelmon* Vice President of Trading President
Thomas W. Killilea* Director None
Richard J. Deagazio* Director None
Edward J. Devereaux* Director and Chief None
Operating Officer
Richard D. Stanley* President Chairman and Trustee
</TABLE>
* All addresses are 2471 East Bayshore Road, Suite 501, Palo
Alto, CA 94303 unless otherwise indicated.
(c) Not applicable.
Item 28. Location of Accounts and Records.
The accounts, books, or other documents required to be maintained
by Section 31(a) of the 1940 Act and the Rules 17 CFR 270.31a-1
to 31a-3 promulgated thereunder, are maintained by the Adviser,
2471 East Bayshore Road, Suite 501, Palo Alto, California 94303;
by the Trust's Administrator, Transfer Agent, and Fund Accounting
Agent, First Data Investor Services Group, 3200 Horizon Drive,
P.O. Box 61503, King of Prussia, PA 19406-0903; and by the
Trust's Custodian, The Bank of New York, 48 Wall Street, New
York, New York 10286.
Item 29. Management Services. Not Applicable.
Item 30. Undertakings. Not Applicable.
29
<PAGE> 38
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
amendment to the Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Palo Alto and the
State of California on this 6th day of April, 1999.
KELMOORE STRATEGIC TRUST
(Registrant)
By: Matthew Kelmon, President*
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
Matthew Kelmon* President, Principal April 6, 1999
Executive Officer
and Trustee
Matthew Kelmon* Principal Financial and April 6, 1999
Accounting Officer
William H. Barnes* Trustee April 6, 1999
Wayne E. Edgerton* Trustee April 6, 1999
Richard D. Stanley* Trustee April 6, 1999
Kenneth D. Treece* Trustee April 6, 1999
Ignatius J. Ponzira* Trustee April 6, 1999
Stephen W. Player* Trustee April 6, 1999
Lisa Ann McCarthy* Trustee April 6, 1999
Jeffrey Ira* Trustee April 6, 1999
By: *Sandra L. Adams,
as Attorney-in-Fact
pursuant to
Powers of Attorney
30
<PAGE> 39
KELMOORE STRATEGIC TRUST
EXHIBIT INDEX TO PART "C"
OF
REGISTRATION STATEMENT
ITEM NO. DESCRIPTION
- -------- -----------
99(a)(3) Agreement and Declaration of Trust dated November
30, 1998, as amended March 22, 1999
99(b)(1) By-Laws dated November 30, 1998, as amended
March 22, 1999
99(d) Investment Advisory Agreement
99(e) Distribution Agreement
99(g)(1) Custodian Agreement
99(i) Legal Opinion
99(j) Consent of Independent Accountants
99(l) Initial Capital Agreement
99(m) Rule 12b-1 Plan
99(p) Powers-of-Attorney
31
<PAGE> 1
Exhibit 99(a)(3)
KELMOORE STRATEGIC TRUST
AGREEMENT AND DECLARATION OF TRUST
NOVEMBER 30, 1998,
AS AMENDED
MARCH 22, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I NAME AND DEFINITIONS 1
Section 1. Name 1
Section 2. Definitions 1
ARTICLE II THE TRUSTEES 3
Section 1. Management of the Trust 3
Section 2. Powers 3
Section 3. Certain Transactions 7
Section 4. Initial Trustees; Election and Number of Trustees 7
Section 5. Term of Office of Trustees 8
Section 6. Vacancies; Appointment of Trustees 8
Section 7. Temporary Vacancy or Absence 8
Section 8. Ownership of Trust Property 8
Section 9. Effect of Trustees Not Serving 9
Section 10. Trustees, etc. as Shareholders 9
ARTICLE III CONTRACTS WITH SERVICE PROVIDERS 9
Section 1. Underwriting Contracts 9
Section 2. Advisory or Management Contract 9
Section 3. Administration Agreement 10
Section 4. Service Agreement 10
Section 5. Transfer Agent 10
Section 6. Custodian 10
Section 7. Affiliations of Trustees or Officers, Etc. 11
ARTICLE IV COMPENSATION, LIMITATION OF LIABILITY
AND INDEMNIFICATION 11
Section 1. Compensation 11
Section 2. Limitation of Liability 11
Section 3. Indemnification 12
Section 4. Indemnification of Shareholders 13
Section 5. No Bond Required of Trustees 13
Section 6. No Duty of Investigation; Notice in
Trust Instruments, Etc. 13
Section 7. Reliance on Experts, Etc. 14
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE V SERIES; CLASSES; SHARES 14
Section 1. Establishment of Series or Class 14
Section 2. Shares 15
Section 3. Investment in the Trust 15
Section 4. Assets and Liabilities of Series 16
Section 5. Ownership and Transfer of Shares 17
Section 6. Status of Shares; Limitation of Shareholder Liability 17
ARTICLE VI DISTRIBUTION AND REDEMPTIONS 18
Section 1. Distributions 18
Section 2. Redemptions 18
Section 3. Determination of Net Asset Value 19
Section 4. Suspension of Right of Redemption 19
Section 5. Repurchase by Agreement 19
ARTICLE VII SHAREHOLDERS' VOTING POWERS
AND MEETINGS 20
Section 1. Voting Powers 20
Section 2. Quorum; Required Vote 20
Section 3. Quorum; Required Vote 21
Section 4. Quorum; Required Vote 21
Section 5. Record Dates 21
Section 6. Additional Provisions 22
ARTICLE VIII EXPENSES OF THE TRUST AND SERIES 22
Section 1. Payment of Expenses by the Trust 22
Section 2. Payment of Expenses by Shareholders 22
ARTICLE IX MISCELLANEOUS 23
Section 1. Trust Not a Partnership 23
Section 2. Trustee Action 23
Section 3. Termination of the Trust 23
Section 4. Reorganization 24
Section 5. Declaration of Trust 24
Section 6. Applicable Law 25
Section 7 Amendments 25
Section 8 Derivative Actions 26
Section 9 Fiscal Year 26
Section 10 Severability 26
</TABLE>
ii
<PAGE> 4
KELMOORE STRATEGIC TRUST
AGREEMENT AND
DECLARATION OF TRUST
This AGREEMENT AND DECLARATION OF TRUST is made on November 30, 1998,
as amended March 22, 1999, by the undersigned Trustee (together with all other
persons from time to time duly elected, qualified and serving as Trustees in
accordance with the provisions of Article II hereof, the "Trustees");
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the Trust shall be held and managed in trust pursuant to this
Agreement and Declaration of Trust.
ARTICLE I
NAME AND DEFINITIONS
Section 1. Name. The name of the Trust created by this Agreement and Declaration
of Trust is "Kelmoore Strategic Trust".
Section 2. Definitions. Unless otherwise provided or required by the context:
(a) "Administrator" means the party, other than the Trust, to the contract
described in Article III, Section 3 hereof.
(b) "By-laws" means the By-laws of the Trust adopted by the Trustees, as
amended from time to time, which By-laws are expressly herein incorporated
by reference as part of the "governing instrument" within the meaning of
the Delaware Act.
(c) "Class" means the class of Shares of a Series established pursuant to
Article V.
(d) "Commission," "Eligible Foreign Custodian," "Qualified Foreign Bank,"
"Interested Person" and "Principal Underwriter" have the meanings provided
in the 1940 Act. Except as such term may be otherwise defined by the
Trustees in conjunction with the establishment of any Series of Shares,
the term "Majority Shareholder Vote" shall have the same meaning as is
assigned to the term "vote of a majority of the outstanding voting
securities" in the 1940 Act.
(e) "Covered Person" means a person so defined in Article IV, Section 3.
(f) "Custodian" means any Person other than the Trust who has custody of any
Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
1
<PAGE> 5
(g) "Declaration" shall mean this Agreement and Declaration of Trust, as
amended or restated from time to time. Reference in this Declaration of
Trust to "Declaration," "hereof," "herein," and "hereunder" shall be
deemed to refer to this Declaration rather than exclusively to the article
or section in which such words appear.
(h) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code entitled
"Treatment of Delaware Business Trusts," as amended from time to time.
(i) "Fund Complex" has the meaning provided in Schedule 14A under the
Securities Exchange Act of 1934, as amended.
(j) "Distributor" means the party, other than the Trust, to the contract
described in Article III, Section 1 hereof.
(k) "His" shall include the feminine and neuter, as well as the masculine,
genders.
(l) "Interested Person" has the meaning provided under the Investment Company
Act of 1940, as amended.
(m) "Investment Adviser" means the party, other than the Trust, to the
contract described in Article III, Section 2 hereof.
(n) "Net Asset Value" means the net asset value of each Series or Class of the
Trust, determined as provided in Article VI, Section 3.
(o) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, limited liability companies, joint ventures, estates
and other entities, and governments and agencies and political
subdivisions thereof, whether domestic or foreign.
(p) "Series" means a series of Shares established pursuant to Article V.
(q) "Shareholder" means a record owner of Outstanding Shares;
(r) "Shares" means the equal proportionate transferable units of interest into
which the beneficial interest of each Series or Class is divided from time
to time (including whole Shares and fractions of Shares). "Outstanding
Shares" means Shares shown in the books of the Trust or its transfer agent
as then issued and outstanding, but does not include Shares which have
been repurchased or redeemed by the Trust.
(s) "Transfer Agent" means any Person other than the Trust who maintains the
Shareholder records of the Trust, such as the list of Shareholders, the
number of Shares credited to each account, and the like.
(t) "Trust" means Kelmoore Strategic Trust established hereby, and reference
to the Trust, when applicable to one or more Series, refers to that
Series.
2
<PAGE> 6
(u) "Trustees" means the persons who have signed this Declaration of Trust and
all other persons who may from time to time be duly qualified and serving
as Trustees in accordance with Article II, in all cases so long as they
shall continue in office in accordance with the terms hereof.
(v) "Trust Property" means any and all property, real or personal, tangible or
intangible, which is owned or held by or for the Trust or any Series or
the Trustees on behalf of the Trust or any Series.
(w) "1940 Act" means the Investment Company Act of 1940 and the Rules and
Regulations thereunder, all as amended from time to time.
ARTICLE II
THE TRUSTEES
Section 1. Management of the Trust. The business and affairs of the Trust shall
be managed by or under the direction of the Trustees, and they shall have all
powers necessary or desirable to carry out that responsibility. The Trustees may
execute all instruments and take all action they deem necessary or desirable to
promote the interests of the Trust. Any determination made by the Trustees in
good faith as to what is in the interests of the Trust shall be conclusive. In
construing the provisions of this Declaration, the presumption shall be in favor
of a grant of power to the Trustees.
Section 2. Powers. The Trustees in all instances shall act as principals, free
of the control of the Shareholders. The Trustees shall have full power and
authority to take or refrain from taking any action and to execute any contracts
and instruments that they may consider necessary or desirable in the management
of the Trust. The Trustees shall not in any way be bound or limited by current
or future laws or customs applicable to trust investments, but shall have full
power and authority to make any investments which they, in their sole
discretion, deem proper to accomplish the purposes of the Trust. The Trustees
may exercise all of their powers without recourse to any court or other
authority. Subject to any applicable limitation herein or in the By-laws or
resolutions of the Trust, the Trustees shall have power and authority, without
limitation:
(a) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, cash; securities,
including common, preferred and preference stocks; warrants; subscription
rights; profit-sharing interests or participations and all other contracts
for or evidence of equity interests; bonds, debentures, bills, time notes
and all other evidences of indebtedness; negotiable or non-negotiable
instruments; government securities, including securities of any state,
municipality or other political subdivision thereof, or any governmental
or quasi-governmental agency or
3
<PAGE> 7
instrumentality; and money market instruments, including bank certificates
of deposit, finance paper, commercial paper, bankers' acceptances and all
kinds of repurchase agreements, of any corporation, company, trust,
association, firm or other business organization however established, and
of any country, state, municipality or other political subdivision, or any
governmental or quasi-governmental agency or instrumentality; or any other
security, property or instrument in which the Trust or any of its Series
shall be authorized to invest.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade in
and deal in, to acquire any rights or options to purchase or sell, to sell
or otherwise dispose of, to lend and to pledge any such securities, to
enter into repurchase agreements, reverse repurchase agreements, firm
commitment agreements and forward foreign currency exchange contracts, to
purchase and sell options on securities, securities indices, currency and
other financial assets, futures contracts, options on futures contracts,
swaps, collars, caps, floors and swaptions of all descriptions and to
engage in all types of hedging and risk-management transactions.
(d) To exercise all rights, powers and privileges of ownership or interest in
all securities and repurchase agreements included in the Trust Property,
including the right to vote thereon and otherwise act with respect thereto
and to do all acts for the preservation, protection, improvement and
enhancement in value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold, use, maintain,
develop and dispose of (by sale or otherwise) any property, real or
personal, including cash or foreign currency, and any interest therein.
(f) To borrow money or other property in the name of the Trust exclusively for
Trust purposes and in this connection issue notes or other evidence of
indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; and to endorse, guarantee, or
undertake the performance of any obligation or engagement of any other
Person and to lend Trust Property.
(g) To aid by further investment any corporation, company, trust, association
or firm, any obligation of or interest in which is included in the Trust
Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect,
preserve, improve or enhance the value of such obligation or interest; and
to guarantee or become surety on any or all of the contracts, stocks,
bonds, notes, debentures and other obligations of any such corporation,
company, trust, association or firm.
(h) To adopt By-laws not inconsistent with this Declaration providing for the
conduct of the business of the Trust and to amend and repeal them to the
extent such right is not reserved to the Shareholders.
(i) To elect and remove such officers and appoint and terminate such agents as
they deem appropriate.
4
<PAGE> 8
(j) To employ as custodian of any assets of the Trust, subject to any
provisions herein or in the By-laws, one or more banks, trust companies or
companies that are members of a national securities exchange, or other
entities permitted by the Commission to serve as such.
(k) To retain one or more transfer agents and shareholder servicing agents, or
both.
(l) To provide for the distribution of Shares either through a Distributor as
provided herein or by the Trust itself, or both, or pursuant to a
distribution plan of any kind.
(m) To set record dates in the manner provided for herein or in the By-laws.
(n) To delegate such authority as they consider desirable to any officers of
the Trust and to any agent, independent contractor, manager, investment
adviser, custodian or underwriter.
(o) To hold any security or other property (i) in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable
form, or (ii) either in the Trust's or Trustees' own name or in the name
of a custodian or a nominee or nominees, subject to safeguards according
to the usual practice of business trusts or investment companies.
(p) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and
with separate Shares representing beneficial interests in such Series, and
to establish separate Classes, all in accordance with the provisions of
Article V.
(q) To the full extent permitted by Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular
Series and assets, liabilities and expenses to a particular Class or to
apportion the same between or among two or more Series or Classes,
provided that any liabilities or expenses incurred by a particular Series
or Class shall be payable solely out of the assets belonging to that
Series or Class as provided for in Article V, Section 4.
(r) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern whose securities are
held by the Trust; to consent to any contract, lease, mortgage, purchase,
or sale of property by such corporation or concern; and to pay calls or
subscriptions with respect to any security held in the Trust.
(s) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited
to, claims for taxes.
(t) To make distributions of income, capital gains, returns of capital (if
any) and redemption proceeds to Shareholders in the manner hereinafter
provided for.
(u) To establish committees for such purposes, with such membership, and with
such responsibilities as the Trustees may consider proper, including a
committee consisting of
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fewer than all of the Trustees then in office, which may act for and bind
the Trustees and the Trust with respect to the institution, prosecution,
dismissal, settlement, review or investigation of any legal action, suit
or proceeding, pending or threatened.
(v) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold, resell,
reissue, dispose of and otherwise deal in Shares; to establish terms and
conditions regarding the issuance, sale, repurchase, redemption,
cancellation, retirement, acquisition, holding, resale, reissuance,
disposition of or dealing in Shares; and, subject to Articles V and VI, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the Trust or of the
particular Series with respect to which such Shares are issued.
(w) To invest part or all of the Trust Property (or part or all of the assets
of any Series), or to dispose of part or all of the Trust Property (or
part or all of the assets of any Series) and invest the proceeds of such
disposition, in securities issued by one or more other investment
companies registered under the 1940 Act all without any requirement of
approval by Shareholders. Any such other investment company may (but need
not) be a trust (formed under the laws of the State of Delaware or of any
other state) which is classified as a partnership for federal income tax
purposes.
(x) To carry on any other business in connection with or incidental to any of
the foregoing powers, to do everything necessary or desirable to
accomplish any purpose or to further any of the foregoing powers, and to
take every other action incidental to the foregoing business or purposes,
objects or powers.
(y) To sell or exchange any or all of the assets of the Trust, subject to
Article IX, Section 4.
(z) To enter into joint ventures, partnerships and other combinations and
associations.
(aa) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit
any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority
with relation to any security (whether or not so deposited or transferred)
as the Trustees shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
(bb) To purchase and pay for entirely out of Trust Property such insurance as
the Trustees may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its
portfolio investments, and, subject to applicable law and any restrictions
set forth in the By-laws, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, Distributors,
or independent contractors of the Trust, individually, against all claims
and liabilities of every nature arising by reason of holding Shares,
holding, being or having held any such office or position, or by reason of
any action alleged to have been taken or omitted by any such Person as
Trustee, officer, employee, agent, investment adviser, Distributor, or
independent contractor, including any action taken
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or omitted that may be determined to constitute negligence, whether or not
the Trust would have the power to indemnify such Person against liability;
(cc) To adopt, establish and carry out pension, profit-sharing, share bonus,
share purchase, savings, thrift and other retirement, incentive and
benefit plans and trusts, including the purchasing of life insurance and
annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents
of the Trust;
(dd) To enter into contracts of any kind and description;
(ee) To interpret the investment policies, practices or limitations of any
Series or Class; and
(ff) To guarantee indebtedness and contractual obligations of others.
The clauses above shall be construed as objects and powers, and the enumeration
of specific powers shall not limit in any way the general powers of the
Trustees. Any action by one or more of the Trustees in their capacity as such
hereunder shall be deemed an action on behalf of the Trust or the applicable
Series, and not an action in an individual capacity. No one dealing with the
Trustees shall be under any obligation to make any inquiry concerning the
authority of the Trustees, or to see to the application of any payments made or
property transferred to the Trustees or upon their order. In construing this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
Section 3. Certain Transactions. Except as prohibited by applicable law, the
Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser, administrator,
distributor or transfer agent for the Trust or with any Interested Person of
such person. The Trust may employ any such person or entity in which such person
is an Interested Person, as broker, legal counsel, registrar, investment
adviser, administrator, distributor, transfer agent, dividend disbursing agent,
custodian or in any other capacity upon customary terms.
Section 4. Initial Trustee; Number of Trustees. The initial Trustee shall be the
person signing this Declaration. The number of Trustees shall be fixed from time
to time by a majority of the Trustees; provided, that there shall be at least
one (1) Trustee.
Section 5. Term of Office of Trustees. Each Trustee shall hold office for life
or until his successor is duly elected and qualified or the Trust terminates;
except that (a) any Trustee may resign by delivering to the other Trustees or to
any Trust officer a written resignation effective upon such delivery or a later
date specified therein; (b) any Trustee may be removed with or without cause at
any time by a written instrument signed by at least a majority of the then
Trustees, specifying the effective date of removal; (c) any Trustee who requests
to be retired, who has reached any mandatory retirement age established by the
Trustees, or who is declared bankrupt or has become physically or mentally
incapacitated or is otherwise unable to serve, may
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be retired by a written instrument signed by a majority of the other Trustees,
specifying the effective date of retirement; and (d) any Trustee may be removed
at any meeting of the Shareholders by a vote of at least two-thirds of the
Outstanding Shares.
