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As filed with the Securities and Exchange Commission on June 28, 2000
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. [ ]
Post-Effective Amendment No. 3 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 5 [ 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:
Kimberly J. Smith, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, NW
Washington, DC 20004-2415
It is proposed that this filing will become effective (check appropriate box).
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ X ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
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The Kelmoore Strategy(TM) Fund
The Kelmoore Strategy(TM) High Beta Fund
[Graphic]
Prospectus
---------------
JUNE 28, 2000
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
<TABLE>
<S> <C>
SUMMARY
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What are the Funds?
What is each Fund's Primary Goal?
What is each Fund's Main Strategy?
What are each Fund's Main Risks?
Who may want to invest in the Funds?
Risk/Return Bar Chart and Table
FEES AND EXPENSES OF THE FUNDS
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Shareholder Fees
Annual Fund Operating Expenses
Example
MAIN STRATEGY
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OTHER STRATEGIES
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MAIN RISKS
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MANAGEMENT OF THE FUNDS
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Investment Adviser
Portfolio Manager
Distribution Plan
YOUR INVESTMENT
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How to Buy Shares
How to Sell Shares
TRANSACTION POLICIES
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SHAREHOLDER SERVICES
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DISTRIBUTIONS AND TAXES
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FINANCIAL HIGHLIGHTS
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FOR MORE INFORMATION
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Shareholder Reports BACK COVER
Statement of Additional Information BACK COVER
</TABLE>
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SUMMARY
WHAT ARE THE FUNDS?
The Kelmoore Strategy(TM) Fund (formerly the
Kelmoore Strategy(TM) Covered Option Fund) and
the Kelmoore Strategy(TM) High Beta Fund (each a
"Fund" and collectively the "Funds") are each
diversified series of Kelmoore Strategic Trust,
an open-end management investment company,
commonly known as a mutual fund.
WHAT IS EACH FUND'S PRIMARY GOAL?
Each 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 a Fund will achieve its goal.
WHAT IS EACH FUND'S MAIN STRATEGY?
KELMOORE STRATEGY(TM) FUND
The main strategy of the Kelmoore Strategy(TM)
Fund is to purchase the common stocks of a
limited number of large companies and to
continually sell or "write" 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 options 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 a 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.
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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
have a market capitalization in excess of $10
billion and 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:
<TABLE>
<CAPTION>
SECTOR EXAMPLES
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<S> <C>
Advanced Manufacturing Boeing, General Motors, Kodak
Consumer Goods Gillette, Home Depot, Merck
Finance Allstate, American Express, Merrill Lynch
Resources Chevron, Exxon, Mobil
Technology Hewlett-Packard, IBM, Intel, Microsoft
</TABLE>
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 a Fund's portfolio.
KELMOORE STRATEGY(TM) HIGH BETA FUND
The main strategy of the Kelmoore Strategy(TM)
High Beta Fund is to purchase the common stocks
of a limited number of technology, biotechnology,
communications, and financial companies ("high
beta stocks") with strong financial fundamentals,
and to continuously sell or "write" related
covered call options against substantially all of
the shares of stock it owns. In addition, the
fund, from time to time, may purchase a stock not
in the market sectors noted above if particularly
attractive options may be sold against the stock.
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 options 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 a 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)"
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The Option 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 historical
price volatility of the underlying security, the
option period, supply and demand and interest
rates.
The Fund will typically hold no more than 30
common stocks, though this number may fluctuate
at the discretion of the Adviser. The issuers of
stock selected for investment by the Fund will
have a market capitalization in excess of $500
million and will tend to have the following
characteristics.
-- Leading edge technology companies
-- Commanding marketing position
-- Widely-held with a high daily trading volume
-- Opportunity for rapid growth
-- Higher volatility than the stocks used in
Kelmoore Strategy(TM) Fund
The Stocks selected will also usually fall into
one of the following industry sectors.
<TABLE>
<CAPTION>
SECTOR EXAMPLES
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<S> <C>
Technology Dell, Applied Materials
Biotechnology Amgen, Medtronics
Communications Lucent, TIBCO
Finance Morgan Witter Discovery, Schwab
</TABLE>
The Adviser generally seeks over time to maintain
a balance of the Fund's assets invested among the
four sectors. The specific companies mentioned
above are examples only and may or may not be
included in a Fund's portfolio.
WHAT ARE EACH FUND'S MAIN RISKS?
As with any mutual fund, the value of a Fund's
investments, and therefore the value of a 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 a Fund
may also vary substantially from year to year.
The principal risks associated with an investment
in a Fund include:
Risks of investing in stocks (both Funds):
-- stock market risk, or the risk that the price
of the securities owned by a Fund may fall due
to changing economic, political or market
conditions
-- selection risk, or the risk that the stocks or
sectors selected by a 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
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Risks of investing in high beta stocks (High Beta
Fund):
-- Enhanced stock market risk, or the risk that
the price of the securities owned by a fund
may fall due to changing economic, political,
or market conditions
-- Enhanced selection risk, or the risk that the
stocks of sectors selected by the Fund will
substantially under perform the stock market
as a whole or certain sectors of the stock
market
-- Financial risk, or the risk that the stock may
file bankruptcy proceedings or be acquired on
unfavorable terms to the stock holders
-- Technology risk, or the risk that new
products, systems, or information will be
developed and introduced to the market place
substantially reducing the value of the stock
Risks of writing covered call options (both
Funds):
-- 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 (both Funds):
-- 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
-- possible residual adverse effects of year 2000
issues on the Funds
WHO MAY WANT TO INVEST IN THE FUNDS?
KELMOORE STRATEGY (TM) FUND The Kelmoore
Strategy(TM) 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.
KELMOORE STRATEGY (TM) HIGH BETA FUND
The Kelmoore Strategy(TM) High Beta 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
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-- are seeking a disciplined and continual
reinvestment of premiums generated from
writing options
-- can tolerate performance which can vary
substantially from year to year
-- can accept wide variation in the value of the
Fund's shares which could cause a capital loss
upon redemption of shares
-- 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 CHARTS AND TABLES
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
Kelmoore Strategy(TM) High Beta Fund is recently
organized and therefore has no performance
history. The Kelmoore Strategy(TM) Fund commenced
operations on ____________, 1999. Once a Fund has
a performance history of at least one calendar
year, a Bar Chart and Performance Table for the
Fund will be included in the prospectus. Each
Fund's annual returns will also be compared to
the returns of a benchmark index.
FEES AND EXPENSES OF THE FUNDS
The tables below describe the fees and expenses
that you may pay if you buy and hold shares of a
Fund.
<TABLE>
<CAPTION>
KELMOORE STRATEGY(TM) FUND KELMOORE STRATEGY(TM)
HIGH BETA FUND
SHAREHOLDER FEES (fees paid directly from your investment): Class A Class C Class A Class C
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<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) imposed on Purchases
(as a percentage of offering price) 5.50%* None 5.50%* None
Maximum Deferred Sales Charge (Load) None None None None
Maximum Sales Charge (Load) imposed on Reinvested Dividends None None None None
Redemption Fees (as a percentage of amount redeemed) ** ** ** **
</TABLE>
* Reduced for purchases of $50,000 and over.
** If you redeem your shares by wire transfer, the Funds' transfer agent
charges a fee (currently $9.00) for each wire redemption. Purchases and
redemptions not made directly through the Funds' 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.
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<TABLE>
<CAPTION>
KELMOORE STRATEGY(TM) FUND KELMOORE STRATEGY(TM)
HIGH BETA FUND
ANNUAL FUND OPERATING EXPENSES Class A Class C Class A Class C
(expenses that are deducted from Fund assets):
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 1.00% 1.00% 1.00% 1.00%
Distribution and Service (12b-1) Fees 0.25% 1.00% 0.25% 1.00%
Other Expenses [____%] [____%] [1.00%]* [1.00%]*
Total Annual Fund Operating Expenses [____%] [____%] [2.25%] [3.00%]
</TABLE>
* "Other Expenses" are based on the estimated expenses that the Kelmoore
Strategy(TM) High Beta Fund expects to incur in its initial fiscal year.
EXAMPLE
This example is designed so that you may compare
the cost of investing in a 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:
<TABLE>
<CAPTION>
KELMOORE STRATEGY(TM) FUND KELMOORE STRATEGY(TM)
HIGH BETA FUND
1 year 3years 5 years 10 years 1 year 3 years
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A $____ $____ $_____ $______ $____ $____
Class C $____ $____ $_____ $______ $____ $____
</TABLE>
MAIN STRATEGY
To generate option premiums the Funds each
purchase the common stocks of a limited number of
companies and simultaneously write covered call
options on these stocks. As the options 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 to an option
buyer 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
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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
proceeds from the sale are used to fund
redemptions.
Other Features
The call options written by each 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.
