<PAGE> 1
THE KELMOORE STRATEGY(TM) FUNDS
[LIGHTBULB GRAPHIC]
SEMI-ANNUAL REPORT
Kelmoore Strategy(TM) Fund
Kelmoore Strategy(TM) Eagle Fund
--------------------------------
AUGUST 31, 2000
<PAGE> 2
KELMOORE STRATEGIC TRUST AUGUST 31, 2000
KELMOORE STRATEGY(TM) FUND (UNAUDITED)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
COMMON STOCKS - 88.8% ++
CONSUMER GOODS - 11.3%
273,000 The Gillette Co. ....................................... $8,190,000
150,000 The Home Depot, Inc. ................................... 7,209,375
100,000 Merck & Co., Inc. ...................................... 6,987,500
100,000 Walgreen Co. ........................................... 3,287,500
100,000 Wal-Mart Stores, Inc. .................................. 4,743,750
-----------
30,418,125
-----------
FINANCIAL SERVICES - 16.4%
100,000 American Express Co. ................................... 5,912,500
133,333 Citigroup, Inc. ........................................ 7,783,333
100,000 Fannie Mae ............................................. 5,375,000
75,000 Goldman Sachs Group .................................... 9,604,688
50,000 Merrill Lynch & Co., Inc. .............................. 7,250,000
75,000 Morgan Stanley Dean Witter & Co. ....................... 8,067,187
-----------
43,992,708
-----------
MANUFACTURING - 14.9%
150,000 Eastman Kodak Co. ...................................... 9,337,500
100,000 General Electric Co. ................................... 5,868,750
150,000 General Motors Corp. ................................... 10,828,125
100,000 International Paper Co. ................................ 3,187,500
100,000 Minnesota Mining
& Manufacturing Co. .................................... 9,300,000
100,000 Xerox Corp. ............................................ 1,606,250
-----------
40,128,125
-----------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
RESOURCES - 14.2%
100,000 Alcoa, Inc. ............................................ $3,325,000
100,000 Chevron Corp. .......................................... 8,450,000
99,800 du Pont (E.I.) de Nemours & Co. ........................ 4,478,525
100,000 Exxon Mobil Corp. ...................................... 8,162,500
100,000 Halliburton Co. ........................................ 5,300,000
100,000 Schlumberger Ltd. ...................................... 8,531,250
-----------
38,247,275
-----------
TECHNOLOGY - 32.0%
10,000 Agilent Technologies+ .................................. 603,125
125,000 America Online, Inc.+ .................................. 7,328,125
100,000 Boeing Co. ............................................. 5,362,500
150,000 Cisco Systems, Inc.+ ................................... 10,293,750
50,000 Hewlett-Packard Co. .................................... 6,037,500
50,000 Intel Corp. ............................................ 3,743,750
150,000 International Business
Machines Corp. ......................................... 19,800,000
205,000 Microsoft Corp.+ ....................................... 14,311,563
200,000 Motorola, Inc. ......................................... 7,212,500
50,000 Oracle Corp.+ .......................................... 4,546,875
100,000 Texas Instruments ...................................... 6,693,750
-----------
85,933,438
-----------
TOTAL COMMON STOCKS
(Cost $248,955,985*) ................................... 238,719,671
-----------
</TABLE>
See Notes to Financial Statements.
