<PAGE>
As filed with the Securities and Exchange Commission March 20, 1995.
File Nos. 2-28719
and 811-1633
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 47 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23 [X]
KEYSTONE AMERICA HARTWELL GROWTH FUND
(formerly known as Hartwell Growth Fund, Inc.)
(Exact name of Registrant as specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(617) 338-3200
Rosemary D. Van Antwerp, Esq., 200 Berkeley Street, Boston,
MA 02116-5034
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
[ ] 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)(i) of Rule 485
[X] on June 1, 1995 pursuant to paragraph (a)(i) of Rule 485
75 days after filing pursuant to paragraph (a)(ii) of Rule 485
on (date) pursuant to paragraph (a)(ii) of Rule 485
The Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940. A Rule 24f-2 Notice for Registrant's last fiscal
year was filed November 29, 1994.
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 47
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 47 to Registration Statement No.
2-25215/811-1380 consists of the following pages, items of information, and
documents:
The Facing Sheet
The Contents Page
The Cross-Reference Sheet
PART A
Prospectus
PART B
Statement of Additional Information
PART C
PART C - OTHER INFORMATION - ITEM 24(a) and (b)
Financial Statements
Independent Auditors' Report
Listing of Exhibits
PART C - OTHER INFORMATION - ITEMS 25-32 - AND SIGNATURE PAGES
Number of Holders of Securities
Indemnification
Business and Other Connections
Principal Underwriter
Location of Accounts and Records
Signatures
Exhibits (including Powers of Attorney)
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND
Cross-Reference Sheet pursuant to Rules 404 and 495 under the Securities Act of
1933.
Items in
Part A of
Form N-1A Prospectus Caption
1 Cover Page
2 Fee Table
3 Financial Highlights
4 Cover Page
The Fund
Investment Objective and Policies
Investment Restrictions
Risk Factors
5 Fund Management and Expenses
Additional Information
5A Not Applicable
6 The Fund
Dividends and Taxes
Fund Shares
Pricing Shares
7 How to Buy Shares
Distribution Plan
Shareholder Services
8 How to Redeem Shares
9 Not Applicable
Items in
Part B of
Form N-1A Statement of Additional Information Caption
10 Cover Page
11 Table of Contents
12 Not Applicable
13 The Fund
Investment Policies
Investment Methods
Investment Restrictions
Brokerage
Appendix
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND
Cross-Reference Sheet continued.
Items in
Part B of
Form N-1A Statement of Additional Information Caption
14 Directors and Officers
15 Additional Information
16 Investment Adviser
Sub-Adviser
Principal Underwriter
Distribution Plan
Sales Charges
Additional Information
17 Brokerage
18 The Fund
Capital Stock
19 Distribution Plan
20 Dividends and Taxes
21 Principal Underwriter
22 Standardized Total Return and Yield Quotations
23 Financial Statements
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND
PART A
PROSPECTUS
<PAGE>
KEYSTONE AMERICA HARTWELL
GROWTH FUND
PROSPECTUS APRIL , 1995
Keystone America Hartwell Growth Fund (the "Fund") is a non-diversified mutual
fund open-end management investment company, commonly known as a mutual fund.
The Fund's objective is capital appreciation. The Fund pursues this objective
through investments in securities selected for their long-term growth prospects.
The Fund offers three classes of shares. Information on share classes and
their fee and sales charge structures may be found in the Fund's fee table,
"Alternative Sales Options," "Contingent Deferred Sales Charge and Waiver of
Sales Charges," "Distribution Plans," and "Fund Shares."
This prospectus concisely states information about the Fund that you should
know before investing. Please read it and retain it for future reference.
Additional information about the Fund, including information about securities
ratings, is contained in a statement of additional information dated April ,
1995, which has been filed with the Securities and Exchange Commission and are
incorporated by reference into this Prospectus. For a free copy, or for other
information about the Fund, write to the address or call the telephone number
listed below.
KEYSTONE AMERICA HARTWELL GROWTH FUND
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116-5034
CALL TOLL FREE 1-800-343-2898
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
TABLE OF CONTENTS
Page
Fee Table 2
Financial Highlights 3
The Fund 6
Investment Objective and Policies 6
Investment Restrictions 7
Risk Factors 7
Pricing Shares 9
Dividends and Taxes 9
Fund Management and Expenses 10
How to Buy Shares 12
Alternative Sales Options 13
Calculation of Contingent Deferred Sales
Charge and Waiver of Sales Charges 16
Distribution Plans 17
How to Redeem Shares 18
Shareholder Services 20
Performance Data 22
Fund Shares 22
Additional Information 23
Additional Investment Information (i)
Exhibit A A-1
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
KEYSTONE AMERICA HARTWELL GROWTH FUND
The purpose of this fee table is to assist investors in understanding the
costs and expenses that an investor in each class will bear directly or
indirectly. For more complete descriptions of the various costs and expenses,
see the following sections of this prospectus: "Fund Management and Expenses";
"How to Buy Shares"; "Distribution Plans"; and "Shareholder Services."
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FRONT END BACK END LEVEL LOAD
SHAREHOLDER TRANSACTION EXPENSES LOAD OPTION LOAD OPTION<F1> OPTION<F2>
--------- --------- ---------
<S> <C> <C> <C>
Sales Charge ...................................... 5.75%<F3> None None
(as a percentage of offering price)
Contingent Deferred Sales Charge .................. 0.00%<F4> 3.00% in the first year 1.00% in the first
(as a percentage of the lesser of cost or declining to 1.00% in year and 0.00%
market value of shares redeemed) the fourth year and thereafter
0.00% thereafter
Exchange Fee (per exchange)<F5>.................... $10.00 $10.00 $10.00
ANNUAL FUND OPERATING EXPENSES<F6>
(as a percentage of average net assets)
Management Fees<F7>................................ 0.89% 0.89% 0.89%
12b-1 Fees ........................................ 0.09% 1.00%<F7> 1.00%<F8>
Other Expenses .................................... 1.19% 1.19% 1.19%
---- ---- ----
Total Fund Operating Expenses ..................... 2.17% 3.08% 3.08%
---- ---- ----
---- ---- ----
<CAPTION>
EXAMPLES<F9> 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1)5%
annual return and (2)redemption at the end of each period:
Class A ................................................................... $78.00 $122.00 $167.00 $293.00
Class B ................................................................... $61.00 $115.00 $162.00 N/A
Class C ................................................................... $41.00 $ 95.00 $162.00 $339.00
You would pay the following expenses on the same investment, assuming no
redemption at the end of each period:
Class A ................................................................... $78.00 $122.00 $167.00 $293.00
Class B ................................................................... $31.00 $ 95.00 $162.00 N/A
Class C ................................................................... $31.00 $ 95.00 $162.00 $339.00
AMOUNTS SHOWN IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<FN>
- ---------
<F1> Class B Shares convert tax free to Class A shares after seven calendar years.
<F2> Class C shares are available only through dealers who have entered into special distribution
agreements with Keystone Distributors, Inc., the Fund's principal underwriter.
<F3> The sales charge applied to purchases of Class A shares declines as the amount invested
increases. See "Sales Charges."
<F4> Purchases of Class A shares in the amount of $1,000,000 or more are not subject to a sales
charge but may be subject to a contingent deferred sales charge of 0.25%. See "Calculation of
Contingent Deferred Sales Charge and Waiver of Sales Charges" for an explanation of the charge.
<F5> There is no fee for exchange orders received by the Fund directly from a shareholder over the
Keystone Automated Response Line ("KARL"). (For a description of KARL, see "Shareholder
Services").
<F6> Expense ratios are for the year ended September 30, 1994, except "Other Expenses" have been
restated to reflect estimated future costs.
<F7> The Fund pays a basic advisory fee which is subject to adjustment up or down by up to 1/2 of 1%
of the average daily net asset value during the latest 12 months depending upon the performance
of the Fund relative to the Standard and Poor's Index of 500 Stocks. See "Fund Management and
Expenses."
<F8> Long term shareholders may pay more than the economic equivalent of the maximum front end sales
charges permitted by the National Association of Securities Dealers, Inc. ("NASD").
<F9> The Securities and Exchange Commission requires use of a 5% annual return figure for purposes
of this example. Actual return for the Fund may be greater or less than 5%.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE AMERICA HARTWELL GROWTH FUND
CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
The following table contains significant financial information with respect
to the Fund. The condensed financial information for the years ended September
30, 1994 has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors. The financial highlights for the five years ended December 31, 1989
and for the period January 1, 1990 through September 30, 1990 was audited by
other auditors. The table appears in the Fund's Annual Report and should be read
in conjunction with the Fund's financial statements and related notes, which
also appear, together with the auditors' report of KPMG Peat Marwick LLP, in the
Fund's Annual Report. The Fund's financial statements, related notes, and
auditors' report are included in the statement of additional information.
Additional information about the Fund's performance is contained in its Annual
Report, which will be made available upon request and without charge.
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------------------ -------------------------
FOR THE PERIOD
JANUARY 1,
YEAR ENDED SEPTEMBER 30, 1990 THROUGH DECEMBER 31,
--------------------------------------- SEPTEMBER 30, ---------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD .... $ 25.41 $ 21.73 $ 19.41 $ 16.39 $ 19.98 $ 14.82 $ 14.35 $ 12.01 $ 11.40 $ 9.93
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment operations
Net investment loss .... (0.33) (0.29) (0.25) (0.20) (0.19) (0.24) (0.28) (0.11) (0.21) (0.14)
Net gains (losses) on
securities ............ (1.75) 3.97 3.27 5.59 (3.40) 5.40 0.75 2.93 2.77 2.31
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations ........ (2.08) 3.68 3.02 5.39 (3.59) 5.16 0.47 2.82 2.56 2.17
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions
Distributions from
capital gains ......... (2.37) 0 (0.70) (2.37) 0 0 0 (0.48) (1.95) (0.70)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (2.37) 0 (0.70) (2.37) 0 0 0 (0.48) (1.95) (0.70)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD ................ $ 20.96 $ 25.41 $ 21.73 $ 19.41 $ 16.39 $ 19.98 $ 14.82 $ 14.35 $ 12.01 $ 11.40
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL RETURN<F3> ....... (8.72%) 16.94% 15.91% 37.88% (17.97%) 35.00% 3.14% 23.60% 24.51% 22.30%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET
ASSETS:
Operating and
management expenses . 2.05% 1.89% 2.11% 2.38% 3.00% <F2> 2.30%<F1> 3.20% 2.70% 2.90% 2.70%
Net investment loss .. (1.49%) (1.27%) (1.18%) (1.15%) (1.30%)<F2> (1.30%) (2.00%) (0.90%) (1.70%) (1.30%)
Portfolio turnover rate 27% 42% 32% 53% 80% <F2> 45% 39% 100% 102% 93%
Net assets, end of
period (thousands) .... $19,971 $26,198 $25,697 $17,952 $13,960 $18,590 $14,610 $25,887 $11,993 $10,316
Per share calculations for all periods are based on weighted average shares
outstanding.
<FN>
<F1> Figure is net of expense reimbursement by Hartwell Keystone in connection
with voluntary expense limitations. Before the expense reimbursement, the
"Ratio of operating and management expenses to average net assets" would
have been 2.70% for the year ended December 31, 1989.
<F2> Annualized.
<F3> Excluding applicable sales charge.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE AMERICA HARTWELL GROWTH FUND
CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table contains significant financial information with respect
to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. The table appears in the Fund's Annual Report and should
be read in conjunction with the Fund's financial statements and related notes,
which also appear, together with the auditors' report, in the Fund's Annual
Report. The Fund's financial statements, related notes, and auditors' report are
included in the statement of additional information. Additional information
about the Fund's performance is contained in its Annual Report, which will be
made available upon request and without charge.
<TABLE>
<CAPTION>
CLASS B SHARES
------------------------------------------
AUGUST 2, 1993
(DATE OF INITIAL
YEAR ENDED PUBLIC OFFERING) TO
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------ ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................................. $25.41 $23.85
------ ------
Income from investment operations
Net investment loss .................................................. (0.52) (0.07)
Net gains (losses) on securities ..................................... (1.72) 1.63
------ ------
Total from investment operations ..................................... (2.24) 1.56
------ ------
Less distributions
Distributions from capital gains ..................................... (2.37) 0
------ ------
Total distributions .................................................. (2.37) 0
------ ------
NET ASSET VALUE, END OF PERIOD ....................................... $20.80 $25.41
------ ------
------ ------
TOTAL RETURN <F2>..................................................... (9.40%) 6.54%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Operating and management expenses .................................. 3.04% 3.42% <F1>
Net investment loss ................................................ (2.45%) (2.80%)<F1>
Portfolio turnover rate .............................................. 27% 42%
Net assets, end of period (thousands) ................................ $ 498 $ 44
Per share calculations for all periods are based on weighted average shares
outstanding.
<FN>
<F1> Annualized for the period August 2, 1993 (Date of Initial Public Offering)
to September 30, 1993.
<F2> Excluding applicable sales charges.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE AMERICA HARTWELL GROWTH FUND
CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table contains significant financial information with respect
to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. The table appears in the Fund's Annual Report and should
be read in conjunction with the Fund's financial statements and related notes,
which also appear, together with the auditors' report, in the Fund's Annual
Report. The Fund's financial statements, related notes, and auditors' report are
included in the statement of additional information. Additional information
about the Fund's performance is contained in its Annual Report, which will be
made available upon request and without charge.
<TABLE>
<CAPTION>
CLASS C SHARES
-------------------------------------------
AUGUST 2, 1993
(DATE OF INITIAL
YEAR ENDED PUBLIC OFFERING) TO
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------ ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................................. $25.41 $23.85
------ ------
Income from investment operations
Net investment loss .................................................. (0.51) (0.01)
Net gains (losses) on securities ..................................... (1.82) 1.57
------ ------
Total from investment operations ..................................... (2.33) 1.56
------ ------
Less distributions
Distributions from capital gains ..................................... (2.37) 0
------ ------
Total distributions .................................................. (2.37) 0
------ ------
NET ASSET VALUE, END OF PERIOD ....................................... $20.71 $25.41
------ ------
------ ------
TOTAL RETURN <F2>..................................................... (9.80%) 6.54%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Operating and management expenses .................................. 3.11% 0.37%<F1>
Net investment loss ................................................ (2.47%) (0.14%)<F1>
Portfolio turnover rate .............................................. 27% 42%
Net assets, end of period (thousands) ................................ $ 224 $ 27
Per share calculations for all periods are based on weighted average shares
outstanding.
<FN>
<F1> Annualized for the period August 2, 1993 (Date of Initial Public Offering)
to September 30, 1993.
<F2> Excluding applicable sales charges.
</TABLE>
<PAGE>
THE FUND
The Fund is a non-diversified, open-end investment company commonly known as a
mutual fund. The Fund was reorganized as a Massachusetts business trust on ,
1995. Originally, the Fund had been incorporated in New York on November 30,
1965 and began operations on March 31, 1966. The Fund is one of 30 funds advised
by Keystone Custodian Funds, Inc. ("Keystone"), the Fund's investment adviser.
Keystone has retained the services of J.M. Hartwell Limited Partnership
("Hartwell") to provide the Fund with subadvisory services, subject to the
supervision of the Fund's Board of Trustees and Keystone.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is capital appreciation. In seeking to
achieve its investment objective, the Fund's investment advisers select for
investment not only those few companies whose unique characteristics or
proprietary advantages, they believe, offer the best prospects for well above
average increases in revenues and earnings, but also those companies that tend
to be grouped in industries that, from time to time, are judged less likely to
be affected by the business cycle and to have strong prospects for revenue
growth. The Fund's advisers continuously monitor these companies and their
industries to make certain the companies retain the characteristics that led to
their selection in the first place.
The Fund pursues its objective through investment in securities selected for
their long-term growth prospects. Selections are made on the basis of
fundamental investment research. The Fund does not make investments for trading
purposes and does not invest in small high growth companies.
The Fund's policy stresses flexibility and adaptability in arranging its
portfolio to seek the desired results. Common stocks (including those listed on
a securities exchange and unlisted) generally constitute all or most of the
portfolio, but the Fund may also invest in preferred stocks and debt securities
when, in the judgment of its advisers, a more conservative investment position
seems appropriate in light of anticipated market conditions, or, occasionally,
opportunities for capital appreciation appear to indicate such investments.
In addition, in pursuing its objective, the Fund may also invest in foreign
securities, and in American Depository Receipts whose underlying securities are,
issued by issuers located in developed countries as well as emerging markets
countries. For this purpose, countries with emerging markets are generally those
where the per capita income is in the low to middle ranges, as determined, from
time to time, by the International Bank for Reconstruction and Development
("World Bank").
When, in the judgment of the Fund's advisers, a defensive or conservative
posture is appropriate, the Fund may hold a portion of its assets in short-term
U.S. Government obligations, cash or cash equivalents. The adoption of such
defensive or conservative positions does not constitute a change in the Fund's
investment objective.
The Fund may invest up to 10% of its assets in unlisted securities registered
under Section 12(g) of the Securities Exchange Act of 1934. The Fund does not
currently do so, however, and does not intend to do so.
The Fund intends to follow policies of the Securities and Exchange Commission
as they are adopted from time to time with respect to illiquid securities,
including, at this time, (1) treating as illiquid securities which may not be
sold or disposed of in the ordinary course of business within seven days at
approximately the value at which the Fund has valued such securities on its
books and (2) limiting its holdings of such securities to 15% of total assets.
The Fund may invest in restricted securities, including securities eligible
for resale pursuant to Rule 144A under the Securities Act of 1933 (the "1933
Act"). Generally, Rule 144A establishes a safe harbor from the registration
requirements of the 1933 Act for resales by large institutional investors of
securities not publicly traded in the U.S. The Fund may purchase Rule 144A
securities when such securities present an attractive investment opportunity and
otherwise meet the Fund's selection criteria. The Board of Trustees has adopted
guidelines and procedures pursuant to which the liquidity of the Fund's Rule
144A securities is determined by Hartwell Keystone and the Board of Trustees
monitors Hartwell Keystone's implementation of such guidelines and procedures.
At the present time, the Fund cannot accurately predict exactly how the market
for Rule 144A securities will develop. A Rule 144A security that was readily
marketable upon purchase may subsequently become illiquid. In such an event, the
Board of Trustees will consider what action, if any, is appropriate.
The Fund may enter into repurchase and reverse repurchase agreements, purchase
and sell securities and currencies on a when issued and delayed delivery basis
and purchase or sell securities on a forward commitment basis, write covered
call and put options and purchase call and put options to close out existing
positions and may employ new investment techniques with respect to such options.
The Fund may also enter into currency and other financial futures contracts and
related options transactions for hedging purposes and not for speculation, and
may employ new investment techniques with respect to such futures contracts and
related options.
For further information about the types of investments and investment
techniques available to the Fund, and the risks associated therewith, see the
"Risk Factors" and "Additional Investment Information" sections of this
prospectus and the statement of additional information.
Of course, there can be no assurance that the Fund will achieve its investment
objective since there is uncertainty in every investment.
NATURE OF INVESTMENT OBJECTIVE
Except as otherwise specified herein or in the statement of additional
information, the Fund's investment objective, policies and methods are not
fundamental policies and may be changed without the vote of a majority of the
Fund's outstanding shares when, in the judgment of the Fund's Board of Trustees,
such changes are advisable. If the Fund's investment objective is changed and a
shareholder determines that the Fund is no longer an appropriate investment, the
shareholder may redeem his shares but may be subject to a contingent deferred
sales charge upon redemption. Fundamental policies may not be changed without
the vote of a majority of the Fund's outstanding shares, which means the lesser
of (1) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (2) more than 50% of the outstanding
shares. There can be no assurance that the Fund will achieve its investment
objective since there is uncertainty in every investment.
INVESTMENT RESTRICTIONS
The Fund has adopted the fundamental restrictions set forth below, which may
not be changed without the approval of a majority of the Fund's outstanding
shares. These restrictions and certain other fundamental restrictions are set
forth in the statement of additional information.
The Fund may not do the following: (1) borrow money, except that the Fund may
borrow money from banks for temporary or emergency purposes in aggregate amounts
up to 10% of the value of the Fund's total assets (computed at cost) or, in any
event, in excess of 33% of its total assets valued at market or, in the absence
of market quotations, at their fair value, or enter into reverse repurchase
agreements provided that bank borrowings and reverse repurchase agreements, in
aggregate, shall not exceed the limits on borrowing; and (2) invest more than
25% of its total assets in securities of issuers in the same industry.
RISK FACTORS
Investing in the Fund involves the risk common to investing in any security,
i.e., net asset value will fluctuate in response to changes in economic
conditions, interest rates and the market's perception of the underlying
portfolio securities of the Fund.
The Fund is designed for long-term investors who can accept the risks entailed
in seeking long-term growth of capital through investment primarily in common
stocks. The Fund is not meant to provide a vehicle for playing short-term swings
in the stock market. Investing in a nondiversified Fund, as opposed to a
diversified Fund, may result in a greater degree of exposure to the economic
movements of the market sector in which the Fund invests. The value of the
Fund's portfolio securities will fluctuate based on market conditions.