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For the Kelmoore Strategy(TM) Fund, 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.
For the Kelmoore Strategy(TM) High Beta Fund, the
Adviser seeks to select underlying common stocks
of high growth companies, which have high trading
volumes, greater price fluctuation than the
stocks held by the Kelmoore Strategy(TM) Fund,
and increased volatility. To reduce selection
risk, the Fund's Adviser selects stocks that are
generally considered to be industry leaders and
have strong financial fundamentals. In addition,
to reduce overall market risk, the Advisor
normally invests across four 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 a 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.
OTHER STRATEGIES
SECURED PUT OPTIONS
A 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.
A 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 a Fund are listed for trading on one
or more domestic securities exchanges and are
issued by the OCC.
When a 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 potential
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 a
loss equal to the entire value of the stock.
TEMPORARY DEFENSIVE POSITION
A Fund may, from time to time, take a temporary
defensive position that is inconsistent with its
principal investment strategies in attempting to
respond to adverse market, economic, political or
other conditions. When a 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.
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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 each Fund invests, and therefore each
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 a 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 a 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 a 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
A 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 a 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 each 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.
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Brokerage commissions are often greater in
relation to options premiums than in relation to
the price of the underlying stocks.
TAX CONSEQUENCES
Each 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 a 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.
YEAR 2000 The Trust did not experience any significant
malfunctions or errors in the computer systems
used by its service providers when the date
changed from 1999 to 2000. Based on operations
since January 1 2000, the Trust does not expect
any significant impact to its on-going business
as a result of the "Year 2000 issue." However,
it is possible that the full impact of the date
change, which was of concern due to computer
programs that use two digits instead of four
digits to define years, has not been fully
recognized. For example, it is possible that
Year 2000 or similar issues, such as leap
year-related problems, may affect the computer
systems used by the Trust's service providers at
month, quarter or year end. The Trust believes
that any such problems are likely to be minor
and correctable.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
Kelmoore Investment Company, Inc. serves as the
investment adviser to each Fund and is
responsible for the selection and ongoing
monitoring of the securities in the Fund's
investment portfolio and for the management of
each Fund's business affairs. The Adviser is a
registered investment adviser and broker-dealer
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 Funds
employ. The Adviser's principal address is 2471
East Bayshore Road, Suite 501, Palo Alto,
California 94303.
Each Fund pays the Adviser a monthly investment
advisory fee at the annual rate of 1.00% of its
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
each Fund will not exceed 2.25% for Class A
shares and 3.00% for Class C shares. The Adviser
reserves the right to terminate this undertaking
at any time, at its sole discretion. Any waiver
or reimbursement by the Adviser is subject to
reimbursement by the respective Fund within the
first three years of the Fund's operations, 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 each 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(TM) for
private accounts and limited partnerships from
1994 to present. Mr. Kelmon also heads up the
equity selection committee of the
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Adviser. Previously, Mr. Kelmon was an account
executive with M.L. Stern & Co., Inc., a bond
dealer, from 1993 to 1994.
DISTRIBUTION PLAN
Each Fund has, on behalf of its Class A and Class
C shares, adopted plans pursuant to Rule 12b-1
under the Investment Company Act of 1940, as
amended, that allows each Fund to pay
distribution and service fees for the sale and
distribution of its shares and for services
provided to its shareholders. Because these fees
are paid out of each 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 for Class A shares permits the
Fund to reimburse the Fund's distributor, an
annual fee not to exceed 0.25% of the average
daily net assets of the Class A shares of each
Fund. The distribution plan for Class C shares
permits the Fund to reimburse the Fund's
distributor an annual fee not to exceed 0.75% of
the average daily net assets of each Fund's Class
C shares. In addition, the distribution plan for
Class C shares permits each Fund to reimburse the
distributor for payments to dealers or others, an
annual service fee not to exceed 0.25% of the
average daily net assets of each Fund attributed
to Class C shares.
YOUR INVESTMENT - HOW TO BUY SHARES
You can purchase shares of the Funds through
broker-dealers, directly through the Adviser, or
through the Automatic Investment Plan. Shares of
the Funds 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.
<TABLE>
<CAPTION>
PURCHASE AMOUNTS
-------------------------------------------------
<S> <C>
Minimum initial investment: $1,000
Minimum additional investments: $ 50
</TABLE>
MULTIPLE CLASSES
Each Fund offers both Class A and Class C shares.
Each Class of shares has a different distribution
arrangement to provide for different investment
needs. This allows you to choose the class of
shares most suitable for you depending on the
amount and length of investment and other
relevant factors. Sales personnel may receive
different compensation for selling each Class of
shares.
CLASS A SHARES
Sales of Class A shares of each Fund include a
front-end sales charge (expressed as a percentage
of the offering price) as shown in the following
table:
CLASS A SHARES -
FRONT-END SALES CHARGE
<TABLE>
<CAPTION>
Approximate Percentage
Percentage of Percentage of of Dealer
Amount of Single Transaction Offering Price Amount Invested Reallowance
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 5.00%
</TABLE>
13
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
$50,000 but less than $100,000 4.75% 4.99% 4.25%
$100,000 but less than $250,000 4.00% 4.17% 3.50%
$250,000 but less than $500,000 3.25% 3.36% 2.75%
$500,000 or more 2.50% 2.56% 2.00%
</TABLE>
Shares acquired as a result of reinvestment of distributions
will not be subject to any sales charge. Class A shares are
subject to a 12b-1 fee of 0.25%, which is lower than the
12b-1 fee for the Class C shares.
The distributor may pay a dealer concession to those selected
dealers who have entered into an agreement with the
distributor. The dealer's concession may be changed from time
to time. The distributor may from time to time offer
incentive compensation to dealers who sell shares of the
Funds subject to sales charges, allowing such dealers to
retain an additional portion of the sales charge. Currently,
dealers receive the concession set forth in the table above,
as well as the 0.25% distribution fee (12b-1). On some
occasions, such incentives will be conditioned upon the sale
of a specified minimum dollar amount of the shares of the
Funds during a specified period of time. A dealer who
receives all or substantially all of the sales charge may be
considered an "underwriter" under the Securities Act of 1933,
as amended. All such sales charges are paid to the securities
dealer involved in the trade, if any.
CLASS A SHARES - REDUCED SALES CHARGES
The sales charge for purchases of Class A shares of the Fund
may be reduced for a single purchaser through Rights of
Accumulation or a Letter of Intent. To qualify for a reduced
sales charge, you must notify your dealer, PFPC Inc. or the
Fund.
RIGHTS OF ACCUMULATION
You may combine your shares and the shares of your spouse and
your children under the age of 21 in order to qualify for the
Rights of Accumulation. If you already hold Class A shares of
a Fund, a reduced sales charge based on the sales charge
schedule for Class A shares may apply to subsequent purchases.
The sales charge on each additional purchase is determined by
adding the current market value of the shares you currently
own to the amount being invested. The reduced sales charge is
applicable only to current purchases. It is your
responsibility to notify PFPC at the time of subsequent
purchases that the purchase is eligible for the reduced sales
charge under the Right of Accumulation.
LETTER OF INTENT
You may qualify for a reduced sales charge immediately by
signing a non-binding Letter of Intent stating your intention
to invest during the next 13 months a specified amount which,
if made at one time, would qualify for a reduced sales charge.
The first investment cannot be made more than 90 days prior to
the date of the Letter of Intent. Any redemptions made during
the 13-month period will be subtracted from the amount of
purchases in determining whether the Letter of Intent has been
satisfied. During the term of the Letter of Intent, PFPC will
hold shares representing 5% of the indicated amount in escrow
for payment of a higher sales charge if the full amount
indicated in the Letter of Intent is not purchased. The
escrowed shares will be released when the full amount
indicated has been purchased. If the full amount indicated is
not purchased within the 13-month period, your escrowed shares
will be redeemed in an amount equal to the difference in the
dollar amount of sales charge actually paid and the amount of
sales charge you would have had to pay on your aggregate
purchases if the total of such purchases had been made
14
<PAGE> 16
at a single time. It is your responsibility to notify PFPC at
the time the Letter of Intent is submitted that there are
prior purchases that may apply.
SALES AT NET ASSET VALUE
The Funds may sell Class A shares at net asset value (i.e.
without any initial sales charge) to certain categories of
investors, including: (1) investment advisory clients of the
Adviser or its affiliates; (2) officers and present or former
Trustees of the Trust; directors and full-time employees of
selected dealers or agents; the spouse, sibling, direct
ancestor or direct descendant (collectively "relatives") of
any such person; any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative; or the estate of any such person or relative; if
such shares are purchased for investment purposes (such shares
may not be resold except to the Fund); (3) the Adviser and its
affiliates and certain employee benefit plans for employees of
the Adviser; (4) employer sponsored qualified pension or
profit-sharing plans (including Section 401(k) plans),
custodial accounts maintained pursuant to Section 403(b)(7)
retirement plans and individual retirement accounts (including
individual retirement accounts to which simplified employee
pension ("SEP") contributions are made), if such plans or
accounts are established or administered under programs
sponsored by administrators or other persons that have been
approved by the Adviser; (5) fee-based financial planners and
registered investment advisors who are purchasing on behalf of
their clients; and (6) broker-dealers who have entered into
selling agreements with the Adviser for their own accounts;
and (7) participants in no-transaction-fee programs of brokers
that maintain an omnibus account with the Funds.