1
<PAGE> 3
KELMOORE STRATEGIC TRUST AUGUST 31, 2000
KELMOORE STRATEGY(TM) FUND - (CONTINUED) (UNAUDITED)
<TABLE>
<CAPTION>
Number of
Contract Shares Expiration Strike Value
Subject to Call Date Price (Note 1)
--------------- ---------- ------ -------------
<S> <C> <C> <C> <C>
CALL OPTIONS WRITTEN - (1.3)%
100,000 Alcoa, Inc. ........................... 9/16/00 $ 35.0 $ (62,500)
125,000 America Online, Inc. .................. 9/16/00 60.0 (125,000)
100,000 American
Express Co. ........................... 9/16/00 60.0 (131,250)
100,000 Boeing Co. ............................ 9/16/00 50.0 (462,500)
100,000 Chevron Corp. ......................... 9/16/00 90.0 (37,500)
150,000 Cisco Systems, Inc. ................... 9/16/00 70.0 (206,250)
133,333 Citigroup, Inc. ....................... 9/16/00 60.0 (108,333)
150,000 du Pont (E.I) de
Nemours & Co. ......................... 9/16/00 45.0 (75,000)
99,800 Eastman
Kodak Co. ............................. 9/16/00 65.0 (99,800)
100,000 Exxon Mobil Corp. ..................... 9/16/00 85.0 (50,000)
100,000 Fannie Mae ............................ 9/16/00 60.0 (12,500)
100,000 General Electric Co. .................. 9/16/00 60.0 (75,000)
150,000 General
Motors Corp. .......................... 9/16/00 75.0 (187,500)
75,000 Goldman
Sachs Group. .......................... 9/16/00 125.0 (421,875)
100,000 Halliburton Co. ....................... 9/16/00 55.0 (112,500)
50,000 Hewlett-Packard Co. ................... 9/16/00 120.0 (231,250)
150,000 The Home
Depot, Inc. ........................... 9/16/00 50.0 (121,875)
50,000 Intel Corp. ........................... 9/16/00 75.0 (100,000)
100,000 Merck & Co., Inc. ..................... 9/16/00 75.0 (37,500)
50,000 Merrill Lynch
& Co., Inc. ........................... 9/16/00 150.0 (106,250)
100,000 Minnesota Mining &
Manufacturing Co. ..................... 9/16/00 100.0 (28,125)
75,000 Morgan Stanley
Dean Witter & Co. ..................... 9/16/00 105.0 (318,750)
50,000 Oracle Corp. .......................... 9/16/00 90.0 (187,500)
100,000 Schlumberger Ltd. ..................... 9/16/00 90.0 (100,000)
100,000 Texas Instruments ..................... 9/16/00 75.0 (43,750)
100,000 Walgreen Co. .......................... 9/16/00 35.0 (31,250)
100,000 Wal-Mart
Stores, Inc. .......................... 9/16/00 50.0 (62,500)
------------
TOTAL CALL OPTIONS WRITTEN
(Premiums received $4,986,373) .......................... (3,536,258)
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Contract Shares Expiration Strike Value
Subject to Call Date Price (Note 1)
--------------- ---------- ------ -------------
<S> <C> <C> <C> <C>
PUT OPTIONS WRITTEN - (0.5)%
250,000 The Allstate Corp. .................... 9/16/00 $ 30.0 $(312,500)
50,000 The Home
Depot, Inc. ........................... 9/16/00 50.0 (118,750)
100,000 Johnson &
Johnson ............................... 9/16/00 95.0 (312,500)
100,000 The Procter &
Gamble Co. ............................ 9/16/00 65.0 (343,750)
100,000 Wal-Mart
Stores, Inc. .......................... 9/16/00 50.0 (300,000)
------------
TOTAL PUT OPTIONS WRITTEN
(Premiums received $1,016,185) ............................ (1,387,500)
------------
CASH AND OTHER ASSETS,
LESS LIABILITIES - 13.0% ........................................... 35,155,846
------------
NET ASSETS - 100.0% ................................................ $268,951,759
============
</TABLE>
----------
+ Non-income producing security.
++ Common stocks are pledged as collateral for written options.
* Aggregate cost for Federal tax purposes is $248,955,985 and net unrealized
depreciation consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation ................................... $ 6,608,998
Gross unrealized depreciation ................................... (16,845,312)
------------
Net unrealized depreciation ................................... $(10,236,314)
============
</TABLE>
See Notes to Financial Statements.
2
<PAGE> 4
KELMOORE STRATEGIC TRUST AUGUST 31, 2000
KELMOORE STRATEGY(TM) EAGLE FUND (UNAUDITED)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
--------- ----------
<S> <C> <C>
COMMON STOCKS - 101.7%++
ELECTRONICS - 21.9%
2,000 Aether Systems, Inc.+ .................................. $ 277,000
5,000 Altera Corp.+ .......................................... 324,063
7,000 Analog Devices, Inc.+ .................................. 703,500
7,000 Applied Materials, Inc.+ ............................... 604,187
2,000 Broadcom Corp. Class A+ ................................ 500,000
5,000 Nokia Corp. ADR ........................................ 224,688
7,000 Qualcomm Inc.+ ......................................... 419,125
----------
3,052,563
----------
INTERNET - 25.1%
3,000 Ariba, Inc.+ ........................................... 472,125
6,000 CMGI, Inc.+ ............................................ 268,500
10,000 Commerce One, Inc.+ .................................... 625,312
6,000 Ebay, Inc.+ ............................................ 372,000