Section 6. Vacancies; Appointment of Trustees. Whenever a vacancy shall exist in
the Board of Trustees, regardless of the reason for such vacancy, the remaining
Trustees shall appoint any person as they determine in their sole discretion to
fill that vacancy, consistent with the limitations under the 1940 Act. Such
appointment shall be made by a written instrument signed by a majority of the
Trustees or by a resolution of the Trustees, duly adopted and recorded in the
records of the Trust, specifying the effective date of the appointment. The
Trustees may appoint a new Trustee as provided above in anticipation of a
vacancy expected to occur because of the retirement, resignation or removal of a
Trustee, or an increase in the number of Trustees, provided that such
appointment shall become effective only at or after the expected vacancy occurs
and provided further that any new Trustee shall have reached the age of majority
in the state in which he resides. As soon as any such Trustee has accepted his
appointment, the trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder. Whenever a vacancy in the number of Trustees shall
occur, until such vacancy is filled as provided in this Article II, the Trustees
in office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by the
Declaration.
Section 7. Temporary Vacancy or Absence. Whenever a vacancy in the Board of
Trustees shall occur, until such vacancy is filled, or while any Trustee is
absent from his domicile (unless that Trustee has made arrangements to be
informed about, and to participate in, the affairs of the Trust during such
absence), or is physically or mentally incapacitated, the remaining Trustees
shall have all the powers hereunder and their certificate as to such vacancy,
absence, or incapacity shall be conclusive.
Section 8. Ownership of Trust Property. The Trust Property of the Trust and of
each Series shall be held separate and apart from any assets now or hereafter
held in any capacity other than as Trustee hereunder by the Trustees or any
successor Trustees. Legal title in and beneficial ownership of all of the assets
of the Trust shall at all times be considered as vested in the Trust, except
that the Trustees may cause legal title in and beneficial ownership of any Trust
Property to be held by, or in the name of, one or more of the Trustees acting
for and on behalf of the Trust, or in the name of any person as nominee acting
for and on behalf of the Trust. No Shareholder shall be deemed to have a
severable ownership in any individual asset of the Trust or of any Series or any
right of partition or possession thereof, but each Shareholder shall have, as
provided in Article V, a proportionate undivided beneficial interest in the
Trust or Series or Class thereof represented by Shares. The Shares shall be
personal property giving only the rights specifically set forth in this Trust
Instrument. The Trust, or at the determination of the Trustees one or more of
the Trustees or a nominee acting for and on behalf of the Trust, shall be deemed
to hold legal title and beneficial ownership of any income earned on securities
of the Trust issued by any business entities formed, organized, or existing
under the laws of any jurisdiction, including the laws of any foreign country.
Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a
Trustee, he shall execute and deliver such documents as the remaining
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Trustees shall require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property held in the name of the resigning or
removed Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall execute and deliver on his behalf such documents as the
remaining Trustees shall require as provided in the preceding sentence.
Section 9. Effect of Trustees Not Serving. The death, resignation, retirement,
removal, incapacity or inability or refusal to serve of the Trustees, or any one
of them, shall not operate to annul the Trust or to revoke any existing agency
created pursuant to the terms of this Declaration.
Section 10. Trustees, etc. as Shareholders. Subject to any restrictions in the
By-laws, any Trustee, officer, agent or independent contractor of the Trust may
acquire, own and dispose of Shares to the same extent as any other Shareholder;
the Trustees may issue and sell Shares to and buy Shares from any such person or
any firm or company in which such person is interested, subject only to any
general limitations herein.
ARTICLE III
CONTRACTS WITH SERVICE PROVIDERS
Section 1. Underwriting Contract. The Trustees may in their discretion from time
to time enter into an exclusive or non-exclusive underwriting contract or
contracts providing for the sale of the Shares whereby the Trustees may either
agree to sell the Shares to the other party to the contract or appoint such
other party as their sales agent for the Shares, and in either case on such
terms and conditions, if any, as may be prescribed in the By-laws, and such
further terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article III or of the By-laws; and
such contract may also provide for the repurchase of the Shares by such other
party as agent of the Trustees.
Section 2. Advisory or Management Contract. The Trustees may in their discretion
from time to time enter into one or more investment advisory or management
contracts or, if the Trustees establish multiple Series, separate investment
advisory or management contracts with respect to one or more Series whereby the
other party or parties to any such contracts shall undertake to furnish the
Trust or such Series management, investment advisory, administration,
accounting, legal, statistical and research facilities and services, promotional
or marketing activities, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any provisions of the Declaration, the Trustees may authorize the Investment
Advisers or persons to whom the Investment Advisers delegate certain or all of
their duties, or any of them, under any such contracts (subject to such general
or specific instructions as the Trustees may from time to time adopt) to effect
purchases, sales, loans or exchanges of portfolio securities and other
investments of the Trust on behalf of the Trustees or may authorize any officer,
employee or Trustee to effect such purchases, sales, loans or exchanges pursuant
to recommendations of such Investment Advisers, or any of them (and all without
further action by
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the Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees.
Section 3. Administration Agreement. The Trustees may in their discretion from
time to time enter into an administration agreement or, if the Trustees
establish multiple Series or Classes, separate administration agreements with
respect to each Series or Class, whereby the other party to such agreement shall
undertake to manage the business affairs of the Trust or of a Series or Class
thereof and furnish the Trust or a Series or a Class thereof with office
facilities, and shall be responsible for the ordinary clerical, bookkeeping and
recordkeeping services at such office facilities, and other facilities and
services, if any, and all upon such terms and conditions as the Trustees may in
their discretion determine.
Section 4. Service Agreement. The Trustees may in their discretion from time to
time enter into service agreements with respect to one or more Series or Classes
of Shares whereby the other parties to such Service Agreements will provide
administration and/or support services pursuant to administration plans and
service plans, and all upon such terms and conditions as the Trustees in their
discretion may determine.
Section 5. Transfer Agent. The Trustees may in their discretion from time to
time enter into a transfer agency and shareholder services contract whereby the
other party to such contract shall undertake to furnish transfer agency and
shareholder services to the Trust. The contract shall have such terms and
conditions as the Trustees may in their discretion determine. Such services may
be provided by one or more Persons.
Section 6. Custodian. The Trustees may appoint or otherwise engage one or more
banks or trust companies, each having aggregate capital, surplus and undivided
profits (as shown in its last published report) of at least two million dollars
($2,000,000), or any other entity satisfying the requirements of the 1940 Act,
to serve as Custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the By-laws of the Trust. The Trustees may also authorize the Custodian to
employ one or more sub-custodians as meet the requirements of applicable
provisions of the 1940 Act, and upon such terms and conditions as may be agreed
upon between the Custodian and such sub-custodian, to hold securities and other
assets of the Trust and to perform the acts and services of the Custodian,
subject to applicable provisions of law and resolutions adopted by the Trustees.
The Trustees may delegate to the Trust's officers, Investment Adviser, Custodian
or a Qualified Foreign Bank the responsibility to select Eligible Foreign
Custodians in accordance with the provisions of the 1940 Act or any rule,
regulation or order of the Commission thereunder.
Section 7. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust or
any Series thereof is a shareholder, director, officer, partner,
trustee, employee, manager, adviser or distributor of or for any
partnership, corporation, trust, association or other
organization or of or for any parent or affiliate of any
organization, with which a contract of the character described
in this Article III or for services as Custodian, Transfer Agent
or disbursing agent or for related services may have been or may
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hereafter be made, or that any such organization, or any parent
or affiliate thereof, is a Shareholder of or has an interest in
the Trust, or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the character described in
Sections 1, 2, 3 or 4 of this Article III or for services as
Custodian, Transfer Agent or disbursing agent or for related
services may have been or may hereafter be made also has any one
or more of such contracts with one or more other partnerships,
corporations, trusts, associations or other organizations, or
has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE IV
COMPENSATION, LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Compensation. The Trustees as such shall be entitled to reasonable
compensation from the Trust, and they may fix the amount of such compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, management, legal, accounting, investment banking or other services
and payment for the same by the Trust.
Section 2. Limitation of Liability. All persons contracting with or having any
claim against the Trust or a particular Series shall look only to the assets of
all Series or such particular Series for payment under such contract or claim;
and neither the Trustees nor, when acting in such capacity, any of the Trust's
officers, employees or agents, whether past, present or future, shall be
personally liable therefor. Provided they have exercised reasonable care and
have acted under the reasonable belief that their actions are in the best
interest of the Trust, the Trustees and officers of the Trust shall not be
responsible or liable for any act or omission or for neglect or wrongdoing of
them or any officer, agent, employee, Investment Adviser or independent
contractor of the Trust, but nothing contained in this Declaration or in the
Delaware Act shall protect any Trustee or officer of the Trust against liability
to the Trust or to Shareholders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 3. Indemnification. (a) Subject to the exceptions and limitations
contained in subsection (b) below:
(i) every person who is, or has been, a Trustee or an officer,
employee or agent of the Trust (including any individual who
serves at its request as director, officer, partner, trustee or
the like of another organization in which it has any interest as
a shareholder, creditor or otherwise) ("Covered Person") shall
be indemnified by the Trust or the appropriate Series to the
fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection
with any claim, action, suit
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or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Covered Person
and against amounts paid or incurred by him in the settlement
thereof; and
(ii) as used herein, the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals),
actual or threatened, and the words "liability" and "expenses"
shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office, or (B) not to have acted in good faith in
the reasonable belief that his action was in the best interest
of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office: (A) by the
court or other body approving the settlement; (B) by at least a
majority of those Trustees who are neither Interested Persons of
the Trust nor are parties to the matter based upon a review of
readily available facts (as opposed to a full trial-type
inquiry); (C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a
full trial-type inquiry) or (D) by a vote of a majority of the
Outstanding Shares entitled to vote (excluding any Outstanding
Shares owned of record or beneficially by such individual).
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may
now or hereafter be entitled, and shall inure to the benefit of the heirs,
executors and administrators of a Covered Person.
(d) To the maximum extent permitted by applicable law, expenses in connection
with the preparation and presentation of a defense to any claim, action,
suit or proceeding of the character described in subsection (a) of this
Section may be paid by the Trust or applicable Series from time to time
prior to final disposition thereof upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by him to
the Trust or applicable Series if it is ultimately determined that he is
not entitled to indemnification under this Section; provided, however,
that either (i) such Covered Person shall have provided appropriate
security for such undertaking, (ii) the Trust is insured against losses
arising out of any such advance payments or (iii) either a majority of the
Trustees who are neither Interested Persons of the Trust nor parties to
the matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to
a full trial-type inquiry) that there is reason to believe that such
Covered Person will not be disqualified from indemnification under this
Section.
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(e) Any repeal or modification of this Article IV by the Shareholders, or
adoption or modification of any other provision of the Declaration or
By-laws that would be inconsistent with this Article, shall be prospective
only, to the extent that such repeal or modification would, if applied
retrospectively, adversely affect any limitation on the liability of any
Covered Person or indemnification available to any Covered Person with
respect to any act or omission which occurred prior to such repeal,
modification or adoption.
Section 4. Indemnification of Shareholders. If any Shareholder or former
Shareholder of any Series shall be held personally liable solely by reason of
his being or having been a Shareholder and not because of his acts or omissions
or for some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of any
entity, its general successor) shall be entitled out of the assets belonging to
the applicable Series to be held harmless from and indemnified against all loss
and expense arising from such liability. The Trust, on behalf of the affected
Series, shall, upon request by such Shareholder, assume the defense of any claim
made against such Shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 5. No Bond Required of Trustees. No Trustee shall be obligated to give
any bond or other security for the performance of any of his duties hereunder.
Section 6. No Duty of Investigation; Notice in Trust Instruments, Etc. No
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer, employee or agent of the Trust or a Series thereof shall be bound
to make any inquiry concerning the validity of any transaction purporting to be
made by the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking, and every other act or thing whatsoever executed
in connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity as Trustees
under this Declaration or in their capacity as officers, employees or agents of
the Trust or a Series thereof. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or a Series thereof or
undertaking made or issued by the Trustees or officers may recite that the same
is executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust or a Series thereof under any
such instrument are not binding upon any of the Trustees, officers, employees,
agents or Shareholders individually, but bind only the Trust Property or the
Trust Property of the applicable Series, and may contain any further recital
which they may deem appropriate, but the omission of such recital shall not
operate to bind the Trustees individually.
Section 7. Reliance on Experts, Etc. Each Trustee, officer or employee of the
Trust or a Series thereof shall, in the performance of his duties, powers and
discretion hereunder be fully and completely justified and protected with regard
to any act or any failure to act resulting from reliance in good faith upon the
books of account or other records of the Trust or a Series thereof, upon an
opinion of counsel, or upon reports made to the Trust or a Series thereof by any
of its officers or employees or by the Investment Adviser, the Administrator,
the Distributor, Transfer
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Agent, selected dealers, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of the
Trust, regardless of whether such counsel or person may also be a Trustee.
ARTICLE V
SERIES; CLASSES; SHARES
Section 1. Establishment of Series or Class. The Trust shall consist of one or
more Series. Without limiting the authority of the Trustees to establish and
designate any further Series, the Trustees hereby establish one Series which
shall be designated as Kelmoore Strategy Covered Option Fund. Each additional
Series shall be established and is effective upon the adoption of a resolution
of a majority of the Trustees or any alternative date specified in such
resolution. The Trustees shall designate the relative rights and preferences of
the Shares of each Series. The Trustees may divide the Shares of any Series into
Classes. Without limiting the authority of the Trustees to establish and
designate any further Classes, the Trustees hereby establish, with respect to
Kelmoore Strategy Covered Option Fund, a single Class of Shares which shall
initially have no designation. The Classes of Shares of the Series herein
established and designated and any Shares of any further Series and Classes that
may from time to time be established and designated by the Trustees shall be
established and designated, and the variations in the relative rights and
preferences as between the different Series or Classes shall be fixed and
determined, by the Trustees; provided, that all Shares shall be identical except
for such variations as shall be fixed and determined between different Series or
Classes by the Trustees in establishing and designating such Series or Class.
Such designation of Series or Classes may be directly set forth by resolution or
may be made by a resolution referring to, or authorizing or approving of,
another document that sets forth such relative rights and preferences of such
Series (or Class) including, without limitation, any registration statement,
prospectus or statement of additional information of the Trust, or as otherwise
provided in such resolution.
All references to Shares in this Declaration shall be deemed to be Shares of any
or all Series or Classes as the context may require. The Trust shall maintain
separate and distinct records for each Series and hold and account for the
assets thereof separately from the other assets of the Trust or of any other
Series. A Series may issue any number of Shares of any Class thereof and need
not issue Shares. Each Share of a Series shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series or
a Class thereof shall be entitled to receive his pro rata share of all
distributions made with respect to such Series or Class. Upon redemption of his
Shares, such Shareholder shall be paid solely out of the funds and property of
such Series. The Trustees may adopt and change the name of any Series or Class.
Section 2. Shares. The beneficial interest in the Trust shall be divided into
transferable Shares of one or more separate and distinct Series or Classes
established by the Trustees. The number of Shares of each Series and Class is
unlimited and each Share shall have a par value of $0.001 per Share or such
other amount as the Trustees may establish. All Shares issued hereunder,
including, without limitation, Shares issued in connection with a dividend in
Shares or a split or reverse split of Shares, shall be fully paid and
nonassessable. Except as otherwise provided by
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the Trustees, Shareholders shall have no preemptive or other right to subscribe
to any additional Shares or other securities issued by the Trust. Subject to the
further provisions of this Article V and any applicable requirements of the 1940
Act, the Trustees shall have full power and authority, in their sole discretion
and without obtaining Shareholder approval, to issue original or additional
Shares at such times and on such terms and conditions as they deem appropriate;
to issue fractional Shares; to establish and to change in any manner Shares of
any Series or Classes with such preferences, terms of conversion, voting powers,
rights and privileges as the Trustees may determine (but the Trustees may not
change Outstanding Shares in a manner materially adverse to the Shareholders of
such Shares); to divide or combine the Shares of any Series or Classes into a
greater or lesser number; to classify or reclassify any unissued Shares of any
Series or Classes into one or more Series or Classes of Shares; to abolish any
one or more Series or Classes of Shares; to issue Shares to acquire other assets
(including assets subject to, and in connection with, the assumption of
liabilities) and businesses; and to take such other action with respect to the
Shares as the Trustees may deem desirable.
Section 3. Investment in the Trust. The Trustees shall accept investments in any
Series or Class from such persons and on such terms as they may from time to
time authorize. At the Trustees' discretion, such investments, subject to
applicable law, may be in the form of cash or securities in which that Series is
authorized to invest, valued as provided in Article VI, Section 3. Investments
in a Series shall be credited to each Shareholder's account in the form of full
Shares at the Net Asset Value per Share next determined after the investment is
received or accepted as may be determined by the Trustees; provided, however,
that the Trustees may, in their sole discretion, (a) impose a sales charge upon
investments in any Series or Class, (b) issue fractional Shares, (c) determine
the Net Asset Value per Share of the initial capital contribution or (d)
authorize the issuance of Shares at a price other than Net Asset Value to the
extent permitted by the 1940 Act or any rule, order or interpretation of the
Commission thereunder. The Trustees shall have the right to refuse to accept
investments in any Series at any time without any cause or reason therefor
whatsoever.
Section 4. Assets and Liabilities of Series. All consideration received by the
Trust for the issue or sale of Shares of a particular Series, together with all
assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof (including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be), shall
be held and accounted for separately from the assets of every other Series and
are referred to as "assets belonging to" that Series. The assets belonging to a
Series shall belong only to that Series for all purposes, subject only to the
rights of creditors of that Series, and to no other Series. Any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Series shall be allocated by
the Trustees between and among one or more Series as the Trustees deem fair and
equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes, and such assets, earnings, income,
profits or funds, or payments and proceeds thereof shall be referred to as
assets belonging to that Series. The assets belonging to a Series shall be so
recorded upon the books of the Trust, and shall be held by the Trustees in trust
for the benefit of the Shareholders of that Series. The assets belonging to a
Series shall be charged with the
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liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series, except that liabilities and expenses allocated
solely to a particular Class shall be borne by that Class. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series or Class shall be
allocated and charged by the Trustees between or among any one or more of the
Series or Classes in such manner as the Trustees deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes.
Without limiting the foregoing, but subject to the right of the Trustees to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, and subject to the statutory provision of Section 3804 of the Delaware
Act referred to below, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
Series shall be enforceable against the assets of such Series only, and not
against the assets of the Trust generally or any other Series, and none of the
debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to the Trust generally or any other Series shall
be enforceable against the assets of such Series. Notice of this contractual
limitation on liabilities among Series may, in the Trustees' discretion, be set
forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the Delaware Act, and upon the giving of such
notice in the certificate of trust, the statutory provisions of Section 3804 of
the Delaware Act relating to limitations on liabilities among Series (and the
statutory effect under Section 3804 of setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series. Any
person extending credit to, contracting with or having any claim against any
Series may look only to the assets of that Series to satisfy or enforce any debt
with respect to that Series. No Shareholder or former Shareholder of any Series
shall have a claim on or any right to any assets allocated or belonging to any
other Series.
Section 5. Ownership and Transfer of Shares. The Trust or a Transfer Agent or
similar agent for the Trust shall maintain a register containing the names and
addresses of the Shareholders of each Series and Class thereof, the number of
Shares of each Series and Class held by such Shareholders, and a record of all
Share transfers. The register shall be conclusive as to the identity of
Shareholders of record and the number of Shares held by them from time to time.
The Trustees may authorize the issuance of certificates representing Shares and
adopt rules governing their use. The Trustees may make rules governing the
transfer of Shares, whether or not represented by certificates. Except as
otherwise provided by the Trustees, Shares shall be transferable on the books of
the Trust only by the record holder thereof or by his duly authorized agent upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer, together with a Share certificate if one is outstanding,
and such evidence of the genuineness of each such execution and authorization
and of such other matters as may be required by the Trustees. Upon such
delivery, and subject to any further requirements specified by the Trustees or
contained in the By-laws, the transfer shall be recorded on the books of the
Trust. Until a transfer is so recorded, the Shareholder of record of Shares
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor the Trust, nor any transfer agent or registrar or any
officer, employee or agent of the Trust, shall be affected by any notice of a
proposed transfer. Without limitation of the foregoing, the Trust or its agent
may
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issue certificates representing Shares and transfer such certificates to a
governmental unit, agency, authority, or authorized depository without prior
notice to a Shareholder and without liability to such Shareholder, to the extent
such action is taken (1) in the response to a notice of levy, lien or similar
action from the Internal Revenue Service or a state tax authority, (2) in
compliance with state laws governing escheat or abandonment of property, or (3)
otherwise in compliance with any applicable legal obligation.