CLASS C SHARES
Class C shares of the Funds are not subject to a front-end
sales charge. Class C shares are subject to a 12-b-1 fee of
1.00%, payable to the distributor. Over time, this may cost
you more than other types of sales charges. Because of the
higher 12b-1 fees, Class C shares have higher expenses and,
consequently, pay lower dividends than Class A shares.
Currently, the 12b-1 fee is paid by the distributor to
selected dealers.
15
<PAGE> 17
TO OPEN AN ACCOUNT
BY MAIL
-- Complete the application.
-- Mail the application and your check to:
PFPC Inc.
211 South Gulph Road
P.O. Box 61503
King of Prussia, PA 19406
-- Please make your check payable to the
appropriate 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: Boston Safe Deposit & Trust (BSDT),
ABA#011001234
Attn: PFPC Inc.
Account #018953
Credit: The name of the Fund
FBO: Name(s) of account registration and
account number
-- Your bank may charge a wire fee.
-- Please make sure your wire is for at least
$1,000.
-- Mail your completed application to PFPC 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:
PFPC Inc.
211 South Gulph Road
P.O. Box 6176
King of Prussia, PA 19406
-- Please make your check payable to the
appropriate Fund.
-- Please make sure your additional investment is
for at least $50.
BY WIRE
-- Call toll-free (877) 328-9456. The wire must
be received by 4:00 p.m. Eastern time for same
day processing.
-- Call your bank with instructions under TO OPEN
AN ACCOUNT - By Wire.
-- Your bank may charge a wire fee.
-- Please make sure your wire is for at least
$50.
16
<PAGE> 18
AUTOMATIC INVESTMENT PLAN
Once an account has been opened, you can make
additional purchases of shares of the Funds
through an automatic investment plan. The
automatic investment plan provides a convenient
method to have monies deducted directly from your
bank account for investment in the Funds. You may
authorize the automatic withdrawal of funds from
your bank account for any amount. The Funds may
alter, modify or terminate this plan at any time.
To begin participating in this plan, please
complete the Automatic Investment Plan section
found on the account application or contact the
Funds at (877) 328-9456.
EXCHANGE PRIVILEGE
PURCHASE PRICE
Class C shares of the Funds are sold at the net
asset value ("NAV") next determined after receipt
of the request in good order. Class A shares of
the Funds are sold at the offering price which is
the NAV next determined after the request is
received in good order plus a sales charge of up
to 5.50%
RIGHTS RESERVED BY THE FUNDS
The Funds reserve 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
YOUR INVESTMENT -HOW TO SELL SHARES
You may "redeem", that is, sell your shares on
any day the New York Stock Exchange ("NYSE") is
open, either directly through the distributor or
through your broker-dealer. The price you receive
will be the NAV next calculated after receipt of
the request in good order by PFPC.
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:
PFPC Inc.
211 South Gulph Road
P.O. Box 61503
King of Prussia, PA 19406
-- A check will be mailed to the name(s) and
address in which the account is registered
within seven days.
17
<PAGE> 19
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 account
application. 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 Trust and PFPC 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. PFPC has
established security procedures to prevent
unauthorized account access. Neither the Trust
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. The telephone transaction privilege may
be suspended, limited, modified or terminated at
any time without prior notice by the Trust or
PFPC.
BY WIRE
In the case of redemption proceeds that are wired
to a bank, a 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
Trust and PFPC will not be responsible for any
delays in wired redemption proceeds due to heavy
wire traffic over the Federal Reserve System. The
Trust reserves the right to refuse a wire
redemption if it is believed advisable to do so.
If you redeem your shares by wire transfer, PFPC
charges a fee (currently $9.00) for each wire
redemption.
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.
SELLING RECENTLY PURCHASED SHARES
If you wish to sell shares that were recently
purchased by check, the Funds 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 PFPC
before the close of the 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
18
<PAGE> 20
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.
19
<PAGE> 21
DETERMINATION OF NAV
The NAV for each Fund is calculated at the close
of regular trading hours of the NYSE, which is
normally 4:00 p.m. Eastern time. Each Fund
calculates NAV by adding up the total value of
its investments and other assets, subtracting
liabilities, and then dividing that figure by the
number of its outstanding shares. Each 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 Board of
Trustees.
INVESTMENTS THROUGH NOMINEES
If you invest through a nominee, such as a
broker-dealer or financial advisor (rather than
directly), transaction procedures 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 Funds. You will not be
charged fees if you purchase or redeem shares of
the Funds directly through the Funds' principal
distributor, Kelmoore Investment Company, Inc.
REDEMPTION POLICIES
Payment for redemption 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
Trust 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 Funds' shareholders, or (3) an
emergency exists making disposal of portfolio
securities or valuation of net assets of the
Funds not reasonably practicable. The Funds will
automatically redeem shares if a purchase check
is returned for insufficient funds. The Funds
reserve the right to reject any third party
check. The Funds reserve 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 a Fund's
operations. Large redemptions are considered to
exceed $250,000 or 1% of each 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 Funds 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 securities dealers, but not from a
notary public. Please call toll-free (877)
328-9456 for information on obtaining a signature
guarantee.
20
<PAGE> 22
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 PFPC 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 PFPC from Monday through
Friday, 9:00 a.m. to 7:00 p.m., Eastern time.
Call toll-free (877) 328-9456.
THE FUNDS: If you have questions about the Funds,
call the Funds' 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 Funds provide 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 Funds provide 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 each Fund and gives account balances,
information on the most recent transactions and
allows sales of shares.
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.
21
<PAGE> 23
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
Each Fund passes along to your account your share
of investment earnings in the form of dividends
and distributions. Each Fund will distribute at
least annually any net realized long-term capital
gains obtained through investment transactions.
Each Fund will pay monthly distributions from net
investment income and any net realized short-term
capital gain. Net investment income consists of
dividends 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 a 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 a Fund will be reinvested
in additional shares of the same Fund. They will
be credited to your account in the Fund at the
same NAV on the applicable dividend payment date.
All distributions a Fund pays to you will be
taxable when paid, regardless of whether they are
taken in cash or reinvested in shares of the
Funds. To change your dividend election, you must
notify PFPC in writing at least fifteen days
prior to the applicable dividend record date.
TAXES
The Funds each intend to qualify as a regulated
investment company. This status exempts each Fund
from paying federal income tax on the income or
capital gains it distributes to its shareholders.
Your investment in each 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.
The tax consequences of each Fund's distributions
depend upon the length of time the Fund holds its
assets. Due to the nature of each Fund's
principal investment strategy, each Fund
anticipates that a majority of its distributions
will be in the form of ordinary income. Each 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,
each 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,
each 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.
Each 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
22
<PAGE> 24
sale of the call or put. A short-term capital
gain also will be realized if a call or put which
a Fund has written lapses unexercised, because
the Fund would retain the premium.
If a call option which a 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 a 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 each Fund with your correct
taxpayer identification number and certify that
you are not subject to backup withholding. If you
do not, the Funds 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 each 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.
23
<PAGE> 25
FOR MORE INFORMATION
SHAREHOLDER REPORTS:
Additional information about each Fund's
investments will be available in the Funds'
annual and semi-annual reports to shareholders.
In the 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
each of the Funds. 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 Funds, please write
or call:
Kelmoore Investment Company, Inc.
2471 E. Bayshore Road, Suite 501
Palo Alto, CA 94303
(877) 328-9456
Information about the Funds (including the SAI)
may be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Call (202)
942-8090 for information on the operation of the
Public Reference Room. You may also request
copies by mail by sending your request, after
paying 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 Funds.
<TABLE>
<S> <C>
ADMINISTRATOR, TRANSFER AGENT AND COUNSEL
FUND ACCOUNTING AGENT Sutherland, Asbill & Brennan, LLP
PFPC Inc. 1275 Pennsylvania Avenue, NW
3200 Horizon Drive Washington, D.C. 20004-2415
King of Prussia, PA 19406
(877) 328-9456
CUSTODIAN INDEPENDENT ACCOUNTANTS
The Bank of New York
48 Wall Street
New York, NY 10286
</TABLE>
- --------------------------------------------------------------------------------
KELMOORE STRATEGIC TRUST
2471 E. Bayshore Road, Suite 501
Palo Alto, CA 94303
(877) 328-9456
The Trust's SEC file no. is 811-9165
24
<PAGE> 26
STATEMENT OF ADDITIONAL INFORMATION
JUNE 28, 2000
KELMOORE STRATEGIC TRUST
THE KELMOORE STRATEGY(TM) FUND
THE KELMOORE STRATEGY(TM) HIGH BETA FUND
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 Funds' Prospectus dated June 28, 2000. 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.