5,000 Exodus Communications+ ................................. 342,188
6,000 Inktomi Corp. + ........................................ 782,250
1,100 Priceline.com, Inc.+ ................................... 29,906
5,000 Yahoo!, Inc.+ .......................................... 607,500
----------
3,499,781
----------
TECHNOLOGY - 54.7%
7,500 America Online, Inc.+ .................................. 439,688
2,000 Broadvision, Inc.+ ..................................... 69,000
6,000 Cisco Systems, Inc.+ ................................... 411,750
3,000 Dell Computer Corp.+ ................................... 130,875
5,000 EMC Corp.+ ............................................. 490,000
3,000 Hewlett-Packard Co. .................................... 362,250
10,000 Infospace, Inc.+ ....................................... 390,000
8,000 Intel Corp. ............................................ 599,000
7,000 JDS Uniphase Corp.+ .................................... 871,391
3,000 Juniper Networks, Inc.+ ................................ 641,250
4,000 Microsoft Corp.+ ....................................... 279,250
7,000 Motorola, Inc. ......................................... 252,437
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note 1)
--------- ----------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
5,000 Oracle Corp.+ .......................................... $ 454,688
4,000 Siebel Systems, Inc.+ .................................. 791,250
3,000 Sun Microsystems, Inc.+ ................................ 380,812
4,000 Texas Instruments ...................................... 267,750
5,000 Veritas Software Co.+ .................................. 602,812
5,000 Vignette Corp.+ ........................................ 190,625
-----------
7,624,828
-----------
TOTAL COMMON STOCKS
(Cost $13,507,279*) .................................. 14,177,172
-----------
</TABLE>
<TABLE>
<CAPTION>
Number of
Contract Shares Expiration Strike Value
Subject to Call Date Price (Note 1)
--------------- ---------- ------ --------
<S> <C> <C> <C> <C>
CALL OPTIONS WRITTEN - (5.2)%
2,000 Aether Systems, Inc. ............. 9/16/00 $150.0 (10,000)
5,000 Altera Corp. ..................... 9/16/00 67.5 (6,250)
7,500 America Online, Inc. ............. 9/16/00 60.0 (7,500)
7,000 Analog Devices, Inc. ............. 9/16/00 100.0 (36,750)
7,000 Applied
Materials, Inc. .................. 9/16/00 90.0 (14,000)
3,000 Ariba, Inc. ...................... 9/16/00 140.0 (57,000)
2,000 Broadcom Corp.
Class A .......................... 9/16/00 270.0 (9,000)
2,000 Broadvision, Inc. ................ 9/16/00 35.0 (4,750)
6,000 CMGI, Inc. ....................... 9/16/00 45.0 (16,500)
6,000 Cisco Systems, Inc. .............. 9/16/00 70.0 (8,250)
5,000 Commerce
One, Inc. ........................ 9/16/00 55.0 (46,250)
5,000 Commerce
One, Inc. ........................ 9/16/00 65.0 (16,875)
3,000 Dell Computer Corp. .............. 9/16/00 40.0 (11,250)
5,000 EMC Corp. ........................ 9/16/00 100.0 (9,375)
6,000 Ebay, Inc. ....................... 9/16/00 60.0 (27,750)
5,000 Exodus
Communications ................... 9/16/00 65.0 (25,000)
3,000 Hewlett-Packard Co. .............. 9/16/00 120.0 (13,875)
5,000 Infospace, Inc. .................. 9/16/00 30.0 (42,500)
</TABLE>
See Notes to Financial Statements.
3
<PAGE> 5
KELMOORE STRATEGIC TRUST AUGUST 31, 2000
KELMOORE STRATEGY(TM) EAGLE FUND - (CONTINUED) (UNAUDITED)
<TABLE>
<CAPTION>
Number of
Contract Shares Expiration Strike Value
Subject to Call Date Price (Note 1)
--------------- ---------- ------ -----------
<S> <C> <C> <C> <C>
CALL OPTIONS WRITTEN - (Continued)
5,000 Infospace, Inc. .................. 9/16/00 35.0 $ (26,250)
6,000 Inktomi Corp. .................... 9/16/00 130.0 (40,500)
8,000 Intel Corp. ...................... 9/16/00 75.0 (16,000)
5,000 JDS Uniphase Corp. ............... 9/16/00 135.0 (6,875)
3,000 Juniper
Networks, Inc. ................... 9/16/00 175.0 (118,500)
4,000 Microsoft Corp. .................. 9/16/00 75.0 (1,750)
7,000 Motorola, Inc. ................... 9/16/00 37.5 (4,812)
5,000 Nokia Corp. ADR .................. 9/16/00 45.0 (7,812)
5,000 Oracle Corp. ..................... 9/16/00 90.0 (18,750)
7,000 Qualcomm Inc. .................... 9/16/00 65.0 (7,875)
4,000 Siebel Systems, Inc. ............. 9/16/00 180.0 (72,000)
3,000 Sun
Microsystems, Inc. ............... 9/16/00 130.0 (7,500)
4,000 Texas
Instruments ...................... 9/16/00 75.0 (1,750)
5,000 Veritas Software Co. ............. 9/16/00 125.0 (18,125)
5,000 Vignette Corp. ................... 9/16/00 45.0 (2,500)
5,000 Yahoo!, Inc. ..................... 9/16/00 135.0 (6,564)
-----------
TOTAL CALL OPTIONS WRITTEN
(Premiums received $467,988) ............................. (720,438)
-----------
CASH AND OTHER ASSETS,
LESS LIABILITIES - 3.5% ........................................... 476,983
-----------
NET ASSETS - 100.0% ............................................... $13,933,717
===========
</TABLE>
----------
+ Non-income producing security.