Consistent with a long-term investment approach, investors in the Fund should be
prepared and able to maintain or add to their investment during periods of
adverse market conditions and should not rely on an investment in the Fund for
their short-term financial needs.
Many of the securities that management believes would have the greatest growth
characteristics may be regarded as speculative. Accordingly, the assets of the
Fund will be subject to substantial risk. Any income received from such
securities will be entirely incidental. Investment in the Fund is not intended
to constitute a complete investment program, nor is it suitable for investors
seeking income.
Investing in securities of foreign issuers generally involves greater risk than
investing in securities of domestic issuers for the following reasons: (1) there
may be less public information available about foreign companies than is
available about U.S. companies; (2) foreign companies are not generally subject
to the uniform accounting, auditing and financial reporting standards and
practices applicable to U.S. companies; (3) foreign stock markets have less
volume than the U.S. market, and the securities of some foreign companies are
much less liquid and much more volatile than the securities of comparable U.S.
companies; (4) foreign securities transactions may involve higher brokerage
commissions; (5) there may be less government regulation of stock markets,
brokers, listed companies and banks in foreign countries than in the U.S.; (6)
the Fund may incur fees on currency exchanges when it changes investments from
one country to another; (7) the Fund's foreign investments could be affected by
expropriation, confiscatory taxation, nationalization, establishment of currency
exchange controls, political or social instability or diplomatic developments;
(8) fluctuations in foreign exchange rates will affect the value of the Fund's
investments, the value of dividends and interest earned, gains and losses
realized on the sale of securities, net investment income and unrealized
appreciation or depreciation of investments; and (9) interest and dividends on
foreign securities may be subject to withholding taxes in a foreign country that
could result in a reduction of net investment income available for distribution;
and (10) to the extent the Fund invests in securities of issuers located in the
formerly communist countries of Eastern Europe and the People's Republic of
China, there is the risk that those countries could convert back to a single
economic structure.
Investing in securities of issuers in emerging markets countries involves
exposure to economic systems that are generally less mature and political
systems that are generally less stable than those of developed countries. In
addition, investing in companies in emerging markets countries may also involve
exposure to national policies that may restrict investment by foreigners and
undeveloped legal systems governing private and foreign investments and private
property. The typically small size of the markets for securities issued by
companies in emerging markets countries and the possibility of a low or
nonexistent volume of trading in those securities may also result in a lack of
liquidity and in price volatility of those securities. Furthermore, investing in
securities of companies in the formerly communist countries of Eastern Europe
and the People's Republic of China involve additional risks to those associated
with investments in companies in non-formerly communist emerging markets
countries. Specifically, those countries could convert back to a single economic
system, and the claims of property owners prior to the expropriation by the
communist regime could be settled in favor of the former property owners, in
which case the Fund could lose its entire investment in those countries.
Investing in ADRs carries almost all of the risks of investing in the
underlying foreign securities themselves, and therefore, an investment in the
Fund involves greater risk than investing in a fund with a portfolio consisting
solely of securities issued by domestic companies.
If and when the Fund invests in zero coupon bonds, the Fund does not expect to
have enough zero coupon bonds to have a material effect on dividends. The Fund
has undertaken to a state securities authority to disclose that zero coupon
securities pay no interest to holders prior to maturity, and the interest on
these securities is reported as income to the Fund and distributed to its
shareholders. These distributions must be made from the Fund's cash assets or,
if necessary, from the proceeds of sales of portfolio securities. The Fund will
not be able to purchase additional income producing securities with cash used to
make such distributions and its current income ultimately may be reduced as a
result.
Past performance should not be considered representative of results for any
future period of time. Moreover, should many shareholders change from this Fund
to some other investment at about the same time, the Fund might have to sell
portfolio securities at a time when it would be disadvantageous to do so and at
a lower price than if such securities were held to maturity or until an
investment decision is made to dispose of them.
For additional information regarding the Fund's investments in Rule 144A
securities, see "Investment Objective and Policies". For further information
about the types of investments and investment techniques available to the Fund,
including the associated risks, see "Additional Investment Information" and the
statement of additional information.
PRICING SHARES
The net asset value of a Fund share is computed each day on which the New York
Stock Exchange (the "Exchange") is open as of the close of trading on the
Exchange (currently 4:00 p.m. Eastern time for the purpose of pricing fund
shares) except on days when changes in the value of the Fund's portfolio
securities do not affect the current net asset value of its shares. The Exchange
currently is closed on weekends, New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share of the Fund is arrived at by determining the value
of the Fund's assets, subtracting its liabilities and dividing the result by the
number of its shares outstanding.
For the purposes of calculating the net asset value of a Fund share on any
given day, securities traded on national securities exchanges or reported on the
National Association of Securities Dealers' Automated Quotation System
("NASDAQ") National Market are valued at the last sale price. If there were no
transactions on that day, securities will be valued at the mean of the closing
bid and asked prices or at such other value as shall be determined in good
faith, by or under the direction of the Fund's Board of Trustees, to be the fair
market value of such securities. Commercial paper is valued at cost, which
approximates market.
Other securities, including unlisted securities, are valued at the last
reported bid price if such prices are available. Prices for such securities are
considered to be unavailable if, for example, the securities are restricted
securities, or if there exists a "thin market" in the securities. In such
situations, the value is determined in good faith by or under the direction of
the Fund's Board of Trustees.
DIVIDENDS AND TAXES
The Fund has qualified and intends to qualify in the future as a regulated
investment company under the Internal Revenue Code (the "Code"). The Fund
qualifies if, among other things, it distributes to its shareholders at least
90% of its net investment income for its fiscal year. The Fund also intends to
make timely distributions, if necessary, sufficient in amount to avoid the
nondeductible 4% excise tax imposed on a regulated investment company to the
extent that it fails to distribute, with respect to each calendar year, at least
98% of its ordinary income for such calendar year and 98% of its net capital
gains for the one-year period ending on October 31 of such calendar year. Any
taxable distribution would be (1) declared in October, November, or December to
shareholders of record in such a month, (2) paid by the following January 31,
and (3) includable in the taxable income of shareholders for the year in which
such distributions were declared. If the Fund qualifies and if it distributes
substantially all of its net investment income and net capital gains, if any, to
shareholders, it will be relieved of any federal income tax liability. The Fund
will make distributions from its net investment income annually and net capital
gains, if any, at least annually. Because Class A shares bear most of the costs
of distribution of such shares through payment of a front end sales charge while
Class B and Class C shares bear such expenses through a higher annual
distribution fee, expenses attributable to Class B shares and Class C shares
will generally be higher, and income distributions paid by the Fund with respect
to Class A shares will generally be greater than those paid with respect to
Class B and Class C shares.
Shareholders receive Fund distributions in the form of Fund shares or, at the
shareholder's option, in cash. Such distributions may be reinvested at net asset
value without any sales charge. Dividends and distributions are taxable whether
or not they are reimbursed. Income dividends, and net short-term gains dividends
are taxable as ordinary income and net long-term gains are taxable as capital
gains regardless of how long the Fund's shares are held. If Fund shares held for
less than six months are sold at a loss, however, such loss will be treated for
tax purposes as a long-term capital loss to the extent of any long-term capital
gains dividends received. The Fund advises its shareholders annually as to the
federal tax status of all distributions made during the year.
FUND MANAGEMENT AND EXPENSES
BOARD OF TRUSTEES
Under Massachusetts law, the Fund's Board of Trustees has absolute and
exclusive control over the management and disposition of all assets of the Fund.
Subject to the general supervision of the Fund's Board of Trustees, Keystone
provides investment advice, management and administrative services to the Fund.
INVESTMENT ADVISER
Keystone, the Fund's investment adviser, located at 200 Berkeley Street,
Boston, Massachusetts 02116-5034, has provided investment advisory and
management services to investment companies and private accounts since it was
organized in 1932. Keystone is a wholly-owned subsidiary of Keystone Group, Inc.
("Keystone Group"), located at 200 Berkeley Street, Boston, Massachusetts
02116-5034.
Keystone Group is a corporation privately owned by current and former members
of management of Keystone and its affiliates. The shares of Keystone Group
common stock beneficially owned by management are held in a number of voting
trusts, the trustees of which are George S. Bissell, Albert H. Elfner, III,
Roger T. Wickers, Edward F. Godfrey and Ralph J. Spuehler, Jr. Keystone Group
provides accounting, bookkeeping, legal, personnel and general corporate
services to Keystone, its affiliates and the Keystone Group of Mutual Funds.
Pursuant to its Investment Management and Advisory Agreement (the "Advisory
Agreement") with the Fund, Keystone provides investment advisory and management
services to the Fund. Keystone manages the investment and reinvestment of the
Fund's assets, supervises the operation of the Fund, provides all necessary
office space, facilities, equipment and personnel and arranges at the request of
the Fund for its employees to serve as officers or agents of the Fund.
The Advisory Agreement provides that, for its services to the Fund, the Fund
pays Keystone a basic monthly fee at the following annual rates of the Fund's
average daily net asset value during the latest 12 months (a moving average
method): 1% of such net assets up to and including $100,000,000, .90% of such
net assets over $100,000,000 up to and including $200,000,000, .80% of such net
assets over $200,000,000 up to and including $300,000,000, .70% of such net
assets over $300,000,000 up to and including $400,000,000, and .65% of such net
assets over $400,000,000.
Under the Advisory Agreement, the basic management fee is subject to an
incentive adjustment, by which the basic fee may be increased or decreased by up
to 1/2 of 1% of the average daily net asset value of the Fund during the latest
12 months (a moving average method) of the Fund, depending on the performance of
the Fund relative to the Standard and Poor's Index of 500 Stocks ("S&P 500").
A fee of 1% or more is higher than the fees paid by most other investment
companies.
For the fiscal year ended September 30, 1994 the Fund paid or accrued to
Hartwell Keystone Advisers, Inc. ("Hartwell Keystone"), which served as the
Fund's investment adviser prior to January 30, 1995, $233,942 in management fees
which represented 0.89% of the Fund's average net assets.
The Advisory Agreement contains provisions permitting Keystone to enter into
an agreement with Hartwell, under which Hartwell, as Subadviser, would, for
compensation paid by Keystone, provide substantially all the advisory services
to be provided by Keystone under the Advisory Agreement, and would delegate to
Hartwell substantially all of Keystone's rights, duties and obligations to
provide investment advisory services under the Advisory Agreement. Keystone has
entered into such an agreement with Hartwell.
The Advisory Agreement provides that it will continue only if approved at
least annually by the Board of Trustees of the Fund or by a vote of a majority
of the outstanding Shares, and such renewal has been approved by the vote of a
majority of the Independent Trustees cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement may be terminated,
without penalty, on 60 days' written notice by the Board of Trustees or by a
vote of a majority of the outstanding Shares. The Advisory Agreement will
terminate automatically upon its "assignment" as that term is defined in the
1940 Act.
SUB-ADVISER
Hartwell, the Fund's subadviser, located at 515 Madison Avenue, New York, New
York 10022, is a majority-owned subsidiary of JMH Management Corporation.
Under the SubInvestment Advisory Agreement ("Subadvisory Agreement"), Hartwell
provides the Fund and Keystone with investment research, advice, information and
recommendations concerning securities to be acquired, held or sold by the Fund.
For its services for each calendar month, Hartwell receives from Keystone,
after calculation of the monthly fee due Keystone, 40% of Keystone's basic
monthly management fee as described above on all assets and 60% of Keystone's
incentive adjustment as described above on all assets, provided that Hartwell's
total fee will always equal at least 25% of the combined total fee paid by the
Fund. The Fund has no responsibility to pay Hartwell's.
For the fiscal year ended September 30, 1994 Hartwell Keystone paid or accrued
to Hartwell Management $166,670 for its services as subadviser under the former
SubInvestment Advisory Agreement, which has been replaced on January 30, 1995,
and which provided for a different subadvisory fee payable by the investment
adviser to the subadviser.
The Subadvisory Agreement is automatically renewed for successive one-year
periods unless either party to it has given the other at least sixty days'
written notice of its intention to terminate the Subadvisory Agreement at the
end of the contract period then in effect, provided, however, that the
continuation of the Subadvisory Agreement for more than two years is subject to
the receipt of annual approvals of the Fund's Board of Trustees or stockholders
in accordance with the 1940 Act and the rules thereunder. The Subadvisory
Agreement may be terminated at any time, without penalty, by the Fund's Board of
Trustees or a majority of the Fund's outstanding Shares, on 60 days' written
notice to Hartwell. The Subadvisory Agreement automatically terminates upon its
"assignment" (as defined in the 1940 Act) by either party.
The Fund has adopted a Code of Ethics incorporating policies on personal
securities trading as recommended by the Investment Company Institute.
FUND EXPENSES
The Fund will pay all of its expenses. In addition to the investment advisory
and management fees discussed above, the principal expenses that the Fund is
expected to pay include, but are not limited to, expenses of certain Trustees;
expenses of its transfer, dividend disbursing and shareholder servicing agent,
its custodian and its independent auditors; fees charged by legal counsel to its
Board of Trustees; fees payable to government agencies, including registration
and qualification fees of the Fund and its shares under federal and state
securities laws; and certain extraordinary expenses. In addition, each class
will pay all of the expenses attributable to it. Such expenses are currently
limited to Distribution Plan expenses. The Fund also pays its brokerage
commissions, interest charges and taxes. For the fiscal year ended September 30,
1994, the Fund's Class A, Class B and Class C shares paid 2.05%, 3.04% and 3.11%
of their average net assets in expenses, respectively.
Keystone has agreed to reimburse the Fund annually for certain operating
expenses incurred by the Fund in excess of the applicable state expense limit.
Keystone is not required to make such reimbursements, however, to an extent that
would result in the Fund's inability to qualify as a regulated investment
company under provisions of the Internal Revenue Code.
For the fiscal year ended September 30, 1994, the Fund paid or accrued to
Keystone Investor Resource Center, Inc. ("KIRC"), the Fund's transfer agent and
dividend disbursing agent and Keystone Group, $16,899 for the cost of certain
accounting services and $72,549 for shareholder services. KIRC is a wholly-owned
subsidiary of Keystone.
PORTFOLIO MANAGER
William C. Miller, president of Hartwell, is the portfolio manager of the Fund
and has more than 26 years of investment management experience.
SECURITIES TRANSACTIONS
Under policies established by the Board of Trustees, the Fund's advisers
select broker-dealers to execute transactions subject to the receipt of best
execution. When selecting broker-dealers to execute portfolio transactions for
the Fund, the advisers may consider as a factor the number of shares of the Fund
sold by the broker-dealer. In addition, broker-dealers executing portfolio
transactions, from time to time, may be affiliated with the Fund, Keystone,
Hartwell, the Fund's principal underwriter or their affiliates.
The Fund may pay higher commissions to broker-dealers which provide research
services. Keystone and/or Hartwell may use these services in advising the Fund
as well as in advising their other clients.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rates for the fiscal years ended September 30,
1993 and 1994 were 42% and 27%, respectively. High portfolio turnover may
involve correspondingly greater brokerage commissions and other transaction
costs, which would be borne directly by the Fund, as well as additional realized
gains and/or losses to shareholders. For further information about brokerage and
distributions, see the statement of additional information.
HOW TO BUY SHARES
Shares of the Fund may be purchased from any broker-dealer that has a selling
agreement with Keystone Distributors, Inc. ("KDI"), the Fund's principal
underwriter. KDI, a wholly-owned subsidiary of Keystone, is located at 200
Berkeley Street, Boston, Massachusetts 02116-5034.
In addition, you may open an account for the purchase of shares of the Fund by
mailing to the Fund c/o Keystone Investor Resource Center, Inc., P.O. Box 2121,
Boston, Massachusetts 02106-2121, a completed account application and a check,
payable to the Fund, or you may telephone 1-800-343-2898 to obtain the number of
an account to which you can wire or electronically transfer and then send in a
completed account application. Subsequent investments in any amount may be made
by check, by wiring Federal funds or by an electronic funds transfer ("EFT").
Orders for the purchase of shares of the Fund will be confirmed at an offering
price equal to the net asset value per share next determined after receipt of
the order in proper form by KDI (generally as of the close of the Exchange on
that day) plus, in the case of Class A shares, the sales charge. Orders received
by dealers or other firms prior to the close of the Exchange and received by KDI
prior to the close of its business day will be confirmed at the offering price
effective as of the close of the Exchange on that day. The Fund reserves the
right to determine the net asset value more frequently than once a day if deemed
desirable. Dealers and other financial services firms are obligated to transmit
orders promptly.
Orders for shares received by broker-dealers prior to that day's close of
trading on the Exchange and transmitted to the Fund prior to its close of
business that day will receive the offering price equal to the net asset value
per share computed at the close of trading on the Exchange on the same day plus,
in the case of Class A shares, the sales charge. Orders received by
broker-dealers after that day's close of trading on the Exchange and transmitted
to the Fund prior to the close of business on the next business day will receive
the next business day's offering price.
Orders for shares received directly by the Fund from shareholders will receive
the offering price equal to the net asset value per share next computed after
the Fund receives the purchase order plus, in the case of Class A shares, the
sales charge.
The initial purchase must be at least $1,000. There is no minimum amount for
subsequent purchases.
The Fund reserves the right to withdraw all or any part of the offering made
by this prospectus and to reject purchase orders.
Shareholder inquiries should be directed to KIRC by calling toll free 1-800-
343-2898 or writing to KIRC or to the firm from which this prospectus was
received.
ALTERNATIVE SALES OPTIONS
The Fund offers three classes of shares:
CLASS A SHARES -- FRONT END LOAD OPTION
Class A shares are sold with a sales charge at the time of purchase. Class A
shares are not subject to a sales charge when they are redeemed (except that
shares sold in a single purchase in excess of $1,000,000 without a front end
sales charge will be subject to a contingent deferred sales charge for one
year).
CLASS B SHARES -- BACK END LOAD OPTION
Class B shares are sold without a sales charge at the time of purchase, but
are subject to a deferred sales charge if they are redeemed within three
calendar years after the calendar year of purchase. Class B shares will
automatically convert to Class A shares at the end of seven calendar years after
the year of purchase.
CLASS C SHARES -- LEVEL LOAD OPTION
Class C shares are sold without a sales charge at the time of purchase, but
are subject to a deferred sales charge if they are redeemed within one year
after the date of purchase. Class C shares are available only through dealers
who have entered into special agreements with KDI.
Each class of shares, pursuant to its Distribution Plan, pays an annual
service fee of 0.25% of the Fund's average daily net assets attributable to that
class. In addition to the 0.25% service fee, the Class B and C Distribution
Plans provide for the payment of an annual distribution fee of up to 0.75% of
the average net assets attributable to their respective classes. As a result,
income distributions paid by the Fund with respect to Class B and Class C shares
will generally be less than those paid with respect to Class A shares.
Investors who would rather pay the entire cost of distribution at the time of
investment, rather than spreading such cost over time, might consider Class A
shares. Other investors might consider Class B or Class C shares, in which case
100% of the purchase price is invested immediately, depending on the amount of
the purchase and the intended length of investment. The Fund will not normally
accept any purchase of Class B shares in the amount of $250,000 or more and will
not normally accept any purchase of Class C shares in the amount of $1,000,000
or more.
CLASS A SHARES
Class A shares are offered at net asset value plus an initial sales charge as
follows:
<TABLE>
<CAPTION>
AS A % OF CONCESSION TO
AS A % OF NET AMOUNT DEALERS AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED<F1> AMOUNT INVESTED
- ------------------------------------------------------------------------------ ---------------------
<S> <C> <C> <C>
Less than $50,000 ...................... 5.75% 6.10% 5.25%
$50,000 but less than $100,000 ......... 4.75% 4.99% 4.25%
$100,000 but less than $250,000 ........ 3.75% 3.90% 3.25%
$250,000 but less than $500,000 ........ 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 ...... 1.50% 1.52% 1.50%
$1,000,000 and over<F2>................. 0% 0% 0.25%
<FN>
- ---------
<F1> Rounded to the nearest one-hundredth percent.
<F2> Purchases of $1,000,000 or more may be subject to a contingent deferred
sales charge of 0.25%. See "Calculation of Contingent Deferred Sales Charge
and Waiver of Sales Charges."
</TABLE>
----------------------------------------
The sales charge is paid to KDI which in turn normally reallows a portion to
your broker-dealer. In addition, your broker-dealer currently will be paid
periodic service fees at an annual rate of up to 0.25% of the average daily net
asset value of outstanding shares of Class A sold by your dealer.
Upon written notice to dealers with whom it has dealer agreements, KDI may
reallow up to the full applicable sales charge.
Initial sales charges may be eliminated for persons purchasing Class A shares
to be included in a managed fee based program (a "wrap account") through broker
dealers who have entered into special agreements with KDI. Initial sales charges
may be reduced or eliminated for persons or organizations purchasing Class A
shares of the Fund alone or in combination with Class A shares of other Keystone
America Funds. See Exhibit A to this prospectus.
Upon prior notification to KDI, Class A shares may be purchased at net asset
value by clients of registered representatives within six months after a change
in the registered representative's employment, where the amount invested
represents redemption proceeds from a registered open-end management investment
company not distributed or managed by Keystone or its affiliates; and the
shareholder either (i) paid a front end sales charge, or (ii) was at some time
subject to, but did not actually pay, a contingent deferred sales charge with
respect to the redemption proceeds.