Section 6. Status of Shares; Limitation of Shareholder Liability. Shares shall
be deemed to be personal property giving Shareholders only the rights provided
in this Declaration. Every Shareholder, by virtue of having acquired a Share,
shall be held expressly to have assented to and agreed to be bound by the terms
of this Declaration and to have become a party hereto. No Shareholder shall be
personally liable for the debts, liabilities, obligations and expenses incurred
by, contracted for, or otherwise existing with respect to, the Trust or any
Series. The death, incapacity, dissolution, termination or bankruptcy of a
Shareholder during the existence of the Trust shall not operate to terminate the
Trust, nor entitle the representative of any such Shareholder to an accounting
or to take any action in court or elsewhere against the Trust or the Trustees,
but entitles such representative only to the rights of such Shareholder under
this Trust. Ownership of Shares shall not entitle the Shareholder to any title
in or to the whole or any part of the Trust Property or right to call for a
partition or division of the same or for an accounting, nor shall the ownership
of Shares constitute the Shareholders as partners. Neither the Trust nor the
Trustees shall have any power to bind any Shareholder personally or to demand
payment from any Shareholder for anything, other than as agreed by the
Shareholder. Shareholders shall have the same limitation of personal liability
as is extended to shareholders of a private corporation for profit incorporated
in the State of Delaware. Every written obligation of the Trust or any Series
may contain a statement to the effect that such obligation may only be enforced
against the assets of the appropriate Series or all Series; however, the
omission of such statement shall not operate to bind or create personal
liability for any Shareholder or Trustee.
ARTICLE VI
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees, or a committee of one or more Trustees
or of one or more Trustees and one or more officers, may declare and pay
dividends and other distributions, including dividends on Shares of a particular
Series and other distributions from the assets belonging to that Series. No
dividend or distribution, including, without limitation, any distribution paid
upon termination of the Trust or of any Series (or Class) with respect to, nor
any redemption or repurchase of, the Shares of any Series (or Class) shall be
effected by the Trust other than from the assets held with respect to such
Series, nor shall any Shareholder of any particular Series otherwise have any
right or claim against the assets held with respect to any other Series except
to the extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series. The Trustees shall have full discretion to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding upon the
Shareholders. The amount and payment of
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dividends or distributions and their form, whether they are in cash, Shares or
other Trust Property, shall be determined by the Trustees. Dividends and other
distributions may be paid pursuant to a standing resolution adopted once or more
often as the Trustees determine. All dividends and other distributions on Shares
of a particular Series shall be distributed pro rata to the Shareholders of that
Series in proportion to the number of Shares of that Series they held on the
record date established for such payment, except that such dividends and
distributions shall appropriately reflect expenses allocated to a particular
Class of such Series and shall be reduced by any required backup, nonresident
alien, or other withholding taxes, which shall be deposited by the Trust in
accordance with applicable law. The Trustees may adopt and offer to Shareholders
such dividend reinvestment plans, cash dividend payout plans or similar plans as
the Trustees deem appropriate.
Section 2. Redemptions. Each Shareholder of a Series shall have the right at
such times as may be permitted by the Trustees to require the Series to redeem
all or any part of his Shares at a redemption price per Share equal to the Net
Asset Value per Share at such time as the Trustees shall have prescribed by
resolution, or, to the extent permitted by the 1940 Act, at such other
redemption price and at such times as the Trustees shall prescribe by
resolution. In the absence of such resolution, the redemption price per Share
shall be the Net Asset Value next determined after receipt by the Series of a
request for redemption in proper form less (1) such charges as are determined by
the Trustees and described in the Trust's Registration Statement for that Series
under the Securities Act of 1933, as amended from time to time, and (2) any
required withholding taxes, which shall be deposited by the Trust in accordance
with applicable law. The Trustees may specify conditions, prices, and places of
redemption, may specify binding requirements for the proper form or forms of
requests for redemption and may specify the amount of any deferred sales charge
or redemption fee to be withheld from redemption proceeds. Payment of the
redemption price may be wholly or partly in securities or other assets at the
value of such securities or assets used in such determination of Net Asset
Value, or may be in cash. Upon redemption, Shares shall be cancelled. The
Trustees may require Shareholders to redeem Shares for any reason under terms
set by the Trustees, including, but not limited to, the failure of a Shareholder
to supply a taxpayer identification number or other information or certification
required by federal or state tax laws, or to have the minimum investment
required, or to pay when due for the purchase of Shares issued to him. To the
extent permitted by law, the Trustees may retain the proceeds of any redemption
of Shares required by them for payment of amounts due and owing by a Shareholder
to the Trust or any Series or Class or any governmental authority. Without
limitation of the foregoing, the Trust may mandatorily redeem shares and the
Trust or its agent may transfer the proceeds of such a redemption to a
governmental unit, agency, authority, or authorized depository without prior
notice to a Shareholder and without liability to such shareholder, to the extent
such action is taken (1) in response to a notice of levy, lien, or similar
action from the Internal Revenue Service or a state tax authority, (2) in
compliance with state laws governing escheat or abandonment of property, (3) in
satisfaction of withholding tax requirements (including any applicable interest
and penalties) applicable to any prior distribution or distributions (including
a redemption or redemptions) to the Shareholder that were not satisfied at the
time of such distribution or distributions or (4) otherwise in compliance with
any applicable legal obligation. Notwithstanding the foregoing, the Trustees may
postpone payment of the redemption price and may suspend the right of the
Shareholders to require any Series or
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Class to redeem Shares during any period of time when and to the extent
permissible under the 1940 Act.
Section 3. Determination of Net Asset Value. The Trustees shall cause the Net
Asset Value of Shares of each Series or Class to be determined from time to time
in a manner consistent with applicable laws and regulations. The Trustees may
delegate the power and duty to determine Net Asset Value per Share to one or
more Trustees or officers of the Trust or to a custodian, depository or other
agent appointed for such purpose. The Net Asset Value of Shares shall be
determined separately for each Series or Class at such times as may be
prescribed by the Trustees or, in the absence of action by the Trustees, as of
the close of regular trading on the New York Stock Exchange on each day for all
or part of which such Exchange is open for trading.
Section 4. Suspension of Right of Redemption. If, as referred to in Section 2 of
this Article, the Trustees postpone payment of the redemption price and suspend
the right of Shareholders to redeem their Shares, such suspension shall take
effect at the time the Trustees shall specify, but not later than the close of
business on the business day next following the declaration of suspension.
Thereafter Shareholders shall have no right of redemption or payment until the
Trustees declare the end of the suspension. If the right of redemption is
suspended, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share next determined after the
suspension terminates.
Section 5. Repurchase by Agreement. The Trust may repurchase Shares directly, or
through the Distributor or another agent designated for the purpose, by
agreement with the owner thereof at a price not exceeding the Net Asset Value
per Share determined as of the time when the purchase or contract of purchase is
made or the Net Asset Value as of any time which may be later determined,
provided payment is not made for the Shares prior to the time as of which such
Net Asset Value is determined.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote only with
respect to (a) the election of Trustees as provided in the 1940 Act; (b) the
removal of Trustees as provided in Article II, Section 5(d); (c) any investment
advisory or management contract entered into pursuant to Article III, Section 2,
unless a shareholder vote is not required pursuant to the provisions of the 1940
Act or any rule, regulation or order of the Commission thereunder; (d) any
termination of the Trust to the extent and as provided in Article IX, Section 3;
(e) the amendment of this Declaration to the extent and as provided in Article
IX, Section 7; and (f) such additional matters relating to the Trust as may be
required or authorized by law, this Declaration, or the By-laws or any
registration of the Trust with the Commission or as the Trustees may consider
desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall be voted
by individual Series or Class, except (a) when required by the 1940 Act, Shares
shall be voted in the aggregate
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and not by individual Series or Class, and (b) when the Trustees have determined
that the matter affects the interests of more than one Series or Class, then the
Shareholders of all such Series or Classes shall be entitled to vote together
thereon. As determined by the Trustees pursuant to resolution and without the
vote or consent of Shareholders, on any matter submitted to a vote of
Shareholders either (i) each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote or (ii) each dollar of net asset
value (number of Shares owned times net asset value per Share of such Series or
Class, as applicable) shall be entitled to one vote on any matter on which such
Shares are entitled to vote and each fractional dollar amount shall be entitled
to a proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy or in any manner
provided for in the By-laws. The By-laws may provide that proxies may be given
by any electronic or telecommunications device or in any other manner, but if a
proposal by anyone other than the officers or Trustees is submitted to a vote of
the Shareholders of any Series or Class, or if there is a proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or
Trustees, Shares may be voted only in person or by written proxy. Until Shares
of a Series are issued, as to that Series the Trustees may exercise all rights
of Shareholders and may take any action required or permitted to be taken by
Shareholders by law, this Declaration or the By-laws. Meetings of Shareholders
shall be called and notice thereof and record dates therefor shall be given and
set as provided in the By-laws.
Section 2. Quorum; Required Vote. One-third (33 1/3%) of the Outstanding Shares
of each affected Series or Class, or one-third (33 1/3%) of the Outstanding
Shares of the Trust, entitled to vote in person or by proxy shall be a quorum
for the transaction of business at a Shareholders' meeting with respect to such
Series or Class, or with respect to the entire Trust, respectively. Any lesser
number shall be sufficient for adjournments. Any adjourned session of a
Shareholders' meeting may be held within a reasonable time without further
notice. Except when a larger vote is required by applicable law, this
Declaration or the By-laws, a majority of the Outstanding Shares voting at a
Shareholders' meeting in person or by proxy shall decide any matters to be voted
upon with respect to the entire Trust and a plurality of such Outstanding Shares
shall elect a Trustee; provided, that if this Declaration or applicable law
permits or requires that Shares be voted on any matter by individual Series or
Classes, then a majority of the Outstanding Shares of that Series or Class
voting at a Shareholders' meeting in person or by proxy on the matter shall
decide that matter insofar as that Series or Class is concerned. Shareholders
may act as to the Trust or any Series or Class by the written consent of a
majority (or such other amount as may be required by applicable law) of the
Outstanding Shares of the Trust or of such Series or Class, as the case may be.
Section 3. Abstentions and Broker Non-Votes. Outstanding Shares represented in
person or by proxy (including Shares which abstain or do not vote with respect
to one or more of any proposals presented for Shareholder approval) will be
counted for purposes of determining whether a quorum is present at a meeting.
Abstentions will be treated as Shares that are present and entitled to vote for
purposes of determining the number of Shares that are present and entitled to
vote with respect to any particular proposal, but will not be counted as a vote
in favor of such proposal. If a broker or nominee holding Shares in "street
name" indicates on the proxy
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that it does not have discretionary authority to vote as to a particular
proposal, those Shares will not be considered as present and entitled to vote
with respect to such proposal.
Section 4. Action Without Meeting. Any action which may be taken by Shareholders
may be taken without a meeting if a majority of Outstanding Shares entitled to
vote on the matter (or such larger proportion thereof as shall be required by
law) consent to the action in writing and the written consents are filed with
the records of the meetings of Shareholders. Such consents shall be treated for
all purposes as a vote taken at a meeting of Shareholders.
Section 5. Record Dates.
(a) For the purpose of determining the Shareholders of any Series or Class who
are entitled to receive payment of any dividend or of any other
distribution, the Trustees may from time to time fix a date, which shall be
before the date for the payment of such dividend or such other payment, as
the record date for determining the Shareholders of such Series or Class
having the right to receive such dividend or distribution. Without fixing a
record date, the Trustees may for distribution purposes close the register
or transfer books for one or more Series or Classes any time prior to the
payment of a distribution. Nothing in this Section shall be construed as
precluding the Trustees from setting different record dates for different
Series or Classes.
(b) The Trustees may fix in advance a date up to one hundred twenty (120) days
before the date of any Shareholders' meeting, or the date for the allotment
of rights, or the date when any change or conversion or exchange of Shares
shall go into effect as a record date for the determination of the
Shareholders entitled to notice of, and to vote at, any such meeting, or to
receive any such allotment of rights, or to exercise such rights in respect
of any such change, conversion or exchange of Shares.
Section 6. Additional Provisions. The By-laws may include further provisions for
Shareholders' votes and meetings and related matters.
ARTICLE VIII
EXPENSES OF THE TRUST AND SERIES
Section 1. Payment of Expenses by the Trust. Subject to Article V, Section 4,
the Trust or a particular Series shall pay, or shall reimburse the Trustees from
the assets belonging to all Series or the particular Series, for their expenses
(or the expenses of a Class of such Series) and disbursements, including, but
not limited to, interest charges, taxes, brokerage fees and commissions;
expenses of issue, repurchase and redemption of Shares; insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, distributors, custodians,
transfer agents, fund accountants; fees of pricing, interest, dividend, credit
and other reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal
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and compliance expenses; costs of forming the Trust and its Series and
maintaining its existence; costs of preparing and printing the prospectuses of
the Trust and each Series, statements of additional information and Shareholder
reports and delivering them to Shareholders; expenses of meetings of
Shareholders and proxy solicitations therefor; costs of maintaining books and
accounts; costs of reproduction, stationery and supplies; fees and expenses of
the Trustees; compensation of the Trust's officers and employees and costs of
other personnel performing services for the Trust or any Series; costs of
Trustee meetings; Commission registration fees and related expenses; state or
foreign securities laws registration and notice fees and related expenses; and
for such non-recurring items as may arise, including litigation to which the
Trust or a Series (or a Trustee or officer of the Trust acting as such) is a
party, and for all losses and liabilities by them incurred in administering the
Trust. The Trustees shall have a lien on the assets belonging to the appropriate
Series, or in the case of an expense allocable to more than one Series, on the
assets of each such Series, prior to any rights or interests of the Shareholders
thereto, for the reimbursement to them of such expenses, disbursements, losses
and liabilities.
Section 2. Payment of Expenses by Shareholders. The Trustees shall have the
power, as frequently as they may determine, to cause each Shareholder, or each
Shareholder of any particular Series, to pay directly, in advance or arrears,
for charges due from such Shareholder of the Trust's custodian or transfer,
shareholder servicing or similar agent, an amount fixed from time to time by the
Trustees, by setting off such charges from declared but unpaid dividends owed
such Shareholder and/or by reducing the number of Shares in the account of such
Shareholder by that number of full and/or fractional Shares which represents the
outstanding amount of such charges due from such Shareholder.
ARTICLE IX
MISCELLANEOUS
Section 1. Trust Not a Partnership. This Declaration creates a trust and not a
partnership. No Trustee shall have any power to bind personally either the
Trust's officers or any Shareholder.
Section 2. Trustee Action. The exercise by the Trustees of their powers and
discretion hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested. Subject
to the provisions of Article IV, the Trustees shall not be liable for errors of
judgment or mistakes of fact or law.
Section 3. Termination of the Trust. (a) This Trust shall have perpetual
existence. Subject to the vote of a majority of the Outstanding Shares of the
Trust, or of each Series to be affected, voting at a Shareholders' meeting in
person or by proxy, the Trustees may:
(i) sell and convey all or substantially all of the assets of all
Series or any affected Series to another Series or to another
entity which is an open-end investment company as defined in the
1940 Act, or is a series thereof, for adequate consideration,
which may include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or
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contingent, of the Trust or any affected Series, and which may
include shares of or interests in such Series, entity, or series
thereof; or
(ii) at any time sell and convert into money all or substantially all
of the assets of all Series or any affected Series.
Upon making reasonable provision for the payment of all known liabilities of all
Series or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the Shareholders of all Series or any affected
Series; however, the payment to any particular Class of such Series may be
reduced by any fees, expenses or charges allocated to that Class.
(b) The Trustees may take any of the actions specified in subsection (a) (i)
and (ii) above without obtaining the vote of a majority of the Outstanding
Shares of the Trust or any Series voting at a Shareholders' meeting in
person or by proxy if a majority of the Trustees determines that the
continuation of the Trust or Series is not in the best interests of the
Trust, such Series, or their respective Shareholders as a result of
factors or events adversely affecting the ability of the Trust or such
Series to conduct its business and operations in an economically viable
manner. Such factors and events may include the inability of the Trust or
a Series to maintain its assets at an appropriate size, changes in laws or
regulations governing the Trust or the Series or affecting assets of the
type in which the Trust or Series invests, or economic developments or
trends having a significant adverse impact on the business or operations
of the Trust or such Series.
(c) Upon completion of the distribution of the remaining proceeds or assets
pursuant to subsection (a) the Trustees and the Trust or affected Series
shall be discharged of any and all further liabilities and duties
hereunder with respect thereto and the right, title and interest of all
parties therein shall be canceled and discharged and any such Series shall
terminate. Following completion of winding up of its business, the
Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee, and
upon filing of such certificate of cancellation, the Trust shall
terminate.
Section 4. Reorganization. (a) Notwithstanding anything else herein, to change
the Trust's form or place of organization, the Trustees may, without Shareholder
approval (unless such approval is required by applicable law), (i) cause the
Trust to merge or consolidate with or into one or more entities, if the
surviving or resulting entity is the Trust or another open-end management
investment company under the 1940 Act, or a series thereof, that will succeed to
or assume the Trust's registration under the 1940 Act, (ii) cause the Shares to
be exchanged under or pursuant to any state or federal statute to the extent
permitted by law, or (iii) cause the Trust to incorporate under the laws of
Delaware or any other U.S. jurisdiction. Any agreement of merger or
consolidation or certificate of merger may be signed by a majority of Trustees
and facsimile signatures conveyed by electronic or telecommunication means shall
be valid.
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(b) Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 4 may effect any amendment to the
Declaration or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
(c) The Trustees may create one or more business trusts to which all or any
part of the assets, liabilities, profits or losses of the Trust or any
Series or Class thereof may be transferred and may provide for the
conversion of Shares in the Trust or any Series or Class thereof into
beneficial interests in any such newly created trust or trusts or any
series or classes thereof.
Section 5. Declaration of Trust. The original or a copy of this Declaration and
of each amendment hereto or Declaration supplemental shall be kept at the office
of the Trust where it may be inspected by any Shareholder. Anyone dealing with
the Trust may rely on a certificate by a Trustee or an officer of the Trust as
to the authenticity of the Declaration or any such amendments or supplements and
as to any matters in connection with the Trust. The masculine gender herein
shall include the feminine and neuter genders. Headings herein are for
convenience only and shall not affect the construction of this Declaration. This
Declaration may be executed in any number of counterparts, each of which shall
be deemed an original.
Section 6. Applicable Law. This Declaration and the Trust created hereunder are
governed by and construed and administered according to the Delaware Act and the
applicable laws of the State of Delaware; provided, however, that there shall
not be applicable to the Trust, the Trustees or this Declaration (a) the
provisions of Section 3540 of Title 12 of the Delaware Code, or (b) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the Delaware Act) pertaining to trusts which relate to or regulate (i) the
filing with any court or governmental body or agency of trustee accounts or
schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards of responsibilities or limitations on the acts or powers of
trustees, which are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this
Declaration. The Trust shall be of the type commonly called a Delaware business
trust, and, without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust under Delaware law. The
Trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts under
the Delaware Act, and the absence of a specific reference herein to any such
power, privilege or action shall not imply that the Trust may not exercise such
power or privilege or take such actions.