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Kelmoore Strategic Trust............................................
Investment Strategies and Related Risks ................................
Investment Restrictions ................................................
Portfolio Turnover......................................................
Management of the Fund..................................................
Trustees and Officers.........................................
Investment Adviser............................................
Other Services..........................................................
Purchases and Redemptions ..............................................
Valuation...............................................................
Taxes...................................................................
Brokerage ..............................................................
Shares of Beneficial Interest...........................................
Calculation of Performance .............................................
Financial Statements ...................................................
</TABLE>
<PAGE> 28
THE KELMOORE STRATEGIC TRUST
The Kelmoore Strategic Trust (the "Trust") is a Delaware business trust
organized on December 1, 1998 as an open-end management investment company. The
Trust employs Kelmoore Investment Company, Inc. as its investment adviser (the
"Adviser") to its diversified series: The Kelmoore Strategy(TM), formerly known
as The Kelmoore Strategy(TM) Covered Option Fund, and The Kelmoore Strategy(TM)
High Beta Fund.
INVESTMENT STRATEGIES AND RELATED RISKS
The following describes certain attributes of particular types of securities in
which each of the Funds 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.
Each 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.
Each 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 each 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 respective 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 respective Fund's net exposure on its written option
position.
Put options written by each Fund will be secured by (i) maintaining cash or
liquid securities in a segregated account with a value at least equal to the
respective 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
respective 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 a Fund is unable to effect a closing purchase
transaction with respect to options it has written, the respective 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.
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
<PAGE> 29
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 Funds 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 Funds to time the receipt of exercise notices. This
prevents the Funds from receiving income on a scheduled basis and may inhibit
the Funds 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. Each 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 each 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 Funds and other clients
advised by the Adviser may constitute such a group. These position limits may
limit the number of options the Funds may write on a particular security. An
exchange may order the liquidation of positions found to be above such limits or
impose other sanctions.
Investments in Other Investment Companies. Each 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.
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. [SHOULD THIS LANGUAGE BE INCLUDED?
DO REPOS APPLY?]
Illiquid Securities. Each 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 respective 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, each
2
<PAGE> 30
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.
3
<PAGE> 31
Other Investments. Subject to prior disclosure to shareholders, the Trustees
may, in the future, authorize each of the Funds to invest in securities other
than those listed here and in the Prospectus, provided that such investment
would be consistent with the respective 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. For each Fund the following investment
restrictions are considered fundamental, which means they may be changed only by
approval of the holders of a majority of the respective 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. A Fund may not purchase securities that would cause more than 25% of the
value of its 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. A Fund may not borrow money or issue senior securities, except to the
extent provided by the 1940 Act.
3. A 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. A 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 a 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. A Fund may not invest in commodities or commodity futures contracts.
6. A Fund may not underwrite securities of other issuers, except insofar as it
may be deemed an underwriter under the Securities Act of 1933 when selling
portfolio securities.
7. A 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. For each Fund the following
restrictions are imposed by management of the Funds and may be modified by the
Trustees without shareholder approval.
1. A Fund may not borrow money, except that a 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 a Fund at
the time of borrowing. In the event asset coverage for such borrowings
falls below 300%, a Fund will reduce, within three days, the amount of its
borrowing in order to provide for 300% asset coverage.
2. A 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 a Fund is valuing
the security. Repurchase agreements with deemed maturities in excess of
seven days are subject to this 15% limit.
3. A Fund may not invest in a company for the purpose of exercising control or
management of the company.
4. A Fund may not purchase securities on margin, except that a 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. A Fund may not invest its assets in securities of any other investment
company, except as permitted by the 1940
4
<PAGE> 32
Act. Under the 1940 Act, a 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 a Fund. Unless
otherwise indicated, all percentage limitations governing the investments of the
Fund apply only at the time of the investment.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund 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. A 100% annual turnover rate would occur if all of
the Fund's securities were replaced one time during a one-year period.
Under certain market conditions, the Funds' portfolio turnover rate is likely to
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
Funds may also engage in short-term trading (purchase and sale of a security in
a relatively brief period of time) in response to stock market conditions or
changes in economic trends and developments. It is anticipated that the
portfolio turnover for The Kelmoore Strategy (TM) High Beta Fund will not exceed
_____% for the initial year. For the period since inception to February 29,
2000, the portfolio turnover for The Kelmoore Strategy (TM) Covered Fund, on an
annualized basis, was ________% due to a large number of options being
exercised.
High rates of portfolio turnover (100% or more) entail certain costs, including
increased taxable income for the Funds' 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 Funds are conducted under the
direction of the Trustees. The Trustees establish the Funds' policies and
oversee the management of the Funds. The Trustees meet regularly to review the
activities of the officers, who are responsible for day-to-day operations of the
Funds.
The Trustees and officers of the Funds 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 Executive
Palo Alto, CA 94303 Trustee 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, CA 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,
</TABLE>
5
<PAGE> 33
<TABLE>
<S> <C> <C>
from 1996 to present. Director, Church of the Pioneers Foundation,
from 1985 to present.
Kenneth D. Treece, Age 54 Trustee Chief Executive Officer of SBMC Corp., a precision
2960 Copper Road sheet metal producer, from 1996 to present. From
Santa Clara, CA 95051 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 Avenue Executive Officer of Custom Chrome, Inc., a
Morgan Hill, CA 95037 supplier of motorcar parts and accessories, from
1969 to 1997.
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.
Tamara Beth Heiman, Age ___ Secretary and Executive Vice President and Director of Marketing
2471 East Bayshore Road, Suite 501 Treasurer of Kelmoore Investment Company since March of
Palo Alto, CA 94303 1999. Vice President, Investment Advisory Services
for Josephthal and Co., Inc, a NYSE Firm, from
1997 to 1999. Vice President, Investment Advisory
Services, for First Allied Securities, a National
Independent Broker Dealer from 1994 to 1999.
</TABLE>
*An asterisk indicates a Trustee who may be deemed to be an "interested person"
of the Trust (as that term is defined in the 1940 Act). Mr. Kelmon is considered
an "interested person" of the Trust due to his affiliation with the Adviser.
Messrs. Stanley and Barnes are considered "interested persons" of the Trust
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 Ms. McCarthy and Messrs.
Barnes and Player. 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 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 paid by the Trust to the
non-interested Trustees during the period since inception to February 29, 2000.
Code of Ethics. To mitigate the possibility that the Fund will be adversely
affected by personal trading of employees, the Fund and the Adviser have adopted
Codes of Ethics under Rule 17j-1 of the 1940 Act. These Codes contain policies
restricting securities trading in personal trading accounts of Trustees and
others who normally come into possession of information on portfolio
transactions.
6
<PAGE> 34
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
NAME OF TRUSTEE FROM THE TRUST THE TRUST PAID TO TRUSTEE
- --------------------------------------------------------------------------------
<S> <C> <C>
Kenneth D. Treece [ ] [ ]
Ignatius J. Panzica [ ] [ ]
Stephen W. Player [ ] [ ]
Lisa Ann McCarthy [ ] [ ]
Jeffrey Ira [ ] [ ]
</TABLE>
Trustees who are "interested persons" are not compensated by the Trust for their
services. The Trust does not have any retirement plan for the Trustees. As of
February 29, 2000 the Trustees and officers owned less than 1% of the shares of
The Kelmoore Strategy(TM) Fund, while Kelmoore Investment Company owned % of
the shares of the Kelmoore Strategy(TM) Fund.
Investment Adviser. The Trust has employed Kelmoore Investment Company, Inc. as
its investment adviser. As of February 29, 2000, the Adviser managed
approximately $_____ 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 Funds.
In addition to managing the Funds' investments consistent with their investment
objectives, policies and limitations, the Adviser makes recommendations with
respect to other aspects and affairs of the Fund. The Adviser also furnishes the
Funds with certain administrative services, office space and equipment. All
other expenses incurred in the operation of the Funds are borne by the Funds.
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 Funds 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, each of the Funds pay 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 February 29, 2000, the Adviser has voluntarily agreed
to waive its fees and reimburse expenses so that the Fund's annual operating
expenses will not exceed 2.25% for Class A shares and 3.00% for Class C shares.]
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. Through
February 29, 2000, the Fund has paid the Adviser $_________ in advisory fees
and the Fund has reimbursed the Adviser $_________ in Fund expenses incurred in
connection with the organization of the Fund.