In addition, since January 1, 1995 through June 30, 1995 ("offering period")
and upon prior notification to Keystone Distributors, Inc., Class A shares may
be purchased at net asset value by clients of registered representatives within
six months after the redemption of shares of any registered open-end investment
company not distributed or managed by Keystone or its affiliates, where the
amount invested represents redemption proceeds from such unrelated registered
open-end investment company, and the shareholder either (i) paid a front end
sales charge, or (ii) was at some time subject to, but did not actually pay, a
contingent deferred sales charge with respect to the redemption proceeds.
With certain exceptions, purchases of Class A shares in the amount of
$1,000,000 or more on which no sales charge has been paid will be subject to a
contingent deferred sales charge of 0.25% upon redemption during the one year
period commencing on the date the shares were originally purchased. The
contingent deferred sales charge is retained by KDI. See "Calculation of
Contingent Deferred Sales Charge and Waiver of Sales Charges" below.
CLASS A DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class A shares
("Class A Distribution Plan"), which provides for payments which are currently
limited to 0.25% annually of the average net asset value of Class A shares, in
connection with the distribution of Class A shares. Payments under the Class A
Distribution Plan are currently made to KDI (which may reallow all or part to
others, such as dealers), as service fees at an annual rate of up to 0.25% of
the average net asset value of Class A shares maintained by the recipients
outstanding on the books of the Fund for specific periods.
CLASS B SHARES
Class B shares are offered at net asset value, without an initial sales
charge. With certain exceptions, the Fund may impose a deferred sales charge of
3.00% on shares redeemed during the calendar year of purchase and the first
calendar year after the year of purchase; 2.00% on shares redeemed during the
second calendar year after the year of purchase; and 1.00% on shares redeemed
during the third calendar year after the year of purchase. No deferred sales
charge is imposed on amounts redeemed thereafter. If imposed, the deferred sales
charge is deducted from the redemption proceeds otherwise payable to you. The
deferred sales charge is retained by KDI. Amounts received by KDI under the
Class B Distribution Plan are reduced by deferred sales charges retained by KDI.
See "Calculation of Contingent Deferred Sales Charge and Waiver of Sales
Charges" below.
Class B shares which have been outstanding during seven calendar years will
automatically convert to Class A shares which are subject to a lower
Distribution Plan charge, without imposition of a front end sales charge or
exchange fee. (Conversion of Class B shares represented by stock certificates
will require the return of the stock certificates to KIRC.) The Class B shares
so converted will no longer be subject to the higher expenses borne by Class B
shares. Because the net asset value per share of the Class A shares may be
higher or lower than that of the Class B shares at the time of conversion,
although the dollar value will be the same, a shareholder may receive more or
less Class A shares than the number of Class B shares converted. Under current
law, it is the Fund's opinion that such a conversion will not constitute a
taxable event under federal income tax law. In the event that this ceases to be
the case, the Board of Trustees will consider what action, if any, is
appropriate and in the best interests of the Class B shareholders.
CLASS B DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class B shares
("Class B Distribution Plan"), which provides for payments at an annual rate of
up to 1.00% of the average daily net asset value of Class B shares, to pay
expenses of the distribution of Class B shares. Payments under the Class B
Distribution Plan are currently made to KDI (which may reallow all or part to
others, such as dealers) (1) as commissions for Fund shares sold and (2) as
shareholder service fees. Amounts paid or accrued to KDI under (1) and (2) in
the aggregate may not exceed the annual limitation referred to above. KDI
generally reallows to brokers or others a commission equal to 3% of the price
paid for each Fund share sold and the shareholder service fee, which is paid at
the rate of 0.25% per annum of the net asset value of shares maintained by the
recipients outstanding on the books of the Fund for specified periods. See
"Distribution Plans" below.
CLASS C SHARES
Class C shares are offered only through dealers who have special distribution
agreements with KDI. Class C shares are offered at net asset value, without an
initial sales charge. With certain exceptions, the Fund may impose a deferred
sales charge of 1.00% on shares redeemed within one year after the date of
purchase. No deferred sales charge is imposed on amounts redeemed thereafter. If
imposed, the deferred sales charge is deducted from the redemption proceeds
otherwise payable to you. The deferred sales charge is retained by KDI. See
"Calculation of Contingent Deferred Sales Charge and Waiver of Sales Charges"
below.
CLASS C DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class C shares
("Class C Distribution Plan"), which provides for payments at an annual rate of
up to 1.00% of the average daily net asset value of Class C shares, to pay
expenses of the distribution of Class C shares. Payments under the Class C
Distribution Plan are currently made to KDI (which may reallow all or part to
others, such as dealers) (1) as commissions for Fund shares sold and (2) as
shareholder service fees. Amounts paid or accrued to KDI under (1) and (2) in
the aggregate may not exceed the annual limitation referred to above. KDI
generally reallows to brokers or others a commission in the amount of 0.75% of
the price paid for each Fund share sold, plus the first year's service fee in
advance in the amount of 0.25% of the price paid for each Fund share sold, and,
beginning approximately fifteen months after purchase, a commission at an annual
rate of 0.75% (subject to the NASD rule -- see "Distribution Plans") plus
service fees which are paid at the annual rate of 0.25%, respectively, of the
average daily net asset value of each share maintained by the recipients
outstanding on the books of the Fund for specified periods. See "Distribution
Plans" below.
CALCULATION OF CONTINGENT DEFERRED
SALES CHARGE AND WAIVER OF
SALES CHARGES
Any contingent deferred sales charge imposed upon the redemption of Class A,
Class B or Class C shares is a percentage of the lesser of (1) the net asset
value of the shares redeemed or (2) the net cost of such shares. No contingent
deferred sales charge is imposed when you redeem amounts derived from (1)
increases in the value of your account above the net cost of such shares due to
increases in the net asset value per share of the Fund; (2) certain shares with
respect to which the Fund did not pay a commission on issuance, including shares
acquired through reinvestment of dividend income and capital gains
distributions; (3) Class C shares and certain Class A shares held for more than
one year from the date of purchase; or (4) Class B shares held during more than
four consecutive calendar years. Upon request for redemption, shares not subject
to the contingent deferred sales charge will be redeemed first. Thereafter,
shares held the longest will be the first to be redeemed.
The Fund also may sell Class A, Class B or Class C shares at net asset value
without any initial sales charge or a contingent deferred sales charge to
certain Trustees, officers and employees of the Fund and Keystone and certain of
their affiliates, to registered representatives of firms with dealer agreements
with KDI and to a bank or trust company acting as a trustee for a single
account.
In addition, no contingent deferred sales charge is imposed on a redemption of
shares of the Fund in the event of (1) death or disability of the shareholder,
(2) a lump-sum distribution from a 401(k) plan or other benefit plan qualified
under the Employee Retirement Income Security Act of 1974 ("ERISA"), (3)
automatic withdrawals from ERISA plans if the shareholder is at least 59 1/2
years old, (4) involuntary redemptions of accounts having an aggregate net asset
value of less than $1,000 or (5) automatic withdrawals under an automatic
withdrawal plan of up to 1 1/2% per month of the shareholder's initial account
balance.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS
KDI may, from time to time, provide promotional incentives, including
reallowance of up to the entire sales charge, to certain dealers whose
representatives have sold or are expected to sell significant amounts of the
Fund. In addition, dealers may from time to time receive additional cash
payments. KDI may also provide written information to dealers with whom it has
dealer agreements that relates to sales incentive campaigns conducted by such
dealers for their representatives as well as financial assistance in connection
with pre-approved seminars, conferences and advertising. No such programs or
additional compensation will be offered to the extent they are prohibited by the
laws of any state or any self-regulatory agency such as the NASD. Dealers to
whom substantially the entire sales charge on Class A shares is reallowed may be
deemed to be underwriters as that term is defined under the 1933 Act.
KDI may, at its own expense, pay concessions in addition to those described
above to dealers which satisfy certain criteria established from time to time by
KDI. These conditions relate to increasing sales of shares of the Keystone funds
over specified periods and certain other factors. Such payments may, depending
on the dealer's satisfaction of the required conditions, be up to .25% of the
value of shares sold by such dealer.
KDI also may pay banks and other financial services firms that facilitate
transactions in shares of the Fund for their clients a transaction fee up to the
level of the payments made allowable to dealers for the sale of such shares as
described above.
The Glass-Steagall Act currently limits the ability of a depository
institution (such as a commercial bank or a savings and loan association) to
become an underwriter or distributor of securities. In the event the Glass-
Steagall Act is deemed to prohibit depository institutions from accepting
payments under the arrangement described above, or should Congress relax current
restrictions on depository institutions, the Board of Trustees will consider
what action, if any, is appropriate.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
DISTRIBUTION PLANS
The Fund bears some of the costs of selling its shares under Distribution
Plans adopted with respect to its Class A, Class B and Class C shares pursuant
to Rule 12b-1 under the 1940 Act. Payments under the Class A Distribution Plan
are currently limited to up to 0.25% annually of the average daily net asset
value of Class A shares. The Class B Distribution Plan and the Class C
Distribution Plan provide for the payment at an annual rate of up to 1.00% of
the average daily net asset value of Class B shares and Class C shares,
respectively.
The NASD rule limits the amount that a Fund may pay annually in distribution
costs for the sale of its shares and shareholder service fees. The rule limits
annual expenditures to 1% of the aggregate average daily net asset value of its
shares, of which 0.75% may be used to pay such distribution costs and 0.25% may
be used to pay shareholder service fees. The NASD rule also limits the aggregate
amount which the Fund may pay for such distribution costs to 6.25% of gross
share sales since the inception of the 12b-1 Distribution Plan, plus interest at
the prime rate plus 1% per annum on such amounts (less any contingent deferred
sales charges paid by shareholders to KDI), remaining unpaid from time to time.
KDI intends, but is not obligated, to continue to pay or accrue distribution
charges incurred in connection with the Class B Distribution Plan which exceed
current annual payments permitted to be received by KDI from the Fund. KDI
intends to seek full payment of such charges from the Fund (together with annual
interest thereon at the prime rate plus one percent) at such time in the future
as, and to the extent that, payment thereof by the Fund would be within the
permitted limits.
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class. However, after the termination of the Class B
Distribution Plan, KDI would be entitled to receive payment, at the annual rate
of 1.00% of the average daily net asset value of Class B shares, as compensation
for its services which had been earned at any time during which the Class B
Distribution Plan was in effect. Unpaid distribution costs at September 30, 1994
for Class B shares were $30,608 (6.1% of Class B's net assets). Unpaid
distribution at September 30, 1994 for Class C shares were $17,415 (7.8% of
Class C's net assets).
For the fiscal year ended September 30, 1994, the Fund paid KDI $18,693,
$2,821 and $1,478 pursuant to the Class A, Class B and Class C Distribution
Plans, respectively. The Fund makes no payments in connection with the sale of
its shares other than the fee paid to its Principal Underwriter.
Dealers or others may receive different levels of compensation depending on
which class of shares they sell. Payments pursuant to a Distribution Plan are
included in the operating expenses of the class.
HOW TO REDEEM SHARES
You may redeem Fund shares for cash at their net asset value upon written
order to the Fund c/o KIRC, and presentation to the Fund of a properly endorsed
share certificate if certificates have been issued. Your signature(s) on the
written order and certificates must be guaranteed as described below. In order
to redeem by telephone you must have completed the authorization in your account
application. Proceeds for shares redeemed on telephonic order will be deposited
by wire or EFT only to the bank account designated in your account application.
The redemption value equals the net asset value per share and may be more or
less than your cost depending upon changes in the value of the Fund's portfolio
securities between purchase and redemption.
REDEMPTION OF SHARES IN GENERAL
At various times, the Fund may be requested to redeem shares for which it has
not yet received good payment. In such a case, the Fund will mail the redemption
proceeds upon clearance of the purchase check, which may take 15 days. Any delay
may be avoided by purchasing shares either with a certified check or by Federal
Reserve or bank wire of funds or EFT. Although the mailing of a redemption
check, wiring or EFT of redemption proceeds may be delayed, the redemption value
will be determined and the redemption processed in the ordinary course of
business upon receipt of proper documentation. In such a case, after the
redemption and prior to the release of the proceeds, no appreciation or
depreciation will occur in the value of the redeemed shares, and no interest
will be paid on the redemption proceeds. If the payment of a redemption has been
delayed, the check will be mailed or the proceeds wired or sent EFT promptly
after good payment has been collected.
The Fund computes the amount due you at the close of the Exchange at the end
of the day on which it has received all proper documentation from you. Payment
of the amount due on redemption will be made within seven days thereafter except
as discussed herein.
You may also redeem your shares through broker-dealers. KDI, acting as agent
for the Fund, stands ready to repurchase Fund shares upon orders from dealers,
and will calculate the net asset value on the same terms as those orders for the
purchase of shares received from broker-dealers and described under "How to Buy
Shares." If KDI has received proper documentation, it will pay the redemption
proceeds to the broker-dealer placing the order within seven days thereafter.
KDI charges no fees for this service. However, your broker-dealer may charge a
service fee.
For your protection, SIGNATURES ON CERTIFICATES, STOCK POWERS AND ALL WRITTEN
ORDERS OR AUTHORIZATIONS MUST BE GUARANTEED BY A U.S. STOCK EXCHANGE MEMBER, A
BANK OR OTHER PERSON ELIGIBLE TO GUARANTEE SIGNATURES UNDER THE SECURITIES
EXCHANGE ACT OF 1934 AND KIRC'S POLICIES. The Fund or KIRC may waive this
requirement but may also require additional documents in certain cases.
Currently, the requirement for a signature guarantee has been waived on
redemptions of $50,000 or less where the account address of record has been the
same for a minimum period of 30 days. The Fund and KIRC reserve the right to
withdraw this waiver at any time.
If the Fund receives a redemption order but you have not clearly indicated the
amount of money or number of shares involved, the Fund cannot execute the order.
In such cases, the Fund will request the missing information from you and
process the order on the day such information is received.
The Fund has the right, at any time and without prior notice to a shareholder,
to redeem shares held in any account registered in the name of such shareholder
at current net asset value, if and to the extent that such redemption is
necessary to reimburse the Fund for any loss sustained by reason of the failure
of such shareholder to make full payment for shares of the Fund purchased or
subscribed. The Fund may exercise such right regardless of whether such
shareholder was already an existing shareholder of the Fund at the time of such
purchase or subscription.
TELEPHONE
Under ordinary circumstances, you may redeem up to $50,000 from your account
by telephone by calling toll free 1-800-343-2898. You must complete the
Telephone Redemptions section of the application to enjoy telephone redemption
privileges.
In order to insure that instructions received by KIRC are genuine when you
initiate a telephone transaction, you will be asked to verify certain criteria
specific to your account. At the conclusion of the transaction, you will be
given a transaction number confirming your request, and written confirmation of
your transaction will be mailed the next business day. Your telephone
instructions will be recorded. Redemptions by telephone are allowed only if the
address and bank account of record have been the same for a minimum period of 30
days.
If the redemption proceeds are less than $2,500, they will be mailed by check.
If they are $2,500 or more, they will be mailed, wired or sent by EFT to your
previously designated bank account as you direct. If you do not specify how you
wish your redemption proceeds to be sent, they will be mailed by check.
If you cannot reach the Fund by telephone, you should follow the procedures
for redeeming by mail or through a broker as set forth herein.
GENERAL
The Fund reserves the right at any time to terminate, suspend or change the
terms of any redemption method described in this prospectus, except redemption
by mail, and to impose fees.
Except as otherwise noted, neither the Fund, KIRC nor KDI assumes
responsibility for the authenticity of any instructions received by any of them
from a shareholder in writing, over the Keystone Automated Response Line
("KARL") or by telephone. KIRC will employ reasonable procedures to confirm that
instructions received over KARL or by telephone are genuine. Neither the Fund,
KIRC nor KDI will be liable when following instructions received over KARL or by
telephone that KIRC reasonably believes to be genuine.
The Fund may temporarily suspend the right to redeem its shares when (1) the
Exchange is closed, other than customary weekend and holiday closings; (2)
trading on the Exchange is restricted; (3) an emergency exists and the Fund
cannot dispose of its investments or fairly determine their value; or (4) the
Securities and Exchange Commission so orders.
SMALL ACCOUNTS
Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem your account if its value has fallen below $1,000, the current
minimum investment level, as a result of your redemptions (but not as a result
of market action). You will be notified in writing and allowed 60 days to
increase the value of your account to the minimum investment level.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Fund to pay for all
redemptions in cash, the Fund may authorize payment to be made in portfolio
securities or other property. However, the Fund has obligated itself under the
1940 Act to redeem for cash all shares presented for redemption by any one
shareholder in any 90-day period up to the lesser of $250,000 or 1% of the
Fund's net assets. Securities delivered in payment of redemptions would be
valued at the same value assigned to them in computing the net asset value per
share and would, to the extent permitted by law, be readily marketable.
Shareholders receiving such securities would incur brokerage costs when these
securities are sold.
REDEMPTIONS OF CERTAIN CLASS A SHARES
Certain purchases of Class A Shares in the amount of $1,000,000 or more, on
which no initial sales charge has been paid, are subject to a contingent
deferred sales charge of 0.25%. See the section entitled "Class A Shares".
SHAREHOLDER SERVICES
Details on all shareholder services may be ob- tained from KIRC by writing or
by calling toll free 1-800-343-2898.
KEYSTONE AUTOMATED RESPONSE LINE
KARL offers shareholders specific fund account information and price and yield
quotations as well as the ability to effect account transactions, including
investments, exchanges and redemptions. Shareholders may access KARL by dialing
toll free 1-800-345-3858 on any touch-tone telephone, 24 hours a day, seven days
a week.
EXCHANGES
A shareholder who has obtained the appropriate prospectus, you may exchange
shares of the Fund for shares of certain other Keystone America Funds and
Keystone Liquid Trust ("KLT") as follows:
Class A shares may be exchanged for Class A shares of other Keystone America
Funds and Class A shares of KLT;
Class B shares may be exchanged for Class B shares of other Keystone America
Funds and Class B shares of KLT; and
Class C shares may be exchanged for Class C shares of other Keystone America
Funds and Class C shares of KLT.
The exchange of Class B shares and Class C shares will not be subject to a
contingent deferred sales charge. However, if the shares being tendered for
exchange are:
(i) Class A shares where the original purchase was for $1,000,000 or more
and no sales charge was paid,
(ii) Class B shares which have been held for less than four years, or
(iii) Class C shares which have been held for less than one year,
and are still subject to a deferred sales charge, such charge will carry over to
the shares being acquired in the exchange transaction.
You may exchange shares for another Keystone Fund for a $10 fee by calling or,
by writing to Keystone. The exchange fee is waived for individual investors who
make an exchange using KARL. Shares purchased by check are eligible for exchange
after 15 days. The Fund reserves the right, after providing the required notice
to shareholders, to terminate this exchange offer or to change its terms,
including the right to change the fee for any exchange.
Orders to exchange shares of the Fund for shares of KLT will be executed by
redeeming the shares of the Fund and purchasing shares of KLT at the net asset
value of such shares next determined after the proceeds from such redemption
become available, which may be up to seven days after such redemption. In all
other cases, orders for exchanges received by the Fund prior to 4:00 p.m. on any
day the Fund is open for business will be executed at the respective net asset
values determined as of the close of business that day. Orders for exchanges
received after 4:00 p.m. on any business day will be executed at the respective
net asset values determined at the close of the next business day.
An excessive number of exchanges may be disadvantageous to the Fund.
Therefore, the Fund, in addition to its right to reject any exchange, reserves
the right to terminate the exchange privilege of any shareholder who makes more
than five exchanges of shares of the funds in a year or three in a calendar
quarter.
An exchange order must comply with the requirements for a redemption or
repurchase order and must specify the dollar value or number of shares to be
exchanged. Exchanges are subject to the minimum initial purchase requirements of
the fund being acquired. An exchange constitutes a sale for federal income tax
purposes.
The exchange privilege is only available in states where shares of the fund
being acquired may legally be sold.
KEYSTONE AMERICA MONEY LINE
Keystone America Money Line eliminates the delay of mailing a check or the
expense of wiring funds. You must request the service on your application.
Keystone America Money Line allows you to authorize electronic transfers of
money to purchase shares in any amount and to redeem up to $50,000 worth of
shares. You can use Keystone America Money Line like an "electronic check" to
move money between your bank account and your account in the Fund with one
telephone call. You must allow two business days after the call for the transfer
to take place. For money recently invested, you must allow normal check clearing
time before redemption proceeds are sent to your bank.
You may also arrange for systematic monthly or quarterly investments in your
account. Once proper authorization is given, your bank account will be debited
to purchase shares in the Fund. You will receive confirmation from KDI for every
transaction.
To change the amount of a Keystone America Money Line service or to terminate
such service (which could take up to 30 days), you must write to KIRC, P.O. Box
2121, Boston, Massachusetts 02106-2121, and include your account numbers.