++ Common stocks are pledged as collateral for written options.
ADR - American Depository Receipt
* Aggregate cost for Federal tax purposes is $13,507,279 and net unrealized
appreciation consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation .................................. $ 999,493
Gross unrealized depreciation .................................. (329,600)
-----------
Net unrealized appreciation .................................. $ 669,893
===========
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 6
KELMOORE STRATEGIC TRUST AUGUST 31, 2000
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
Kelmoore Kelmoore Strategy(TM)
Strategy(TM) Fund Eagle Fund
----------------- ---------------------
<S> <C> <C>
ASSETS:
Investments at market value (Cost $248,955,985 and $13,507,279, respectively)
(Note 1) ........................................................................ $ 238,719,671 $ 14,177,172
Cash (Note 1) ..................................................................... 30,520,238 518,601
Deposits with brokers for open option contracts (Note 1) .......................... 6,002,558 467,988
Receivables:
Investment securities sold ..................................................... 112,806 25,605
Capital stock sold ............................................................. 4,459,489 611,965
Dividends and interest ......................................................... 705,142 4,385
Due From Adviser ............................................................... -- 14,914
Other assets ...................................................................... 11,691 4,226
------------- ------------
Total Assets ................................................................... 280,531,595 15,824,856
------------- ------------
LIABILITIES:
Payables:
Investment securities purchased ................................................ -- 733,625
Capital stock redeemed ......................................................... 375,156 200
Accrued distribution fees Class C .............................................. 158,281 3,703
Accrued distribution fees Class A .............................................. 14,792 1,201
Accrued expenses ............................................................... 276,159 24,454
Distribution payable Class C ................................................... 4,219,276 206,159
Distribution payable Class A ................................................... 1,612,414 201,359
Option contracts written (Proceeds $6,002,558 and $467,988, respectively)
(Note 1) ....................................................................... 4,923,758 720,438
------------- ------------
Total Liabilities .............................................................. 11,579,836 1,891,139
------------- ------------
NET ASSETS ..................................................................... $ 268,951,759 $ 13,933,717
============= ============
CLASS C SHARES:
Applicable to 21,812,966 and 700,983 shares, respectively; unlimited number
of shares of beneficial interest authorized with $0.001 par value .............. $ 193,947,550 $ 7,046,156
============= ============
Net asset value, offering and redemption price per Class C share .................. $ 8.89 $ 10.05
============= ============
CLASS A SHARES:
Applicable to 8,361,676 and 684,661 shares, respectively; unlimited number
of shares of beneficial interest authorized with $0.001 par value .............. $ 75,004,209 $ 6,887,561
============= ============
Net asset value and redemption price per Class A share ............................ $ 8.97 $ 10.06
============= ============
Offering price per Class A share (Net asset value / 0.945) ........................ $ 9.49 $ 10.65
============= ============
NET ASSETS CONSIST OF:
Paid-in capital ................................................................... $ 278,092,349 $ 13,522,883
Undistributed net investment loss ................................................. (529,593) (23,495)
Accumulated undistributed net realized gain on securities and written options ..... 546,517 16,886
Net unrealized appreciation (depreciation) on securities and written options ...... (9,157,514) 417,443
------------- ------------
NET ASSETS ..................................................................... $ 268,951,759 $ 13,933,717
============= ============
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 7
KELMOORE STRATEGIC TRUST FOR THE PERIOD ENDED
STATEMENTS OF OPERATIONS AUGUST 31, 2000
<TABLE>
<CAPTION>
Kelmoore Kelmoore Strategy(TM)
Strategy(TM) Fund Eagle Fund*
(Unaudited) (Unaudited)
----------------- ---------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends .............................................. $ 1,115,440 $ 192
Interest (Note 1) ...................................... 617,600 7,135
------------ -----------
Total Income ........................................ 1,733,040 7,327
------------ -----------
EXPENSES:
Investment advisory fees (Note 3) ...................... 971,604 12,225
Recovery of reimbursed expenses (Note 3) ............... 98,495 --
Distribution expense Class C (Note 3) .................. 767,340 4,421
Distribution expense Class A (Note 3) .................. 51,066 1,951
Accounting fees ........................................ 28,755 4,131