As part of the Trust's organization, the Kelmoore Strategy(TM) Fund issued
10,000 shares of beneficial interest at $10.00 per share and the Kelmoore
Strategy(TM) High Beta Fund issued ________ shares of beneficial interest at
$____ per share in a private placement to the Adviser.
The Investment Advisory Agreement for the Kelmoore Strategy(TM) Fund was
approved by the Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust, on March 22, 1999. The Investment Advisory
Agreement for the Kelmoore Strategy(TM) High Beta Fund was approved by the
Trustees, including a majority of the Trustees who are not "interested persons"
of the Trust, on ________, 2000. The Investment Advisory Agreement, as it
applies to each Fund, 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
respective 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
7
<PAGE> 35
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 Funds or by the Adviser, upon
sixty days' written notice. The Investment Advisory Agreement terminates
automatically if assigned.
Expenses. Each of the Funds pay 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 Funds' 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 Strategy" and
the word "Kelmoore" in the name of any Fund. If the Adviser ceases to be the
investment adviser of the Funds, the Adviser may require the Trust and the Funds
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 Funds' shares, which are offered on a continuous
basis. The Distributor serves as the principal distributor of the Funds' shares
pursuant to a Distribution Agreement with each of the Funds. 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 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.
For the fiscal year ended February 29, 2000, such fees totaled $________, all
of which were paid to the Distributor for the services described above.
Shares of the Funds 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 Funds 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 Class A shares of the Funds (the "Class A
Plan") and the Class C shares of the Funds (the "Class C Plan", collectively,
the "Plans"). The Plans permit 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 Class A Plan, each of the Funds 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 respective Fund.
Under the Class C Plan, (a) each of the Funds shall reimburse the Distributor a
monthly fee not to exceed 0.75% per annum of the average daily net assets of the
respective Fund; and (b) in addition to the amounts described in (a) above, each
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
respective Fund, as a service fee.
The fees payable under the Class A Plan and section (a) of the Class C Plan
shall be used to reimburse the Distributor for any expenses primarily intended
to result in the sale of each Fund's shares, including, but not limited to:
payments the Distributor makes to broker-dealers or other financial institutions
and industry professionals for providing
8
<PAGE> 36
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 Funds.
The fees payable under section (b) of the Class C 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 of other financial institutions and industry
professionals for providing administrative support services to the holders of
the Funds' shares.
All such expenses covered by the Plans 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 Plans.
The Plans are subject to annual approval by the Trustees. The Plans are
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 each of the Funds. Pursuant
to the Plans, 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 Plans that would materially increase the cost of a Plan to the
Funds require shareholder approval; otherwise, the Plans 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 Funds to pay expenses incurred by the
Distributor in excess of payments made to the Distributor under the Plans, if a
Plan is terminated, the Trustees will consider how to treat such expenses. All
distribution expenses in excess of the fee rates provided for in the Plans 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 Plans 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 Plans. None of the non-interested
Trustees has a financial interest in the operation of either Plan.
The Plans were adopted because of their 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. PFPC Inc. ("PFPC"), located at 3200 Horizon Drive, King of
Prussia, PA 19406, provides transfer agency and dividend disbursing agent
services for the Trust. As part of these services, PFPC maintains records
pertaining to the sale and redemption of Fund shares and will distribute the
Funds' cash dividends to shareholders. For the period ended February 29, 2000,
the Kelmoore Strategy(TM) Fund paid $________ to PFPC for its services as
Transfer Agent.
Administrative Services. PFPC also serves as the administrator for the Trust.
The services include the day-to-day administration of matters necessary to the
Funds' operations, maintenance of its records and books, preparation of reports,
and compliance monitoring of its activities. For the period ended February 29,
2000, the Kelmoore Strategy(TM) Fund paid $________ to PFPC for its services as
Administrator.
Accounting Services. PFPC also serves as the accounting agent for the Fund and
maintains the accounting books and records of the Fund, calculates the Funds'
net asset value in accordance with the provisions of the Fund's current
Prospectus and prepares for the Fund approval and use various government
reports, tax returns, and proxy materials. For the period ended February 29,
2000, the Kelmoore Strategy(TM) Fund paid $________ to PFPC for its services as
Accounting Agent.
9
<PAGE> 37
Custodian and Custody Administrator. The Bank of New York, 48 Wall Street, New
York, New York 10286, is custodian of the Funds' 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 Funds (ii) holds and transfers
portfolio securities on account of the Funds, (iii) accepts receipts and make
disbursements of money on behalf of the Funds, (iv) collects and receives all
income and other payments and distributions on account of the Funds' securities
and (v) makes periodic reports to the Trustees concerning the Funds' operations.
PFPC will act as custody administrator and has agreed to pay the fees and
expenses of the custodian.
Independent Accountants. The accounting firm of [insert name and address for B
filing], has been designated as independent accountants for the Trust.
[Auditor's name] performs annual audits of the Funds and is periodically called
upon to provide accounting and tax advice.
Legal Counsel. Sutherland, Asbill & Brennan LLP, 1275 Pennsylvania Ave, NW,
Washington, D.C. 20004-2415 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 Funds 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 Funds to the detriment of existing shareholders. If the recipient sold
such securities, a brokerage charge might be incurred.
Telephone Instructions. Neither the Funds nor PFPC 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 instructions are genuine,
PFPC 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 PFPC will be recorded.
Systematic Withdrawal Plan. Shareholders who own $5,000 or more of a Fund's
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 a Fund's share
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.
PFPC, 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 PFPC upon written notice to participants. The plan may be
terminated at any time without penalty upon written notice by the participants,
the Funds, or PFPC.
VALUATION
The Funds' 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
10
<PAGE> 38
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 a 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
Funds 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. Each of the Funds intend to be taxed as a regulated
investment company under Subchapter M of the Code. Accordingly, each 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, 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 Funds fail to qualify as a regulated
investment company, the Funds will be subject to U.S. federal income tax.
As a regulated investment company, each 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 Funds intend 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, each 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 a 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
11
<PAGE> 39
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 Funds to a corporate shareholder, to the extent such dividends are
attributable to dividends received by the Funds 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 Funds, 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 Funds, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of the Funds 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 Funds, 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 Funds 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 Funds with the shareholder's correct taxpayer
identification number or social security number, (2) the IRS notifies the
shareholder or the Funds 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
Each of the Funds 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 Funds 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.
12
<PAGE> 40
From inception through February 29, 2000, the Kelmoore Strategy(TM) Fund paid
$904,587 in brokerage commissions to Kelmoore Investment Company which
constitutes 100% of the commissions paid by the Fund.
The Adviser may utilize non-affiliated brokers, dealers or members of a
securities exchange to execute portfolio transactions on behalf of the Funds
and, like the Adviser, such firms may receive commissions for executing the
Funds' 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 Funds. At times, investment decisions
may be made to purchase or sell the same security for the Funds 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 Funds with respect to
price and availability of securities. In other cases, however, it is believed
that transactions would be advantageous to the Funds.
SHARES OF BENEFICIAL INTEREST
There are no conversion or preemptive rights in connection with any shares of
the Funds, nor are there cumulative voting rights. Each of the Funds' 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 a class of
the Funds are entitled to participate equally in dividends and distributions
declared and in the net assets of the Funds 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 Funds.
All issued and outstanding shares of the Funds will be fully paid and
non-assessable and will be redeemable at net asset value per share. The
interests of shareholders in the Fund will not be evidenced by a certificate or
certificates representing shares of the Funds.
The authorized capitalization of each of the Funds consist of an unlimited
number of shares having a par value of $0.001 per share. The Trustees have
authorized two series with two classes 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 Funds 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 Funds' 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.
CALCULATION OF PERFORMANCE
From time to time, each Fund may advertise its yield and total return. THESE
FIGURES WILL BE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE
FUTURE PERFORMANCE. No representation can be made regarding future yields or
returns.
The yield of a Fund refers to the annualized income generated by an investment
in the Fund over a specified 30-day period. The "total return" or "average
annual total return" of a Fund reflects the change in the value of an investment
13
<PAGE> 41
in a Fund over a stated period of time. Total returns and average annual returns
measure both the net investment income from and any realized or unrealized
appreciation or depreciation of a Fund's holdings for a stated period and assume
that the entire investment is redeemed at the end of each period and the
reinvestment of all dividends and capital gain distributions.
The yield of a Fund will be computed by annualizing net investment income per
share for a recent 30-day period and dividing that amount by a share's maximum
offering price (reduced by any undeclared earned income expected to be paid
shortly as a dividend) on the last trading day of that period. Net investment
income will reflect amortization of any market value premium or discount of
fixed income securities (except for obligations backed by mortgages or other
assets) and may include recognition of a pro rata portion of the stated dividend
rate of dividend paying portfolio securities. The yield of a Fund will vary from
time to time depending upon market conditions, the composition of the Fund's
portfolio and operating expenses of the Trust allocated to the Fund. These
factors and possible differences in the methods used in calculating yield should
be considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of a Fund's shares and to the
relative risks associated with the investment objective and policies of such
Fund.