RETIREMENT PLANS
The Fund has various pension and profit-sharing plans available to you,
including Individual Retirement Accounts ("IRAs"); Rollover IRAs; Simplified
Employee Pension Plans ("SEPs"); Tax Sheltered Annuity Plans ("TSAs"); 401(k)
Plans; Keogh Plans; Corporate Profit-Sharing Plans; Pension and Target Benefit
Plans; Money Purchase Pension Plans and Salary-Reduction Plans. For details,
including fees and application forms, call toll free 1-800-247-4075 or write to
KIRC.
AUTOMATIC WITHDRAWAL PLAN
Under an Automatic Withdrawal Plan, if your account has a value of at least
$10,000, you may arrange for regular monthly or quarterly fixed withdrawal
payments. Each payment must be at least $100 and may be as much as 1.5% per
month or 4.5% per quarter of the total net asset value of the Fund shares in
your account when the Automatic Withdrawal Plan is opened. Excessive withdrawals
may decrease or deplete the value of your account. Moreover, because of the
effect of the applicable sales charge, a Class A investor should not make
continuous purchases of the Fund's shares while participating in the Automatic
Withdrawal Plan.
DOLLAR COST AVERAGING
Through dollar cost averaging you can invest a fixed dollar amount each month
or each quarter in any Keystone America Fund. This results in more shares being
purchased when the selected fund's net asset value is relatively low and fewer
shares being purchased when the fund's net asset value is relatively high, which
may cause a lower average cost per share than a less systematic investment
approach.
Prior to participating in dollar cost averaging, you must have established an
account in a Keystone America Fund or a money market fund managed or advised by
Keystone. You should designate on the application the dollar amount of each
monthly or quarterly investment (minimum $100) you wish to make and the fund in
which the investment is to be made. Thereafter, on the first day of the
designated month, an amount equal to the specified monthly or quarterly
investment will automatically be redeemed from your initial account and invested
in shares of the designated fund. If you are a Class A investor and paid a sales
charge on your initial purchase, the shares purchased will be eligible for
Rights of Accumulation and the sales charge applicable to the purchase will be
determined in accordance with Rights of Accumulation. In addition, the value of
shares purchased will be included in the total amount required to fulfill a
Letter of Intent. If a sales charge was not paid on the initial purchase, a
sales charge will be imposed at the time of subsequent purchases, and the value
of shares purchased will become eligible for Rights of Accumulation and Letters
of Intent.
TWO DIMENSIONAL INVESTING
You may elect to have income and capital gains distributions from any of your
Keystone America Funds automatically invested to purchase Class A shares of any
other Keystone America Fund. You may select this service on the application and
indicate the Keystone America Fund(s) into which distributions are to be
invested. The value of shares purchased will be ineligible for Rights of
Accumulation and Letters of Intent.
OTHER SERVICES
Under certain circumstances, you may, within 30 days after a redemption,
reinstate your account at current net asset value.
PERFORMANCE DATA
From time to time, the Fund may advertise "total return" and "current yield".
ALL DATA IS BASED ON HISTORICAL EARNINGS AND IS NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. Total return and yield are computed separately for each class of
shares of the Fund. Total return refers to average annual compounded rates of
return over specified periods determined by comparing the initial amount
invested in a particular class to the ending redeemable value of that amount.
The resulting equation assumes reinvestment of all dividends and distributions
and deduction of the maximum sales charge or applicable contingent deferred
sales charge and all recurring charges, if any, applicable to all shareholder
accounts. The exchange fee is not included in the calculation.
Current yield quotations represent the yield on an investment for a stated
30-day period computed by dividing net investment income earned per share during
the base period by the maximum offering price per share on the last day of the
base period.
The Fund may also include comparative performance data for each class of
shares when advertising or marketing the Fund's shares, such as data from Lipper
Analytical Services, Inc., Morningstar, Inc. and Abbotson Associates or other
industry publications.
FUND SHARES
The Fund currently issues three classes of shares which participate
proportionately based on their relative net asset values in dividends and
distributions and have equal voting, liquidation and other rights except that
(1) expenses related to the distribution of each class of shares or other
expenses that the Board of Trustees may designate as class expenses from time to
time, are borne solely by each class; (2) each class of shares has exclusive
voting rights with respect to its Distribution Plan, (3) each class has
different exchange privileges and (4) each class has a different designation.
When issued and paid for, the shares will be fully paid and nonassessable by the
Fund. Shares may be exchanged as explained under "Shareholder Services" but will
have no other preference, conversion, exchange or preemptive rights. Shares are
redeemable, transferable and freely assignable as collateral. The Fund is
authorized to issue three additional classes of shares.
Shareholders are entitled to one vote for each full share owned and fractional
votes for fractional shares. Shares of the Fund vote together except when
required by law to vote separately by class. The Fund does not have annual
meetings. The Fund will have special meetings, from time to time, as required
under its Declaration of Trust and under the 1940 Act. As provided in the Fund's
Declaration of Trust, shareholders have the right to remove Trustees by an
affirmative vote of two-thirds of the outstanding shares. A special meeting of
the shareholders will be held when 10% of the outstanding shares request a
meeting for the purpose of removing a Trustee. The Fund is prepared to assist
shareholders in communications with one another for the purpose of convening
such a meeting as prescribed by Section 16(c) of the 1940 Act.
Under Massachusetts law, it is possible that a Fund shareholder may be held
personally liable for the Fund's obligations. The Fund's Declaration of Trust
provides, however, that shareholders shall not be subject to any personal
liability for the Fund's obligations and provides indemnification from Fund
assets for any shareholder held personally liable for the Fund's obligations.
Disclaimers of such liability are included in each Fund agreement.
ADDITIONAL INFORMATION
KIRC, located at 101 Main Street, Cambridge, Massachusetts 02142-1519, is a
wholly-owned subsidiary of Keystone and serves as the Fund's transfer agent and
dividend disbursing agent.
When the Fund determines from its records that more than one account in the
Fund is registered in the name of a shareholder or shareholders having the same
address, upon written notice to those shareholders, the Fund intends, when an
annual report or semi-annual report of the Fund is required to be furnished, to
mail one copy of such report to that address.
Except as otherwise stated in this prospectus or required by law, the Fund
reserves the right to change the terms of the offer stated in this prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
The Fund may engage in the following investment practices to the extent
described in the prospectus and the statement of additional information.
OBLIGATIONS OF FOREIGN BRANCHES OF UNITED STATES BANKS
The obligations of foreign branches of U.S. banks may be general obligations
of the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by government regulation. Payment of interest
and principal upon these obligations may also be affected by governmental action
in the country of domicile of the branch (generally referred to as sovereign
risk). In addition, evidences of ownership of such securities may be held
outside the U.S., and the Fund may be subject to the risks associated with the
holding of such property overseas. Examples of governmental actions would be the
imposition of currency controls, interest limitations, withholding taxes,
seizure of assets or the declaration of a moratorium. Various provisions of
federal law governing domestic branches do not apply to foreign branches of
domestic banks.
OBLIGATIONS OF UNITED STATES BRANCHES OF FOREIGN BANKS
Obligations of U.S. branches of foreign banks may be general obligations of
the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by federal and state regulation as well as by
governmental action in the country in which the foreign bank has its head
office. In addition, there may be less publicly available information about a
U.S. branch of a foreign bank than about a domestic bank.
MASTER DEMAND NOTES
Master demand notes are unsecured obligations that permit the investment of
fluctuating amounts by the Fund at varying rates of interest pursuant to direct
arrangements between the Fund, as lender, and the issuer, as borrower. Master
demand notes may permit daily fluctuations in the interest rate and daily
changes in the amounts borrowed. The Fund has the right to increase the amount
under the note at any time up to the full amount provided by the note agreement
or to decrease the amount. The borrower may repay up to the full amount of the
note without penalty. Notes purchased by the Fund permit the Fund to demand
payment of principal and accrued interest at any time (on not more than seven
days notice) and to resell the note at any time to a third party. Notes acquired
by the Fund may have maturities of more than one year, provided that (1) the
Fund is entitled to payment of principal and accrued interest upon not more than
seven days notice, and (2) the rate of interest on such notes is adjusted
automatically at periodic intervals, which normally will not exceed 31 days, but
may extend up to one year. The notes are deemed to have a maturity equal to the
longer of the period remaining to the next interest rate adjustment or the
demand notice period. Because these types of notes are direct lending
arrangements between the lender and borrower, such instruments are not normally
traded and there is no secondary market for these notes, although they are
redeemable and thus repayable by the borrower at face value plus accrued
interest at any time. Accordingly, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. In
connection with master demand note arrangements, Keystone considers, under
standards established by the Board of Trustees, earning power, cash flow and
other liquidity ratios of the borrower and will monitor the ability of the
borrower to pay principal and interest on demand. These notes are not typically
rated by credit rating agencies. Unless rated, the Fund will invest in them only
if at the time of an investment the issuer meets the criteria established for
commercial paper.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements; i.e., the Fund purchases a
security subject to the Fund's obligation to resell and the seller's obligation
to repurchase that security at an agreed upon price and date, such date usually
being not more than seven days from the date of purchase. The resale price is
based on the purchase price plus an agreed upon current market rate of interest
that (for purposes of the transaction) is generally unrelated to the coupon rate
or maturity of the purchased security. A repurchase agreement imposes an
obligation on the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security. The value of the
underlying security is at least equal to the amount of the agreed upon resale
price and marked to market daily to cover such amount. The Fund may enter into
such agreements only with respect to U.S. government and foreign government
securities, which may be denominated in U.S. or foreign currencies. The Fund may
enter into such repurchase agreements with foreign banks and securities dealers
approved in advance by the Fund's Trustees. Whether a repurchase agreement is
the purchase and sale of a security or a collateralized loan has not been
definitively established. This might become an issue in the event of the
bankruptcy of the other party to the transaction. It does not presently appear
possible to eliminate all risks involved in repurchase agreements. These risks
include the possibility of an increase in the market value of the underlying
securities or inability of the repurchaser to perform its obligation to
repurchase coupled with an uncovered decline in the market value of the
collateral, including the underlying securities, as well as delay and costs to
the Fund in connection with enforcement or bankruptcy proceedings. Therefore, it
is the policy of the Fund to enter into repurchase agreements only with large,
well-capitalized banks that are members of the Federal Reserve System and with
primary dealers in U.S. government securities (as designated by the Federal
Reserve Board) whose creditworthiness has been reviewed and found satisfactory
by the Fund's advisers.
REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, the Fund would sell securities and agree
to repurchase them at a mutually agreed upon date and price. The Fund intends to
enter into reverse repurchase agreements to avoid otherwise having to sell
securities during unfavorable market conditions in order to meet redemptions. At
the time the Fund enters into a reverse repurchase agreement, it will establish
a segregated account with the Fund's custodian containing liquid assets having a
value not less than the repurchase price (including accrued interest) and will
subsequently monitor the account to ensure such value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
that the Fund is obligated to repurchase may decline below the repurchase price.
Borrowing and reverse repurchase agreements magnify the potential for gain or
loss on the portfolio securities of the Fund and, therefore, increase the
possibility of fluctuation in the Fund's net asset value. Such practices may
constitute leveraging. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's obligation to repurchase the securities and the Fund's use of
the proceeds of the reverse repurchase agreement may effectively be restricted
pending such determination. The staff of the Securities and Exchange Commission
has taken the position that the reverse repurchase agreements are subject to the
percentage limit on borrowings imposed under the 1940 Act.
FOREIGN SECURITIES
The Fund may invest in securities principally traded in securities markets
outside the U.S. While investment in foreign securities is intended to reduce
risk by providing further diversification, such investments involve sovereign
risk in addition to the credit and market risks normally associated with
domestic securities. Foreign investments may be affected favorably or
unfavorably by changes in currency rates and exchange control regulations. There
may be less publicly available information about a foreign company, particularly
emerging market country companies, than about a U.S. company, and foreign
companies may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S. companies.
Securities of some foreign companies are less liquid or more volatile than
securities of U.S. companies, and foreign brokerage commissions and custodian
fees are generally higher than in the United States. Investments in foreign
securities may also be subject to other risks different from those affecting
U.S. investments, including local political or economic developments,
particularly with respect to companies in the formerly communist countries of
Eastern Europe and the People's Republic of China, expropriation or
nationalization of assets, imposition of withholding taxes on dividend or
interest payments and currency blockage (which would prevent cash from being
brought back to the U.S.).
AMERICAN DEPOSITARY RECEIPTS
The Fund may purchase American Depositary Receipts ("ADRs"). ADRs are
negotiable certificates issued by a United States ("U.S.") bank representing the
right to receive securities of a foreign issuer deposited in that bank or a
foreign correspondent bank. The Fund may invest in ADRs representing securities
of issuers located in developed countries as well as the emerging markets
countries. Although the ADRs in which the Fund invests are typically listed on a
major U.S. exchange, there are variations as to marketability.
ZERO COUPON BONDS
A zero coupon (interest) "stripped" bond represents ownership in serially
maturing interest or principal payments on specific underlying notes and bonds,
including coupons relating to such notes and bonds. The interest and principal
payments are direct obligations of the issuer. These bonds mature on the payment
dates of the interest or principal which they represent. Each zero coupon bond
entitles the holder to receive a single payment at maturity. There are no
periodic interest payments on a zero coupon bond. Zero coupon bonds are offered
at discounts from their face amounts.
In general, owners of zero coupon bonds have substantially all the rights and
privileges of owners of the underlying coupon obligations or principal
obligations. Owners of zero coupon bonds have the right upon default on the
underlying coupon obligations or principal obligations to proceed directly and
individally against the issuer and are not required to act in concert with other
holders of zero coupon bonds.
For federal income tax purposes, a purchaser of principal zero coupon bonds
(either initially or in the secondary market) is treated as if the buyer had
purchased a corporate obligation issued on the purchase date with an original
issue discount equal to the excess of the amount payable at maturity over the
purchase price. The purchaser is required to take into income each year as
ordinary income an allocaable portion of such discounts determined on a
"constant yield" method. Any such income increases the holder's tax basis for
the zero coupon bond, and any gain or loss on a sale of the zero coupon bonds
relative to the holder's basis, as so adjusted, is a capital gain or loss. If
the holder owns zero coupon bonds representing separate interests in the coupon
(interest) payments and the principal payments from the same underlying issue of
securities, a special basis allocation rule (requiring the aggregate basis to be
allocated among the items sold and retained based on their relative fair market
values at the time of sale) may apply to determine the gain or loss on a sale of
any such zero coupon bonds.
"WHEN ISSUED" SECURITIES
The Fund may also purchase and sell securities and currencies on a when issued
and delayed delivery basis. When issued or delayed delivery transactions arise
when securities or currencies are purchased or sold by the Fund with payment and
delivery taking place in the future in order to secure what is considered to be
an advantageous price and yield to the Fund at the time of entering into the
transaction. When the Fund engages in when issued and delayed delivery
transactions, the Fund relies on the buyer or seller, as the case may be, to
consummate the sale. Failure to do so may result in the Fund missing the
opportunity to obtain a price or yield considered to be advantageous. When
issued and delayed delivery transactions may be expected to occur a month or
more before delivery is due. No payment or delivery is made by the Fund however,
until it receives payment or delivery from the other party to the transaction. A
separate account of liquid assets equal to the value of such purchase
commitments will be maintained until payment is made. When issued and delayed
delivery agreements are subject to risks from changes in value based upon
changes in the level of interest rates, currency rates and other market factors,
both before and after delivery. The Fund does not accrue any income on such
securities or currencies prior to their delivery. To the extent the Fund engages
in when issued and delayed delivery transactions, it will do so consistent with
its investment objective and policies and not for the purpose of investment
leverage. The Fund currently does not intend to invest more than 5% of its
assets in when issued or delayed delivery transactions.
LOANS OF SECURITIES TO BROKER-DEALERS
The Fund may lend securities to brokers and dealers pursuant to agreements
requiring that the loans be continuously secured by cash or securities of the
U.S. government, its agencies or instrumentalities, or any combination of cash
and such securities, as collateral equal at all times in value to at least the
market value of the securities loaned. Such securities loans will not be made
with respect to the Fund if, as a result, the aggregate of all outstanding
securities loans exceeds 15% of the value of the Fund's total assets taken at
their current value. The Fund continues to receive interest or dividends on the
securities loaned and simultaneously earns interest on the investment of the
cash loan collateral in U.S. Treasury notes, certificates of deposit, other
high-grade, short-term obligations or interest bearing cash equivalents.
Although voting rights attendant to securities loaned pass to the borrower, such
loans may be called at any time and will be called so that the securities may be
voted by the Fund if, in the opinion of the Fund, a material event affecting the
investment is to occur. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even loss of rights in the
collateral should the borrower of the securities fail financially. Loans may
only be made to borrowers deemed to be of good standing, under standards
approved by the Board of Trustees, when the income to be earned from the loan
justifies the attendant risks.
DERIVATIVES
The Fund may use derivatives in furtherance of its investment objective.
Derivatives are financial contracts whose value depends on, or is derived from,
the value of an underlying asset, reference rate or index. These assets, rates,
and indices may include bonds, stocks, mortgages, commodities, interest rates,
currency exchange rates, bond indices and stock indices. Derivatives can be used
to earn income or protect against risk, or both. For example, one party with
unwanted risk may agree to pass that risk to another party who is willing to
accept the risk, the second party being motivated, for example, by the desire
either to earn income in the form of a fee or premium from the first party, or
to reduce its own unwanted risk by attempting to pass all or part of that risk
to the first party.
Derivatives can be used by investors such as the Fund to earn income and
enhance returns, to hedge or adjust the risk profile of the portfolio, and
either in place of more traditional direct investments or to obtain exposure to
otherwise inaccessible markets. The Fund is permitted to use derivatives for one
or more of these purposes, although the Fund generally uses derivatives
primarily as direct investments in order to enhance yields and broaden portfolio
diversification. Each of these uses entails greater risk than if derivatives
were used solely for hedging purposes. The Fund uses futures contracts and
related options for hedging purposes. Derivatives are a valuable tool which,
when used properly, can provide significant benefit to Fund shareholders.
Keystone is not an aggressive user of derivatives with respect to the Fund.
However, the Fund may take positions in those derivatives that are within its
investment policies if, in Keystone's judgement, this represents an effective
response to current or anticipated market conditions. Keystone's use of
derivatives is subject to continuous risk assessment and control from the
standpoint of the Fund's investment objectives and policies.
Derivatives may be (1) standardized, exchange-traded contracts or (2)
customized, privately negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated.
There are four principal types of derivative instruments -- options, futures,
forwards and swaps -- from which virtually any type of derivative transaction
can be created. Further information regarding options and futures, is provided
later in this section and is provided in the Fund's statement of additional
information. The Fund does not presently engage in the use of swaps.
While the judicious use of derivatives by experienced investment managers such
as Keystone can be beneficial, derivatives also involve risks different from,
and, in certain cases, greater than, the risks presented by more traditional
investments. Following is a general discussion of important risk factors and
issues concerning the use of derivatives that investors should understand before
investing in the Fund.
* Market Risk -- This is the general risk attendant to all investments that the
value of a particular investment will decline or otherwise change in a way
detrimental to the Fund's interest.
* Management Risk -- Derivative products are highly specialized instruments that
require investment techniques and risk analyses different from those
associated with stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument, but also of the
derivative itself, without the benefit of observing the performance of the
derivative under all possible market conditions. In particular, the use and
complexity of derivatives require the maintenance of adequate controls to
monitor the transactions entered into, the ability to assess the risk that a
derivative adds to the Fund's portfolio and the ability to forecast price,
interest rate or currency exchange rate movements correctly.
* Credit Risk -- This is the risk that a loss may be sustained by the Fund as a
result of the failure of a another party to a derivative (usually referred to
as a "counterparty") to comply with the terms of the derivative contract. The
credit risk for exchange traded derivatives is generally less than for
privately negotiated derivatives, since the clearing house, which is the
issuer or counterparty to each exchange-traded derivative, provides a
guarantee of performance. This guarantee is supported by a daily payment
system (i.e., margin requirements) operated by the clearing house in order to
reduce overall credit risk. For privately negotiated derivatives, there is no
similar clearing agency guarantee. Therefore, the Fund considers the
creditworthiness of each counterparty to a privately negotiated derivative in
evaluating potential credit risk.
* Liquidity Risk -- Liquidity risk exists when a particular instrument is
difficult to purchase or sell. If a derivative transaction is particularly
large or if the relevant market is illiquid (as is the case with many
privately negotiated derivatives), it may not be possible to initiate a
transaction or liquidate a position at an advantageous price.
* Leverage Risk -- Since many derivatives have a leverage component, adverse
changes in the value or level of the underlying asset, rate or index can
result in a loss substantially greater than the amount invested in the
derivative itself. In the case of swaps, the risk of loss generally is related
to a notional principal amount, even if the parties have not made any initial
investment. Certain derivatives have the potential for unlimited loss,
regardless of the size of the initial investment.
* Other Risks -- Other risks in using derivatives include the risk of mispricing
or improper valuation and the inability of derivatives to correlate perfectly
with underlying assets, rates and indices. Many derivatives; in particular
privately negotiated derivatives, are complex and often valued subjectively.