Section 7. Amendments. The Trustees may, without any Shareholder vote, amend or
otherwise supplement this Declaration by making an amendment, a Declaration of
Trust supplemental hereto or an amended and restated trust instrument; provided,
that Shareholders shall have the
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right to vote on any amendment (a) which would affect the voting rights of
Shareholders granted in Article VII, Section 1, (b) to this Section 7, (c)
required to be approved by Shareholders by law or by the Trust's registration
statement(s) filed with the Commission, or (d) submitted to them by the Trustees
in their discretion. Any amendment submitted to Shareholders which the Trustees
determine would affect the Shareholders of any Series shall be authorized by
vote of the Shareholders of such Series and no vote shall be required of
Shareholders of a Series not affected. Notwithstanding anything else herein, (i)
any amendment to Article IV which would have the effect of reducing the
indemnification or other rights provided thereby to Trustees, officers,
employees, and agents of the Trust or to Shareholders or former Shareholders,
and any repeal or amendment of this sentence shall each require the affirmative
vote of the holders of two-thirds of the Outstanding Shares of the Trust
entitled to vote thereon and (ii) no amendment to Article IV that would have the
effect of reducing the indemnification or other rights provided thereby to
Trustees, officers, employees, and agents of the Trust or to Shareholders or
former Shareholders shall be effective with respect to any acts or omissions of
any such Persons occurring or otherwise relating to any time period prior to the
adoption of such amendment or shall otherwise have any retroactive effect.
Section 8. Derivative Actions. In addition to the requirements set forth in
Section 3816 of the Delaware Act, a Shareholder may bring a derivative action on
behalf of the Trust only if the following conditions are met:
(a) Shareholders eligible to bring such derivative action under the Delaware
Act who hold at least 10% of the Outstanding Shares of the Trust, or 10%
of the Outstanding Shares of the Series or Class to which such action
relates, shall join in the request for the Trustees to commence such
action;
(b) the Trustees must be afforded a reasonable amount of time to consider such
shareholder request and to investigate the basis of such claim. The
Trustees shall be entitled to retain counsel or other advisers in
considering the merits of the request and shall require an undertaking by
the Shareholders making such request to reimburse the Trust for the
expense of any such advisers in the event that the Trustees determine not
to bring such action; and
(c) Shareholders are not relieved of the conditions in Sections 8(a) and (b)
if a Trustee who is not an Interested Person of the Trust or any Series
serves as a trustee of any other investment company in the Fund Complex.
(d) Shareholders of an unaffected Series or Class may not bring a derivative
action on behalf of another Series or Class.
Section 9. Fiscal Year. The fiscal year of the Trust shall end on a specified
date as adopted by resolution of the Trustees. The taxable year of each Series
of the Trust shall be as determined by the Trustees from time to time.
Section 10. Severability. The provisions of this Declaration are severable. If
the Trustees determine, with the advice of counsel, that any provision hereof
conflicts with the 1940 Act, the
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<PAGE> 29
regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Declaration; provided, however, that
such determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination. If any provision hereof shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision only in such jurisdiction and shall not affect any
other provision of this Declaration.
IN WITNESS WHEREOF, the undersigned being the sole initial Trustee of
the Trust executed this instrument as of the date first written above.
/s/ Ralph M. Kelmon
Ralph M. Kelmon 2471 E. Bayshore Rd., Suite 501
as Trustee and not individually Palo Alto, CA 94303
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<PAGE> 1
Exhibit 99(b)(1)
KELMOORE STRATEGIC TRUST
BY-LAWS
NOVEMBER 30, 1998
AS AMENDED
MARCH 22, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS...........................................................................1
ARTICLE II OFFICES ......................................................................1
Section 1. Principal Office......................................................................1
Section 2. Other Offices.........................................................................1
Section 3. Registered Office and Registered Agent................................................1
ARTICLE III SHAREHOLDERS.........................................................................1
Section 1. Meetings.............................................................................1
Section 2. Notice of Meetings...................................................................1
Section 3. Proxies..............................................................................2
Section 4. Inspection of Records................................................................2
ARTICLE IV TRUSTEES.............................................................................2
Section 1. Meetings of the Trustees and Action by Written Consent...............................2
Section 2. Quorum and Manner of Acting at Meetings..............................................3
ARTICLE V COMMITTEES...........................................................................3
Section 1. Executive and Other Committees.......................................................3
Section 2. Meetings, Quorum and Manner of Acting................................................3
ARTICLE VI OFFICERS.............................................................................4
Section 1. General Provisions...................................................................4
Section 2. Term of Office and Qualifications....................................................4
Section 3. Removal..............................................................................4
Section 4. Powers and Duties of the Chairman....................................................4
Section 5. Powers and Duties of the President...................................................4
Section 6. Powers and Duties of Vice Presidents.................................................4
Section 7. Powers and Duties of the Treasurer...................................................5
Section 8. Powers and Duties of the Secretary...................................................5
Section 9. Powers and Duties of Assistant Officers..............................................5
Section 10. Powers and Duties of Assistant Secretaries...........................................5
Section 11. Compensation of Officers and Trustees and
Members of the Advisory Board........................................................5
ARTICLE VII FISCAL YEAR..........................................................................5
ARTICLE VIII SEAL.................................................................................6
ARTICLE IX SUFFICIENCY AND WAIVERS OF NOTICE....................................................6
ARTICLE X AMENDMENTS...........................................................................6
</TABLE>
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<PAGE> 3
KELMOORE STRATEGIC TRUST
BY-LAWS
ARTICLE I
DEFINITIONS
All capitalized terms have the respective meanings given them in the
Agreement and Declaration of Kelmoore Strategic Trust dated November 30, 1998,
as amended or restated from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the principal office
of the Trust shall be as designated by the Trustees as designated by resolution.
Section 2. Other Offices. The Trust may have offices in such other places
without as well as within the State of Delaware as the Trustees may from time to
time determine.
Section 3. Registered Office and Registered Agent. The Board of Trustees shall
establish a registered office in the State of Delaware and shall appoint as the
Trust's registered agent for service of process in the State of Delaware an
individual resident of the State of Delaware or a Delaware corporation or a
corporation authorized to transact business in the State of Delaware; in each
case the business office of such registered agent for service of process shall
be identical with the registered Delaware office of the Trust.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders of the Trust or a Series or
Class thereof shall be held as provided in the Declaration of Trust at such
place within or without the State of Delaware as the Trustees shall designate.
Section 2. Notice of Meetings. Notice of all meetings of the Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail or telegraphic or electronic means to each Shareholder at his
address as recorded on the register of the Trust mailed at least (10) days and
not more than ninety (90) days before the meeting, provided, however, that
notice of a meeting need not be given to a Shareholder to whom such notice need
not be given under the proxy rules of the Commission under the 1940 Act and the
Securities Exchange Act of 1934, as amended.
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<PAGE> 4
Only the business stated in the notice of the meeting shall be considered at
such meeting. Any adjourned meeting may be held as adjourned without further
notice. No notice need be given to any Shareholder who shall have failed to
inform the Trust of his current address or if a written waiver of notice,
executed before or after the meeting by the Shareholder or his attorney
thereunto authorized, is filed with the records of the meeting.
Section 3. Proxies. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken. A
proxy shall be deemed signed if the shareholder's name is placed on the proxy
(whether by manual signature, typewriting, telegraphic transmission, facsimile,
other electronic means or otherwise) by the Shareholder or the Shareholder's
attorney-in-fact. Proxies may be given by any electronic (including
computerized) or telecommunication device except as otherwise provided in the
Declaration of Trust. The placing of a shareholder's name on a proxy pursuant to
telephonic or electronically (including by computer) transmitted instructions
pursuant to procedures reasonably designed, as determined by the Trustees, to
verify that such instructions have been authorized by the shareholder shall
constitute execution of the proxy by or on behalf of the shareholder. Proxies
may be solicited in the name of one or more Trustees or one or more of the
officers of the Trust. Only Shareholders of record shall be entitled to vote.
When any Share is held jointly by several persons, any one of them may vote at
any meeting in person or by proxy in respect of such Share, but if more than one
of them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Share. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. If the holder of any such share is a minor or a
person of unsound mind, and subject to guardianship or the legal control of any
other person as regards the charge or management of such Share, he may vote by
his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy.
Section 4. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Delaware business corporation.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees and Action by Written Consent. The Trustees
may in their discretion provide for regular or stated meetings of the Trustees.
Notice of regular or stated meetings need not be given. Meetings of the Trustees
other than regular or stated meetings shall be held whenever called by the
President, the Chairman or by any one of the Trustees, at the time being in
office. Notice of the time and place of each meeting other than regular or
stated meetings shall be given by the Secretary or an Assistant Secretary or by
the officer or Trustee calling the meeting and shall be mailed to each Trustee
at least two days before the meeting, or shall be given by telephone, cable,
wireless, facsimile or other electronic mechanism to each Trustee at his
business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be
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<PAGE> 5
waived by any Trustee. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him before or after the meeting, is filed
with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him. A notice or waiver of notice need not specify the purpose of any meeting.
The Trustees may meet by conference telephone, teleconference or other
electronic media or communication equipment by means of which all persons
participating in the meeting can communicate with each other and participation
by such means shall be deemed to have been held at a place designated by the
Trustees at the meeting. Participation in a telephone conference meeting shall
constitute presence in person at such meeting. Any action required or permitted
to be taken at any meeting of the Trustees may be taken by the Trustees without
a meeting if a majority of the Trustees consent to the action in writing and the
written consents are filed with the records of the Trustees' meetings. Such
consents shall be treated as a vote for all purposes.
Section 2. Quorum and Manner of Acting at Meetings. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees in
order to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration of Trust or these By-laws)
the act of a majority of the Trustees present at any such meeting, at which a
quorum is present, shall be the act of the Trustees. In the absence of a quorum,
a majority of the Trustees present may adjourn the meeting from time to time
until a quorum shall be present. Notice of an adjourned meeting need not be
given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a majority of
all the Trustees may elect from their own number an Executive Committee to
consist of not less than two (2) members to hold office at the pleasure of the
Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session and such other
powers of the Trustees as the Trustees may delegate to them, from time to time,
except those powers which by law, the Declaration of Trust or these By-laws they
are prohibited from delegating. The Trustees may also elect from their own
number other Committees from time to time; the number composing such Committees,
the powers conferred upon the same (subject to the same limitations as with
respect to the Executive Committee) and the term of membership on such
Committees to be determined by the Trustees. The Trustees may designate a
chairman of any such Committee. In the absence of such designation the Committee
may elect its own chairman.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (1) provide
for stated meetings of any Committee, (2) specify the manner of calling and
notice required for special meetings of any Committee, (3) specify the number of
members of a Committee required to constitute a quorum and the number of members
of a Committee required to exercise specified powers delegated to such
Committee, (4) authorize the making of decisions to exercise specified powers by
written assent of the requisite number of members of a Committee without a
meeting, and (5) authorize the members of a Committee to meet by means of a
telephone conference circuit.
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<PAGE> 6
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a President, a
Treasurer and a Secretary, who shall be elected by the Trustees. The Trustees
may elect or appoint such other officers or agents as the business of the Trust
may require, including one or more Vice Presidents, one or more Assistant
Secretaries, and one or more Assistant Treasurers. The Trustees may delegate to
any officer or committee the power to appoint any subordinate officers or
agents.
Section 2. Term of Office and Qualifications. Except as otherwise provided by
law, the Declaration of Trust or these By-laws, the President, the Treasurer,
the Secretary and any other officer shall each hold office at the pleasure of
the Board of Trustees or until his successor shall have been duly elected and
qualified. Any two or more offices may be held by the same person. Any officer
may be but none need be a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer with or without cause, by a vote of a majority
of the Trustees then in office. Any officer or agent appointed by an officer or
committee may be removed with or without cause by such appointing officer or
committee.
Section 4. Powers and Duties of the Chairman. The Trustees may, but need not,
appoint from among their number a Chairman. When present he shall preside at the
meetings of the Shareholders and of the Trustees. He may call meetings of the
Trustees and of any committee thereof whenever he deems it necessary. He shall
be an executive officer of the Trust and shall have, with the President, general
supervision over the business and policies of the Trust, subject to the
limitations imposed upon the President, as provided in Section 5 of this Article
VI.
Section 5. Powers and Duties of the President. The President shall be the Chief
Executive Officer of the Trust. The President may call meetings of the Trustees
and of any Committee thereof when he deems it necessary and shall preside at all
meetings of the Shareholders. Subject to the control of the Trustees and to the
control of any Committees of the Trustees, within their respective spheres, as
provided by the Trustees, he shall at all times exercise a general supervision
and direction over the affairs of the Trust. He shall have the power to employ
attorneys and counsel for the Trust or any Series or Class thereof and to employ
such subordinate officers, agents, clerks and employees as he may find necessary
to transact the business of the Trust or any Series or Class thereof. He shall
also have the power to grant, issue, execute or sign such powers of attorney,
proxies or other documents as may be deemed advisable or necessary in
furtherance of the interests of the Trust or any Series thereof. The President
shall have such other powers and duties, as from time to time may be conferred
upon or assigned to him by the Trustees.
Section 6. Powers and Duties of Vice Presidents. In the absence or disability of
the President, the Vice President or, if there be more than one Vice President,
any Vice President designated by the Trustees, shall perform all the duties and
may exercise any of the powers of the President, subject to the control of the
Trustees. Each Vice President shall perform such other duties as may be assigned
to him from time to time by the Trustees and the President.
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<PAGE> 7
Section 7. Powers and Duties of the Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Trust. He shall deliver all
funds of the Trust or any Series or Class thereof which may come into his hands
to such Custodian as the Trustees may employ. He shall render a statement of
condition of the finances of the Trust or any Series or Class thereof to the
Trustees as often as they shall require the same and he shall in general perform
all the duties incident to the office of a Treasurer and such other duties as
from time to time may be assigned to him by the Trustees. The Treasurer shall
give a bond for the faithful discharge of his duties, if required so to do by
the Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
Section 8. Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Trustees and of the Shareholders in proper books
provided for that purpose; he shall have custody of the seal of the Trust; he
shall have charge of the Share transfer books, lists and records unless the same
are in the charge of a transfer agent. He shall attend to the giving and serving
of all notices by the Trust in accordance with the provisions of these By-laws
and as required by law; and subject to these By-laws, he shall in general
perform all duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Trustees.
Section 9. Powers and Duties of Assistant Officers. In the absence or disability
of the Treasurer, any officer designated by the Trustees shall perform all the
duties, and may exercise any of the powers, of the Treasurer. Each officer shall
perform such other duties as from time to time may be assigned to him by the
Trustees. Each officer performing the duties and exercising the powers of the
Treasurer, if any, and any Assistant Treasurer, shall give a bond for the
faithful discharge of his duties, if required so to do by the Trustees, in such
sum and with such surety or sureties as the Trustees shall require.
Section 10. Powers and Duties of Assistant Secretaries. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him by the Trustees and the President.
Section 11. Compensation of Officers and Trustees and Members of the Advisory
Board. Subject to any applicable provisions of the Declaration of Trust, the
compensation of the officers and Trustees and members of an advisory board shall
be fixed from time to time by the Trustees or, in the case of officers, by any
Committee or officer upon whom such power may be conferred by the Trustees. No
officer shall be prevented from receiving such compensation as such officer by
reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall end on a specified date as adopted by
resolution of the Trustees. The taxable year of each Series of the Trust shall
be as determined by the Trustees from time to time.
ARTICLE VIII
5
<PAGE> 8
SEAL
The Trustees may adopt a seal which shall be in such form and shall have such
inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
SUFFICIENCY AND WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the Declaration of
Trust or these By-laws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been sent by mail, telegraph, cable, wireless, facsimile or other electronic
means for the purposes of these By-laws when it has been delivered to a
representative of any company holding itself out as capable of sending notice by
such means with instructions that it be so sent.
ARTICLE X
AMENDMENTS
These By-laws, or any of them, may be altered, amended or repealed, or new
By-laws may be adopted by (a) vote of a majority of the Outstanding Shares
voting in person or by proxy at a meeting of Shareholders and entitled to vote
or (b) by the Trustees; provided, however, that no By-law may be amended,
adopted or repealed by the Trustees if such amendment, adoption or repeal
requires, pursuant to law, the Declaration of Trust or these By-laws, a vote of
the Shareholders.
END OF BY-LAWS
6
<PAGE> 1
Exhibit 99(d)
KELMOORE STRATEGIC TRUST
INVESTMENT ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
This Investment Advisory Agreement is made as of this 22nd day of March, 1999,
by and between Kelmoore Strategic Trust, a Delaware business trust (the
"Trust"), on behalf of each series of the Trust listed in Schedule I attached
hereto, as such may be amended from time to time (individually, a "Fund" and
collectively, the "Funds") and Kelmoore Investment Company, Inc., a California
corporation (the "Adviser").
WHEREAS, the Trust is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended;
WHEREAS, the Trust desires to retain the Adviser to render investment advisory
and other services to the Funds pursuant to the terms and provisions of this
Agreement, and the Adviser is interested in furnishing said services;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained in this Agreement, the parties hereto agree as follows:
SECTION 1. APPOINTMENT.
The Trust hereby appoints the Adviser to act as investment adviser to the
Funds for the period and on the terms and subject to the conditions set
forth in this Agreement. The Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
Additional series of the Trust may from time to time be added to those
covered by this Agreement by the parties executing a new Schedule I that
shall become effective upon its execution and shall supersede any Schedule I
having an earlier date.
SECTION 2. INVESTMENT ADVISORY AND OTHER SERVICES.
Subject to the supervision of the Trust's Trustees (the "Trustees"), the
Adviser shall provide a continuous investment program for each of the Funds,
including investment, research and management with respect to all securities
and investments and cash equivalents in the Funds. The Adviser shall
determine from time to time what securities and other investments will be
purchased, retained or sold by the Trust with respect to the Funds. The
Adviser shall provide the services under this Agreement in accordance with
each of the Fund's investment objectives, policies, and restrictions as
stated in such Fund's most current Prospectus and Statement of Additional
Information, including all amendments or supplements thereto, and in such
resolutions of the Trustees as may be adopted from time to time. The Adviser
further agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to any fiduciary accounts for which it has
investment responsibilities;
- --------------------------------------------------------------------------------
1
<PAGE> 2
(b) will conform with all applicable rules and regulations of the U.S.
Securities and Exchange Commission (the "Commission") and, in addition,
will conduct its activities under this Agreement in accordance with any
applicable regulations of any governmental authority pertaining to the
investment advisory activities of the Adviser;
(c) will place orders pursuant to its investment determinations for the
Funds either directly with the issuer or with any broker or dealer,
including the Adviser. In placing orders with brokers and dealers, the
Adviser will attempt to obtain and is hereby directed to obtain prompt
execution of orders in an effective manner at the most favorable price.
Consistent with this obligation, the Adviser may, in its discretion,
purchase and sell portfolio securities to and from brokers and dealers
who provide the Adviser with brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934).
Subject to the review of the Trustees from time to time with respect to
the extent and continuation of this policy, the Adviser is authorized to
pay a broker or dealer who provides such brokerage and research services
a commission for effecting a securities transaction for any of the Funds
which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, the
Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by
such broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Adviser with respect
to the accounts as to which it exercises investment discretion. On
occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of one or more of the Funds as well as of other
clients, the Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in
order to obtain the most favorable price or lower brokerage commissions
and the most efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Adviser in the manner it considers to
be the most equitable and consistent with its fiduciary obligations to
the Funds and to such other clients. In placing orders with the Adviser
for the Trust, the Adviser will comply with the procedures adopted by
the Trust pursuant to Rule 17e-1 under the 1940 Act.
(d) will maintain all books and records with respect to the securities
transactions of the Funds and will furnish the Trust's Board of Trustees
such periodic and special reports with respect to each Fund's investment
activities as the Trustees may reasonably request; and
(e) will advise and assist the officers of the Trust in taking such
actions as may be necessary or appropriate to carry out the decisions of
the Trustees and of the appropriate committees of the Trustees regarding
the conduct of the business of the Funds.
SECTION 3. EXPENSES.
During the term of this Agreement, the Adviser will pay all expenses
incurred by it in connection with its activities, duties and obligations
under this Agreement, other than the costs of securities (including
brokerage fees, if any) purchased for the Funds. The Adviser will also
furnish the Funds with office space and equipment necessary for the conduct
of the Funds' business.
- --------------------------------------------------------------------------------
2
<PAGE> 3
SECTION 4. COMPENSATION.