Calculation of Total Return:
Each quotation of average annual total return will be computed by finding the
average annual compounded rate of return over that period which would equate the
value of an initial amount of $1,000 invested in a Fund equal to the ending
redeemable value, according to the following formula:
P(T + 1)(n) = ERV
Where: P = a hypothetical initial payment of $1,000, T = average annual total
return, n = number of years, and ERV = ending redeemable value of a hypothetical
$1,000 payment at the beginning of the period at the end of the period for which
average annual total return is being calculated assuming a complete redemption.
The calculation of average annual total return assumes the deduction of the
maximum sales charge, if any, from the initial investment of $1,000, assumes the
reinvestment of all dividends and distributions at the price stated in the then
effective Prospectus on the reinvestment dates during the period and includes
all recurring fees that are charged to all shareholder accounts assuming such
Fund's average account size.
A Fund, may also advertise aggregate total return in addition to average annual
total return. Aggregate total return is a measure of the change in value of an
investment in a Fund over the relevant period and is calculated similarly to
average annual total return except that the result is not annualized.
For the following periods ended February 29, 2000, the average annual total
returns for the Funds were as follows:
<TABLE>
<CAPTION>
FUND Since
1 Year 5 Year Inception
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Kelmoore Strategy(TM) Fund* N/A N/A _______%
Kelmoore Strategy(TM) High Beta Fund** N/A N/A N/A
</TABLE>
* The Kelmoore Strategy(TM) Fund commenced operations on
____________,1999.
** The Kelmoore Strategy(TM) High Beta Fund had not commenced
operations on the date of this SAI.
For the period of _________, 1999 (commencement of operations) through
February 29, 2000, the aggregate total return for the Kelmoore Strategy(TM) Fund
was ______%.
The performance figures above reflect voluntary fee waivers and expense
reimbursements. Absent such fee waivers and expense reimbursements, the yield
and total returns of the Funds would have been lower.
14
<PAGE> 42
At any time in the future, yields and total return may be higher or lower than
past yields and total return and there can be no assurance that any historical
results will continue. Investors in the Funds are specifically advised that
share prices, expressed as the net asset values per share, will vary just as
yields and total return will vary.
Comparing Performance. The performance of a Fund may periodically be compared
with that of other mutual funds or broad groups of comparable mutual funds
tracked by mutual fund rating services (such as Lipper Analytical Services,
Inc.) and financial and business publications and periodicals. In addition, a
Fund's performance may be compared with unmanaged indices of various investments
for which reliable performance data is available. These may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs. The performance of a Fund may also be compared in various
publications to averages, performance rankings or other information prepared by
recognized mutual fund statistical services. A Fund may quote Morningstar, Inc.,
a service that ranks mutual funds on the basis of risk-adjusted performance, or
Ibbotson Associates of Chicago, Illinois, which provides historical returns of
the capital markets in the United States. A Fund may use the long-term
performance of these capital markets to demonstrate general long-term risk
versus reward scenarios and could include the value of a hypothetical investment
in any of the capital markets.
A Fund may also quote financial and business publications and periodicals, such
as SMART MONEY, as they relate to Trust management, investment philosophy, and
investment techniques. A Fund may also quote from time to time various measures
of volatility and benchmark correlations in advertising and may compare these
measures with those of other mutual funds. Measures of volatility attempt to
compare historical share price fluctuations or total returns to a benchmark
while measures of benchmark correlation indicate how valid a comparative
benchmark might be. Measures of volatility and correlation are calculated using
averages of historical data and cannot be calculated precisely.
FINANCIAL STATEMENTS
Reports to Shareholders. The audited financial statements and notes thereto for
the Kelmoore Strategy(TM) Fund, contained in the Annual Report to Shareholders
dated February 29, 2000, are incorporated by reference into this Statement of
Additional Information and have been audited by_________________________, whose
report also appears in the Annual Report and is also incorporated by reference
herein. No other parts of the Annual Report are incorporated by reference
herein.
15
<PAGE> 43
KELMOORE STRATEGIC TRUST
PART C - OTHER INFORMATION
Item 23. EXHIBITS:
(a)(1) Certificate of Trust dated December 1, 1998 -- Incorporated by
reference to the Initial Registration Statement as filed with
the SEC on December 21, 1998.
(a)(2) Agreement and Declaration of Trust as amended March 22, 1999
--Incorporated by reference to Pre-Effective Amendment No. 2
to the Registration Statement as filed with the SEC on April
6, 1999.
(b) By-Laws as amended March 22, 1999 -- Incorporated by reference
to Pre-Effective Amendment No. 2 to the Registration Statement
as filed with the SEC on April 6, 1999.
(c) Instruments Defining Rights of Security Holders -- not
applicable.
(d) Investment Advisory Agreement dated March 22, 1999 --
Incorporated by reference to Pre-Effective Amendment No. 2 to
the Registration Statement as filed with the SEC on April 6,
1999.
(e) Distribution Agreement dated March 22, 1999 -- Incorporated by
reference to Pre-Effective Amendment No. 2 to the Registration
Statement as filed with the SEC on April 6, 1999.
(f) Bonus or Profit Sharing Contracts -- none.
(g) Custodian Agreement dated March 22, 1999 -- Incorporated by
reference to Pre-Effective Amendment No. 2 to the Registration
Statement as filed with the SEC on April 6, 1999.
(h) Services Agreement dated May 3, 1999 -- Incorporated by
reference to Post-Effective Amendment No. 1 to the
Registration Statement as filed with the SEC on August 25,
1999.
(i) Legal Opinion dated March 30, 1999 -- Incorporated by
reference to Pre-Effective Amendment No. 2 to the Registration
Statement as filed with the SEC on April 6, 1999.
(i)(1) Consent to reference Legal Opinion dated March 30, 1999 -
Incorporated by reference to Post-Effective Amendment No. 2 to
the Registration Statement as filed with the SEC on October
22, 1999.
(j) Consent of Independent Accountants -- Not applicable.
(k) Omitted Financial Statements - not applicable.
(l) Initial Capital Agreements dated March 25, 1999-- Incorporated
by reference to Pre-Effective Amendment No. 2 to the
Registration
<PAGE> 44
Statement as filed with the SEC on April 6, 1999.
(m)(1) Rule 12b-1 Plan of Distribution and Service Plan for Class C
Shares dated October 24, 1999 -- Incorporated by reference to
Post-Effective Amendment No. 2 to the Registration Statement
as filed with the SEC on October 22, 1999.
(m)(2) Rule 12b-1 Plan of Distribution Plan for Class A Shares dated
October 24, 1999 -- Incorporated by reference to
Post-Effective Amendment No. 2 to the Registration Statement
as filed with the SEC on October 22, 1999.
(n) Rule 18f-3 Plan dated October 24, 1999 -- Incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement as filed with the SEC on October 22,
1999.
(o)(1) Powers of Attorney -- Incorporated by reference to
Pre-Effective Amendment No. 2 to the Registration Statement as
filed with the SEC on April 6, 1999.
(o)(2) Power of Attorney of Norman H. Moore, Jr. -- Incorporated by
reference to Post-Effective Amendment No. 1 to the
Registration Statement as filed with the SEC on August 25,
1999.
(o)(3) Power of Attorney of Tamara Beth Heiman -- Incorporated by
reference to Post-Effective Amendment No. 2 to the
Registration Statement as filed with the SEC on October 22,
1999.
(p) Code of Ethics of the Trust the Adviser and Distributor dated
--- filed herewith.
Item 24. Persons Controlled by or under Common Control with Registrant.
Not Applicable
Item 25. Indemnification.
The Agreement and Declaration of Trust (Article IV, Section 3)
of the Trust
<PAGE> 45
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 has purchased Errors and Omissions insurance
with Directors and Officers liability coverage.
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 Trust 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 ____________ 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
Funds. 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>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
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 Vice President- None
Administration: Corporate
Secretary and Chief
Compliance Officer
Norman H. Moore, Jr. Director None
Matthew Kelmon Vice President of Trading President and Trustee
Thomas W. Killilea Director None
Richard J. Deagazio Director None
</TABLE>
<PAGE> 46
<TABLE>
<S> <C> <C>
Edward J. Devereaux Director and Chief None
Operating Officer
Richard D. Stanley None Chairman and Trustee
Tamara Beth Heiman Executive Vice President Secretary and Treasurer
and Director of Marketing
Shawn Young Chief Financial Officer Chief Financial Officer
</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, PFPC, 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.