Administration fees .................................... 85,795 4,131
Audit fees ............................................. 27,705 9,037
Custodian fees ......................................... 33,399 10,844
Directors' fees ........................................ 12,508 38
Insurance fees ......................................... 5,527 --
Legal fees ............................................. 21,303 4,131
Miscellaneous fees ..................................... 2,257 1,291
Printing fees .......................................... 19,163 3,873
Registration fees ...................................... 42,087 7,746
Transfer agent fees .................................... 95,629 19,623
------------ -----------
Total Expenses ...................................... 2,262,633 83,442
Expenses waived by Adviser (Note 3) ................. -- (52,620)
------------ -----------
Net Expenses ........................................ 2,262,633 30,822
------------ -----------
Net Investment Loss .................................... (529,593) (23,495)
------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from:
Security transactions ............................... 9,361,868 382,758
Written options ..................................... 11,174,527 344,222
Net change in unrealized appreciation (depreciation) on:
Security transactions ............................... 72,888 669,893
Written options ..................................... 2,461,621 (252,450)
------------ -----------
Net realized and unrealized gain on investments ..... 23,070,904 1,144,423
------------ -----------
Net increase in nets assets resulting from operations .. $ 22,541,311 $ 1,120,928
============ ===========
</TABLE>
* Commenced operations on June 29, 2000.
See Notes to Financial Statements.
6
<PAGE> 8
KELMOORE STRATEGIC TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Kelmoore Strategy(TM)
Kelmoore Strategy(TM) Fund Eagle Fund
------------------------------------ ---------------------
For the Six
Months Ended For the Period Ended
August 31, 2000 Year Ended August 31, 2000
(Unaudited) February 29, 2000 (Unaudited)*
--------------- ----------------- ---------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment loss .............................................. $ (529,593) $ (305,441) $ (23,495)
Net realized gain on securities and written options .............. 20,536,395 13,876,322 726,980
Net change in unrealized appreciation (depreciation) on securities
and written options ........................................... 2,534,509 (11,692,023) 417,443
------------- ------------- ------------
Net increase in net assets resulting from operations ............. 22,541,311 1,878,858 1,120,928
------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized short-term capital gains:
Class C ....................................................... (15,603,628) (12,729,782) (306,525)
Class A ....................................................... (4,571,127) (809,109) (403,569)
------------- ------------- ------------
Total Distributions to Shareholders .............................. (20,174,755) (13,538,891) (710,094)
------------- ------------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class C ....................................................... 86,281,285 123,435,999 6,733,472
Class A ....................................................... 59,502,802 16,529,130 6,526,213
Reinvestment of distributions:
Class C ....................................................... 9,257,797 11,283,775 83,788
Class A ....................................................... 2,238,514 604,558 200,521
Cost of shares redeemed:
Class C ....................................................... (19,281,993) (8,220,450) (10,224)
Class A ....................................................... (2,954,352) (531,829) (10,887)
------------- ------------- ------------
Increase in net assets derived from capital share transactions (a) 135,044,053 143,101,183 13,522,883
------------- ------------- ------------
TOTAL INCREASE IN NET ASSETS ..................................... 137,410,609 131,441,150 13,933,717
------------- ------------- ------------
NET ASSETS:
Beginning of period .............................................. 131,541,150 100,000 --
------------- ------------- ------------
End of period .................................................... $ 268,951,759 $ 131,541,150 $ 13,933,717
============= ============= ============
(a) Transactions in capital stock were:
Shares sold:
Class C ..................................................... 9,746,891 12,844,559 692,724
Class A ..................................................... 6,685,952 1,743,184 663,660
Shares issued through reinvestment of distributions:
Class C ..................................................... 1,061,779 1,205,716 9,269
Class A ..................................................... 250,099 65,711 22,182
Shares redeemed:
Class C ..................................................... (2,180,521) (865,458) (1,010)
Class A ..................................................... (325,869) (57,401) (1,181)
------------- ------------- ------------
Increase in shares outstanding ................................... 15,238,331 14,936,311 1,385,644
============= ============= ============
</TABLE>
* Commenced operations on June 29, 2000.
See Notes to Financial Statements.