For the services provided and the expenses assumed pursuant to this
Agreement, each of the Funds will pay the Adviser and the Adviser will
accept as full compensation therefor the annual fee set forth on Schedule I
hereto. The obligations of the Funds to pay the above described fee to the
Adviser will begin as of the respective dates of the initial public sale of
shares in the Funds, including any shares sold or exchanged in connection
with a merger, consolidation or reorganization involving one or more of the
Funds. Such fee shall be paid monthly based upon each respective Fund's
average daily net assets calculated in the manner provided in the Prospectus
and Statement of Additional Information then in effect.
The fee shall be accrued daily by each Fund and paid to the Adviser within
five (5) business days after the end of each calendar month. If this
Agreement is terminated before the end of any month, the fee to the Adviser
shall be prorated for the portion of any month in which this Agreement is in
effect and shall be payable within ten (10) days after the date of
termination.
The Adviser may voluntarily waive fees or reimburse expenses at any time.
Any amounts waived or reimbursed by the Adviser are subject to reimbursement
by the Fund within the following three years, to the extent such
reimbursement by the Fund would not cause the Fund to exceed any current
expense limitation.
SECTION 5. LIMITATION OF LIABILITY.
The Adviser shall not be liable for any error of judgment or mistake of fact
or law or for any loss suffered by the Funds in connection with the
performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
SECTION 6. DURATION AND TERMINATION.
This Agreement shall become effective at the time the Trust's initial
Registration Statement under the Securities Act of 1933 with respect to the
shares of the Trust is declared effective by the Commission and shall remain
in effect for a period of two (2) years, unless sooner terminated as
hereinafter provided. This Agreement shall continue in effect thereafter for
additional periods not exceeding one (1) year so long as such continuation
is approved for each Fund at least annually by (i) the vote of the Trustees
or the vote of a majority of the outstanding voting securities of such Fund,
and (ii) the vote of a majority of the Trustees of the Trust who are not
parties to this Agreement nor interested persons thereof, cast in person at
a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated as to a
particular Fund at any time on sixty days' written notice, without the
payment of any penalty, by the Trust (by vote of the Trustees or by vote of
a majority of the outstanding voting securities of such Fund) or by the
Adviser. This Agreement will automatically terminate in the event of its
assignment.
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<PAGE> 4
Any notice under this Agreement shall be given in writing, addressed and
delivered or mailed to the other party at the principal office of such
party.
As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same
meanings as ascribed to such terms in the 1940 Act.
SECTION 7. NAME.
The word "Kelmoore" in the name of the Trust or the Funds is understood to
be used by the Trust with the Adviser's consent, and the Trust is hereby
granted a non-exclusive license to use the name "Kelmoore Strategic Trust"
and to use the word "Kelmoore" in any Fund's name provided that the Trust
and the Funds may use such name only so long as (i) the Adviser shall
continue to be retained by the Trust and the Funds as their adviser pursuant
to an investment advisory agreement between the Trust and the Adviser, as
from time to time amended or supplemented, or (ii) the Adviser shall
specifically consent in writing to such continued use. Any such use by the
Trust and the Funds shall in no way prevent the Adviser or any of its
successors or assigns from using or permitting the use of the name
"Kelmoore" alone or with any other word or business whether or not the same
directly or indirectly competes or conflicts with the Trust or its business
in any manner. To the extent permitted by the 1940 Act and the rules and
regulations thereunder, and Investment Company Act Release No. 5510, in the
event that the Adviser shall cease to be the adviser of the Trust and the
Funds, the Trust, upon the Adviser's written request, shall take such
further action as may be necessary to delete from its name and the name of
the Funds the word "Kelmoore" and thereafter (i) cease to use the name
"Kelmoore Strategic Trust" and omit the word "Kelmoore" from the Funds'
names or any name deceptively similar thereto or to "Kelmoore Investment
Company" in any way whatsoever, and (ii) for such period and in such manner
as may reasonably be required by you, on all letterheads and other material
designed to be read or used by salesmen, underwriters or investors, state in
a prominent position and prominent type that Kelmoore Investment Company,
Inc. ceased to be the adviser of the Trust and the Funds.
SECTION 8. ADVISER'S REPRESENTATIONS.
The Adviser hereby represents and warrants that it is willing, and possesses
all requisite legal authority, to provide the services contemplated by this
Agreement without violation of applicable laws and regulations.
SECTION 9. AMENDMENT OF THIS AGREEMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
SECTION 10. MISCELLANEOUS.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute,
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4
<PAGE> 5
rule or otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and shall be governed
by the laws of the State of California.
All persons contracting with or having any claim against the Trust or a
particular Fund shall look only to the assets of all Funds or such
particular Fund for payment under such contract or claim; and neither the
Trustees nor, when acting in such capacity, any of the Trust's shareholders,
officers, employees or agents, whether past, present or future, shall be
personally liable therefor.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
KELMOORE STRATEGIC TRUST KELMOORE INVESTMENT COMPANY, INC.
By: /s/ Matthew Kelmon By: /s/ Ralph M. Kelmon, Jr.
------------------------- -------------------------------------
Name: Matthew Kelmon Name: Ralph M. Kelmon, Jr.
------------------------- -------------------------------------
Title: President Title: President and Chief Executive Officer
------------------------- -------------------------------------
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5
<PAGE> 6
SCHEDULE I
Name of Fund Annual Fee
- ------------ ----------
KELMOORE STRATEGY COVERED OPTION FUND 1.00%
Dated: March 22, 1999
KELMOORE STRATEGIC TRUST KELMOORE INVESTMENT COMPANY, INC.
By: /s/ Matthew Kelmon By: /s/ Ralph M. Kelmon, Jr.
------------------------- -------------------------------------
Name: Matthew Kelmon Name: Ralph M. Kelmon, Jr.
------------------------- -------------------------------------
Title: President Title: President and Chief Executive Officer
------------------------- -------------------------------------
- --------------------------------------------------------------------------------
6
<PAGE> 1
Exhibit 99(e)
KELMOORE STRATEGIC TRUST
DISTRIBUTION AGREEMENT
- --------------------------------------------------------------------------------
This Distribution Agreement (the "Agreement") is made as of this 22nd day of
March, 1999, by and between Kelmoore Strategic Trust, a Delaware business trust
(the "Trust"), on behalf of each series of the Trust listed in Schedule I
attached hereto, as may be amended from time to time (individually, a "Fund"
and, collectively, the "Funds") and Kelmoore Investment Company, Inc., a
California corporation (the "You").
SECTION 1. GENERAL DUTIES AS DISTRIBUTOR OF FUND SHARES.
It is hereby agreed that you shall act as principal distributor for each
series of the Trust set forth on Schedule I and any other series of the
Trust as the parties may agree from time to time. Each Fund may be
authorized to issue multiple classes of shares pursuant to Rule 18f-3 under
the Investment Company Act of 1940, as amended (the "1940 Act"). As
Distributor, you will have the exclusive right to purchase, as principal,
from each Fund, shares of each class authorized and issued by the Fund and
it is further agreed that during the term of this Agreement, you will use
your best efforts to solicit or otherwise cause sales of the shares of each
Fund and any authorized class of the Funds' shares which are registered or
qualified for sale. You agree, as agent for each Fund, to repurchase, and
accept for redemption, the shares of each class authorized and issued by the
Fund; whenever the officers of the Trust deem it advisable for the
protection of shareholders, they may suspend or cancel such authority with
respect to one or more of the Funds. In the performance of these duties you
shall be guided by the requirements of this Agreement, the applicable
provisions of the Trust's Agreement and Declaration of Trust, By-laws, and
applicable federal and state law, all as amended and/or supplemented from
time to time, and each Fund's Prospectus and Statement of Additional
Information, which is from time to time in effect under the Trust's
Registration Statement filed with the U.S. Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "1933 Act"), and the 1940 Act.
SECTION 2. DEALERS.
You may, as principal, solicit qualified dealers for orders to purchase
shares of the Funds and may enter into dealer Agreements with any such
dealers, the form thereof to be determined by you.
SECTION 3. SALES LITERATURE AND ADVERTISEMENTS.
All sales literature and advertisements used by you in connection with the
sale of the Trust's shares must be approved in advance by a Trust officer.
In connection with the sale or arranging for the sale of the Trust's shares,
you are authorized to give only such information and to make only such
statements or representations as are contained in each Fund's Prospectus in
effect under the Trust's Registration Statement, or in sales literature or
advertisements approved by the Trust.
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1
<PAGE> 2
SECTION 4. LIMITATION UPON INVESTMENT IN THE TRUST
You shall not accept any initial or subsequent investment in shares of a
Fund, except as described in the Fund's then-current Prospectus.
SECTION 5. OFFERING PRICE. NET ASSET VALUE PER SHARE.
Shares of each Fund sold under this Agreement shall be sold only at the
offering price in effect at the time of such sale, as described in the
then-current Prospectus and Statement of Additional Information of each
Fund, and each Fund shall receive not less than the full net asset value
thereof. Any front-end sales charge payable upon purchases and any
contingent deferred sales charge ("CDSC") payable upon redemptions shall be
retained by you, it being understood that such amounts will not exceed those
set forth in each Fund's then-current Prospectus. You may re-allow to
dealers all or any part of these sales charges.
Any reference to "net asset value per share" shall refer to each Fund's net
asset value per share computed in accordance with the Trust's Agreement and
Declaration of Trust, each Fund's then-current Prospectus and Statement of
Additional Information and the instructions of the Trustees, all as amended
from time to time. The Trust or its agent will advise you as promptly as
practicable of each Fund's net asset value per share on each day on which it
is determined.
SECTION 6. DUTIES UPON SALE OR REDEMPTION OF SHARES OF THE TRUST.
You shall remit to the Trust's custodian the net asset value per share of
all shares of each Fund sold by you. Each Fund will, as promptly as
practicable, cause the account of the purchaser to be credited with the
number of shares purchased. The Trust will not issue share certificates.
You shall process or cause to be processed requests received from each
Fund's shareholders for redemption of its shares, in the manner prescribed
in the Fund's then-current Prospectus and Statement of Additional
Information. Shares shall be redeemed at their net asset value per share
next computed after receipt of the redemption request, subject to any
applicable redemption fee as set forth in the Fund's then current
Prospectus. You shall arrange for payment to such shareholders from each
Fund's account with the custodian.
You shall reimburse the respective Fund for any loss caused by the failure
of a shareholder to confirm in writing any purchase or redemption order
accepted by you. In the event that orders for the purchase or redemption of
shares of a Fund are placed and subsequently canceled, you shall pay to that
Fund, on at least an annual basis, an amount equal to the losses (net of any
gains) realized by the Fund as a result of such cancellations.
SECTION 7. INFORMATION RELATING TO THE TRUST.
The Trust or its agent will furnish you with a certified copy of all
financial statements and a signed copy of each report prepared by its
independent public accountants, and will cooperate fully with you in your
efforts to sell the Funds' shares, and in the performance by you of all of
your duties under this Agreement.
SECTION 8. FILING OF REGISTRATION STATEMENTS.
The Trust or its agent will from time to time file (and furnish you with
copies of) such registration statements, amendments and supplements thereto,
and reports or other documents
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2
<PAGE> 3
as may be required under the 1933 Act, the 1940 Act, or the laws of the
states in which you desire to sell shares of the Funds.
SECTION 9. MULTIPLE CAPACITIES.
Nothing contained in this Agreement shall be deemed to prohibit you from
acting, and being separately compensated for acting, in one or more
capacities on behalf of the Trust, including, but not limited to, the
capacities of adviser, administrator, broker and distributor. The Trust
understands that you may act in one or more such capacities on behalf of
other investment companies and customers. You shall give the Trust equitable
treatment under the circumstances in supplying services in any capacity, but
the Trust recognizes that it is not entitled to receive preferential
treatment from you as compared with the treatment given to any other
investment company or customer. Whenever you shall act in multiple
capacities on behalf of the Trust, you shall maintain the appropriate
separate account and records for each such capacity.
SECTION 10. PAYMENT OF FEES AND EXPENSES.
You shall be entitled to receive for your services as distributor the fees
payable in accordance with any plans adopted by the Funds (or class of
shares of the respective Funds) pursuant to Rule 12b-1 under the 1940 Act.
The foregoing shall not be deemed to limit your right to receive and retain
any front-end sales charges or CDSC's referred to in Section 5. hereof.
SECTION 11. LIABILITY OF THE DISTRIBUTOR.
You shall be liable for your own acts and omissions caused by your willful
misfeasance, bad faith, or gross negligence in the performance of your
duties, or by your reckless disregard of your obligations under this
Agreement, and nothing herein shall protect you against any such liability
to the Trust or its shareholders. Subject to the first sentence of this
Section, you shall not be liable for any action taken or omitted on advice,
obtained in good faith, of counsel, provided such counsel is satisfactory to
the Trust.
SECTION 12. TERMINATION OF AGREEMENT; ASSIGNMENT.
This Agreement may be terminated at any time, without the payment of any
penalty, on 60 days' written notice (i) by you; (ii) by the Trust, acting
pursuant to a resolution adopted by the non-interested Trustees; or (iii) by
the vote of the holders of the lesser of (1) 67% of the Trust's shares
present at a meeting if the holders of more than 50% of the outstanding
shares are present in person or represented by proxy, or (2) more than 50%
of the outstanding shares of the Trust. This Agreement shall automatically
terminate in the event of its assignment. Termination shall not affect the
rights of the parties which have accrued prior thereto.
SECTION 13. DURATION.
Unless sooner terminated, this Agreement shall continue in effect for one
year from the date herein above first written, and from year to year
thereafter until terminated, provided that the continuation of this
Agreement and the terms hereof are specifically approved annually in
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3
<PAGE> 4
accordance with the requirements of the 1940 Act as modified or superseded
by any rule, regulation, order or interpretive position of the Commission.
SECTION 14. DEFINITIONS.
The terms "assignment" and "interested person" when used in this Agreement
shall have the meanings given such terms in the 1940 Act.
SECTION 15. CONCERNING APPLICABLE PROVISIONS OF LAW, ETC.
This Agreement shall be subject to all applicable provisions of law,
including, without being limited to, the applicable provisions of the 1940
Act, the 1933 Act, and the Securities Exchange Act of 1934, as amended; and
to the extent that any provisions of this Agreement are in conflict with
such laws, the latter shall control.
This Agreement is executed and delivered in California, and the laws of the
State of California shall govern the construction, validity and effect of
this Agreement.
SECTION 16. MISCELLANEOUS.
The obligations of the Trust and each Fund are not personally binding upon,
nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust or any Fund, but
only the relevant Fund's property shall be bound. No Fund shall be liable
for the obligations of any other Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
KELMOORE STRATEGIC TRUST KELMOORE INVESTMENT COMPANY, INC.
By: /s/ Matthew Kelmon By: /s/ Ralph M. Kelmon, Jr.
------------------------- -------------------------------------
Name: Matthew Kelmon Name: Ralph M. Kelmon, Jr.
------------------------- -------------------------------------
Title: President Title: President and Chief Executive Officer
------------------------- -------------------------------------
- --------------------------------------------------------------------------------
4
<PAGE> 5
SCHEDULE A
Kelmoore Strategic Trust:
Kelmoore Strategy Covered Option Fund
- --------------------------------------------------------------------------------
5
<PAGE> 1
Exhibit 99(g)(1)
CUSTODY AGREEMENT
Agreement made as of this 22nd day of March, 1999, between KELMOORE STRATEGIC
TRUST, a Delaware business trust organized and existing under the laws of the
State of Delaware, having its principal office and place of business at 2471 E.
Bayshore Road, Palo Alto, California 94303 (hereinafter called the "Trust"), and
THE BANK OF NEW YORK, a New York corporation authorized to do a banking
business, having its principal office and place of business at One Wall Street,
New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
WHEREAS, pursuant to the Services Agreement (as hereinafter defined) between
First Data Investors Services Group ("FDISG") and the Trust, FDISG (a) has
agreed to perform certain administrative functions which may include the
functions of administrator, transfer agent and accounting agent and (b) has been
appointed by the Trust to act as its agent in respect of certain transactions
contemplated in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth,
the Trust and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
1. "Administrator" shall mean FDISG and such successors or permitted assigns as
may succeed and perform its duties under the Services Agreement.
2. "Services Agreement" shall mean that certain separate agreement entitled
"Services Agreement" dated as of March , 1999 between the Trust and FDISG.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry system
for United States and federal agency securities, its successor or successors and
its nominee or nominees.
4. "Call Option" shall mean an exchange traded option with respect to Securities
other than Stock Index Options entitling the holder, upon timely exercise and
payment of the exercise price, as specified therein, to purchase from the writer
thereof the specified underlying Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to the Custodian
which is actually received by the Custodian and signed on behalf of the Trust by
any two Officers and, provided the Custodian has received from the Trust
resolutions substantially in the form of Exhibit D hereto, the term Certificate
shall also include Instructions communicated to the Custodian.
6. "Clearing Member" shall mean a registered broker-dealer which is a clearing
member under the rules of O.C.C. and a member of a national securities exchange
qualified to act as a custodian, or any broker-dealer reasonably believed by the
Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated which is
specifically allocated to a Series and pledged to the Custodian as security for,
and in consideration of, the Custodian's issuance of (a) any Put Option
guarantee letter or similar document described in paragraph 3 of Article V
herein, or (b) any receipt described in Article V herein.
8. "Covered Call Option" shall mean an exchange traded option entitling the
holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
which are owned by the writer thereof and subject to appropriate restrictions.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing
agency registered with the Securities and Exchange Commission, its successor or
successors and its nominee or nominees. The term "Depository" shall further mean
and include any other person authorized to act as a depository under the
<PAGE> 2
Investment Company Act of 1940, its successor or successors and its nominee or
nominees, specifically identified in a certified copy of a resolution of the
Trust's Trustees specifically approving deposits therein by the Custodian.
10. "Instructions" shall mean instructions communications transmitted by
electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission signed by an Officer and tested telex.
11. "Margin Account" shall mean a segregated account in the name of a broker,
dealer, or Clearing Member, or in the name of the Trust for the benefit of a
broker, dealer, or Clearing Member, or otherwise, in accordance with an
agreement between the Trust, the Custodian and a broker, dealer, or Clearing
Member (a "Margin Account Agreement"), separate and distinct from the custody
account, in which certain Securities and/or money of the Trust shall be
deposited and withdrawn from time to time in connection with such transactions
as the Trust may from time to time determine. Securities held in the Book-Entry
System or the Depository shall be deemed to have been deposited in, or withdrawn
from, a Margin Account upon the Custodian's effecting an appropriate entry in
its books and records.
12. "Money Market Security" shall be deemed to include, without limitation, debt
obligations issued or guaranteed as to interest and principal by the government
of the United States or agencies or instrumentalities thereof, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to the same and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale.
13. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
14. "Officers" shall be deemed to include the President, any Vice President, the
Secretary, the Clerk, the Treasurer, the Controller, any Assistant Secretary,
any Assistant Clerk, any Assistant Treasurer, and any other person or persons,
including officers or employees of the Administrator, whether or not any such
other person is an officer of the Trust, duly authorized by the Trustees of the
Trust to execute any Certificate, instruction, notice or other instrument on
behalf of the Trust and listed in the Certificate annexed hereto as Appendix A
or such other Certificate as may be received by the Custodian from time to time.
15. "Option" shall mean a Covered Call Option and/or a Put Option.
16. "Oral Instructions" shall mean verbal instructions actually received by the
Custodian from an Officer or from a person reasonably believed by the Custodian
to be an Officer.
17. "Put Option" shall mean an exchange traded option with respect to Securities
other than Stock Index Options, entitling the holder, upon timely exercise and
tender of the specified underlying Securities, to sell such Securities to the
writer thereof for the exercise price.
18. "Security" shall be deemed to include, without limitation, Money Market
Securities, Call Options, Put Options, Repurchase Agreements, common stocks and
other securities having characteristics similar to common stocks, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase, sell or subscribe for the same, or evidencing or representing any
other rights or interest therein, or any property or assets, provided the same
are primarily cleared and settled within the United States.
19. "Series" shall mean the various portfolios, if any, of the Trust as
described from time to time in the current and effective prospectus for the
Trust and listed on Appendix B hereto as amended from time to time.