Improper valuations can result in increased cash payment requirements to
counterparties or a loss of value to a Fund. Derivatives do not always
perfectly or even highly correlate or track the value of the assets, rates or
indices they are designed to closely track. Consequently, the Fund's use of
derivatives may not always be an effective means of, and sometimes could be
counterproductive to, furthering the Fund's investment objective.
OPTIONS TRANSACTIONS
WRITING COVERED OPTIONS. The Fund may write (i.e., sell) covered call and put
options. By writing a call option, the Fund becomes obligated during the term of
the option to deliver the securities underlying the option upon payment of the
exercise price. By writing a put option, the Fund becomes obligated during the
term of the option to purchase the securities underlying the option at the
exercise price if the option is exercised. The Fund also may write straddles
(combinations of covered puts and calls on the same underlying security).
The Fund may only write "covered" options. This means that so long as the Fund
is obligated as the writer of a call option it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, the Fund might own substantially similar U.S. Treasury bills. If
the Fund has written options against all of its securities that are available
for writing options, the Fund may be unable to write additional options unless
it sells a portion of its portfolio holdings to obtain new securities against
which it can write options. If this were to occur, higher portfolio turnover and
correspondingly greater brokerage commissions and other transaction costs may
result. The Fund does not expect, however, that this will occur.
The Fund will be considered "covered" with respect to a put option it writes
if, so long as it is obligated as the writer of the put option, it deposits and
maintains with its custodian in a segregated account liquid assets having a
value equal to or greater than the exercise price of the option.
The principal reason for writing call or put options is to obtain, through a
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. The Fund receives a premium from writing a call or
put option, which it retains whether or not the option is exercised. By writing
a call option, the Fund might lose the potential for gain on the underlying
security while the option is open, and, by writing a put option, the Fund might
become obligated to purchase the underlying security for more than its current
market price upon exercise.
PURCHASING OPTIONS. The Fund may purchase put or call options, including
purchasing put or call options for the purpose of offsetting previously written
put or call options of the same series.
If the Fund is unable to effect a closing purchase transaction with respect to
covered options it has written, the Fund will not be able to sell the underlying
securities or dispose of assets held in a segregated account until the options
expire or are exercised.
An option position may be closed out only in a secondary market for an option
of the same series. Although the Fund generally will write only those options
for which there appears to be an active secondary market, there is no assurance
that a liquid secondary market will exist for any particular option at any
particular time, and, for some options, no secondary market may exist. In such
event, it might not be possible to effect a closing transaction in a particular
option.
Options on some securities are relatively new, and it is impossible to predict
the amount of trading interest that will exist in such options. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair the Fund's ability to
use such options to achieve its investment objective.
OPTIONS TRADING MARKETS. Options in which the Fund will trade are generally
listed on national securities exchanges. Exchanges on which such options
currently are traded include the Chicago Board Options Exchange and the New
York, American, Pacific and Philadelphia Stock Exchanges. Options on some
securities may not be listed on any exchange, but traded in the over-the-counter
market. Options traded in the over-the-counter market involve the additional
risk that securities dealers participating in such transactions could fail to
meet their obligations to the Fund. The use of options traded in the
over-the-counter market may be subject to limitations imposed by certain state
securities authorities. In addition to the limits on its use of options
discussed herein, the Fund is subject to the investment restrictions described
in this prospectus and in the statement of additional information.
The staff of the Securities and Exchange Commission is of the view that the
premiums that the Fund pays for the purchase of unlisted options and the value
of securities used to cover unlisted options written by the Fund are considered
to be invested in illiquid securities or assets for the purpose of calculating
whether the Fund is in compliance with its policies on illiquid securities.
FUTURES TRANSACTIONS
The Fund may enter into currency and other financial futures contracts and
write options on such contracts. The Fund intends to enter into such contracts
and related options for hedging purposes. The Fund will enter into securities,
currency or index based futures contracts in order to hedge against changes in
interest or exchange rates or securities prices. A futures contract on
securities or currencies is an agreement to buy or sell securities or currencies
at a specified price during a designated month. A futures contract on a
securities index does not involve the actual delivery of securities, but merely
requires the payment of a cash settlement based on changes in the securities
index. The Fund does not make payment or deliver securities upon entering into a
futures contract. Instead, it puts down a margin deposit, which is adjusted to
reflect changes in the value of the contract and which continues until the
contract is terminated.
The Fund may sell or purchase futures contracts. When a futures contract is
sold by the Fund, the value of the contract will tend to rise when the value of
the underlying securities or currencies declines and to fall when the value of
such securities or currencies increases. Thus, the Fund sells futures contracts
in order to offset a possible decline in the value of its securities or
currencies. If a futures contract is purchased by the Fund, the value of the
contract will tend to rise when the value of the underlying securities or
currencies increases and to fall when the value of such securities or currencies
declines. The Fund intends to purchase futures contracts in order to fix what is
believed by Keystone to be a favorable price and rate of return for securities
or favorable exchange rate for currencies the Fund intends to purchase.
The Fund also intends to purchase put and call options on futures contracts
for hedging purposes. A put option purchased by the Fund would give it the right
to assume a position as the seller of a futures contract. A call option
purchased by the Fund would give it the right to assume a position as the
purchaser of a futures contract. The purchase of an option on a futures contract
requires the Fund to pay a premium. In exchange for the premium, the Fund
becomes entitled to exercise the benefits, if any, provided by the futures
contract, but is not required to take any action under the contract. If the
option cannot be exercised profitably before it expires, the Fund's loss will be
limited to the amount of the premium and any transaction costs.
The Fund may enter into closing purchase and sale transactions in order to
terminate a futures contract and may sell put and call options for the purpose
of closing out its options positions. The Fund's ability to enter into closing
transactions depends on the development and maintenance of a liquid secondary
market. There is no assurance that a liquid secondary market will exist for any
particular contract or at any particular time. As a result, there can be no
assurance that the Fund will be able to enter into an offsetting transaction
with respect to a particular contract at a particular time. If the Fund is not
able to enter into an offsetting transaction, the Fund will continue to be
required to maintain the margin deposits on the contract and to complete the
contract according to its terms, in which case, it would continue to bear market
risk on the transaction.
Although futures and related options transactions are intended to enable the
Fund to manage market, interest rate or exchange rate risk, unanticipated
changes in interest rates, exchange rates or market prices could result in
poorer performance than if it had not entered into these transactions. Even if
Keystone correctly predicts interest or exchange rate movements, a hedge could
be unsuccessful if changes in the value of the Fund's futures position did not
correspond to changes in the value of its investments. This lack of correlation
between the Fund's futures and securities or currencies positions may be caused
by differences between the futures and securities or currencies markets or by
differences between the securities or currencies underlying the Fund's futures
position and the securities or currencies held by or to be purchased for the
Fund. Keystone will attempt to minimize these risks through careful selection
and monitoring of the Fund's futures and options positions.
The Fund does not intend to use futures transactions for speculation or
leverage. The Fund has the ability to write options on futures, but intends to
write such options only to close out options purchased by the Fund. The Fund
will not change these policies without supplementing the information in its
prospectus and statement of additional information.
FOREIGN CURRENCY TRANSACTIONS
As discussed above, the Fund may invest in securities of foreign issuers. When
the Fund invests in foreign securities they usually will be denominated in
foreign currencies, and the Fund temporarily may hold funds in foreign
currencies. Thus, the value of Fund shares will be affected by changes in
exchange rates.
As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the Fund may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency the Fund
will deliver or receive when the contract is completed) is fixed when the Fund
enters into the contract. The Fund usually will enter into these contracts to
stabilize the U.S. dollar value of a security it has agreed to buy or sell. The
Fund intends to use these contracts to hedge the U.S. dollar value of a security
it already owns, particularly if the Fund expects a decrease in the value of the
currency in which the foreign security is denominated. Although the Fund will
attempt to benefit from using forward contracts, the success of its hedging
strategy will depend on Keystone's ability to accurately predict the future
exchange rates between foreign currencies and the U.S. dollar. The value of the
Fund's investments denominated in foreign currencies will depend on the relative
strength of those currencies and the U.S. dollar, and the Fund may be affected
favorably or unfavorably by changes in the exchange rates or exchange control
regulations between foreign currencies and the dollar. Changes in foreign
currency exchange rates also may affect the value of dividends and interest
earned, gains and losses realized on the sale of securities and net investment
income and gains, if any, to be distributed to shareholders by the Fund.
Although the Fund does not currently intend to do so, the Fund may also purchase
and sell options related to foreign currencies. The Fund does not intend to
enter into foreign currency transactions for speculation or leverage.
<PAGE>
EXHIBIT A
REDUCED SALES CHARGES
Initial sales charges may be reduced or eliminated for persons or
organizations purchasing Class A shares of the Fund alone or in combination with
Class A shares of other Keystone America Funds.
For purposes of qualifying for reduced sales charges on purchases made
pursuant to Rights of Accumulation or Letters of Intent, the term "Purchaser"
includes the following persons: an individual; an individual, his or her spouse
and children under the age of 21; a trustee or other fiduciary of a single trust
estate or single fiduciary account established for their benefit; an
organization exempt from federal income tax under Section 501(c)(3) or (13) of
the Internal Revenue Code; a pension, profit-sharing or other employee benefit
plan whether or not qualified under Section 401 of the Internal Revenue Code; or
other organized groups of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some purpose
other than the purchase of redeemable securities of a registered investment
company at a discount. In order to qualify for a lower sales charge, all orders
from an organized group will have to be placed through a single investment
dealer or other firm and identified as originating from a qualifying purchaser.
CONCURRENT PURCHASES
For purposes of qualifying for a reduced sales charge, a Purchaser may combine
concurrent direct purchases of Class A shares of two or more of the "Eligible
Funds," as defined below. For example, if a Purchaser concurrently invested
$75,000 in one of the other "Eligible Funds" and $75,000 in the Fund, the sales
charge would be that applicable to a $150,000 purchase, i.e., 3.75% of the
offering price, as indicated in the Sales Charge Schedule in the Prospectus.
RIGHT OF ACCUMULATION
In calculating the sales charge applicable to current purchases of the Fund's
Class A shares, a Purchaser is entitled to accumulate current purchases with the
current value of previously purchased Class A shares of the Fund and Class A
shares of certain other eligible funds that are still held in (or exchanged for
shares of and are still held in) the same or another eligible fund ("Eligible
Fund(s)"). The Eligible Funds are the Keystone America Funds and Keystone Liquid
Trust.
For example, if a Purchaser held shares valued at $99,999 and purchased an
additional $5,000, the sales charge for the $5,000 purchase would be at the next
lower sales charge of 3.75% of the offering price as indicated in the Sales
Charge schedule. KIRC must be notified at the time of purchase that the
Purchaser is entitled to a reduced sales charge, which reduction will be granted
subject to confirmation of the Purchaser's holdings. The Right of Accumulation
may be modified or discontinued at any time.
LETTER OF INTENT
A Purchaser may qualify for a reduced sales charge on a purchase of Class A
shares of the Fund alone or in combination with purchases of Class A shares of
any of the other Eligible Funds by completing the Letter of Intent section of
the application. By so doing, the Purchaser agrees to invest within a
thirteen-month period a specified amount which, if invested at one time, would
qualify for a reduced sales charge. Each purchase will be made at a public
offering price applicable to a single transaction of the dollar amount specified
on the application, as described in this prospectus. The Letter of Intent does
not obligate the Purchaser to purchase, nor the Fund to sell, the amount
indicated.
After the Letter of Intent is received by KIRC, each investment made will be
entitled to the sales charge applicable to the level of investment indicated on
the application. The Letter of Intent may be back-dated up to ninety days so
that any investments made in any of the Eligible Funds during the preceding
ninety-day period, valued at the Purchaser's cost, can be applied toward
fulfillment of the Letter of Intent. However, there will be no refund of sales
charges already paid during the ninety-day period. No retroactive adjustment
will be made if purchases exceed the amount specified in the Letter of Intent.
Income and capital gains distributions taken in additional shares will not apply
toward completion of the Letter of Intent.
If total purchases made pursuant to the Letter of Intent are less than the
amount specified, the Purchaser will be required to remit an amount equal to the
difference between the sales charge paid and the sales charge applicable to
purchases actually made. Out of the initial purchase (or subsequent purchases,
if necessary) 5% of the dollar amount specified on the application will be held
in escrow by KIRC in the form of shares registered in the Purchaser's name. The
escrowed shares will not be available for redemption, transfer or encumbrance by
the Purchaser until the Letter of Intent is completed or the higher sales charge
paid. All income and capital gains distributions on escrowed shares will be paid
to the Purchaser or his order.
When the minimum investment specified in the Letter of Intent is completed
(either prior to or by the end of the thirteen-month period), the Purchaser will
be notified and the escrowed shares will be released. If the intended investment
is not completed, the Purchaser will be asked to remit to KDI any difference
between the sales charge on the amount specified and on the amount actually
attained. If the Purchaser does not within 20 days after written request by KDI
or his dealer pay such difference in sales charge, KIRC will redeem an
appropriate number of the escrowed shares in order to realize such difference.
Shares remaining after any such redemption will be released by KIRC. Any
redemptions made by the Purchaser during the thirteen-month period will be
subtracted from the amount of the purchases for purposes of determining whether
the Letter of Intent has been completed. In the event of a total redemption of
the account prior to completion of the Letter of Intent, the additional sales
charge due will be deducted from the proceeds of the redemption and the balance
will be forwarded to the Purchaser.
By signing the application, the Purchaser irrevocably constitutes and appoints
KIRC his attorney to surrender for redemption any or all escrowed shares with
full power of substitution.
The Purchaser or his dealer must inform KDI or KIRC that a Letter of Intent is
in effect each time a purchase is made.
<PAGE>
KEYSTONE AMERICA
FAMILY OF FUNDS
*
Capital Preservation and Income Fund
Government Securities Fund
Intermediate Term Bond Fund
Strategic Income Fund
World Bond Fund
Tax Free Income Fund
California Insured Tax Free Fund
Florida Tax Free Fund
Massachusetts Tax Free Fund
Missouri Tax Free Fund
New York Insured Tax Free Fund
Pennsylvania Tax Free Fund
Texas Tax Free Fund
Fund for Total Return
Global Opportunities Fund
Hartwell Emerging Growth Fund, Inc.
Hartwell Growth Fund, Inc.
Omega Fund, Inc.
Fund of the Americas
Strategic Development Fund
[Logo] KEYSTONE
Distributors, Inc.
200 Berkeley Street
Boston, Massachusetts 02116-5034
KEYSTONE
AMERICA
HARTWELL
GROWTH FUND
[Logo]
PROSPECTUS AND
APPLICATION
<PAGE>
<TABLE>
KEYSTONE AMERICA FUNDS
APPLICATION
- ------------------------------------------------------------------------------ -----------------------------------------
Make check payable to the fund selected and mail with the application to Keystone, P.O. Box 2121, Boston, MA 02106-2121
- ------------------------------------------------------------------------------ -----------------------------------------
A. FUND SELECTION Indicate investment amount and share class below. There is
a $1,000 minimum initial investment. If a class is not
indicated, your investment will be made in Class A shares.
<S> <C> <C> <S> <S> <S>
CLASS AMOUNT CLASS AMOUNT
INCOME TAX FREE INCOME
Capital Preservation and Income Fund -------- $ -------- Tax Free Income Fund -------- $ --------
Government Securities Fund -------- $ -------- Florida Tax Free Fund -------- $ --------
Intermediate Term Bond Fund -------- $ -------- Pennsylvania Tax Free Fund -------- $ --------
World Bond Fund -------- $ -------- Massachusetts Tax Free Fund -------- $ --------
Strategic Income Fund -------- $ -------- New York Insured Tax Free Fund -------- $ --------
GROWTH & INCOME Texas Tax Free Fund -------- $ --------
Fund for Total Return -------- $ -------- California Insured Tax Free Fund -------- $ --------
Fund of the Americas -------- $ -------- Missouri Tax Free Fund -------- $ --------
MONEY MARKET GROWTH
Keystone Liquid Trust -------- $ -------- Global Opportunities Fund -------- $ --------
Hartwell Emerging Growth Fund -------- $ --------
Hartwell Growth Fund -------- $ --------
Omega Fund, Inc. -------- $ --------
Strategic Development Fund -------- $ --------
If you have an existing Keystone account, please enter the account number here >
- ------------------------------------------------------------------------------ -----------------------------------------
B. INVESTMENT DEALER
- ------------------------------------------------------------------------------ -----------------------------------------
Name of Broker/Dealer Firm Rep/AE No. Last Name First Initial
- ------------------------------------------------------------------------------ -----------------------------------------
Broker/Dealer Branch Office Telephone Number Investor's Account Number (if any) with your Firm
- ------------------------------------------------------------------------------ -----------------------------------------
C. SHAREHOLDER REGISTRATION (please print) For information about naming a
beneficiary in your account registration, please call Keystone.
Individual -------------------------------------------------------------------------------------------------------------
First Name Middle Initial Last Name Social Security #
Joint Tenant -----------------------------------------------------------------------------------------------------------
First Name Middle Initial Last Name Social Security #
Other ------------------------------------------------------------------------------------------------------------------
Name of Corporation, Organization, Fiduciary Taxpayer I.D. #
If trust give date of trust agreement: ------------------------------------------------------------------
Uniform Gifts to Minors Act --------------------------------------------------------------------------------------------
Custodian's Name
Uniform Transfers to Minors Act ----------------------------------------------------------------------------------------
Custodian's Name
As Custodian for ----------------------------------------------- Under ------------------------------------------------
Minor's Name Minor's Social Security # State
- ------------------------------------------------------------------------------------------------------------------------
Street Address City State 9-digit Zip Code
Daytime Telephone ( ) Evening Telephone ( )
-----------------------------------------------------------------------------------------------------
Area Code Area Code
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------
D. DISTRIBUTIONS. Choose One (If no choice is indicated, distributions will be reinvested)
[] Reinvest all income dividends and capital gains in additional shares [] Pay all dividends and capital gains distributions
in cash (if payment is to be made to other than
registered owner, identify in Section I).
[] Invest my dividends in another Keystone America Fund* ---------------- [] Pay all dividends in cash and reinvest
Designate Fund capital gains.
[] Invest my capital gains in another Keystone America Fund* -------------
Designate Fund
*See "Two Dimensional Investing" under the "Shareholder Services" section of the Prospectus.
- ------------------------------------------------------------------------------------------------------------------------
E. OPTIONAL SERVICES (please select by checking appropriate box)
1. Telephone Exchanges (1-800-343-2898) [] Subject to Prospectus provisions, I authorize Keystone
to accept my telephone instructions to exchange my shares
in any Keystone America Fund for shares in any other
Keystone America Fund. There is a $10.00 fee for each
exchange; however, if the exchange is made through KARL by
an individual investor, there is no fee.
[] Subject to Prospectus provisions, I authorize Keystone
to accept telephone instructions from my financial adviser
of record to exchange my shares in any Keystone America
Fund for shares of any other Keystone America Fund. There
is a $10.00 fee for each exchange.
Please refer to the Prospectus for a more complete
description of telephone privileges.
- ------------------------------------------------------------------------------------------------------------------------
2. Telephone Redemptions (1-800-343-2898) [] Subject to Prospectus provisions, I authorize Keystone to
accept my telephone instructions to redeem up to $50,000
from my account in any Keystone America Fund and to
deposit the proceeds to my bank by electronic funds
transfer. Redemptions of less than $2,500 will be mailed
by check. Only shares on deposit with Keystone can be
redeemed by telephone. Redemptions by telephone are
allowed only if the address and bank account of record
have been the same for a minimum period of 30 days.
(Please provide information on your bank in Section I.)
Please refer to the Prospectus for a more complete
description of telephone privileges.
- ------------------------------------------------------------------------------------------------------------------------
3. Automatic Investments by [] I wish to make automatic investments of $ ------------ in
Electronic Funds Transfer my Keystone America Fund
($100 minimum) ----------------------------------------------------------------------------
Name of Fund
[] Monthly. On [] the 5th or [] 20th day of each month, commencing ---------- 19 ---- or
[] Quarterly. Every three months on the [] 5th or [] 20th day, commencing ---------- 19 ----
Please provide information on your bank in Section I. You must receive
notification from Keystone that your electronic transfer feature is active
before you make electronic transactions. This is normally 30 business days
after we receive your application.
- ------------------------------------------------------------------------------ -----------------------------------------
4. Automatic Withdrawals by Electronic Funds Transfer or Check. ($100 minimum
per withdrawal; withdrawals may be as much as 1.5% per month or 4.5% per
quarter of account asset value at time withdrawals commence.)
[] Beginning ---------- 19 ---- please electronically transfer to my bank the
amount of $ --------- on the first day of each
[] month or [] quarter Please allow 30 days for payments to begin. Please
provide information on your bank under Section I.
[] I prefer to have checks sent to the registered
owner's address. [] Payment by check made to payee other than
registered shareholders. Please identify in
Section I.