7
<PAGE> 9
KELMOORE STRATEGIC TRUST
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
Kelmoore Strategy(TM) Fund
-------------------------------------------------------------
For the Six Months
Ended August 31, 2000 Period Ended
(Unaudited) February 29, 2000
----------------------------- -----------------------------
CLASS C CLASS A CLASS C* CLASS A**
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 8.80 $ 8.84 $ 10.00 $ 9.43
-------- ------- -------- -------
Income from investment operations:
Net investment loss ............................ (0.05) (0.02) (0.05)# 0.00#
Net realized and unrealized gain on investments 1.00 1.01 0.59 0.44
-------- ------- -------- -------
Total from investment operations ............... 0.95 0.99 0.54 0.44
-------- ------- -------- -------
Less distributions from:
Net realized gains ............................. (0.86) (0.86) (1.74) (1.03)
-------- ------- -------- -------
NET ASSET VALUE, END OF PERIOD .................... $ 8.89 $ 8.97 $ 8.80 $ 8.84
======== ======= ======== =======
TOTAL RETURN ...................................... 11.37%(2) 11.79%(2,+) 5.54%(2) 4.55%(2,+)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) ............... $193,948 $75,004 $116,051 $15,490
Ratio of expenses to average net assets:
Before expense reimbursement ................... 2.48%(1) 1.73%(1) 3.20%(1) 2.45%(1)
After expense reimbursement .................... 2.48%(1) 1.73%(1) 3.00%(1) 2.25%(1)
Ratio of net investment loss to average net assets:
Before expense reimbursement ................... (1.33%)(1) (0.58%)(1) (1.82%)(1) (1.07%)(1)
After expense reimbursement .................... (1.33%)(1) (0.58%)(1) (1.62%)(1) (0.87%)(1)
Portfolio turnover rate ........................... 124.93%(2) 124.93%(2) 218.66%(2) 218.66%(2)
</TABLE>
<TABLE>
<CAPTION>
Kelmoore Strategy(TM)
Eagle Fund
---------------------------
For the Period Ended
August 31, 2000
(Unaudited)*
---------------------------
CLASS C*** CLASS A***
----------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $10.00 $10.00
------ ------
Income from investment operations:
Net investment loss ............................ (0.02) (0.02)
Net realized and unrealized gain on investments 0.80 0.81
------ ------
Total from investment operations ............... 0.78 0.79
------ ------
Less distributions from:
Net realized gains ............................. (0.73) (0.73)
------ ------
NET ASSET VALUE, END OF PERIOD .................... $10.05 $10.06
====== ======
TOTAL RETURN ...................................... 8.44%(2) 8.55%(2,+)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) ............... $7,046 $6,888
Ratio of expenses to average net assets:
Before expense reimbursement ................... 7.28%(1) 6.53%(1)
After expense reimbursement .................... 3.00%(1) 2.25%(1)
Ratio of net investment loss to average net assets:
Before expense reimbursement ................... (7.20%)(1) (6.45%)(1)
After expense reimbursement .................... (2.92%)(1) (2.17%)(1)
Portfolio turnover rate ........................... 64.95%(2) 64.95%(2)
</TABLE>
* Commenced operations on May 3, 1999.
** Commenced operations on October 25, 1999.
*** Commenced operations on June 29, 2000.
(1) Annualized.
(2) Not Annualized.
# Per share numbers have been calculated using the monthly average share
method, which more appropriately represents the per share data for the
period.
+ Total return calculation does not reflect sales load.
See Notes to Financial Statements.
8
<PAGE> 10
KELMOORE STRATEGIC TRUST
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Kelmoore Strategic Trust (the "Trust"), an open-end, diversified management
investment company was organized as a Delaware business trust on November 30,
1998. The Trust operates as a series company and, at August 31, 2000, consisted
of 2 diversified investment portfolios (each a "Fund" and collectively the
"Funds"). The Trust has a fiscal year ending the last day of February each year
and currently consists of two investment funds, the Kelmoore Strategy(TM) Fund
("Strategy") and Kelmoore Strategy(TM) Eagle Fund ("Eagle"). The Strategy Fund's
primary goal is to maximize realized gains from writing covered options on
common stocks. The Eagle Fund's main strategy is to purchase the common stocks
of a limited number of large companies which have strong financial fundamentals
and to continually sell or write related covered call options against
substantially all the shares of stock it owns. The Funds authorized capital
consists of an unlimited number of shares of beneficial interest of $0.001 par
value. The Funds offer two classes of shares (Class A and Class C). The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of their financial statements. The policies are
in conformity with generally accepted accounting principles for investment
companies.