<PAGE> 3
20. "Shares" shall mean the shares of beneficial interest of the Trust, each of
which is, in the case of a Trust having Series, allocated to a particular
Series.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Trust hereby constitutes and appoints the Custodian as custodian of the
Securities and money at any time owned by the Trust during the period of this
Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees to
perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and the Trust
will deliver or cause to be delivered to the Custodian all Securities and all
money owned by it, at any time during the period of this Agreement, and shall
specify with respect to such Securities and money the Series to which the same
are specifically allocated. The Custodian shall segregate, keep and maintain the
assets of the Series separate and apart. The Custodian will not be responsible
for any Securities and money not actually received by it. The Custodian will be
entitled to reverse any credits made on the Trust's behalf where such credits
have been previously made and money is not finally collected. The Trust shall
deliver to the Custodian a certified resolution of the Board of Trustees of the
Trust, substantially in the form of Exhibit A hereto, approving, authorizing and
instructing the Custodian on a continuous and on-going basis to deposit in the
Book-Entry System, in accordance with Rule 17f-4 under the Investment Company
Act of 1940, as amended, all Securities eligible for deposit therein, regardless
of the Series to which the same are specifically allocated and to utilize the
Book-Entry System to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with settlements of
purchases and sales of Securities, and deliveries and returns of Securities
collateral. Prior to a deposit of Securities specifically allocated to a Series
in the Depository, the Trust shall deliver to the Custodian a certified
resolution of the Trustees of the Trust, substantially in the form of Exhibit B
hereto, approving, authorizing and instructing the Custodian on a continuous and
ongoing basis until instructed to the contrary by a Certificate actually
received by the Custodian to deposit in the Depository, in accordance with Rule
17f-4 under the Investment Company Act of 1940, as amended, all Securities
specifically allocated to such Series eligible for deposit therein, and to
utilize the Depository to the extent possible with respect to such Securities in
connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities and deliveries
and returns of Securities collateral. Securities and money deposited in either
the Book-Entry System or the Depository will be represented in accounts which
include only assets held by the Custodian for customers, including, but not
limited to, accounts in which the Custodian acts in a fiduciary or
representative capacity and will be specifically allocated on the Custodian's
books to the separate account for the applicable Series. Prior to the
Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Trust's Trustees, substantially in the form of Exhibit C hereto, approving,
authorizing and instructing the Custodian on a continuous and on-going basis,
until instructed to the contrary by a Certificate actually received by the
Custodian, to accept, utilize and act in accordance with such confirmations as
provided in this Agreement with respect to such Series.
<PAGE> 4
2. The Custodian shall establish and maintain separate accounts, in the name of
each Series, and shall credit to the separate account for each Series all money
received by it for the account of the Trust with respect to such Series. Money
credited to a separate account for a Series shall be disbursed by the Custodian
only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and address of the person to
whom the payment is to be made, the Series account from which payment is to be
made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses and liabilities
of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall furnish
the Administrator with confirmations and a summary, on a per Series basis, of
all transfers to or from the account of the Trust for a Series, either hereunder
or with any co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Trust for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Administrator with a detailed statement, on a per Series basis, of the
Securities and money held by the Custodian for the Trust.
4. Except as otherwise provided in paragraph 7 of this Article, all Securities
held by the Custodian hereunder, which are issued or issuable only in bearer
form, except such Securities as are held in the Book-Entry System, shall be held
by the Custodian in that form; all other Securities held hereunder may be
registered in the name of the Trust, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from time to time
determine, or in the name of the Book-Entry System or the Depository or their
successor or successors, or their nominee or nominees. The Trust agrees to
furnish or cause to be furnished to the Custodian appropriate instruments to
enable the Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of the Book-Entry
System or the Depository any Securities which it may hold hereunder and which
may from time to time be registered in the name of the Trust. The Custodian
shall hold all such Securities specifically allocated to a Series which are not
held in the Book-Entry System or in the Depository in a separate account in the
name of such Series physically segregated at all times from those of any other
person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Trust hereunder in accordance with preceding paragraph 4:
(a) collect all income due or payable;
(b) present for payment and collect the amount payable upon such Securities
which are called, but only if either (i) the Custodian receives a written notice
of such call, or (ii) notice of such call appears in one or more of the
publications listed in Appendix C annexed hereto, which may be amended at any
time by the Custodian without the prior notification or consent of the Trust;
(c) present for payment and collect the amount payable upon all Securities which
mature;
(d) surrender Securities in temporary form for definitive Securities;
(e) execute, as custodian, any necessary declarations or certificates of
ownership under the Federal Income Tax Laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
<PAGE> 5
(f) hold directly, or through the Book-Entry System or the Depository with
respect to Securities therein deposited, for the account of a Series, all rights
and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian, directly or
through the use of the Book-Entry System or the Depository, shall:
(a) execute and deliver to such persons as may be designated in such Certificate
proxies, consents, authorizations, and any other instruments whereby the
authority of the Trust as owner of any Securities held by the Custodian
hereunder for the Series specified in such Certificate may be exercised;
(b) deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
conversion privilege and receive and hold hereunder specifically allocated to
such Series any cash or other Securities received in exchange;
(c) deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Series specified in
such Certificate, and take such other steps as shall be stated in such
Certificate to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or recapitalization of the
Trust; and
(e) present for payment and collect the amount payable upon Securities not
described in preceding paragraph 5(b) of this Article which may be called as
specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian shall
not be required to obtain possession of any instrument or certificate
representing any Option until after it shall have determined, or shall have
received a Certificate from the Trust stating, that any such instruments or
certificates are available. The Trust shall deliver to the Custodian such a
Certificate no later than the business day preceding the availability of any
such instrument or certificate. Prior to such availability, the Custodian shall
comply with Section 17(f) of the Investment Company Act of 1940, as amended, in
connection with the purchase, sale, settlement, closing-out or writing of
Options by making payments or deliveries specified in Certificates received by
the Custodian in connection with any such purchase, sale, writing, settlement or
closing-out upon its receipt from a broker or dealer of a statement or
confirmation reasonably believed by the Custodian to be in the form customarily
used by brokers or dealers with respect to such Options confirming that such
Security is held by such broker or dealer in book-entry form or otherwise, in
the name of the Custodian (or any nominee of the Custodian) as custodian for the
Trust, provided, however, that notwithstanding the foregoing, payments to or
deliveries from the Margin Account and payments with respect to Securities to
which a Margin Account relates, shall be made in accordance with the terms and
conditions of the Margin Account Agreement. Whenever any such instruments or
certificates are available, the Custodian shall, notwithstanding any provision
in this Agreement to the contrary, make payment for any Option for which such
instruments or such certificates are available only against the delivery to the
Custodian of such instrument or such certificate, and deliver any Option for
which such instruments or such certificates are available only against receipt
by the Custodian of payment therefor. Any such instrument or
<PAGE> 6
certificate delivered to the Custodian shall be held by the Custodian hereunder
in accordance with, and subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE TRUST OTHER THAN OPTIONS
1. Promptly after each purchase of Securities by the Trust, other than a
purchase of an Option, the Trust shall deliver or cause the Administrator to
deliver to the Custodian (i) with respect to each purchase of Securities which
are not Money Market Securities, a Certificate, and (ii) with respect to each
purchase of Money Market Securities, a Certificate or Oral Instructions,
specifying with respect to each such purchase: (a) the Series to which such
Securities are to be specifically allocated; (b) the name of the issuer and the
title of the Securities; (c) the number of shares or the principal amount
purchased and accrued interest, if any; (d) the date of purchase and settlement;
(e) the purchase price per unit; (f) the total amount payable upon such
purchase; (g) the name of the person from whom or the broker through whom the
purchase was made, and the name of the clearing broker, if any; and (h) the name
of the broker to whom payment is to be made. The Custodian shall, upon receipt
of Securities purchased by or for the Trust, pay to the broker specified in the
Certificate out of the money held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Trust, other than a sale of any
Option, the Trust shall deliver or cause the Administrator to deliver to the
Custodian (i) with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate or Oral Instructions, specifying with respect to each
such sale: (a) the Series to which such Securities were specifically allocated;
(b) the name of the issuer and the title of the Security; (c) the number of
shares or principal amount sold, and accrued interest, if any; (d) the date of
sale; (e) the sale price per unit; (f) the total amount payable to the Trust
upon such sale; (g) the name of the broker through whom or the person to whom
the sale was made, and the name of the clearing broker, if any; and (h) the name
of the broker to whom the Securities are to be delivered. The Custodian shall
deliver the Securities specifically allocated to such Series to the broker
specified in the Certificate against payment upon receipt of the total amount
payable to the Trust upon such sale, provided that the same conforms to the
total amount payable as set forth in such Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Whenever the Trust writes a Covered Call Option, the Trust shall deliver or
cause the Administrator to deliver to the Custodian a Certificate specifying
with respect to such Covered Call Option: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the title and number of
shares for which the Covered Call Option was written and which underlie the
same; (c) the expiration date; (d) the exercise price; (e) the premium to be
received by the Trust; (f) the date such Covered Call Option was written; and
(g) the name of the Clearing Member through whom the premium is to be received.
The Custodian shall deliver or cause to be delivered, in exchange for receipt of
the premium specified in the Certificate with respect to such Covered Call
Option, such receipts as are required in accordance with the customs prevailing
among Clearing Members dealing in Covered Call Options and shall impose, or
direct the Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
<PAGE> 7
right, upon prior written notification to the Trust, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
2. Whenever a Covered Call Option written by the Trust and described in the
preceding paragraph of this Article is exercised, the Trust shall deliver or
cause the Administrator to deliver to the Custodian a Certificate instructing
the Custodian to deliver, or to direct the Depository to deliver, the Securities
subject to such Covered Call Option and specifying: (a) the Series for which
such Covered Call Option was written; (b) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (c) the Clearing Member
to whom the underlying Securities are to be delivered; and (d) the total amount
payable to the Trust upon such delivery. Upon the return and/or cancellation of
any receipts delivered pursuant to paragraph 6 of this Article, the Custodian
shall deliver, or direct the Depository to deliver, the underlying Securities as
specified in the Certificate against payment of the amount to be received as set
forth in such Certificate.
3. Whenever the Trust writes a Put Option, the Trust shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to such Put Option: (a) the Series for which such Put Option was written; (b)
the name of the issuer and the title and number of shares for which the Put
Option is written and which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Trust; (f) the date such
Put Option is written; (g) the name of the Clearing Member through whom the
premium is to be received and to whom a Put Option guarantee letter is to be
delivered; and (h) the amount of cash and/or the amount and kind of Securities
specifically allocated to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making the deposits into the
Collateral Account specified in the Certificate, issue a Put Option guarantee
letter substantially in the form utilized by the Custodian on the date hereof,
and deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
4. Whenever a Put Option written by the Trust and described in the preceding
paragraph is exercised, the Trust shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying: (a) the Series to which such
Put Option was written; (b) the name of the issuer and title and number of
shares subject to the Put Option; (c) the Clearing Member from whom the
underlying Securities are to be received; (d) the total amount payable by the
Trust upon such delivery; and (e) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be withdrawn from the
Collateral Account for such Series. Upon the return and/or cancellation of any
Put Option guarantee letter or similar document issued by the Custodian in
connection with such Put Option, the Custodian shall pay out of the money held
for the account of the Series to which such Put Option was specifically
allocated the total amount payable to the Clearing Member specified in the
Certificate as set forth in such Certificate against delivery of such
Securities, and shall make the withdrawals specified in such Certificate.
5. Whenever the Trust purchases any Option identical to a previously written
Option described in paragraphs 1 or 3 of this Article in a transaction expressly
designated as a "Closing Purchase Transaction" in order to liquidate its
position as a writer of an Option, the Trust shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying with respect
to the Option being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the Series for which the Option was written; (c) the name of
the issuer and the title and number of shares subject to the Option, or, in the
<PAGE> 8
case of a Stock Index Option, the stock index to which such Option relates and
the number of Options held; (d) the exercise price; (e) the premium to be paid
by the Trust; (f) the expiration date; (g) the type of Option (put or call); (h)
the date of such purchase; (i) the name of the Clearing Member to whom the
premium is to be paid; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, or a specified
Margin Account, for such Series. Upon the Custodian's payment of the premium and
the return and/or cancellation of any receipt issued pursuant to paragraphs 1 or
3 of this Article with respect to the Option being liquidated through the
Closing Purchase Transaction, the Custodian shall remove, or direct the
Depository to remove, the previously imposed restrictions on the Securities
underlying the Call Option.
6. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Trust and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Trust pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account and the Margin Account
as may be specified in a Certificate received in connection with such
expiration, exercise, or consummation.
ARTICLE VI
CONCERNING MARGIN ACCOUNTS AND COLLATERAL ACCOUNTS
1. The Custodian shall make deliveries or payments from a Margin Account to the
broker, dealer, or Clearing Member in whose name, or for whose benefit, the
account was established as specified in the Margin Account Agreement.
2. Amounts received by the Custodian as payments or distributions with respect
to Securities deposited in any Margin Account shall be dealt with in accordance
with the terms and conditions of the Margin Account Agreement.
3. The Custodian shall have a continuing lien and security interest in and to
any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Trust within the scope of Article IX herein.
4. On each business day the Custodian shall furnish the Trust with a statement
with respect to each Margin Account in which money or Securities are held
specifying as of the close of business on the previous business day: (a) the
name of the Margin Account; (b) the amount and kind of Securities held therein;
and (c) the amount of money held therein. The Custodian shall make available
upon request to any broker or dealer specified in the name of a Margin Account a
copy of the statement furnished the Trust with respect to such Margin Account.
5. Promptly after the close of business on each business day in which cash
and/or Securities are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Administrator with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Trust of such statement, the Trust shall deliver or cause the
Administrator to deliver to the Custodian a Certificate specifying the then
market value of the Securities described in such statement. In the event such
then market value is indicated to be less than the Custodian's obligation with
respect to any outstanding Put Option guarantee letter or similar document, the
Trust shall promptly specify or cause the Administrator to promptly specify in a
<PAGE> 9
Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE VII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Trust shall deliver or cause the Administrator to deliver to the
Custodian a copy of the resolution of the Board of Trustees of the Trust,
certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant
Clerk, either (i) setting forth with respect to the Series specified therein the
date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the dividend agent and
any sub-dividend agent or co-dividend agent of the Trust on the payment date, or
(ii) authorizing with respect to the Series specified therein the declaration of
dividends and distributions on a daily basis and authorizing the Custodian to
rely on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be determined,
the amount payable per Share of such Series to the shareholders of record as of
that date and the total amount payable to the dividend agent on the payment
date.
2. Upon the payment date specified in such resolution, Oral Instructions or
Certificate, as the case may be, the Custodian shall pay out of the money held
for the account of each Series the total amount payable to the dividend agent
and any sub-dividend agent or co-dividend agent of the Trust with respect to
such Series.
ARTICLE VIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Trust shall sell any Shares, it shall deliver or cause the
Administrator to deliver to the Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and price; and
(b) the amount of money to be received by the Custodian for the sale of such
Shares and specifically allocated to the separate account in the name of such
Series.
2. Upon receipt of such money from the transfer agent, the Custodian shall
credit such money to the separate account in the name of the Series for which
such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes, if any, required
to be paid by the Trust in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Trust desires the Custodian to
make payment out of the money held by the Custodian hereunder in connection with
a redemption of any Shares, it shall deliver or cause the Administrator to
deliver to the Custodian a Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the transfer agent of an advice setting forth the Series
and number of Shares received by the transfer agent for redemption and that such
Shares are in good form for redemption, the Custodian shall make payment to the
transfer agent out of the money held in the separate account in the name of the
Series the total amount specified in the Certificate delivered pursuant to the
foregoing paragraph 4 of this Article.
<PAGE> 10
6. Notwithstanding the above provisions regarding the redemption of any Shares,
whenever any Shares are redeemed pursuant to any check redemption privilege
which may from time to time be offered by the Trust, the Custodian, unless
otherwise instructed by a Certificate, shall, upon receipt of an advice from the
Trust or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being redeemed.
ARTICLE IX
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on behalf of any
Series which results in an overdraft because the money held by the Custodian in
the separate account for such Series shall be insufficient to pay the total
amount payable upon a purchase of Securities specifically allocated to such
Series, as set forth in a Certificate or Oral Instructions, or which results in
an overdraft in the separate account of such Series for some other reason, or if
the Trust is for any other reason indebted to the Custodian with respect to a
Series, including any indebtedness to The Bank of New York under the Trust's
Cash Management and Related Services Agreement, if any, (except a borrowing for
investment or for temporary or emergency purposes using Securities as collateral
pursuant to a separate agreement and subject to the provisions of paragraph 2 of
this Article), such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Trust for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to 1/2% over Custodian's prime
commercial lending rate in effect from time to time, such rate to be adjusted on
the effective date of any change in such prime commercial lending rate but in no
event to be less than 6% per annum, or at such other rate per annum, if any, as
the Trust and the Custodian may agree upon in writing from time to time. In
addition, the Trust hereby agrees that the Custodian shall have a continuing
lien and security interest in and to any property specifically allocated to such
Series at any time held by it for the benefit of such Series or in which the
Trust may have an interest which is then in the Custodian's possession or
control or in possession or control of any third party acting in the Custodian's
behalf. The Trust authorizes the Custodian, in its sole discretion, at any time
to charge any such overdraft or indebtedness together with interest due thereon
against any balance of account standing to such Series' credit on the
Custodian's books. In addition, the Trust hereby covenants that on each business
day on which either it intends to borrow from a third party, or which next
succeeds a business day on which at the close of business the Trust had
outstanding such a borrowing, it shall prior to 9 a.m., New York City time,
advise the Custodian, in writing, of each such borrowing, shall specify the
Series to which the same relates, and shall not incur any indebtedness not so
specified other than from the Custodian.
2. The Trust will cause to be delivered to the Custodian by any bank (including,
if the borrowing is pursuant to a separate agreement, the Custodian) from which
it borrows money for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for such borrowings, a
notice or undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Trust against delivery of a
stated amount of collateral. The Trust shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a) the Series to
which such borrowing relates; (b) the name of the bank, (c) the amount and terms
of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Trust, or other loan agreement,
(d) the time and date, if known, on which the loan is to be entered into, (e)
<PAGE> 11
the date on which the loan becomes due and payable, (f) the total amount payable
to the Trust on the borrowing date, (g) the market value of Securities to be
delivered as collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal amount of any particular
Securities, and (h) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan is in
conformance with the Investment Company Act of 1940 and the Trust's prospectus.
The Custodian shall deliver on the borrowing date specified in a Certificate the
specified collateral and the executed promissory note, if any, against delivery
by the lending bank of the total amount of the loan payable, provided that the
same conforms to the total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein given the
lending bank by virtue of any promissory note or loan agreement. The Custodian
shall deliver such Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in this
paragraph. The Trust shall cause all Securities released from collateral status
to be returned directly to the Custodian, and the Custodian shall receive from
time to time such return of collateral as may be tendered to it. In the event
that the Trust fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of any particular
Securities to be delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any Securities.
ARTICLE X
INSTRUCTIONS
1. With respect to any software provided by the Custodian to the Trust in order
for the Trust to transmit Instructions to the Custodian (the "Software"), the
Custodian grants to the Trust a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Trust shall use the Software solely for its own internal and
proper business purposes, and not in the operation of a service bureau, and
agrees not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of the Custodian. The Trust acknowledges that the
Custodian and its suppliers have title and exclusive proprietary rights to the
Software, including any trade secrets or other ideas, concepts, know how,
methodologies, or information incorporated therein and the exclusive rights to
any copyrights, trademarks and patents (including registrations and applications
for registration of either) or statutory or legal protections available with
respect thereof. The Trust further acknowledges that all or a part of the
Software may be copyrighted or trademarked (or a registration or claim made
therefor) by the Custodian or its suppliers. The Trust shall not take any action
with respect to the Software inconsistent with the foregoing acknowledgments,
nor shall the Trust attempt to decompile, reverse engineer or modify the
Software. The Trust may not copy, sell, lease or provide, directly or
indirectly, any of the Software or any portion thereof to any other person or
entity without the Custodian's prior written consent. The Trust may not remove
any statutory copyright notice, or other notice including the software or on any
media containing the Software. The Trust shall reproduce any such notice on any
reproduction of the Software and shall add statutory copyright notice or other
notice to the Software or media upon the Bank's request. Custodian agrees to
provide reasonable training, instruction manuals and access to Custodian's "help
desk" in connection with the Trust's user support necessary to use of the
Software. At the Trust's request, Custodian agrees to permit reasonable testing
of the Software by the Trust.