<PAGE> 47
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 King of Prussia
and the State of Pennsylvania on this 14th day of April, 2000.
KELMOORE STRATEGIC TRUST
(Registrant)
/s/ Matthew Kelmon
-------------------------------
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Matthew Kelmon* President, Principal April 14, 2000
Executive Officer
and Trustee
Tamara Beth Heiman* Secretary, Treasurer and April 14, 2000
Chief Financial Officer
William H. Barnes* Trustee April 14, 2000
Richard D. Stanley* Trustee April 14, 2000
Jeffrey Ira* Trustee April 14, 2000
Kenneth D. Treece* Trustee April 14, 2000
Lisa Ann McCarthy* Trustee April 14, 2000
Ignatius J. Panzica* Trustee April 14, 2000
Stephen W. Player* Trustee April 14, 2000
By: /s/ Sandra Adams
-------------------
*Sandra L. Adams,
as Attorney-in-Fact
pursuant to
Powers of Attorney
</TABLE>
<PAGE> 48
KELMOORE STRATEGIC TRUST
EXHIBIT INDEX TO PART "C"
OF
REGISTRATION STATEMENT
ITEM NO. DESCRIPTION
(p) Code of Ethics of the Trust, the Adviser and the Distributor
<PAGE> 1
EXHIBIT 99.(p)(1)
KELMOORE STRATEGIC TRUST
KELMOORE INVESTMENT COMPANY, INC.
CODE OF ETHICS AND POLICY ON PERSONAL TRADING
AS AMENDED FEBRUARY 18, 2000
SECTION 1. STATEMENT OF GENERAL PRINCIPLES.
Rule 17j-1 under the Investment Company Act of 1940 (the "1940 Act") imposes an
obligation on registered investment companies, their investment advisers and
principal underwriters to adopt written codes of ethics covering the securities
activities of certain of their directors, trustees, officers, and employees.
This Code of Ethics and Policy on Personal Trading (the "Code") is designed to
ensure that those individuals who have access to information regarding the
portfolio securities activities of Kelmoore Strategic Trust (the "Trust"), an
investment company registered under the 1940 Act, do not use that information
for their personal benefit or to the detriment of the Trust.
It is not the intention of this Code to prohibit personal securities activities
by Access Persons (defined below), but rather to prescribe rules designed to
prevent actual and apparent conflicts of interest. While it is not possible to
address all possible situations in which conflicts may arise, this Code sets
forth the policies of the Trust regarding conduct in those situations in which
conflicts are most likely to develop.
In discharging his or her obligations under the Code, every Access Person should
adhere to the following general fiduciary principles governing personal
investment activities:
1. Every Access Person should at all times place the interests of the
Trust's shareholders ahead of his or her own interests with respect to
any decision relating to personal investments.
2. No Access Person should take inappropriate advantage of his or her
position by using his or her knowledge of any transactions for the
Trust to his or her personal profit or advantage.
Furthermore, it is expected that Access Persons will be sensitive to all areas
of potential conflict, even if this Code does not address specifically an area
of fiduciary responsibility.
SECTION 2. DEFINITIONS.
(a) "ACCESS PERSON" means: (i) any trustee, officer or Advisory Person (as
defined below) of the Trust; or (ii) any director, officer or Advisory
Person (as defined below) of Kelmoore Investment Company, Inc., the
investment adviser and principal underwriter of the Trust (the
"Adviser").
(b) "ADVISORY PERSON" means: (i) any employee of the Trust or the Adviser,
or of any company in a control relationship with the Trust or the
Adviser, who, in connection with his or her regular functions or
duties, makes, participates in, or obtains information regarding the
purchase or sale of a Covered Security by the Trust, or whose functions
relate to the making of any recommendations with respect to such
purchases or sales; and (ii) any natural person in a control
relationship with the Trust or the Adviser who obtains information
concerning
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recommendations made to the Trust with regard to the purchase or sale
of Covered Securities.
(c) A Covered Security is "BEING CONSIDERED FOR PURCHASE OR SALE" when a
recommendation to purchase or sell a Covered Security has been made and
communicated, and, with respect to a person making a recommendation,
when such person seriously considers making such a recommendation.
(d) "BENEFICIAL OWNERSHIP" shall be interpreted in the same manner as it
would be under Rule 16a-1(a)(2) of the Securities Exchange Act of 1934.
An Access Person may be deemed to have beneficial ownership of an
account of another person if, by reason of any contract, arrangement,
understanding, relationship or otherwise, the Access Person can share
in any profit from the securities in the account, including securities
held by a family member sharing the same household, by a partnership,
corporation or other entity controlled by the Access Person, or by a
trust of which the Access Person is a trustee, beneficiary or settlor.
(e) "COMPLIANCE OFFICER" means the person appointed by the Trustees to have
the powers and authorities needed to carry out the duties and
responsibilities delegated by this Code or by resolution of the
Trustees. A person appointed as Alternative Compliance Officer shall
have the authority to act in the Compliance Officer's stead in the
event the Compliance Officer is unable or unwilling to act.
(f) "COVERED SECURITY" Means any Security, except that it does not include
securities issued by the Government of the United States or by federal
agencies which are direct obligations of the United States, bankers
acceptances, bank certificates of deposit, commercial paper, high
quality short-term debt instruments (including repurchase agreements),
such other money market instruments as may be designated from time to
time by the Trustees and shares of registered open-end investment
companies.
(g) "IPO" means an offering of securities registered under the Securities
Act of 1933, the issuer of which, immediately before the registration,
was not subject to the reporting requirements of section 13 or 15(d) of
the Securities Exchange Act of 1934.
(h) "LIMITED OFFERING" is an offering that is exempt from registration
under the Securities Act of 1933 pursuant to section 4(2) or section
4(6) or pursuant to rule 504, rule 505, or rule 506 under the
Securities Act of 1933.
(i) "PURCHASE OR SALE OF A SECURITY" includes, among other things, the
writing of an option to purchase or sell a security.
(j) "SECURITY" shall have the meaning set forth in Section 2(a)(36) of the
1940 Act.
(k) "SECURITY HELD OR TO BE ACQUIRED BY THE TRUST" means any Covered
Security which, within the most recent 15 days, is or has been held by
the Trust, or is being or has been considered by the Trust or the
Adviser for purchase by the Trust; and any option to purchase or sell,
and any security convertible into or exchangeable for, a Covered
Security described in this paragraph.
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<PAGE> 3
SECTION 3. TRADING PRACTICES.
(a) GENERAL. It shall be a violation of this Code for an Access Person of
the Trust, in connection with the purchase or sale, directly or
indirectly, by such person of a Security held or to be acquired by the
Trust:
(i) to employ any device, scheme or artifice to defraud the Trust;
(ii) to make to the Trust any untrue statement of a material fact
or omit to state to the Trust a material fact necessary in
order to make the statements made, in light of the
circumstances under which they are made, not misleading;
(iii) to engage in any act, practice or course of business which
operates or would operate as a fraud or deceit upon the Trust;
or
(iv) to engage in any manipulative practice with respect to the
Trust.
(b) SERVICES AS A DIRECTOR. Advisory Persons may not serve on the boards of
directors of publicly-traded companies, unless: (i) the individual
serving as a director has received prior authorization based upon a
determination that the board service would not be inconsistent with the
interests of the Trust; and (ii) policies and procedures have been
developed that are designed to isolate the individual from those making
investment decisions concerning the company in which he or she is a
board member.
(c) PRE-APPROVAL OF INVESTMENTS IN IPOS AND LIMITED OFFERINGS. Advisory
Persons must obtain approval from the Compliance Officer before
directly or indirectly acquiring beneficial ownership in any Securities
in an IPO or a Limited Offering or any securities in the universe of
stocks and options in which the Trust trades.
SECTION 4. TRADES IN SHARES OF THE TRUST.
All purchases and sales of shares of the Trust that are not part of a systematic
or periodic purchase or sale program should be placed by 1:00 p.m. Eastern
Standard Time each day, and like all Securities transactions, should not be made
when in possession of material, non-public information.
SECTION 5. REPORTING.
(a) All Access Persons (unless specifically exempted under Section 6
hereof) must file with the Compliance Officer a written report with
respect to any holding of or transaction in any Covered Security in
which such Access Persons have or acquired direct or indirect
Beneficial Ownership within:
(i) 10 days after becoming an Access Person (an "Initial Report");
(ii) 10 days after the end of each calendar quarter (a "Quarterly
Report"); and
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<PAGE> 4
(iii) 30 days after the Fund's fiscal year end (an "Annual Report")
which contains information as of a date not more than 30 days
prior to the date the Annual Report is submitted.
(b) The Initial Report and Annual Report shall be in substantially the form
attached hereto as Exhibit B and shall contain the following
information:
(i) the title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct or
indirect beneficial ownership;
(ii) the name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were held
for the direct or indirect benefit of the Access Person; and
(iii) the date of the report.