- ------------------------------------------------------------------------------ -----------------------------------------
5. Dollar Cost Averaging [] Monthly [] Quarterly
[] I authorize Keystone to withdraw $ ---------- ($100 minimum) from my Keystone America -----------------------------
Designate Fund
account to purchase shares of Keystone America --------------------,
beginning ---------- 1st, 19 -----------------. Designate Fund
Month
- ------------------------------------------------------------------------------ -----------------------------------------
F. CHECKWRITING (Capital Preservation & Income Fund and Keystone Liquid Trust ONLY)
[] Yes, I want free checkwriting ($500 minimum per check). Please be sure to
fill out the attached signature card.
- ------------------------------------------------------------------------------ -----------------------------------------
<PAGE>
G. LETTER OF INTENT (Letter of Intent applies only to Class A shares)
[] I agree to the terms of the Letter of Intent set forth in the Prospectus (including the escrowing of
shares). Although I am not obligated to do so, it is my intention to invest over a thirteen-month
period in shares of one or more Keystone America Funds in an aggregate amount at least equal to:
[] $50,000 [] $100,000 [] $250,000 [] $500,000 [] $1,000,000
- ------------------------------------------------------------------------------ -----------------------------------------
H. RIGHTS OF ACCUMULATION (Rights of Accumulation applies only to Class A shares)
I qualify for Rights of Accumulation as described in the Prospectus. Listed below are accounts in the
Keystone America Family of Funds which may entitle me to a reduced sales charge:
- ------------------------------------------------------------------------------------------------------------------------
Fund Account Number
- ------------------------------------------------------------------------------------------------------------------------
Fund Account Number
- ------------------------------------------------------------------------------------------------------------------------
I. BANK AND PAYEE INFORMATION IMPORTANT -- YOUR BANK MUST BE A MEMBER OF THE AUTOMATED
CLEARING HOUSE IN ORDER FOR YOU TO USE ELECTRONIC
FUNDS TRANSFER SERVICES.
If you have elected to have funds deposited to or withdrawn from your bank account, please attach here a
voided check or pre-printed deposit slip for your bank account. Your Keystone America account and your
bank account must have one name in common.
- ------------------------------------------------------------------------------------------------------------------------
Name on Bank Account Bank Account Number
Type of Bank Account: [] Savings [] Checking [] NOW
I am identifying below the: [] Payee for distributions [] Payee for telephone redemptions [] Payee for automatic withdrawals
- ------------------------------------------------------------------------------------------------------------------------
Name of Payee (other than bank) Street Address City State Zip
- ------------------------------------------------------------------------------------------------------------------------
Keystone Use Only Bank Routing/Transit
- ----------------------------------------------------------------------------------------------------------------------
J. SIGNATURES
[] Check if any owner is a citizen or resident of the U.S.
[] Check if any owner is a foreign Indicate Country -----------------------------------
person not subject to U.S. tax
reporting requirement.
NOTE: See reverse side for important tax information.
I (WE) AM (ARE) OF LEGAL AGE AND HAVE RECEIVED THE PROSPECTUS(ES) AND AGREE TO ITS (THEIR) TERMS.
IF I (WE) HAVE ELECTED ANY OF THE OPTIONAL EXCHANGE, REDEMPTION, AUTOMATIC INVESTMENT OR AUTOMATIC
WITHDRAWAL SERVICES DESCRIBED ABOVE: (I) I (WE) HEREBY RATIFY ANY INSTRUCTIONS RECEIVED BY KEYSTONE IN
WRITING AND I (WE) AGREE THAT NEITHER THE FUND, KIRC NOR KDI WILL BE HELD RESPONSIBLE FOR THE
AUTHENTICITY OF SUCH INSTRUCTIONS; (II) I (WE) AGREE THAT NEITHER THE FUND, KIRC NOR KDI WILL BE HELD
LIABLE WHEN FOLLOWING INSTRUCTIONS RECEIVED OVER KARL OR BY TELEPHONE WHICH ARE REASONABLY BELIEVED TO
BE GENUINE; AND (III) I (WE) UNDERSTAND, THAT IF SUCH REASONABLE PROCEDURES ARE NOT FOLLOWED, THE FUND,
KIRC OR KDI MAY BE LIABLE FOR ANY LOSSES DUE TO UNAUTHORIZED OR FRAUDULENT INSTRUCTIONS.
UNDER PENALTIES OF PERJURY, EACH OF THE UNDERSIGNED CERTIFIES THAT THE NUMBER SHOWN ABOVE IS THE
UNDERSIGNED'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND THAT THE UNDERSIGNED IS NOT SUBJECT TO BACKUP
WITHHOLDING UNLESS INDICATED BY CHECKING THE BOX BELOW.
[] THE UNDERSIGNED IS SUBJECT TO BACKUP WITHHOLDING UNDER THE PROVISIONS OF THE INTERNAL REVENUE CODE
SECTION 3406(A)(1)(C).
[] CHECK HERE IF YOU DO NOT HAVE A NUMBER BUT HAVE APPLIED OR INTEND TO APPLY FOR ONE. THE SIGNATURE OF
EACH PERSON ON THIS APPLICATION SERVES TO CERTIFY THIS, AND THAT EACH UNDERSIGNED UNDERSTANDS THAT IF
THE UNDERSIGNED DOES NOT PROVIDE A NUMBER WITHIN 60 DAYS WE ARE REQUIRED BY LAW TO WITHHOLD 31% OF ALL
DIVIDENDS, CAPITAL GAINS, REDEMPTIONS, EXCHANGES, AND CERTAIN OTHER PAYMENTS.
> >
Signature Date
- ------------------------------------------------------------------------------ -----------------------------------------
> >
Signature Date
- ------------------------------------------------------------------------------ -----------------------------------------
</TABLE>
<PAGE>
IMPORTANT TAX NOTICE
BACKUP WITHHOLDING INFORMATION
- ------------------------------------------------------------------------------
Federal tax law requires us to obtain your certification that:
1. The taxpayer identification number you provide is correct, and
2. That you are not subject to backup withholding. (For most individuals, the
taxpayer identification number is the Social Security Number.)
Nonresident aliens must certify that they qualify as foreign persons, exempt
from U.S. tax reporting requirements. On joint accounts where an owner is a U.S.
citizen or resident, that owner must certify that the taxpayer identification
number provided is correct and is not subject to backup withholding.
Certification of foreign status must be filed every three years.
If you do not provide us with the above information on the application, we are
required by law to withhold 31% of all your dividends, capital gains,
redemptions, exchanges and certain other payments.
The following are the other conditions under which you will be subject to backup
withholding:
1. If you have received a notice from the Internal Revenue Service that you
provided an incorrect taxpayer identification number.
2. If you have received a notice from the Internal Revenue Service that you
underreported interest or dividend payments or did not file a return
reporting such payments.
DO NOT CHECK THE BOX INDICATING THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING
UNLESS YOU HAVE RECEIVED A NOTICE FROM THE INTERNAL REVENUE SERVICE.
If you fall within one of the following categories, you are exempt from backup
withholding on ALL payments and should NOT check the box:
* CORPORATION * FINANCIAL INSTITUTION * REGISTERED SECURITIES DEALER * COMMON
TRUST FUND * COLLEGE, CHURCH OR CHARITABLE ORGANIZATION * RETIREMENT PLAN *
OTHER ENTITY LISTED IN INTERNAL REVENUE CODE SEC. 3452.
FOR FURTHER DETAILS, REFER TO INTERNAL REVENUE SERVICE FORM W-9.
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
April ____, 1995
This statement of additional information is not a prospectus, but relates
to, and should be read in conjunction with, the prospectus of Keystone America
Hartwell Growth Fund (the "Fund") dated April ____, 1995. A copy of the
prospectus may be obtained from Keystone Distributors, Inc. ("KDI"), the Fund's
principal underwriter ("Principal Underwriter") 200 Berkeley Street, Boston,
Massachusetts 02116-5034.
TABLE OF CONTENTS
Page
The Fund 2
Investment Policies 2
Investment Methods 2
Investment Restrictions 4
Distributions and Taxes 5
Valuation of Securities 6
Sales Charges 7
Distribution Plans 10
Investment Adviser 13
Sub-Adviser 16
Trustees and Officers 17
Principal Underwriter 21
Brokerage 23
Capital Stock 24
Standardized Total Return
and Yield Calculations 25
Additional Information 26
Appendix A-1
Financial Statements F-1
Independent Auditors' Report F-12
<PAGE>
THE FUND
The Fund is a non-diversified open-end investment company commonly known as
a mutual fund. The Fund's investment objective is capital appreciation. The Fund
was reorganized as a Massachusetts business trust on _______________, 1995.
Originally, the Fund had been incorporated in New York on November 30, 1965 and
began operations on March 31, 1966. The Fund is one of 30 funds advised by
Keystone Custodian Funds, Inc. ("Keystone"). Keystone has retained the services
of J.M Hartwell Limited Partnership ("Hartwell") to provide the Fund with
subadvisory services, subject to the supervision of the Fund's Board of Trustees
and Keystone. Effective July 27, 1993, the Fund changed its name from Hartwell
Growth Fund, Inc. to Keystone America Hartwell Growth Fund, Inc., and in
connection with its reorganization as a Massachusetts business trust the Fund's
name became Keystone America Hartwell Growth Fund.
The essential information about the Fund is contained in its prospectus.
This statement of additional information provides additional information about
the Fund that may be of interest to some investors.
INVESTMENT POLICIES
In seeking to achieve the Fund's investment objective of capital
appreciation, the Fund's advisers select for investment not only those few
companies whose unique characteristics or proprietary advantages, they believe,
offer the best prospects for well above average increases in revenues and
earnings, but also companies that tend to be grouped in industries that, from
time to time, are judged to be less likely to be affected by the business cycle
and to have strong prospects for revenue growth. The Fund's advisers
continuously monitor these companies and their industries to make certain the
companies retain the characteristics that led to their selection in the first
place. Ratings criteria applicable to the Fund are more fully explained in the
Appendix to this statement of additional information.
<PAGE>
INVESTMENT METHODS
The Fund considers a number of factors when selecting investments, including
the growth prospects for a company's products, the economic outlook for its
industry, its new product development, its operating management capabilities,
utilization and reinvestment of earnings, the relationship between the price of
the security and estimated fundamental values and an analysis of the market,
economic and political environments. Before a company is selected for the Fund's
portfolio, it is subjected to a 20-point test developed by the Fund's
subadviser. The test includes such objective criteria as position in the
marketplace (normally only companies ranking first or a close second will be
considered), average gross profit margin (will normally average at least 45%
over three years), ratio of long-term debt to total capital (will generally be
under 25%) as well as more subjective criteria including breadth of product
line, proprietary product position, distribution strength and pricing
flexibility.
In determining the companies in which to actually invest, the Fund considers
a number of additional criteria including the following:
Growth: The annual growth rate over the next two to three years is
estimated by the Fund's advisers to be at least 1 1/2 times that
of the market as a whole.
Valuation: Total market capitalization should not be more than twice the
projected revenues and the anticipated growth rate should be at
least twice the price earnings ratio.
Generally, the Fund will sell a stock if its current price-earnings multiple
exceeds its growth rate by more than one-half. The Fund considers selling a
stock if it experiences a price erosion of 15%. The Fund will sell a stock
whenever the reasons for which it was purchased are no longer valid or if its
fundamentals begin to deteriorate. The Fund will not invest for management or
control.
No assurance can be given that the Fund's objective will be realized. The
Fund's shares may increase or decrease in value depending upon many factors that
might produce fluctuations in value of securities held by the Fund. Factors
generally affecting security values include changes in earnings, dividends,
growth outlook, operating gains or losses, general market conditions or economic
and political conditions.
<PAGE>
NATURE OF INVESTMENT OBJECTIVE
Except as otherwise specified in the prospectus or statement of additional
information, the investment objective, policies and methods of the Fund are not
fundamental and may be changed without the vote of a majority of the Fund's
outstanding shares when, in the judgment of the Fund's Board of Trustees, such
changes are advisable. If the Fund's investment objective is changed and a
shareholder determines that the Fund is no longer an appropriate investment, the
shareholder may redeem his shares but may be subject to a contingent deferred
sales charge upon redemption. Fundamental policies may not be changed without
the vote of a majority of the Fund's outstanding shares (which means the lesser
of (1) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (2) more than 50% of the outstanding
shares).
INVESTMENT RESTRICTIONS
The Fund has adopted the fundamental investment restrictions set forth
below, which may not be changed without the vote of a majority, as defined in
the Investment Company Act of 1940 (the "1940 Act"), of the Fund's outstanding
shares. Unless otherwise stated, all references to the Fund's assets are in
terms of current market value.
The Fund may not do the following:
(1) act as underwriter of securities issued by other persons, except insofar
as the Fund may technically be deemed to be an underwriter by virtue of the
disposition of a particular block of securities;
(2) make loans, except that the purchase of bonds, debentures or other debt
securities issued by publicly held companies, either from the issuer thereof or
from others, shall not be deemed to be the making of loans;
(3) invest in real estate, commodities or commodity contracts, but this
limitation does not preclude the purchase of marketable securities of any real
estate investment trust or other issuer engaged in the business of purchasing or
selling real estate;
(4) borrow money, except that the Fund may (a) borrow from a bank as a
temporary measure for extraordinary or emergency purposes not in excess of 10%
of its total assets taken at cost or, in any event, in excess of 33% of its
total assets valued at market or, in the absence of market quotations, at their
fair value;
<PAGE>
(5) concentrate its investments by making any purchase which would result in
the investment of more than 25% of the total value of its assets in the
securities of issuers in any particular industry or group of industries; or
(6) invest more than 10% of the value of the Fund's net assets in securities
of companies with an operating history of less than three years.
In addition to the above policies, the Fund has also adopted the following
non-fundamental restrictions which may be changed without shareholder approval.
The Fund will not do the following:
(1) purchase securities on margin, except it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities;
(2) make short sales of securities, unless at the time of such sale it owns
an equal amount of such securities, or, by virtue of ownership of convertible or
exchangeable securities, it has the right to obtain through the conversion or
exchange of such other securities an amount equal to the securities sold short;
(3) purchase more than 10% of the outstanding voting securities of any
other issuer;
(4) invest in puts and calls, or in securities of an investment trust (other
than real estate investment trusts) or another investment company;
(5) purchase or retain the securities of any issuer if those officers and
directors of the Fund or its investment advisers, who own individually more than
.5% of such issuer, together own more than 5% of the securities of such issuer;
(6) invest in oil, gas and other mineral leases;
(7) invest more than 5% of the value of the Fund's net assets in warrants
(valued at the lower of cost or market). Included within such amount, but not to
exceed 2% of the value of the Fund's net assets, may be warrants not listed on
the New York or American Stock Exchanges. Warrants acquired by the Fund in units
or attached to securities may be deemed to be without value for purposes of this
limitation; and
(8) purchase or sell real estate (including limited partnership interests,
but excluding readily marketable interests in real estate investment trusts or
readily marketable securities of companies which invest in real estate).
DISTRIBUTIONS AND TAXES
The Fund ordinarily distributes its net capital gains in shares of the Fund
or, at the option of the shareholder, in cash. All shareholders may reinvest
dividends without being subject to a contingent deferred sales charge when
shares so purchased are redeemed. Shareholders who have opted prior to the
record date to receive shares with regard to capital gains and/or income
distributions will have the number of such shares determined on the basis of the
share value computed at the end of the day on the record date after adjustment
for the distribution. Net asset value is used in computing the appropriate
number of shares in a capital gains distribution and in an income distribution
reinvestment. Account statements and/or checks as appropriate will be mailed to
shareholders within seven days after the Fund pays the distribution. Unless the
Fund receives instructions to the contrary from a shareholder before the record
date, it will assume that the shareholder wishes to receive that distribution
and future gains and income distributions in shares. Instructions continue in
effect until changed in writing.
The Fund's income distributions may be eligible, in whole or in part, for
the corporate 70% dividends received deduction. Distributed long-term capital
gains are taxable as such to the shareholder whether received in cash or in
additional Fund shares and regardless of the period of time Fund shares have
been held by the shareholder. Distributions designated by the Fund as capital
gains dividends are not eligible for the corporate dividends received deduction.
If the net asset value of shares was reduced below a shareholder's cost by
distribution of gains realized on sales of securities, such distribution, to the
extent of the reduction, would be a return of investment though taxable as
stated above. Since distributions of capital gains depend upon securities
profits actually realized, they may or may not occur. The foregoing comments
relating to the taxation of dividends and distributions paid on the Fund's
shares relate solely to federal income taxation. Such dividends and
distributions may also be subject to state and local taxes.
When the Fund makes a distribution, it intends to distribute only its net
capital gains and such income as has been predetermined, to the best of the
Fund's ability, to be taxable as ordinary income. Fund shareholders will be
advised annually of the tax status of distributions.
VALUATION OF SECURITIES
Current values for the Fund's portfolio securities are determined as
follows:
(1) securities for which market quotations are readily available, are
valued at the mean of the bid and asked prices at the time of valuation;
(2) short-term investments which are purchased with maturities of sixty days
or less are valued at amortized cost (original purchase cost as adjusted for
amortization of premium or accretion of discount), which, when combined with
accrued interest, approximates market and which reflects fair value as
determined by the Fund's Board of Trustees;
(3) short-term investments maturing in more than sixty days when purchased
which are held on the sixtieth day prior to maturity are valued at amortized
cost (market value on the sixtieth day adjusted for amortization of premium or
accretion of discount), which, when combined with accrued interest approximates
market;
(4) short-term investments having maturities of more than sixty days, for
which market quotations are readily available, are valued at current market
value; and
(5) the following are valued at prices deemed in good faith to be fair under
procedures established by the Fund's Board of Trustees: (a) securities,
including restricted securities, for which complete quotations are not readily
available, and (b) other assets.
The Fund believes that reliable market quotations are generally not readily
available for purposes of valuing fixed income securities. As a result,
depending on the particular securities owned by the Fund, it is likely that most
of the valuations for such securities will be based upon their fair value
determined under procedures which have been approved by the Fund's Board of
Trustees. The Fund's Board of Trustees has authorized the use of a pricing
service to determine the fair value of its fixed income securities and certain
other securities. Securities for which market quotations are readily available
are valued on a consistent basis at that price quoted which, in the opinion of
the Board of Trustees or the person designated by the Board of Trustees to make
the determination, most nearly represents the market value of the particular
security. Any securities for which market quotations are not readily available
or other assets are valued on a consistent basis at fair value as determined in
good faith using methods prescribed by the Fund's Board of Trustees.
SALES CHARGES
GENERAL
The Fund offers three classes of shares. Class A shares are offered with a
sales charge of 5.75% payable at the time of purchase of Fund shares ("Front End
Load Option"). Class B shares are sold subject to a contingent deferred sales
charge payable upon redemption during the calendar year of purchase or within
three calendar years after purchase. ("Back End Load Option"). Class B shares
which have been outstanding during seven calendar years will automatically
convert to Class A shares, without imposition of a front end sales charge.
(Conversion of Class B shares represented by stock certificates will require the
return of the stock certificates to Keystone Investor Resource Center, Inc.
("KIRC")). Class C shares are sold subject to a contingent deferred sales charge
payable upon redemption within one year after purchase ("Level Load Option").
Class C shares are available only through dealers who have entered into special
distribution agreements with KDI, the Fund's Principal Underwriter. The
Prospectus contains a general description of how investors may buy shares of the
Fund, as well as a table of applicable sales charges for Class A shares, a
discussion of reduced sales charges which may apply to subsequent purchases and
a description of applicable contingent deferred sales charges.
CONTINGENT DEFERRED SALES CHARGES
In order to reimburse the Fund for certain expenses relating to the sale of
its shares (See "Distribution Plan"), a contingent deferred sales charge may be
imposed at the time of redemption of certain Fund shares, as follows:
CLASS A SHARES
With certain exceptions, purchases of Class A shares in the amount of
$1,000,000 on which no sales charge has been paid will be subject to a
contingent deferred sales charge of 0.25% upon redemption during the one year
period commencing on the date the shares were originally purchased. The
contingent deferred sales charge will be retained by KDI. See "Calculation of
Contingent Deferred Sales Charge" below.
CLASS B SHARES
With certain exceptions, the Fund may impose a deferred sales charge of
3.00% on shares redeemed during the calendar year of purchase and during the
first calendar year after purchase; 2.00% on shares redeemed during the second
calendar year after purchase; and 1.00% on shares redeemed during the third
calendar year after purchase. No deferred sales charge is imposed on amounts
redeemed thereafter. If imposed, the deferred sales charge is deducted from the
redemption proceeds otherwise payable to you. The deferred sales charge is
retained by KDI. See "Calculation of Contingent Deferred Sales Charge" below.
CLASS C SHARES
With certain exceptions, the Fund may impose a deferred sales charge of 1%
on shares redeemed within one year after the date of purchase. No deferred sales
charge is imposed on amounts redeemed thereafter. If imposed, the deferred sales
charge is deducted from the redemption proceeds otherwise payable to you. The
deferred sales charge is retained by KDI. See "Calculation of Contingent
Deferred Sales Charge" below.