A. SECURITY VALUATION. The Fund's securities are valued based on market value
or, where market quotations are not readily available, based on fair value as
determined in good faith by or at the direction of the Trustees. Equity
securities traded on an exchange or on the NASDAQ National Market System (the
"NASDAQ"), will be valued at the last sale price on the exchange or system in
which they are principally traded on the valuation date. If there is no sale on
the valuation date, securities traded principally on a U.S. exchange or the
NASDAQ will be valued at the mean between the closing bid and asked prices or on
a foreign exchange at the most recent closing price. Equity securities which are
traded in the over-the-counter market only, but which are not included in the
NASDAQ, will be valued at the last sale price on the valuation day or, if no
sale occurs, at the mean between the last bid and asked prices. 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.
B. OPTION VALUATION. Exchange traded options are valued at the last sale price
on the exchange where the options are principally traded or, if no sale occurs,
at the mean between the last bid and asked price.
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 expires, or if the Fund enters a closing purchase
transaction, the Fund will realize a gain (or a loss in the case of a closing
purchase transaction where the cost exceeds the original premium received) and
the liability related to the option will be extinguished. Any such gain or loss
is a short-term capital gain or loss for Federal income tax purposes, except
that any loss realized when the Fund closes certain covered call options whose
underlying security is trading above the exercise price of the option will be
long-term capital loss if the hypothetical sale of the underlying security on
the date of such transaction would have given rise to a long-term capital gain.
If a call option which the Fund has written on any equity security is exercised,
the Fund realizes a capital gain or loss (long-term or short-term, depending on
the holding period of the underlying security) from the sale of the underlying
security and the proceeds from such sale are increased by the premium originally
received. If a put option which the Fund has written on an equity security is
exercised, the amount of the premium originally received will reduce the cost of
the security which the Fund purchases upon exercise of the option.
9
<PAGE> 11
KELMOORE STRATEGIC TRUST
NOTES TO FINANCIAL STATEMENTS - (CONTINUED) AUGUST 31, 2000
The risk in writing a call option is that the Fund may forego the opportunity of
profit if the market value of the underlying security increases and the option
is exercised, although any potential loss would be reduced by the amount of
option premium received.
The risk in writing a put option is that the Fund may be called on to pay the
exercise price of the option for a security that has decreased (potentially to
zero) in market price, although any potential loss would be reduced by the
amount of option premium received.
Generally, options transactions also involve risks concerning the liquidity of
the options' market. An illiquid market for an option may limit the Fund's
ability to write options or enter closing transactions. As the options written
by the Fund are traded on a national exchange, counterparty and credit risk are
limited to the failure of the exchange on which the options are traded.
Transactions in options contracts written for the period ended August 31, 2000
were as follows:
<TABLE>
<CAPTION>
STRATEGY FUND EAGLE FUND
CONTRACTS PREMIUM CONTRACTS PREMIUM
----------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Outstanding at February 29, 2000......... (1,925,200) $ (3,663,310) -- $ --
Options written during period ........... (16,481,433) (32,466,877) (346,200) (1,028,302)
Options exercised during period ......... 3,960,300 8,526,686 59,700 214,382
Options expired during period ........... 7,864,000 14,612,522 119,800 343,144
Options closed during period ............ 3,274,200 6,988,421 1,200 2,788
----------- ------------ -------- -----------
Outstanding at August 31, 2000 .......... (3,308,133) $ (6,002,558) (165,500) $ (467,988)
=========== ============ ======== ===========
</TABLE>
C. INVESTMENT INCOME AND SECURITIES TRANSACTIONS. Securities transactions are
accounted for on the date the securities are purchased or sold (trade date).
Cost is determined and gains and losses are based on the identified cost basis
for both financial statement and Federal income tax purposes. Dividend income is
reported on the ex-dividend date. Interest income and expenses are accrued
daily. Uninvested cash and premiums from options written are swept daily into an
interest bearing account at the Bank of New York.
D. DISTRIBUTIONS TO SHAREHOLDERS. The Funds will distribute substantially all of
their net investment income and short-term capital gains monthly and long-term
capital gains, if any, annually. Distributions to shareholders are recorded on
the ex-dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
E. FEDERAL INCOME TAXES. It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of their taxable income and
capital gains to shareholders. Therefore, no Federal income tax provision is
required.