(c) Each Quarterly Report shall be in substantially the form attached
hereto as Exhibit A and shall contain the following information:
(i) the date of the transaction, the name (including interest rate
and maturity date, if applicable) and the number of shares or
units or principal of each Covered Security involved;
(ii) the nature of the transaction (i.e., purchase, sale, or any
other type of acquisition or disposition);
(iii) the price of the Covered Security at which the transaction was
effected;
(iv) the name of the broker, dealer or bank with or through whom
the transaction was effected;
(v) the name of the broker, dealer or bank with whom the Access
Person established any account in which any Securities were
held during the quarter for the direct or indirect benefit of
the Access Person and the date such account was established;
and
(vi) the date the report was filed.
(d) For periods in which no reportable transactions were effected or
accounts established, a Quarterly Report shall contain a representation
that no events subject to the reporting requirement occurred. Such a
report is not necessary if duplicate confirmations and periodic
statements are filed.
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<PAGE> 5
SECTION 6. EXCEPTIONS TO REPORTING REQUIREMENTS.
(a) A Trustee who is not "interested person" (as defined in the 1940 Act)
of the Trust, and who would be required to make a report solely by
reason of his or her position as Trustee, is not required to file an
Initial Report or an Annual Report.
(b) A Trustee who is not an "interested person" (as defined in the 1940
Act) of the Trust, and who would be required to make a report solely by
reason of his or her position as Trustee, is not required to file a
Quarterly Report with respect to a transaction in a Covered Security,
provided such Trustee neither knew nor, in the ordinary course of
fulfilling his or her official duties as Trustee, should have known
that, during the 15-day period immediately preceding or following the
date of the transaction by the Trustee, such security is or was
purchased or sold by the Trust or is or was being considered for
purchase or sale by the Trust or by the Adviser.
(c) No Quarterly Report need be made by any Access Person who files copies
of confirmations and periodic (monthly or quarterly) brokerage account
statements with the Adviser, provided they are filed with the Adviser
within the time periods required by Section 5(a) hereof and duplicate
the information required to be reported under this Code.
(d) A person need not make an Initial Report, Quarterly Report or Annual
Report with respect to transactions effected for, and any Covered
Security held in, any account over which the person has no direct or
indirect influence or control.
SECTION 7. REVIEW OF REPORTS.
(a) The Compliance Officer shall review all reports of personal securities
transactions filed with the Trust to determine whether non-compliance
with this Code or other applicable trading procedures may have
occurred. The Compliance Officer may delegate this function to one or
more other persons. Before making any determination that such
non-compliance may have occurred, the Compliance Officer shall give
such person an opportunity to supply additional explanatory material.
(b) No person shall review his or her own reports. If a securities
transaction of the Compliance Officer is under consideration, the
Alternate Compliance Officer shall act in all respects in the manner
prescribed herein for the Compliance Officer.
SECTION 8. SANCTIONS.
(a) If the Compliance Officer determines that non-compliance with this Code
may have occurred, he or she shall, following consultation with
counsel, submit a written determination, together with the relevant
reports, if any, and any explanatory material provided, to the
Trustees, who shall, following consultation with counsel, make an
independent determination of whether a violation has occurred.
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<PAGE> 6
(b) The Trustees may impose such sanctions as they deem appropriate,
including a letter of censure, suspension, termination of employment,
and/or disgorgement of any profits. Any profits subject to disgorgement
will be given to a charity selected by the Trustees or under the
Trustees' direction. The Trustees have the authority to interpret the
provisions of, and grant exceptions to, this Code in their sole
discretion.
SECTION 9. OTHER PROCEDURES.
(a) The Compliance Officer shall identify and maintain a current list of
all Access Persons and shall inform the same of their reporting
obligations under this Code. The Compliance Officer shall institute
procedures to ensure that all reporting Access Persons have submitted
reports, confirmations or statements in a timely manner. The Compliance
Officer may delegate this function to one or more other persons.
(b) Access Persons are required to certify upon becoming Access Persons and
annually thereafter that they have complied with the requirements of
this Code and that they have disclosed or reported all information
required to be disclosed or reported pursuant to this Code.
(c) The Compliance Officer and Alternate Compliance Officer shall be
appointed by resolution of the Trustees and their identities shall be
maintained in the records of the Trust.
(d) The appropriate officer of the Trust and Adviser shall report to the
Trustees, at least annually and in writing, any issues arising under
this Code since the last report, including, but not be limited to,
information about any material violations of this Code and any
sanctions imposed. Such report shall also certify that the Trust and
the Adviser each have adopted procedures reasonably necessary to
prevent Access Persons from violating this Code.
(e) The Compliance Officer shall maintain records under this Code in the
manner and to the extent set out in Rule 17j-1(f).
(f) All reports disclosing personal securities transactions or holdings,
and any other information filed pursuant to this Code, shall be treated
as confidential, but are subject to review as provided herein and by
representatives of the Securities and Exchange Commission.
I have read and understood this Code. I have complied with the requirements of
this Code and have disclosed or reported all information required to be
disclosed or reported pursuant to this Code.
Signature___________________________________ Date ___________________
Print Name__________________________________
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<PAGE> 7
List of Access Persons of KELMOORE STRATEGIC TRUST
Dated 2/10/00
A. Duncan King
Barry Martin
Cece G. Montgomery
David R. Moore
Matthew Kelmon
Michael Romanchak
Norman H. Moore
Norman H. Moore, Jr.
Paul Gavin Chait
Ralph M. Kelmon
Richard J. DeAgazio
Shawn K. Young
Tamara Heiman
Thomas Killilea
Ignatius J. Panzica
Jeffrey Ira
Kenneth D. Treece
Lisa Ann McCarthy
Richard D. Stanley
Stephen W. Player
William H. Barnes
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<PAGE> 8
Exhibit A
KELMOORE STRATEGIC TRUST
KELMOORE INVESTMENT COMPANY, INC.
(as Adviser and Underwriter)
PERSONAL SECURITIES TRANSACTIONS REPORT
CALENDAR QUARTER ENDED ___/___/___
During the calendar quarter referred to above, the following transactions were
effected in covered securities of which I had, or by reason of such transactions
acquired, direct or indirect beneficial ownership:
<TABLE>
<CAPTION>
NATURE OF
NUMBER OF TRANSACTION
DATE OF SHARES OR PRINCIPAL (PURCHASE, BROKER/DEALER OR BANK
NAME OF SECURITY TRANSACTION UNITS AMOUNT SALE, OTHER) PRICE THROUGH WHOM EFFECTED
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
During the quarter, I established the following accounts in which securities
held for my direct or indirect benefit:
<TABLE>
<CAPTION>
NAME OF BROKER/DEALER/BANK DATE ACCOUNT ESTABLISHED
- --------------------------------------------------------------------------------
<S> <C>
</TABLE>
This report (i) excludes transactions with respect to which I had no direct or
indirect influence or control and (ii) is not an admission that I had or
acquired any direct or indirect beneficial ownership in the securities listed.
Date:______________ Signature:________________________________________
Print Name:_______________________________________
Exhibit A
<PAGE> 9
Exhibit B
KELMOORE STRATEGIC TRUST
KELMOORE INVESTMENT COMPANY, INC.
(as Adviser and Underwriter)
PERSONAL SECURITIES TRANSACTIONS REPORT
PLEASE CHECK ONE: / / INITIAL REPORT
/ / ANNUAL REPORT
I hold direct or indirect beneficial ownership of the covered securities listed
below: (PLEASE CONTINUE LIST ON PAGE 2 OF THIS REPORT OR ATTACH ADDITIONAL PAGES
IF NEEDED)
<TABLE>
<CAPTION>
NUMBER OF SHARES OR BROKER, DEALER, BANK OR OTHER ENTITY BY WHICH
NAME OF SECURITY PRINCIPAL AMOUNT SECURITIES ARE HELD
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
I maintain accounts of securities held for my direct or indirect benefit at the
banks/brokers/dealers below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This report (i) excludes securities with respect to which I had no direct or
indirect influence or control and (ii) is not an admission that I have or had
any direct or indirect beneficial ownership in the securities listed above.
Date:______________ Signature:_____________________________________
Print Name:____________________________________
Exhibit B Page - 1 -
<PAGE> 10
Exhibit B
PERSONAL SECURITIES TRANSACTIONS REPORT
Name: _________________________________
Date: _________________________________
<TABLE>
<CAPTION>
NUMBER OF SHARES OF BROKER/DEALER, BANK OR OTHER ENTITY WITH WHICH
NAME OF SECURITY SECURITY SECURITIES ARE HELD
<S> <C> <C>
</TABLE>
Exhibit B Page - 2 -