<PAGE>
CALCULATION OF CONTINGENT DEFERRED SALES CHARGE
Any contingent deferred sales charge imposed upon the redemption of Class A,
Class B or Class C shares is a percentage of the lesser of (1) the net asset
value of the shares redeemed or (2) the net cost of such shares. No contingent
deferred sales charge is imposed when you redeem amounts derived from (1)
increases in the value of your account above the net cost of such shares due to
increases in the net asset value per share of such shares; (2) certain shares
with respect to which the Fund did not pay a commission on issuance, including
shares acquired through reinvestment of dividend income and capital gains
distributions; (3) Class C shares and certain Class A shares held during more
than one year; or (4) Class B shares held during more than four consecutive
calendar years. Upon request for redemption, shares not subject to the
contingent deferred sales charge will be redeemed first. Thereafter, shares held
the longest will be the first to be redeemed. There is no contingent deferred
sales charge when the shares of a class are exchanged for the shares of the same
class of another Keystone America Fund. Moreover, when shares of one such class
of a fund have been exchanged for shares of another such class of a fund, the
calendar year of the purchase of the shares of the fund exchanged into is
assumed to be the year shares tendered for exchange were originally purchased.
WAIVER OF SALES CHARGES
Shares of the Fund also may be sold, to the extent permitted by applicable
law, regulations, interpretations or exemptions, at net asset value without the
payment of a commission or the imposition of an initial sales charge to
officers, Trustees, Trustees, full-time employees and sales representatives of
the Fund, Hartwell Keystone, Hartwell Management, Keystone, Keystone Group, Inc.
("Keystone Group"), any of their subsidiaries or KDI, who have been such for not
less than ninety days or a pension and profit-sharing plan established by such
companies, their subsidiaries and affiliates, for the benefit of their officers,
Trustees, Trustees, full-time employees and sales representatives, or a
registered representative of a firm with a dealer agreement with KDI, provided
all such sales are made upon the written assurance that the purchase is made for
investment purposes and that the securities will not be resold except through
redemption by the Fund.
No initial sales charge is charged on purchases of shares of the Fund by a
bank or trust company in a single account in the name of such bank or trust
company as trustee, if the initial investment in shares of the Fund or any other
Keystone Group Fund pursuant to this waiver is at least $500,000 and any
commission paid at the time of such purchase is not more than 1% of the amount
invested.
In addition, no contingent deferred sales charge is imposed on a redemption
of shares of the Fund in the event of (1) death or disability of the
shareholder; (2) a lump-sum distribution from a benefit plan qualified under the
Employee Retirement Income Security Act of 1974 ("ERISA"); (3) automatic
withdrawals from ERISA plans if the shareholder is at least 59 1/2 years old;
(4) involuntary redemptions of an account having an aggregate net asset value of
less than $1,000; or (5) automatic withdrawals under an Automatic Withdrawal
Plan of up to 1 1/2% per month of the shareholder's initial account balance.
REDEMPTION OF SHARES
The Fund has obligated itself under the 1940 Act to redeem for cash all
shares presented for redemption by any one shareholder in any 90-day period up
to the lesser of $250,000 or 1% of the Fund's assets.
DISTRIBUTION PLANS
Rule 12b-1 under the 1940 Act permits investment companies such as the Fund
to use their assets to bear expenses of distributing their shares if they comply
with various conditions, including adoption of a distribution plan containing
certain provisions set forth in Rule 12b-1. The Fund bears some of the costs of
selling its shares under a Distribution Plan (the "Distribution Plan") adopted
on June 26, 1990 pursuant to Rule 12b-1.
DISTRIBUTION PLANS IN GENERAL
A rule adopted by the National Association of Securities Dealers, Inc.
("NASD") limits the amount that a Fund may pay annually in distribution costs
for sale of its shares and shareholder service fees. The NASD rule limits annual
expenditures to 1% of the aggregate average daily net asset value of its shares,
of which 0.75% may be used to pay such distribution costs and 0.25% may be used
to pay shareholder service fees. The NASD rule also limits the aggregate amount
which the Fund may pay for such distribution costs to 6.25% of gross share sales
since the inception of the 12b-1 Plan, plus interest at the prime rate plus 1%
on such amounts (less any contingent deferred sales charges paid by shareholders
to KDI).
CLASS A DISTRIBUTION PLAN. The Class A Distribution Plan provides that the Fund
may expend daily amounts at an annual rate which is currently limited to up to
0.25% of the Fund's average daily net asset value attributable to Class A shares
to finance any activity which is primarily intended to result in the sale of its
shares, including without limitation, expenditures consisting of payments to a
principal underwriter of the Fund ("Principal Underwriter") (currently KDI) to
enable the Principal Underwriter to pay or to have paid to others (dealers) who
sell Class A shares a service or other fee, at such intervals as the Principal
Underwriter may determine, in respect of Class A shares maintained by any such
recipients outstanding on the books of the Fund for specified periods.
Amounts paid by the Fund under the Class A Distribution Plan are currently
used to pay others, such as dealers, service fees at an annual rate of up to
0.25% of the average net asset value of Class A shares sold by such others and
remaining outstanding on the books of the Fund for specific periods.
CLASS B DISTRIBUTION PLAN. The Class B Distribution Plan provides that the Fund
may expend daily amounts at an annual rate of up to 1.00% of the Fund's average
daily net asset value attributable to Class B shares to finance any activity
which is primarily intended to result in the sale of its shares, including,
without limitation, expenditures consisting of payments to the Principal
Underwriter to pay to others (dealers) commissions in respect of Class B shares
since inception of the Distribution Plan; and to enable the Principal
Underwriter to pay or to have paid to others (dealers) a service fee, at such
intervals as the Principal Underwriter may determine, in respect of Class B
shares maintained by any such recipients outstanding on the books of the Fund
for specified periods.
Amounts paid by the Fund under the Class B Distribution Plan are currently
used to pay others (dealers) (1) a commission normally equal to 3.00% for each
share sold; and/or (2) service fees at an annual rate of 0.25% of the average
net asset value of shares sold by such others and remaining outstanding on the
books of the Fund for specified periods.
KDI intends, but is not obligated, to continue to pay or accrue distribution
charges incurred in connection with the Class B Distribution Plan that exceed
current annual payments permitted to be received by KDI from the Fund. KDI
intends to seek full payment of such charges from the Fund (together with annual
interest thereon at the prime rate plus one percent) at such time in the future
as, and to the extent that, payment thereof by the Fund would be within the
permitted limits.
CLASS C DISTRIBUTION PLAN. The Class C Distribution Plan provides that the Fund
may expend daily amounts at an annual rate of up to 1.00% of the Fund's average
daily net asset value attributable to Class C shares to finance any activity
which is primarily intended to result in the sale of its shares, including,
without limitation, expenditures consisting of payments to the Principal
Underwriter to pay to others (dealers) commissions in respect of Class C shares
since inception of the Distribution Plan; and to enable the Principal
Underwriter to pay or to have paid to others (dealers) a service fee, at such
intervals as the Principal Underwriter may determine, in respect of Class C
shares maintained by any such recipients outstanding on the books of the Fund
for specified periods.
Amounts paid by the Fund under the Class C Distribution Plan are currently
used to pay others (dealers) (1) a payment at the time of purchase of 1.00% of
the value of each share sold, such payment to consist of a commission in the
amount of 0.75% plus the first year's service fee in advance in the amount of
0.25%, and (2) beginning approximately fifteen months after purchase, a
commission at an annual rate of 0.75% (subject to the NASD rule - see
"Distribution Plans") plus service fees at an annual rate of 0.25%,
respectively, of the average daily net asset value of each share sold by such
others and remaining outstanding on the books of the Fund for specified periods.
Whether any expenditure under a Distribution Plan is subject to a state
expense limit will depend upon the nature of the expenditure and the terms of
the state law, regulation or order imposing the limit. The Fund does not treat
Distribution Plan expenses as includable in the Fund's total operating expenses
for purposes of determining compliance with state expense limits.
Each of the Distribution Plans may be terminated at any time by a vote of a
majority of the Fund's Rule 12b-1 Trustees ("Rule 12b-1 Trustees") (who are the
same as the Independent Trustees) or by vote of a majority of the outstanding
shares of the respective classes of Fund shares. However, after the termination
of the Class B Distribution Plan, KDI would be entitled to receive payment, at
the annual rate of 1.00% of the average daily net asset value of Class B shares,
as compensation for its services which had been earned at any time during which
the Class B Distribution Plan was in effect. Any change in a Distribution Plan
that would materially increase the distribution expenses of the Fund provided
for in a Distribution Plan requires shareholder approval. Otherwise, a
Distribution Plan may be amended by the Fund's Trustees, including the Rule
12b-1 Trustees. Unpaid distribution costs at September 30, 1994 for Class B and
Class C shares were $30,608 (6.1% of net class assets) and $17,415 (7.8% of net
class assets), respectively.
While a Distribution Plan is in effect, the Fund will be required to commit
the selection and nomination of candidates for Independent Trustees to the
discretion of the Independent Trustees.
The total amounts paid by the Fund under the foregoing arrangements may not
exceed the maximum Distribution Plan limit specified above, and the amounts and
purposes of expenditures under a Distribution Plan must be reported to the Rule
12b-1 Trustees quarterly. The Rule 12b-1 Trustees may require or approve changes
in the implementation or operation of a Distribution Plan, and may also require
that total expenditures by the Fund under a Distribution Plan be kept within
limits lower than the maximum amount permitted by a Distribution Plan as stated
above.
For the fiscal year ended September 30, 1994, the Fund paid KDI $18,693,
$2,821 and $1,478 under the Class A, Class B and Class C Distribution Plans,
respectively.
The Independent Trustees of the Fund have determined that the sales of the
Fund's shares resulting from payments under the Distribution Plans have
benefited the Fund.
<PAGE>
INVESTMENT ADVISER
Subject to the general supervision of the Fund's Board of Trustees,
Keystone, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034,
serves as investment adviser to the Fund and is responsible for the overall
management of the Fund's business and affairs. Keystone organized in 1932, is a
wholly-owned subsidiary of Keystone Group, located at 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
Keystone Group is a corporation privately owned by current and former
members of management of Keystone and its affiliates. The shares of Keystone
Group common stock beneficially owned by management are held in a number of
voting trusts, the Trustees of which are George S. Bissell, Albert H. Elfner,
III, Roger T. Wickers, Edward F. Godfrey and Ralph J. Spuehler, Jr. Keystone
Group provides accounting, bookkeeping, legal, personnel and general corporate
services to Keystone, their affiliates and the Keystone Group of Mutual Funds.
Except as otherwise noted below, pursuant to an Investment Advisory and
Management Agreement with the Fund (the "Advisory Agreement") and subject to the
supervision of the Fund's Board of Trustees, Keystone manages and administers
the operation of the Fund and manages the investment and reinvestment of the
Fund's assets in conformity with the Fund's investment objectives and
restrictions. The Advisory Agreement stipulates that Keystone shall provide
office space, all necessary office facilities, equipment and personnel in
connection with its services and pay or reimburse the Fund for the compensation
of Fund officers and Trustees who are affiliated with the investment adviser as
well as pay all of its expenses incurred in connection with the provision of its
services. All charges and expenses other than those specifically referred to as
being borne by Keystone will be paid by the Fund, including, but not limited to,
custodian charges and expenses; bookkeeping and auditors' charges and expenses;
transfer agent charges and expenses; fees of Independent Trustees; brokerage
commissions, brokers' fees and expenses; issue and transfer taxes; costs and
expenses under the Distribution Plan; taxes and trust fees payable to
governmental agencies; the cost of share certificates; fees and expenses of the
registration and qualification of the Fund and its shares with the Securities
and Exchange Commission (sometimes referred to herein as the "SEC" or the
"Commission") or under state or other securities laws; expenses of preparing,
printing and mailing prospectuses, statements of additional information,
notices, reports and proxy materials to shareholders of the Fund; expenses of
shareholders' and Trustees' meetings; charges and expenses of legal counsel for
the Fund and for the Trustees of the Fund on matters relating to the Fund;
charges and expenses of filing annual and other reports with the SEC and other
authorities; and all extraordinary charges and expenses of the Fund.
The Advisory Agreement permits Keystone to enter into an agreement with
Hartwell, or another investment adviser, pursuant to which Hartwell or such
other investment adviser, (as investment adviser and subject to the supervision
of the Fund's Board of Trustees and Keystone) will furnish an investment program
for the Fund and will furnish to the Fund and Keystone from time to time, as
needed, investment research, advice, information and recommendations concerning
securities to be acquired, held or sold by the Fund. Keystone has entered into a
Subinvestment Advisory Agreement with Hartwell.
For the services provided by Keystone, the Fund pays a basic monthly
management fee of 1/12 of 1% of that portion of the Fund's average daily net
asset value during the latest 12 months (a moving average method), up to and
including $100,000,000 (an annual rate of 1%), 1/12 of 0.90% of that portion
over $100,000,000 up to and including $200,000,000 (an annual rate of 0.90%),
1/12 of 0.80% of that portion over $200,000,000 up to and including $300,000,000
(an annual rate of 0.80%), 1/12 of 0.70% of that portion over $300,000,000 up to
and including $400,000,000 (an annual rate of 0.70%) and 1/12 of 0.65% of that
portion over $400,000,000 (an annual rate of 0.65%). For the fiscal year ended
September 30, 1994, the Fund had average daily net assets of $23,394,239. The
basic management fee is accrued daily and paid monthly.
The basic management fee payable by the Fund to Keystone is subject to an
incentive adjustment, calculated monthly, depending upon the performance of the
Fund relative to the Standard & Poor's 500 Index (the "Index"), on the basis of
1/12 of the results during the latest 12 months (a moving average method). The
incentive adjustment, if any, is added to or subtracted from the monthly basic
management fee, and is payable after the close of each month on the basis of the
latest 12 months' results. The incentive adjustment is accrued as incurred for
the purpose of calculating the redemption price and offering price per share.
The incentive adjustment for the Fund is calculated each month as follows:
(1) The sum of the net asset value of a share of the Fund at the end of the
last 12-month period, plus the value per share during such period of all cash
distributions made and capital gain taxes paid or payable on undistributed
realized long-term capital gains (treated as reinvested in shares of the Fund on
the record date of such distribution or the date on which provision for such
taxes is made, as the case may be) is compared to the net asset value per share
of the Fund at the beginning of the period and the difference is expressed as a
percentage (the "Fund's percentage change").
(2) The Fund's percentage change is compared to the percentage change in the
Index, which change is determined by adding to the level of the Index at the end
of the period, in accordance with SEC guidelines, the value of cash
distributions on securities which comprise the Index, treated as reinvested in
the Index based on a monthly value supplied by Standard & Poor's and comparing
such adjusted level with the level of the Index at the beginning of the period.
(3) If the Fund's percentage change during such period shows a relative
performance more than 5 percentage points better or worse than that of the
Index, the excess over 5 percentage points is the "excess performance
differential," and the incentive adjustment is an amount equal to 5% of this
"excess performance differential" multiplied by the net asset value of the Fund
averaged daily over the 12-month period and divided by 12. The incentive
adjustment for any month, however, may not exceed 1/12 of 1/2 of 1% of the
average net asset value for any 12-month period (equivalent on an annual basis
to an adjustment of 1/2 of 1%). A percentage change in a share of the Fund which
is no greater than 5 percentage points better or worse than the percentage
change in the Index results in no incentive adjustment.
During the fiscal year ended September 30, 1992, the Fund paid or accrued to
Hartwell Keystone Advisers, Inc. ("Hartwell Keystone"), which served as the
Fund's investment-adviser prior to January 30, 1995, $282,787, which represented
1.22% of the Fund's average daily net assets.
During the fiscal year ended September 30, 1993, the Fund paid or accrued to
Hartwell Keystone $239,841, which represented 0.90% of the Fund's average daily
net assets.
During the fiscal year ended September 30, 1994, the Fund paid or accrued to
Hartwell Keystone $233,942, which represented 0.89% of the Fund's average daily
net assets.
As a continuing condition of registration of shares in a state, Keystone has
agreed to reimburse the Fund annually for certain operating expenses incurred by
the Fund in excess of certain percentages of the Fund's average daily net
assets. Keystone is not required, however, to make such reimbursements to an
extent which would result in the Fund's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code. This condition
may be modified or eliminated in the future.
The Advisory Agreement continues in effect from year to year only if
approved at least annually by the Fund's Board of Trustees or by a vote of a
majority of the Fund's outstanding shares, and such renewal has been approved by
the vote of a majority of the Independent Trustees cast in person at a meeting
called for the purpose of voting on such approval. The Advisory Agreement may be
terminated, without penalty, on 60 days' written notice by the Fund's Board of
Trustees or by a vote of a majority of the Fund's outstanding shares. The
Advisory Agreement will terminate automatically upon its "assignment" as that
term is defined in the 1940 Act.
SUB-ADVISER
Pursuant to the terms of the Advisory Agreement, Keystone has delegated
certain of its investment advisory functions, except for certain administrative
and management services, to Hartwell and has entered into a SubInvestment
Advisory Agreement (the "Subadvisory Agreement") with Hartwell under which
Hartwell furnishes to the Fund and Keystone from time to time, as needed,
investment research, advice, information and recommendations concerning
securities to be acquired, held or sold by the Fund.
Hartwell, located at 515 Madison Avenue, New York, New York 10022, was
organized in 1994 and is a majority-owned subsidiary of JMH Management
Corporation.
For its services for each calendar month, Hartwell receives promptly from
Keystone after calculation of the monthly fee due Keystone under the Advisory
Agreement, 40% of Keystone's basic monthly management fee as described above on
all assets and 60% of Keystone's incentive adjustment as described above on all
assets, provided that Hartwell's total fee will always equal at least 25% of the
combined total fee paid by the Fund. The Fund has no responsibility to pay
Hartwell's fee.
The Subadvisory Agreement automatically renews for successive one-year
periods unless either party to the agreement has given the other party at least
sixty days' written notice of its intention to terminate the agreement at the
end of the contract period then in effect; provided, however, that the
continuation of the Subadvisory Agreement for more than two years shall be
subject to the receipt of annual approvals of the Fund's Board of Trustees or
shareholders in accordance with the 1940 Act and the rules thereunder. The
Subadvisory Agreement may be terminated at any time, without penalty, by the
Fund's Board of Trustees or a majority of the Fund's outstanding shares, on 60
days' written notice to Hartwell. The Subadvisory Agreement will automatically
terminate upon its "assignment" (as defined in the 1940 Act) by either party.
For the fiscal years ended September 30, 1992, 1993 and 1994, Hartwell
Management Company, Inc., Hartwell's predecessor which served as the Fund's
subadviser prior to January 30, 1995, received $246,750, $172,732 and $166,670
from Hartwell Keystone for its services under its SubInvestment Advisory
Agreement.
The Fund is subject to certain annual state expense limitations, the most
restrictive of which is as follows:
2.5% of the first $30 million of Fund average net assets; 2.0% of the next
$70 million of Fund average net assets; and 1.5% of Fund average net assets
over $100 million.
Capital charges and certain expenses, including a portion of the Fund's
Distribution Plan fees, are not included in the calculation of the state expense
limitation. This limitation may be modified or eliminated in the future.
<PAGE>
TRUSTEES AND OFFICERS
Trustees and officers of the Fund, their principal occupations and some of
their affiliations over the last five years are as follows:
*ALBERT H. ELFNER, III: President, Trustee and Chief Executive Officer of the
Fund; Chairman of the Board, President, Director and Chief Executive
Officer of Keystone Group, Inc. ("Keystone Group"), President and Trustee
or Director of Keystone America Capital Preservation and Income Fund,
Keystone America Intermediate Term Bond Fund, Keystone America Strategic
Income Fund, Keystone America World Bond Fund, Keystone Tax Free Income
Fund, Keystone America State Tax Free Fund, Keystone America State Tax Free
Fund - Series II, Keystone America Fund for Total Return, Keystone America
Global Opportunities Fund, Keystone America Hartwell Emerging Growth Fund,
Inc., Keystone America Omega Fund, Inc., Keystone Fund of the Americas
Luxembourg and Keystone Fund of the Americas - U.S., Keystone Strategic
Development Fund (collectively, "Keystone America Funds"); Keystone
Custodian Funds, Series B-1, B-2, B-4, K-1, K-2, S-1, S-3, and S-4;
Keystone International Fund, Keystone Precious Metals Holdings, Inc.,
Keystone Tax Free Fund, Keystone Tax Exempt Trust, Keystone Liquid Trust
(collectively, "Keystone Custodian Funds"); Keystone Institutional
Adjustable Rate Fund and Master Reserves Trust (all such funds,
collectively, "Keystone Group Funds"); Director and Vice Chairman of
Keystone Custodian Funds, Inc. ("Keystone"); Chairman of the Board and
Director of Keystone Investment Management Corporation ("KIMCO") and
Keystone Fixed Income Advisors ("KFIA"); President and Director of Keystone
Management, Inc. ("Keystone Management"), Hartwell Keystone Advisers, Inc.
("Hartwell Keystone") and Keystone Software Inc. ("Keystone Software");
Director of Keystone Distributors, Inc. ("KDI"), Keystone Investor Resource
Center, Inc. ("KIRC"), Fiduciary Investment Company, Inc. ("FICO") and
Robert Van Partners, Inc.; Director of Boston Children's Services
Association and Trustee of Anatolia College, Middlesex School and
Middlebury College ; Member, Board of Governors, New England Medical
Center; former Trustee of Neworld Bank and former President of Keystone.