<PAGE> 12
2. The Trust shall obtain and maintain at its own cost and expense all equipment
and services, including but not limited to communications services, necessary
for it to utilize the Software and transmit Instructions to the Custodian. The
Custodian shall not be responsible for the reliability, compatibility with the
Software or availability of any such equipment or services or the performance or
nonperformance by any nonparty to this Custody Agreement.
3. The Trust acknowledges that the Software, all data bases made available to
the Trust by utilizing the Software (other than data bases relating solely to
the assets of the Trust and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Trust shall keep the Information
confidential by using the same care and discretion that the Trust uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Trust shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Trust distributed to third parties. The provisions of this Article shall not
affect the copyright status of any of the Information which may be copyrighted
and shall apply to all Information whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own expense, the Software
from time to time without prior notice and the Trust shall install new releases
of the Software as the Custodian may direct. The Trust agrees not to modify or
attempt to modify the Software without the Custodian's prior written consent.
The Trust acknowledges that any modifications to the Software, whether by the
Trust or the Custodian and whether with or without the Custodian's consent,
shall become the property of the Custodian.
5. The Custodian and its manufacturers and suppliers make no warranties or
representations of any kind with regard to the Software or the method(s) by
which the Trust may transmit Instructions to the Custodian, express or implied,
including but not limited to any implied warranties of merchantability or
fitness for a particular purpose.
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED STATES
LAW. THE TRUST AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL, DIVERT,
TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO
ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE TRUST OUTSIDE
THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN
ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S.
LAWS PROHIBITED. The Trust hereby authorizes Custodian to report its name and
address to government agencies to which Custodian is required to provide such
information by law.
7. Where the method for transmitting Instructions by the Trust involves an
automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Trust may
not claim that such Instructions were received by the Custodian, and the Trust
shall deliver a Certificate by some other means.
8. (a) The Trust agrees that where it delivers to the Custodian Instructions
hereunder, it shall be the Trust's sole responsibility to ensure that only
persons duly authorized by the Trust transmit such Instructions to the
Custodian. The Trust will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the Custodian
to act in accordance with and rely upon Instructions received by it pursuant
hereto.
<PAGE> 13
(b) The Trust hereby represents, acknowledges and agrees that it is fully
informed of the protections and risks associated with the various methods of
transmitting Instructions to the Custodian and that there may be more secure
methods of transmitting instructions to the Custodian than the method(s)
selected by the Trust. The Trust hereby agrees that the security procedures (if
any) to be followed in connection with the Trust's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
9. The Trust hereby represents, warrants and covenants to the Custodian that
this Agreement has been duly approved by a resolution of its Board of Trustees,
and that its transmission of Instructions pursuant hereto shall at all times
comply with the Investment Company Act.
10. The Trust shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the business day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Trust
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Trust's ability to send Instructions.
11. Custodian will indemnify and hold harmless the Trust with respect to any
liability, damages, loss or claim incurred by or brought against Trust by reason
any claim or infringement against any patent, copyright, license or other
property right arising out or by reason of the Trust's use of the Software in
the form provided under this Section. Custodian at its own expense will defend
such action or claim brought against Trust to the extent that it is based on a
claim that the Software in the form provided by Custodian infringes any patents,
copyrights, license or other property right, provided that Custodian is provided
with reasonable written notice of such claim, provided that the Trust has not
settled, compromised or confessed any such claim without the Custodian's written
consent, in which event Custodian shall have no liability or obligation
hereunder, and provided Trust cooperates with and assists Custodian in the
defense of such claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result of any claim of
infringement against any patent, copyright, license or other property right,
Custodian is enjoined from using the Software, or if Custodian believes that the
System is likely to become the subject of a claim of infringement, Custodian at
its option may in its sole discretion either (a) at its expenses procure the
right for the Trust to continue to use the Software, or (b), replace or modify
the Software so as to make it non-infringing, or (c) discontinue the license
granted herein upon written notice to the Trust.
ARTICLE XI
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided neither the Custodian nor its nominee shall be
liable for any loss or damage, including reasonable counsel fees, resulting from
its action or omission to act or otherwise, either hereunder or under any Margin
Account Agreement, except for any such loss or damage arising out of its own
negligence or willful misconduct. The Custodian agrees to indemnify and hold
harmless the Trust and Trust's Trustees and officers to the extent described
below against any loss as a result of any breach or violation of this Agreement
by the Custodian or its officers, employees and agents or its nominees,
resulting from their negligence or willful misconduct. The Custodian may, with
respect to questions of law arising hereunder or under any Margin Account
Agreement, apply for and obtain the advice and opinion of counsel to the Trust,
<PAGE> 14
or of its own counsel, at the expense of the Trust, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the Trust for any loss
or damage resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the part of the
Custodian or any of its employees or agents. Notwithstanding the foregoing, or
any other provision contained in this Agreement, in no event shall the Custodian
be liable to the Trust, its Trustees or officers, or any third party, for
special, indirect or consequential damages, or lost profits or loss of business,
arising under or in connection with this Agreement, even if previously informed
of the possibility of such damages and regardless of the form of action.
2. Without limiting the generality of the foregoing, the Custodian shall be
under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased, sold, or written by
or for the Trust, the legality of the purchase, sale or writing thereof, or the
propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or the propriety of
the amount to be received or paid therefor;
(c) the legality of the declaration or payment of any dividend by the Trust;
(d) the legality of any borrowing by the Trust using Securities as collateral;
(e) the sufficiency or value of any amounts of money and/or Securities held in
any Margin Account or Collateral Account in connection with transactions by the
Trust. In addition, the Custodian shall be under no duty or obligation to see
that any broker, dealer or Clearing Member makes payment to the Trust of any
variation margin payment or similar payment which the Trust may be entitled to
receive from such broker, dealer or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer or Clearing Member is the
amount the Trust is entitled to receive, or to notify the Trust of the
Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the Custodian of,
any money, whether or not represented by any check, draft, or other instrument
for the payment of money, received by it on behalf of the Trust until the
Custodian actually receives and collects such money directly or by the final
crediting of the account representing the Trust's interest at the Book-Entry
System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice from
the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Trust of an overdue amount on Securities held in the Depository the
Custodian shall make a claim against the Depository on behalf of the Trust,
except that the Custodian shall not be under any obligation to appear in,
prosecute or defend any action, suit or proceeding in respect to any Securities
held by the Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all expense and liability
be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take action to
effect collection of any amount due to the Trust from the transfer agent of the
Trust nor to take any action to effect payment or distribution by the transfer
agent of the Trust of any amount paid by the Custodian to the transfer agent of
the Trust in accordance with this Agreement.
<PAGE> 15
6. The Custodian shall not be under any duty or obligation to take action to
effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may appoint one or more banking institutions as Depository or
Depositories, as Sub-Custodian or Sub-Custodians, or as Co-Custodian or
Co-Custodians of Securities and money at any time owned by the Trust, upon such
terms and conditions as may be approved in a Certificate or contained in an
agreement executed by the Custodian, the Trust and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to ascertain
whether any Securities at any time delivered to, or held by, it for the account
of the Trust and specifically allocated to a Series are such as properly may be
held by the Trust or such Series under the provisions of its then current
prospectus, or (b) to ascertain whether any transactions by the Trust, whether
or not involving the Custodian, are such transactions as may properly be engaged
in by the Trust.
9. The Trust shall pay to the Administrator fees for custodian services
(including custodian services rendered hereunder by the Custodian) in accordance
with the Service Agreement. The Custodian's payment for services rendered
hereunder, including reimbursement for out-of-pocket expenses (collectively, its
"Compensation"), is set forth in a separate agreement between the Custodian and
the Administrator. The Trust represents that the Administrator has agreed to pay
such Compensation promptly upon receipt of statements therefor, and hereby
directs the Custodian to (i) send all statements for Compensation to its
attention care of the Administrator at the following address: FDISG Services,
Inc., 3200 Horizon Drive, King of Prussia, PA 19406-0903, Attention: Mr. Elmer
Gardner, Senior Vice President, and (ii) accept all payments made by the
Administrator in the Trust's name as if such payments were made directly by the
Trust. Should the Administrator fail to pay or remit such Compensation to the
Custodian within 20 days of the date the same is due and payable, Custodian
shall notify the Trust. If such payment or remittance is not received from the
Administrator within 15 days of such notice, then the Custodian will be entitled
to debit the custody account of the appropriate Series directly for such
Compensation.
10. The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing received by the Custodian and reasonably believed by
the Custodian to be a Certificate. The Custodian shall be entitled to rely upon
any Oral Instructions actually received by the Custodian. The Trust agrees to
forward or cause the Administrator to forward to the Custodian a Certificate or
facsimile thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to the Custodian.
The Trust agrees that the fact that such confirming instructions are not
received by the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby authorized by the
Trust. The Trust agrees that the Custodian shall incur no liability to the Trust
in acting upon Oral Instructions given to the Custodian hereunder concerning
such transactions provided such instructions reasonably appear to have been
received from an Officer.
11. The Custodian shall be entitled to rely upon any instrument, instruction or
notice received by the Custodian and reasonably believed by the Custodian to be
given in accordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing, the Custodian shall
be under no duty to inquire into, and shall not be liable for, the
<PAGE> 16
accuracy of any statements or representations contained in any such instrument
or other notice including, without limitation, any specification of any amount
to be paid to a broker, dealer or Clearing Member.
12. The books and records pertaining to the Trust which are in the possession of
the Custodian shall be the property of the Trust. Such books and records shall
be prepared and maintained as required by the Investment Company Act of 1940, as
amended, and other applicable securities laws and rules and regulations. The
Trust, or the Trust's authorized representatives, shall have access to such
books and records during the Custodian's normal business hours. Upon the
reasonable request of the Trust, copies of any such books and records shall be
provided by the Custodian to the Trust or the Trust's authorized representative,
and the Trust shall reimburse the Custodian its expenses of providing such
copies. Upon reasonable request of the Trust, the Custodian shall provide in
hard copy or on micro-film, whichever the Custodian elects, any records included
in any such delivery which are maintained by the Custodian on a computer disc,
or are similarly maintained, and the Trust shall reimburse the Custodian for its
expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Trust with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
the Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Trust may reasonably request from time to time.
14. The Trust agrees to indemnify the Custodian against and save the Custodian
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or non-payment of checks
pursuant to paragraph 6 of Article VIII as part of any check redemption
privilege program of the Trust, except for any such liability, claim, loss and
demand arising out of the Custodian's own negligence or willful misconduct.
Should the Trust fail to pay or remit to the Custodian amounts to which the
Custodian is actually entitled under this paragraph 14 within 20 days of the
date the same is due and payable, the Custodian shall notify the Trust. If such
payment or remittance is not received from the Trust within 15 days of such
notice, then the Custodian will be entitled to debit the custody account of the
appropriate Series directly for such amounts. For any legal proceeding giving
rise to the indemnification set forth above in this paragraph, the Trust shall
be entitled to defend or prosecute any claim in the name of the Custodian at its
own expense and through counsel of its own choosing reasonably acceptable to the
Custodian if it gives written notice to the Custodian within ten (10) business
days of receiving notice from Custodian of such claim. Notwithstanding the
foregoing, the Custodian may participate in the litigation at its own expense
and with counsel of its own choosing.
15. Subject to the foregoing provisions of this Agreement, the Custodian may
deliver and receive Securities, and receipts with respect to such Securities,
and arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Trust assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to Certificates or instructions of the Trust or the
Administrator which responsibility and liability shall continue until final
payment in full has been received by the Custodian.
16. In the event the Custodian is advised by the Trust that the Trust is no
longer utilizing the services of the Administrator, then the Custodian shall
furnish or give to the Trust the statements or notices described above as to be
furnished or given to the Administrator.
<PAGE> 17
17. The Custodian shall have no duties or responsibilities whatsoever except
such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian. Without limiting the generality of the foregoing, the
Custodian shall have no duties or responsibilities by reason of any terms or
provisions in the Services Agreement, and if such Services Agreement shall cease
to be in effect the Custodian shall have no additional duties hereunder.
ARTICLE XII
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to the
other party a notice in writing specifying the date of such termination, which
shall be not less than ninety (90) days after the date of giving of such notice,
provided, however, that if such notice is sent by the Trust and recites that it
is being given contemporaneously with a termination of the Services Agreement,
such notice may specify any date of termination selected by the Trust. In the
event such notice is given by the Trust, it shall be accompanied by a copy of a
resolution of the Board of Trustees of the Trust, certified by the Secretary,
the Clerk, any Assistant Secretary or any Assistant Clerk, electing to terminate
this Agreement and designating a successor custodian or custodians, each of
which shall be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. In the event such notice is given by the
Custodian the Trust shall, on or before the termination date, deliver to the
Custodian a copy of a resolution of the Board of Trustees of the Trust,
certified by the Secretary, the Clerk, any Assistant Secretary or any Assistant
Clerk, designating a successor custodian or custodians. In the absence of such
designation by the Trust, the Custodian may designate a successor custodian
which shall be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth in such notice
this Agreement shall terminate, and the Custodian shall upon receipt of a notice
of acceptance by the successor custodian on that date deliver directly to the
successor custodian all Securities and money then owned by the Trust and held by
it as Custodian, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Trust or the Custodian in
accordance with the preceding paragraph, the Trust shall upon the date specified
in the notice of termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Trust) and money then owned by the Trust be
deemed to be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book Entry System which cannot be
delivered to the Trust to hold such Securities hereunder in accordance with this
Agreement.
ARTICLE XIII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the present
Officers of the Trust under its seal, setting forth the names and the signatures
of the present Officers. The Trust agrees to furnish to the Custodian a new
Certificate in similar form in the event that any such present Officer ceases to
be an Officer or in the event that other or additional Officers are elected or
appointed. Until such new Certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement upon Oral
Instructions or signatures of the present Officers as set forth in the last
delivered Certificate.
<PAGE> 18
2. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, shall be sufficiently given if addressed
to the Custodian and mailed or delivered to it at its offices at 90 Washington
Street, New York, New York 10286, or at such other place as the Custodian may
from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Trust shall be sufficiently given if addressed to
the Trust and mailed or delivered to it at its office at the address for the
Trust first above written, or at such other place as the Trust may from time to
time designate in writing, and any notice or other instrument in writing
authorized or required to be given to the Administrator shall be sufficiently
given if addressed to the Administrator at such address as the Administrator may
from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Trustees of the Trust.
5. This Agreement shall extend to and shall be binding upon the parties hereto,
and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Trust without the written consent of
the Custodian, or by the Custodian without the written consent of the Trust,
authorized or approved by a resolution of the Trust's Trustees.
6. This Agreement shall be construed in accordance with the laws of the State of
New York without giving effect to conflict of laws principles thereof. Each
party hereby consents to the jurisdiction of a state or federal court situated
in New York City, New York in connection with any dispute arising hereunder and
hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
8. The assets of a particular Series of the Trust shall under no circumstances
be charged with liabilities attributable to any other Series of the Trust, and
all persons extending credit to, or contracting with or having any claim against
a particular Series of the Trust shall look only to the assets of that
particular Series for payment of such credit, contract or claim and not to any
of the Trustees, shareholders, officers, employees or agents of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective Officers, thereunto duly authorized and their respective
seals to be hereunto affixed, as of the day and year first above written.
KELMOORE STRATEGIC TRUST
[SEAL] By: Matthew Kelmon
Attest:
THE BANK OF NEW YORK
[SEAL] By: Jorge E. Ramos, VP
Attest:
APPENDIX A
I, Matthew Kelmon, President and I, Norman H. Moore, Jr., Secretary of KELMOORE
STRATEGIC TRUST, a Delaware business trust (the "Trust"), do hereby certify
that:
The following individuals including officers and employees of the Administrator
have been duly authorized by the Trustees of the Trust in conformity with the
Trust's Declaration of Trust and By-Laws to give Certificates or Oral
<PAGE> 19
Instructions on behalf of the Trust, and the signatures set forth opposite their
respective names are their true and correct signatures:
Name
Signature
Matthew Kelmon
Norman H. Moore, Jr.
APPENDIX B
Kelmoore Strategy Covered Option Fund
APPENDIX C
I, Nicholas A Deliso, a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
EXHIBIT A
CERTIFICATION
The undersigned, Matthew Kelmon, hereby certifies that he or she is the duly
elected and acting President of KELMOORE STRATEGIC TRUST, a Delaware business
trust (the "Trust"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Trust at a meeting duly held on March
22, 1999, at which a quorum was at all times present and that such resolution
has not been modified or rescinded and is in full force and effect as of the
date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Trust dated as of March 22, 1999,
(the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to deposit in the Book-Entry System, as defined in the Custody
Agreement and in accordance with Rule 17f-4 under the 1940 Act, all securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Book-Entry System to the extent
possible in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of securities
and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of KELMOORE
STRATEGIC TRUST, as of the 22nd day of March, 1999.
[SEAL] Matthew Kelmon, President
EXHIBIT B
CERTIFICATION
The undersigned, Matthew Kelmon, hereby certifies that he or she is the duly
elected and acting President of KELMOORE STRATEGIC TRUST, a Delaware business
trust (the "Trust"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Trust at a meeting duly held on March
22, 1999, at which a quorum was at all times present and that such resolution
has not been modified or rescinded and is in full force and effect as of the
date hereof.
<PAGE> 20
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Trust dated as of March 22, 1999,
(the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Depository, as defined in
the Custody Agreement and in accordance with Rule 17f-4 under the 1940 Act, all
securities eligible for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize the Depository to the extent
possible in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of securities,
and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of KELMOORE
STRATEGIC TRUST, as of the 22nd day of March, 1999.
[SEAL] Matthew Kelmon, President
EXHIBIT B-1
CERTIFICATION
The undersigned, Matthew Kelmon, hereby certifies that he or she is the duly
elected and acting President of KELMOORE STRATEGIC TRUST, a Delaware business
trust (the "Trust"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Trust at a meeting duly held on March
22, 1999, at which a quorum was at all times present and that such resolution
has not been modified or rescinded and is in full force and effect as of the
date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Trust dated as of March 22, 1999,
(the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Participants Trust Company
as Depository, as defined in the Custody Agreement and in accordance with Rule
17f-4 under the 1940 Act, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically allocated, and to
utilize the Participants Trust Company to the extent possible in connection with
its performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of KELMOORE
STRATEGIC TRUST, as of the 22nd day of March, 1999.
[SEAL] Matthew Kelmon, President
EXHIBIT C
CERTIFICATION
The undersigned, Matthew Kelmon, hereby certifies that he or she is the duly
elected and acting President of KELMOORE STRATEGIC TRUST, a Delaware business
trust (the "Trust"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Trust at a meeting duly held on March
22, 1999, at which a quorum was at all times present and that such resolution
has not been modified or rescinded and is in full force and effect as of the
date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Trust dated as of
<PAGE> 21
March 22, 1999, (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate, as
defined in the Custody Agreement, to the contrary, to accept, utilize and act
with respect to Clearing Member confirmations for Options and transaction in
Options, regardless of the Series to which the same are specifically allocated,
as such terms are defined in the Custody Agreement, as provided in the Custody
Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of KELMOORE
STRATEGIC TRUST, as of the 22nd day of March, 1999.