F. USE OF ESTIMATES. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
10
<PAGE> 12
KELMOORE STRATEGIC TRUST
NOTES TO FINANCIAL STATEMENTS - (CONTINUED) AUGUST 31, 2000
G. NET ASSET VALUE AND CALCULATION OF EXPENSES. Net asset value per share of
each class, investment income, realized and unrealized gains and losses and
expenses other than class specific expenses are allocated daily to each class of
shares based upon the proportion of shares outstanding attributed to each class
at the beginning of each day. Distribution expenses are solely borne by and
charged to the respective class shares.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments, during the
period ended August 31, 2000, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Kelmoore Strategy(TM) Fund $326,750,998 $221,356,170
Kelmoore Strategy(TM) Eagle Fund 17,960,612 4,621,919
</TABLE>
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Kelmoore Investment Company, Inc. (the "Adviser"), a registered investment
adviser, provides the Funds with investment management services. The Adviser
receives a fee, computed daily and paid monthly, based on an annual rate of
1.00% of the average daily net assets from each of the Strategy and Eagle Funds,
respectively. The Adviser has voluntarily undertaken to waive all or a portion
of its fees and to reimburse certain expenses of the Funds. The total operating
expenses for the period on the Strategy Fund will not exceed 2.00% for Class A
and 2.75% for Class C and for the Eagle Fund will not exceed 2.25% for Class A
and 3.00% for Class C. The Adviser reserves the right to terminate this
undertaking at any time, in its sole discretion. Any waiver or reimbursement by
the Adviser is subject to recoupments from the Fund within the following three
years, to the extent such recoupment would not cause total expenses to exceed
any current expense limitation. For the period ended August 31, 2000, advisory
fees of $971,604 and $12,225 were paid by the Strategy and Eagle Funds,
respectively, to the Adviser and the Adviser reimbursed the Eagle Fund $52,620
which the Adviser may recoup through February 28, 2003. For the period ended
August 31, 2000, the adviser recouped $98,495 of reimbursed expenses on the
Strategy Fund. As part of the Strategy Fund's organization, the Fund has issued
to the Adviser 10,000 shares of beneficial interest at $10.00 per share in a
private placement.
The Funds have, on behalf of the Class A and Class C shares, adopted plans
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended,
(each a "Plan") that allow the Funds to pay distribution and service fees for
the sale and distribution of its shares and for services provided to
shareholders. Because these fees are paid out of 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 Plan for Class A
shares permits the Funds to reimburse the Adviser, as the Funds' distributor, an
annual fee not to exceed 0.25% of the average daily net assets of the Class. The
Plan for Class C shares permits the Funds to reimburse the Adviser an annual fee
not to exceed 0.75% of the average daily net assets of the Class. In addition,
the Plan for Class C shares permits the Funds to reimburse the Adviser for
payments to dealers or others, an annual service fee not to exceed 0.25% of the
average daily net assets of the Class. For the period ended August 31, 2000, the
Strategy Fund reimbursed the Distributor $818,406, ($51,066 for Class A and
$767,340 for Class C) and the Eagle Fund reimbursed the Distributor $6,372
($1,951 for Class A and $4,421 for Class C), respectively for distribution and
servicing expenses incurred.
A. SERVICES AGREEMENT. The Funds have entered into a Services Agreement with
PFPC Inc. Under the Services Agreement, PFPC Inc. provides certain transfer
agency, administrative, accounting and custody administration services.
11
<PAGE> 13
KELMOORE STRATEGIC TRUST
NOTES TO FINANCIAL STATEMENTS - (CONTINUED) AUGUST 31, 2000
B. BROKERAGE COMMISSIONS. The Funds place substantially all their securities
transactions, including transactions involving options, through the Adviser in
accordance with procedures adopted by the Trustees.
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. As of August
31, 2000, the Funds have paid $1,593,969, and $26,189 for the Strategy and Eagle
Fund, respectively, in brokerage commissions to the Adviser and affiliated
parties.
C. OFFICER AND TRUSTEE COMPENSATION. Certain officers and trustees of the Funds
are affiliated persons of the Adviser and the Distributor. No officer, Trustee
or employee of the Adviser, PFPC Inc., or any affiliate thereof, receives any
compensation from the Trust for serving as an officer or Trustee of the Trust.
The Trust pays each Trustee who is not an affiliated person of the Adviser, PFPC
Inc., or any affiliate thereof an annual retainer of $6,000, payable in
quarterly installments, and the Trust reimburses expenses incurred by the
Trustees for attendance at Trustee meetings.
12
<PAGE> 14
FOR MORE INFORMATION
ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTING AGENT
PFPC Inc.
3200 Horizon Drive
King of Prussia, PA 19406
(877) 328-9456
CUSTODIAN
The Bank of New York
48 Wall Street
New York, NY 10286
COUNSEL
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue NW
Washington, DC 20004-2415
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
333 Market Street
San Francisco, CA 94105
--------------------------------------------------------------------------------
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
FOR ADDITIONAL INFORMATION ABOUT
THE KELMOORE STRATEGY(TM) FUNDS
CALL 877-328-9456
This report is submitted for general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by an effective Prospectus which includes details
regarding the Fund's objectives, policies, expenses and other information.