[SEAL] Matthew Kelmon, President
EXHIBIT D
The undersigned, Matthew Kelmon, hereby certifies that he or she is the duly
elected and acting President of KELMOORE STRATEGIC TRUST, a Delaware business
trust (the "Trust"), further certifies that the following resolutions were
adopted by the Board of Trustees of the Trust at a meeting duly held on March
22, 1999, at which a quorum was at all times present and that such resolutions
have not been modified or rescinded and are in full force and effect as of the
date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody
Agreement between The Bank of New York and the Trust dated as of March 22, 1999
(the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to rely on Instructions (as defined
in the Custody Agreement).
RESOLVED, that the Trust shall establish access codes and grant use of such
access codes only to Officers of the Trust as defined in the Custody Agreement,
shall establish internal safekeeping procedures to safeguard and protect the
confidentiality and availability of user and access codes, passwords and
authentication keys, and shall use Instructions only in a manner that does not
contravene the Investment Company Act of 1940, as amended, or the rules and
regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of KELMOORE
STRATEGIC TRUST, as of the 22nd day of March, 1999.
[SEAL] Matthew Kelmon, President
<PAGE> 1
Exhibit 99(i)
The Law Offices of
Howard, Rice, Nemerovski, Canady, Falk & Rabkin
A Professional Corporation
Three Embarcadero Center, 7th Floor
San Francisco, California 94111-4065
Telephone 415-434-1600
March 30, 1999
Kelmoore Strategic Trust
2471 East Bayshore Road, Suite 501
Palo Alto, California 94303
Re: Kelmoore Strategic Trust/N-1A Registration Statement
Ladies and Gentlemen:
You have requested our opinion as counsel for Kelmoore Strategic Trust, a
Delaware business trust (the "Trust"), in connection with the registration
under the Securities Act of 1933, as amended (the "Securities Act"), and the
Investment Company Act of 1940, as amended (the "1940 Act"), of shares of
beneficial interest in the Trust (the "Shares").
In this connection, we have examined and are familiar with originals or
copies, certified or otherwise identified to our satisfaction, of: the
Certificate of Trust of the Trust as filed in the Office of the Secretary of
State of the State of Delaware (the "Recording Office") on December 1, 1998 (the
"Certificate"); the Agreement and Declaration of Trust dated November 30, 1998,
as amended March 22, 1999 (the "Governing Instrument"); the By-Laws of the Trust
dated November 30, 1998, as amended March 22, 1999 (the "By-Laws"); the consent
of the Initial Trustee dated November 30, 1998; the consent of the Initial
Shareholder dated March 25, 1999; certain resolutions of the Trustees of the
Trust adopted at the organizational meeting held on March 22, 1999;
Pre-Effective Amendment No. 2 to the Trust's Registration Statement on Form N-1A
to be filed with the Securities and Exchange Commission on or about March 30,
1999; a certification of good standing of the Trust obtained as of March 29,
1999 from the Recording Office; and a Certificate of Secretary and Treasurer
dated as of the date hereof.
<PAGE> 2
Kelmoore Strategic Trust
March 30, 1999
Page 2
In connection with this opinion we have assumed the following: (a) the
authenticity of original documents and the genuineness of all signatures; (b)
the conformity to the originals of all documents submitted to us as copies; (c)
the truth, accuracy and completeness of the information, representations and
warranties contained in the instruments, documents, records and certificates we
have reviewed; and (d) the due authorization, execution and delivery on behalf
of the respective parties thereto of the documents referred to herein. As to
matters of fact material to our opinions, we have relied on our review of the
documents referred to above and statements made to us by officers of the Trust.
We have not independently verified any factual matters or any assumptions made
by us in this letter and disclaim any inference as to the reasonableness of any
such assumption.
Based upon the foregoing and subject to the limitations set forth below; we
are of the opinion that the Shares, when issued and paid for in accordance with
the terms of the Governing Instrument, the By-Laws and the Registration
Statement, will be legally issued, fully paid and non-assessable.
Notwithstanding the opinion expressed above, we note that, pursuant to
Section 2 of Article VIII of the Governing Instrument, the Trustees have the
power to cause shareholders, or shareholders of a particular series, to pay
certain custodian, transfer, shareholder servicing or similar agent charges by
setting off the same against declared but unpaid dividends or by reducing Share
ownership (or by both means).
We are members of the bar of the State of California and are not admitted
to practice in any other jurisdiction. The opinion set forth above is limited
in all respects to matters governed by the federal laws of the United States of
America and Title 12, Part 5, Chapter 38 of the Delaware Code pertaining to the
Treatment of Delaware Business Trusts.
The opinion set forth herein is given as of the date hereof and is
expressly limited to the matters stated. No opinion is implied or may be
inferred beyond what is explicitly stated in this letter. We disclaim any
obligation to notify you or any other person or entity after the date of this
letter if any change in fact or law should change our opinion with respect to
any matter on which we are expressing an opinion herein.
We are delivering this opinion to the Trust to satisfy the requirement of
the Securities and Exchange Commission set forth in Item 23 of Part C of Form
N-1A under the Securities Act and the 1940 Act, and no other person may rely on
it. Copies of this letter may not be circulated or furnished to any other
person or entity, and this letter may not be referred to in any report or
document furnished to any other person or entity, without our prior written
consent.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of our name under the heading "Counsel" in the
prospectus and "Other Services-Legal Counsel" in the statement of additional
information constituting part of the Registration Statement.
2
<PAGE> 3
Kelmoore Strategic Trust
March 30, 1999
Page 3
Very truly yours,
HOWARD, RICE, NEMEROVSKI, CANADY,
FALK & RABKIN
A Professional Corporation
By: /s/ Andre W. Brewster
----------------------------
Andre W. Brewster
On behalf of the Firm
3
<PAGE> 1
Exhibit 99(j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Pre-effective Amendment No. 2
to the registration statement on Form N-1A (the "Registration Statement") of our
report dated March 24, 1999, relating to the financial statements of The
Kelmoore Strategy Covered Option Fund, which are also incorporated by reference
into the Registration Statement. We also consent to the reference to us under
the heading "Independent Accountants" in such Statement of Additional
Information.
PricewaterhouseCoopers LLP
San Francisco, Ca
April 6, 1999
<PAGE> 1
Exhibit 99(l)
March 25, 1999
Kelmoore Strategic Trust
2471 East Bayshore Road, Suite 501
Palo Alto, CA 94303
RE: Investment Letter
Ladies and Gentlemen:
Kelmoore Investment Company, Inc. (the "Company") hereby agrees to acquire
10,000 shares of beneficial interest (the "Shares") of Kelmoore Strategy Covered
Option Fund (the "Fund") at a purchase price of $10.00 per share.
Shares will be issued in a private offering prior to the effectiveness of the
Registration Statement filed by Kelmoore Strategic Trust (the "Trust") under the
Securities Act of 1933. The Shares are being purchased pursuant to Section 14 of
the Investment Company Act of 1940 to serve as the seed money for the Trust
prior to the commencement of the public offering of its shares.
In connection with such purchase, the Company represents that: (i) it is
acquiring the Shares for its own account as the sole beneficial owner thereof
and with a view to or for sale in connection with any distribution of the
Shares; and (ii) the purchase is being made for investment purposes and not with
the present intention of redeeming or reselling the Shares.
The Company, as evidenced by the signature of its officer, hereby agrees to the
above and consents to the filing of this Investment Letter as an exhibit to the
Form N-1A Registration Statement of the Trust.
Sincerely,
Kelmoore Investment Company, Inc.
By: /s/ Ralph M. Kelmon
-----------------------------
Name: Ralph M. Kelmon, Jr.
Title: President and Chief Executive Officer
<PAGE> 1
Exhibit 99(m)
KELMOORE STRATEGIC TRUST
RULE 12B-1 PLAN OF DISTRIBUTION AND SERVICE PLAN
MARCH 22, 1999
- --------------------------------------------------------------------------------
The following Distribution and Service Plan (the "Plan") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"1940 Act"), by Kelmoore Strategic Trust (the "Trust") for the shares of
Kelmoore Strategy Covered Option Fund (the "Fund"). The Plan has been approved
by a majority of the Trust's Trustees, including a majority of the Trustees who
are not interested persons of the Trust (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreement related to the Plan (the "non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan.
SECTION 1. ANNUAL FEE.
(a) The Fund shall reimburse Kelmoore Investment Company, Inc., as the
Fund's distributor (the "Distributor"), a monthly fee not to exceed 0.75%
(3/4 of 1%) per annum of the average daily net assets of the Fund.
(b) In addition to the amounts described in (a) above, the Fund shall
reimburse the Distributor for payment to dealers or others a monthly fee
not to exceed 0.25% (1/4 of 1%) per annum of the average daily net assets
of the Fund, as a service fee.
SECTION 2. EXPENSES COVERED BY THE PLAN.
The fees payable under Section 1(a) of the Plan shall be used to reimburse
the Distributor for any expenses primarily intended to result in the sale
of the Fund's shares, including, but not limited to: payments the
Distributor makes to broker-dealers or other financial institutions and
industry professionals for providing distribution assistance, payments made
for the preparation, printing and distribution of advertisements and sales
literature, and payments made for printing and distributing prospectuses
and shareholder reports to other than existing shareholders of the Fund.
The fees payable under Section 1(b) of the Plan shall be used to reimburse
the Distributor for any expenses for personal service and/or the
maintenance of shareholder accounts, including, but not limited to:
payments made to broker-dealers or other financial institutions and
industry professionals for providing administrative support services to the
holders of the Fund's shares.
All such expenses covered by the Plan shall be deemed incurred whether paid
directly by the Distributor or by a third party to the extent reimbursed
therefor by the Distributor.
SECTION 3. DISTRIBUTION EXPENSES IN EXCESS OF FEE.
All Distribution Expenses in excess of the fee rates provided for in this
Plan may be carried forward and resubmitted in a subsequent fiscal year
provided that (i) Distribution Expenses cannot be carried forward for more
than three years following initial submission; and (ii) the non-interested
Trustees determine at the time of initial submission that the Distribution
Expenses are appropriate to be reimbursed. Distribution Expenses will be
paid on a first-in, first-out basis.
- --------------------------------------------------------------------------------
1
<PAGE> 2
SECTION 4. WRITTEN REPORTS.
The Adviser shall furnish to the Trustees, for their review, on a quarterly
basis, a written report of the monies paid under the Plan or any related
agreement and the purposes therefor, and shall furnish the Trustees with
such other information as the Trustees may reasonably request in connection
with payments made under the Plan or any related agreement in order to
enable the Trustees to make an informed determination of whether the Plan
should be continued.
SECTION 5. TERMINATION.
The Plan may be terminated at any time, without penalty, by a vote of a
majority of the non-interested Trustees or by vote of a majority of the
outstanding voting securities of the Fund, and any distribution agreement
under the Plan may be likewise terminated on not more than sixty (60) days'
written notice. Once terminated, no further payments shall be made under
the Plan notwithstanding the existence of any unreimbursed current or
carried forward distribution expenses.
SECTION 6. AMENDMENTS.
The Plan may not be amended to increase materially the amount to be spent
for distribution and servicing of Fund shares without approval by a
majority of the outstanding voting securities of the Fund. All material
amendments to the Plan and any related distribution agreement shall be
approved by the Trustees and the non-interested Trustees cast in person at
a meeting called for the purpose of voting on any such amendment.
SECTION 7. SELECTION OF INDEPENDENT TRUSTEES.
So long as the Plan is in effect, the selection and nomination of the
Trust's non-interested Trustees shall be committed to the discretion of
such non-interested Trustees.
SECTION 8. EFFECTIVE DATE OF PLAN.
The Plan shall take effect as of the date hereof and, unless sooner
terminated, shall continue in effect for a period of more than one year
from the date of its execution only so long as such continuance is
specifically approved at least annually by the Trustees, including the
non-interested Trustees, cast in person at a meeting called for the purpose
of voting on such continuance.
SECTION 9. PRESERVATION OF MATERIALS.
The Trust will preserve copies of the Plan, any agreements relating to the
Plan and any report made pursuant to Section 4 above, for a period of not
less than six years (the first two years in an easily accessible place)
from the date of the Plan, agreement or report.
SECTION 10. MEANINGS OF CERTAIN TERMS.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act and the rules and regulations under the
1940 Act, subject to any exemption that may be granted to the Trust under
the 1940 Act by the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
2
<PAGE> 1
Exhibit 99(p)
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Sandra L. Adams, Gerald J. Holland, Carolyn Mead, Esq. and David
Peters, Esq., and each of them, with full power to act without the other, as a
true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission, any amendment to the Registration Statement
of Kelmoore Strategic Trust (the "Trust"), to file any request for exemptive
relief from state and federal regulations, to file the prescribed notices in the
various states regarding the sale of shares of the Trust, to perform on behalf
of the Trust any and all such acts as such attorneys-in-fact may deem necessary
or advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 22nd day of March, 1999.
/s/ Kenneth D. Treece
---------------------------
Kenneth D. Treece
ACKNOWLEDGMENT
State of California )
) ss:
County of Santa Clara )
The foregoing instrument was acknowledged before me this 22nd day of March,
1999, by Lisa Toquinto.
/s/ Lisa Toquinto
- -----------------------------
Notary Public
<PAGE> 2
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Sandra L. Adams, Gerald J. Holland, Carolyn Mead, Esq. and David
Peters, Esq., and each of them, with full power to act without the other, as a
true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission, any amendment to the Registration Statement
of Kelmoore Strategic Trust (the "Trust"), to file any request for exemptive
relief from state and federal regulations, to file the prescribed notices in the
various states regarding the sale of shares of the Trust, to perform on behalf
of the Trust any and all such acts as such attorneys-in-fact may deem necessary
or advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 22nd day of March, 1999.
/s/ Lisa Ann McCarthy
----------------------------
Lisa Ann McCarthy
ACKNOWLEDGMENT
State of California )
) ss:
County of Santa Clara )
The foregoing instrument was acknowledged before me this 22nd day of March,
1999, by Lisa Toquinto.
/s/ Lisa Toquinto
- -------------------------
Notary Public
<PAGE> 3
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Sandra L. Adams, Gerald J. Holland, Carolyn Mead, Esq. and David
Peters, Esq., and each of them, with full power to act without the other, as a
true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission, any amendment to the Registration Statement
of Kelmoore Strategic Trust (the "Trust"), to file any request for exemptive
relief from state and federal regulations, to file the prescribed notices in the
various states regarding the sale of shares of the Trust, to perform on behalf
of the Trust any and all such acts as such attorneys-in-fact may deem necessary
or advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 22nd day of March, 1999.
/s/ Jeffrey Ira
---------------------------
Jeffrey Ira
ACKNOWLEDGMENT
State of California )
) ss:
County of Santa Clara )
The foregoing instrument was acknowledged before me this 22nd day of March,
1999, by Lisa Toquinto.
/s/ Lisa Toquinto
- ----------------------------
Notary Public
<PAGE> 4
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Sandra L. Adams, Gerald J. Holland, Carolyn Mead, Esq. and David
Peters, Esq., and each of them, with full power to act without the other, as a
true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission, any amendment to the Registration Statement
of Kelmoore Strategic Trust (the "Trust"), to file any request for exemptive
relief from state and federal regulations, to file the prescribed notices in the
various states regarding the sale of shares of the Trust, to perform on behalf
of the Trust any and all such acts as such attorneys-in-fact may deem necessary
or advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 22nd day of March, 1999.
/s/ Stephen W. Player
--------------------------------
Stephen W. Player
ACKNOWLEDGMENT
State of California )
) ss:
County of Santa Clara )
The foregoing instrument was acknowledged before me this 22nd day of March,
1999, by Lisa Toquinto.
/s/ Lisa Toquinto
- --------------------------
Notary Public
<PAGE> 5
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Sandra L. Adams, Gerald J. Holland, Carolyn Mead, Esq. and David
Peters, Esq., and each of them, with full power to act without the other, as a
true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission, any amendment to the Registration Statement
of Kelmoore Strategic Trust (the "Trust"), to file any request for exemptive
relief from state and federal regulations, to file the prescribed notices in the
various states regarding the sale of shares of the Trust, to perform on behalf
of the Trust any and all such acts as such attorneys-in-fact may deem necessary
or advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 22nd day of March, 1999.
/s/ Richard D. Stanley
-----------------------------
Richard D. Stanley
ACKNOWLEDGMENT
State of California )
) ss:
County of Santa Clara )
The foregoing instrument was acknowledged before me this 22nd day of March,
1999, by Lisa Toquinto.
/s/ Lisa Toquinto
- ----------------------------
Notary Public
<PAGE> 6
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Sandra L. Adams, Gerald J. Holland, Carolyn Mead, Esq. and David
Peters, Esq., and each of them, with full power to act without the other, as a
true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission, any amendment to the Registration Statement
of Kelmoore Strategic Trust (the "Trust"), to file any request for exemptive
relief from state and federal regulations, to file the prescribed notices in the
various states regarding the sale of shares of the Trust, to perform on behalf
of the Trust any and all such acts as such attorneys-in-fact may deem necessary
or advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
the 22nd day of March, 1999.
/s/ Ignatius J. Panzica
---------------------------------
Ignatius J. Panzica
ACKNOWLEDGMENT
State of California )
) ss:
County of Santa Clara )
The foregoing instrument was acknowledged before me this 22nd day of March,
1999, by Janet D. Toquinto.
/s/ Janet D. Toquinto
- ----------------------------
Notary Public
<PAGE> 7
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Sandra L. Adams, Gerald J. Holland, Carolyn Mead, Esq. and David
Peters, Esq., and each of them, with full power to act without the other, as a
true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission, any amendment to the Registration Statement
of Kelmoore Strategic Trust (the "Trust"), to file any request for exemptive
relief from state and federal regulations, to file the prescribed notices in the
various states regarding the sale of shares of the Trust, to perform on behalf
of the Trust any and all such acts as such attorneys-in-fact may deem necessary
or advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 22nd day of March, 1999.
/s/ William H. Barnes
-------------------------------
William H. Barnes
ACKNOWLEDGMENT
State of California )
) ss:
County of Santa Clara )
The foregoing instrument was acknowledged before me this 22nd day of March,
1999, by Janet D. Toquinto.
/s/ Janet D. Toquinto
- ----------------------------
Notary Public
<PAGE> 8
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Sandra L. Adams, Gerald J. Holland, Carolyn Mead, Esq. and David
Peters, Esq., and each of them, with full power to act without the other, as a
true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission, any amendment to the Registration Statement
of Kelmoore Strategic Trust (the "Trust"), to file any request for exemptive
relief from state and federal regulations, to file the prescribed notices in the
various states regarding the sale of shares of the Trust, to perform on behalf
of the Trust any and all such acts as such attorneys-in-fact may deem necessary
or advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 22nd day of March, 1999.
/s/ Matthew Kelmon
-----------------------------
Matthew Kelmon
ACKNOWLEDGMENT
State of California )
) ss:
County of Santa Clara )
The foregoing instrument was acknowledged before me this 22nd day of March,
1999, by Janet D. Toquinto.
/s/ Janet D. Toquinto
- ----------------------------
Notary Public
<PAGE> 9
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Sandra L. Adams, Gerald J. Holland, Carolyn Mead, Esq. and David
Peters, Esq., and each of them, with full power to act without the other, as a
true and lawful attorney-in-fact and agent, with full and several power of
substitution, to take any appropriate action to execute and file with the U.S.
Securities and Exchange Commission, any amendment to the Registration Statement
of Kelmoore Strategic Trust (the "Trust"), to file any request for exemptive
relief from state and federal regulations, to file the prescribed notices in the
various states regarding the sale of shares of the Trust, to perform on behalf
of the Trust any and all such acts as such attorneys-in-fact may deem necessary
or advisable in order to comply with the applicable laws of the United States or
any such state, and in connection therewith to execute and file all requisite
papers and documents including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys for service of
process; granting to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act requisite and necessary
to be done in connection therewith, as fully as each might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 22nd day of March, 1999.
/s/ Wayne E. Edgerton
---------------------------------
Wayne E. Edgerton
ACKNOWLEDGMENT
State of California )
) ss:
County of Santa Clara )
The foregoing instrument was acknowledged before me this 22nd day of March,
1999, by Janet D. Toquinto.
/s/ Janet D. Toquinto
- ----------------------------
Notary Public