FREDERICK AMLING: Trustee of the Fund; Trustee or Director of all other Keystone
Group Funds; Professor, Finance Department, George Washington University;
President, Amling & Company (investment advice); Member, Board of Advisers,
Credito Emilano (banking); and former Economics and Financial Consultant,
Riggs National Bank.
CHARLES A. AUSTIN III: Director of the Fund; Trustee or Director of all other
Keystone Group Funds; Investment Counselor to Appleton Partners, Inc.;
former Managing Director, Seaward Management Corporation (investment
advice) and former Director, Executive Vice President and Treasurer, State
Street Research & Management Company (investment advice).
*GEORGE S. BISSELL: Chairman of the Board and Trustee of the Fund; Director of
Keystone Group, Keystone, Keystone Management, Keystone Software Inc., KFIA
and KIRC; Chairman of the Board and Trustee or Director of all other
Keystone Group Funds,; Director of KIMCO; Chairman of the Board and Trustee
of Anatolia College; Trustee of University Hospital (and Chairman of its
Investment Committee); former Chief Executive Officer and Chairman of the
Board of Keystone Group; and former Chief Executive Officer of the Fund.
EDWIN D. CAMPBELL: Trustee of the Fund; Trustee or Trustee of all other Keystone
Group Funds; Executive Director, Coalition of Essential Schools, Brown
University; Director and former Executive Vice President, National Alliance
of Business; former Vice President, Educational Testing Services; and
former Dean, School of Business, Adelphi University.
CHARLES F. CHAPIN: Trustee of the Fund; Trustee or Director of all other
Keystone Group Funds; former Group Vice President, Textron Corp.; and
former Director, Peoples Bank (Charlotte, N.C).
LEROY KEITH, JR.: Trustee of the Fund; Trustee or Director of all other Keystone
Group Funds; Director of Phoenix Total Return Fund and Equifax, Inc.;
Trustee of Phoenix Series Fund, Phoenix Multi-Portfolio Fund and The Phoenix
Big Edge Series Fund; and former President, Morehouse College.
K. DUN GIFFORD: Trustee of the Fund; Trustee or Director of all other Keystone
Group Funds; Chairman of the Board, Director and Executive Vice President,
The London Harness Company; Managing Partner, Roscommon Capital Corp.;
Trustee, Cambridge College; Chairman Emeritus and Director, American
Institute of Food and Wine; Chief Executive Officer, Gifford Gifts of Fine
Foods; Chairman, Gifford, Drescher & Associates (environmental consulting);
President, Oldways Preservation and Exchange Trust (education); and former
Director, Keystone Group and Keystone.
F. RAY KEYSER, JR.: Trustee of the Fund; Trustee or Director of all other
Keystone Group Funds; Of Counsel, Keyser, Crowley & Meub, P.C.; Member,
Governor's (VT) Council of Economic Advisers; Chairman of the Board and
Director, Central Vermont Public Service Corporation and Hitchcock Clinic;
Director, Vermont Yankee Nuclear Power Corporation, Vermont Electric Power
Company, Inc., Grand Trunk Corporation, Central Vermont Railway, Inc.,
S.K.I. Ltd., Sherburne Corporation, Union Mutual Fire Insurance Company, New
England Guaranty Insurance Company, Inc. and the Investment Company
Institute; former Governor of Vermont; former Director and President,
Associated Industries of Vermont; former Chairman and President, Vermont
Marble Company; former Director of Keystone; and former Director and
Chairman of the Board, Green Mountain Bank.
DAVID M. RICHARDSON: Trustee of the Fund; Trustee or Director of all other
Keystone Group Funds; Executive Vice President, DHR International, Inc.
(executive recruitment); former Senior Vice President, Boyden International
Inc. (executive recruitment); and Director, Commerce and Industry
Association of New Jersey, 411 International, Inc. and J & M Cumming Paper
Co.
RICHARD J. SHIMA: Trustee of the Fund; Trustee or Director of all other Keystone
Group Funds; Chairman, Environmental Warranty, Inc., and Consultant, Drake
Beam Morin, Inc. (executive outplacement); Director of Connecticut Natural
Gas Corporation, Trust Company of Connecticut, Hartford Hospital, Old State
House Association and Enhanced Financial Services, Inc.; Member, Georgetown
College Board of Advisors; Chairman, Board of Trustees, Hartford Graduate
Center; Trustee, Kingswood-Oxford School and Greater Hartford YMCA; former
Director, Executive Vice President and Vice Chairman of The Travelers
Corporation; and former Managing Director of Russell Miller, Inc.
ANDREW J. SIMONS: Trustee of the Fund; Trustee or Director of all other Keystone
Group Funds; Partner, Farrell, Fritz, Caemmerer, Cleary, Barnosky &
Armentano, P.C.; President, Nassau County Bar Association; former Associate
Dean and Professor of Law, St. John's University School of Law.
EDWARD F. GODFREY: Senior Vice President of the Fund; Senior Vice President of
all other Keystone Group Funds; Director, Senior Vice President, Chief
Financial Officer and Treasurer of Keystone Group, KDI, Keystone Asset
Corporation, Keystone Capital Corporation, Keystone Trust Company;
Treasurer of KIMCO, Robert Van Partners, Inc., and FICO; Treasurer and
Director of Keystone Management, Keystone Software, Inc., and Hartwell
Keystone; Vice President and Treasurer of KFIA; and Director of KIRC.
JAMES R. McCALL: Senior Vice President of the Fund; Senior Vice President of all
other Keystone Group Funds; and President of Keystone.
KEVIN J. MORRISSEY: Treasurer of the Fund; Treasurer of all other Keystone Group
Funds; Vice President of Keystone Group; Assistant Treasurer of FICO and
Keystone; and former Vice President and Treasurer of KIRC.
ROSEMARY D. VAN ANTWERP: Senior Vice President and Secretary of the Fund; Senior
Vice President and Secretary of all other Keystone Group Funds; Senior Vice
President, General Counsel and Secretary of Keystone; Senior Vice
President, General Counsel, Secretary and Director of KDI, Keystone
Management and Keystone Software, Senior Vice President and General Counsel
of KIMCO; Senior Vice President, General Counsel and Director of FICO and
KIRC; Senior Vice President and Secretary of Hartwell Keystone and Robert
Van Partners, Inc. Vice President and Secretary of KFIA; Senior Vice
President, General Counsel and Secretary of Keystone Group, Keystone Asset
Corporation, Keystone Capital Corporation and Keystone Trust Company.
**JOHN M. HARTWELL: Vice President of the Fund; Vice President and former
President of Keystone America Hartwell Emerging Growth Fund, Inc.; former
Chairman and President of the Fund; former President, Treasurer and
Director of Hartwell Management, JMH Management Corporation and J.M.
Hartwell & Co., Inc., an investment counseling firm; and former Director of
Hartwell Distributors, Inc.
**WILLIAM C. MILLER: Vice President of the Fund; Vice President of Keystone
America Hartwell Emerging Growth Fund, Inc.; former President of the Fund;
President of Hartwell Management and Director of Hartwell Distributors,
Inc.
* This Trustee may be considered an "interested person" within the meaning of
the 1940 Act.
** The address of these officers is 515 Madison Avenue, New York, New York
10022.
Mr. Elfner and Mr. Bissell are "interested persons" by virtue of their
positions as officers and/or Trustees of Keystone Group and several of its
affiliates including Keystone, Hartwell Keystone, KDI and KIRC. Mr. Elfner and
Mr. Bissell own shares of Keystone Group. Mr. Elfner is Chairman of the Board,
President and Chief Executive Officer of Keystone Group. Mr. Bissell is a
Trustee of Keystone Group.
During the fiscal year ended September 30, 1994, no Trustee affiliated with
Hartwell Keystone or any officer received any direct remuneration from the Fund.
As of December 31, 1994, the Fund's Trustees and officers beneficially owned
none of the Fund's then outstanding Class A shares, Class B or Class C shares.
Except where indicated, the address of all of the Fund's Trustees and
officers and the address of the Fund is 200 Berkeley Street, Boston,
Massachusetts 02116-5034.
PRINCIPAL UNDERWRITER
The Fund has entered into a Principal Underwriting Agreement, (the
"Underwriting Agreement") with KDI, a wholly-owned subsidiary of Keystone. KDI,
as agent, has agreed to use its best efforts to find purchasers for the shares.
KDI may retain and employ representatives to promote distribution of the shares
and may obtain orders from brokers, dealers and others, acting as principals,
for sales of shares to them. The Underwriting Agreement provides that KDI will
bear the expense of preparing, printing and distributing advertising and sales
literature and prospectuses used by it. In its capacity as Principal
Underwriter, KDI may receive payments from the Fund pursuant to the Fund's
Distribution Plans.
All subscriptions and sales of shares by KDI are at the offering price of
the shares in accordance with the provisions of the Fund's Restated Certificate
of Incorporation, By-Laws, the current prospectus and statement of additional
information. All orders are subject to acceptance by the Fund and the Fund
reserves the right, in its sole discretion, to reject any order received. Under
the Underwriting Agreement, the Fund is not liable to anyone for failure to
accept any order.
The Fund has agreed under the Underwriting Agreement to pay all expenses in
connection with the registration of its shares with the SEC and auditing and
filing fees in connection with the registration of its shares under the various
state "blue-sky" laws.
From time to time, if in KDI's judgment it could benefit the sales of Fund
shares, KDI may use its discretion in providing to selected dealers promotional
materials and selling aids, including, but not limited to, personal computers,
related software and Fund data files.
KDI has agreed that it will in all respects duly conform with all state and
federal laws applicable to the sale of the shares and will indemnify and hold
harmless the Fund, and each person who has been, is or may be a Trustee or
officer of the Fund, against expenses reasonably incurred by any of them in
connection with any claim or in connection with any action, suit or proceeding
to which any of them may be a party, which arises out of or is alleged to arise
out of any misrepresentation or omission to state a material fact on the part of
KDI or any other person for whose acts KDI is responsible or is alleged to be
responsible, unless such misrepresentation or omission was made in reliance upon
written information furnished by the Fund.
The Underwriting Agreement provides that it will remain in effect as long as
its terms and continuance are approved by a majority of the Fund's Independent
Trustees at least annually at a meeting called for that purpose and if its
continuance is approved annually by vote of a majority of Trustees or by vote of
a majority of the outstanding shares.
The Underwriting Agreement may be terminated, without penalty, on 60 days'
written notice by the Fund's Board of Trustees or by a vote of a majority of the
Fund's outstanding shares. The Underwriting Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
BROKERAGE
It is the policy of the Fund, in effecting transactions in portfolio
securities, to seek best execution of orders at the most favorable prices. The
determination of what may constitute best execution and price in the execution
of a securities transaction by a broker involves a number of considerations
including, without limitation, the overall direct net economic result to the
Fund, involving both price paid or received and any commissions and other costs
paid, the efficiency with which the transaction is effected, the ability to
effect the transaction at all where a large block is involved, the availability
of the broker to stand ready to execute potentially difficult transactions in
the future and the financial strength and stability of the broker. Such
considerations are weighed by management in determining the overall
reasonableness of brokerage commissions paid.
Subject to the foregoing, a factor in the selection of brokers is the
receipt of research services, such as analyses and reports concerning issuers,
industries, securities, economic factors and trends and other statistical and
factual information. Any such research and other statistical and factual
information provided by brokers to the Fund or its advisers is considered to be
in addition to and not in lieu of services required to be performed by the
adviser under its Advisory Agreement with the Fund or the subadviser under its
SubAdvisory Agreement. The cost, value and specific application of such
information are indeterminable and cannot be practically allocated among the
Fund and other clients of the advisers who may indirectly benefit from the
availability of such information. Similarly, the Fund may indirectly benefit
from information made available as a result of transactions effected for such
other clients. Under the Advisory Agreement and the SubAdvisory Agreement, the
advisers are permitted to pay higher brokerage commissions for brokerage and
research services in accordance with Section 28(e) of the Securities Exchange
Act of 1934. In the event the advisers do follow such a practice, they will do
so on a basis which is fair and equitable to the Fund.
The Fund expects that purchases and sales of securities usually will be
effected through brokerage transactions for which commissions are payable.
Purchases from underwriters will include the underwriting commission or
concession, and purchases from dealers serving as market makers will include a
dealer's mark up or reflect a dealer's mark down. Where transactions are made in
the over-the-counter market, the Fund will deal with primary market makers
unless more favorable prices are otherwise obtainable.
The Fund may participate, if and when practicable, in group bidding for the
purchase directly from an issuer of certain securities for the Fund's portfolio
in order to take advantage of the lower purchase price available to members of
such a group.
Neither the advisers nor the Fund intend to place securities transactions
with any particular broker-dealer or group thereof. The Fund's Board of
Trustees, however, has determined that the Fund may follow a policy of
considering sales of shares as a factor in the selection of broker-dealers to
execute portfolio transactions, subject to the requirements of best execution,
including best price, described above.
The policy of the Fund with respect to brokerage is and will be reviewed by
the Fund's Board of Trustees from time to time. Because of the possibility of
further regulatory developments affecting the securities exchanges and brokerage
practices generally, the foregoing practices may be changed, modified or
eliminated.
Investment decisions for the Fund are made independently by the advisers
from those of the other funds and investment accounts managed by the advisers.
It may frequently develop that the same investment decision is made for more
than one fund. Simultaneous transactions are inevitable when the same security
is suitable for the investment objective of more than one account. When two or
more funds or accounts are engaged in the purchase or sale of the same security,
the transactions are allocated as to amount in accordance with a formula which
is equitable to each fund or account. It is recognized that in some cases this
system could have a detrimental effect on the price or volume of the security as
far as the Fund is concerned. In other cases, however, it is believed that the
ability of the Fund to participate in volume transactions will produce better
executions for the Fund.
In no instance are portfolio securities purchased from or sold to the
advisers, KDI or any of their affiliated persons, as defined in the 1940 Act and
rules and regulations issued thereunder.
For the fiscal years ended September 30, 1994, 1993 and 1992, the Fund paid
$16,565, $18,295 and $15,005, respectively, in brokerage commissions.
CAPITAL STOCK
The Fund has authorized the following classes of shares, $1.00 par value:
Class A 15,000,000
Class B 15,000,000
Class C 15,000,000
Class D 50,000,000
Class E 15,000,000
Class F 15,000,000
Each share represents an equal proportionate interest in the Fund with each
other share of that class. Upon liquidation, shares are entitled to a pro rata
share in the net assets of the Fund based on the relative net asset value of
each class of shares. Each share of the Fund is entitled to one vote. Classes of
shares of the Fund have equal voting rights except that each class of shares has
exclusive voting rights with respect to its respective Distribution Plan.
Fund shares are fully paid and non-assessable when issued and have no
preemptive, conversion or exchange rights. Shareholders are entitled to redeem
their shares as set forth under "How to Redeem Shares" in the prospectus. The
shares are transferable without restriction. The Fund does not issue
certificates for fractional shares.
Fund shares have non-cumulative voting rights, which means that the holders
of more than 50% of shares voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so. In such an event, the holders of the
remaining shares so voting are not able to elect any Trustees.
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS
Total return quotations for a class of shares of the Fund as they may appear
from time to time in advertisements are calculated by finding the average annual
compounded rates of return over one, five and ten year periods, or the time
periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added and the maximum sales
charge and all recurring fees charged to all shareholder accounts are deducted.
The ending redeemable value assumes a complete redemption at the end of the
relevant periods.
The cumulative total return of Class A shares of the Fund for the five and
ten year periods ended September 30, 1994 were 27.54% and 229.96%, respectively.
The compounded average annual total rates of return for Class A shares of the
Fund for the one, five and ten year periods ended September 30, 1994 were
(13.97)%, 4.98% and 12.68%, respectively.
The cumulative total return for Class B of the Fund for the period since
commencement of operations (August 2, 1993) until September 30, 1994 ("Life of
the Fund") was (6.09)%. The compounded average annual rates of return for Class
B of the Fund for the one year period ended September 30, 1994 and the Life of
the Fund were (11.86)% and (5.26)%, respectively.
The cumulative total return for Class C of the Fund for the period since
commencement of operations (August 2, 1993) until September 30, 1994 ("Life of
the Fund") was (3.90)%. The compounded average annual rates of return for Class
C of the Fund for the one year period ended September 30, 1994 and the Life of
the Fund were (9.80)% and (3.36)%, respectively.
Current yield quotations as they may appear from time to time in
advertisements will consist of a quotation based on a 30-day period ended on the
date of the most recent balance sheet of the Fund computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the base period. The Fund does not presently
intend to advertise current yield.
ADDITIONAL INFORMATION
To the best of the Fund's knowledge, as of December 31, 1994, no
shareholder, owned 5% or more of the Fund's Class A outstanding shares.
As of December 31, 1994, the following shareholders owned 5% or more of the
Fund's Class B shares: Kenneth S. White, c/o Alan White, 506 W. MT. Pleasant
Ave., Philadelphia, PA 19119-2929, 10.65%; Merrill Lynch Pierce Fenner & Smith,
Attn: Book Entry, 4800 Deer Lake Dr. E, 3rd Fl., Jacksonville, FL 32246-6484,
7.14%; Piper Jaffrey as Cust. FBO Kathleen M. Williams, IRA 850 740997, 222 S0.
9th Street, Minneapolis, MN 55402-3389, 5.16%.
As of December 31, 1994, the following shareholders owned 5% or more of the
Fund's Class C shares: Merrill Lynch Pierce Fenner & Smith, Attn: Book Entry,
4800 Deer Lake Dr. E, 3rd Fl., Jacksonville, FL 32246-6484, 26.19%; Piper
Jaffrey as Cust. FBO Peter M. Ihle, IRA 600 385671, 222 So. 9th Street,
Minneapolis, MN 55402-3389, 10.82%; Paine Webber for the Benefit of Paine Webber
CON FBO Robert E. Soulerin IRA Rollover P.O. Box 3321, Weehaw Ken, CA 92686,
8.98%; Mark A. Roberts, 2202 214th Pl. SW, Brier, WA 98036-8913, 5.806%.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the custodian ("Custodian") of all securities and cash
of the Fund. The Custodian performs no investment management functions for the
Fund but, in addition to its custodial services, is responsible for accounting
and related recordkeeping on behalf of the Fund.
KPMG Peat Marwick LLP, One Boston Place, Boston, Massachusetts 02108,
Certified Public Accountants, are the independent auditors for the Fund.
KIRC, located at 101 Main Street, Cambridge, Massachusetts 02142-1519, is a
wholly-owned subsidiary of Keystone and acts as transfer agent and dividend
disbursing agent for the Fund.
Except as otherwise stated in its prospectus or required by law, the Fund
reserves the right to change the terms of the offer stated in its prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
No dealer, salesman or other person is authorized to give any information or
to make any representation not contained in the Fund's prospectus, statement of
additional information or in supplemental sales literature issued by the Fund or
KDI, and no person is entitled to rely on any information or representation not
contained therein.
The Fund's prospectus and statement of additional information omit certain
information contained in the registration statement filed with the Commission
which may be obtained from the Commission's principal office in Washington, D.C.
upon payment of the fee prescribed by the Rules and Regulations promulgated by
the Commission.
The Fund is one of 15 different investment companies in the family of
Keystone America Funds. The Keystone America Funds offer a range of choices to
serve shareholder needs. The Keystone America Funds consist of the funds having
the various investment objectives described below:
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND - Seeks capital appreciation by
investment primarily in small and medium-sized companies in a relatively early
stage of development that are principally traded in the over-the-counter market.
KEYSTONE AMERICA HARTWELL GROWTH FUND - Seeks capital appreciation by investment
in securities selected for their long-term growth prospects.
KEYSTONE AMERICA CAPITAL PRESERVATION AND INCOME FUND - Seeks high level of
current income, consistent with low volatility of principal, by investing under
ordinary circumstances at least 65% in adjustable rate securities issued by the
U.S. government, its agencies or instrumentalities.
KEYSTONE AMERICA FUND FOR TOTAL RETURN - Seeks above-average income, dividend
growth and capital appreciation potential from quality common stocks, preferred
stocks, convertible bonds, other fixed-income securities and foreign securities
(up to 50%).
KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND - Seeks long-term capital growth from
foreign and domestic securities.
KEYSTONE AMERICA GOVERNMENT SECURITIES FUND - Seeks income and capital
preservation from U.S. government securities.
KEYSTONE AMERICA INTERMEDIATE TERM BOND FUND - Seeks income, capital
preservation and price appreciation potential from investment grade corporate
bonds.
KEYSTONE AMERICA OMEGA FUND, INC. - Seeks maximum capital growth from common
stocks and securities convertible into common stocks.
KEYSTONE AMERICA STATE TAX FREE FUND - A mutual fund consisting of five separate
series of shares investing in different portfolio securities which seeks the
highest possible current income, exempt from federal income taxes and applicable
state taxes.
KEYSTONE AMERICA STATE TAX FREE FUND - SERIES II - A mutual fund consisting of
two separate series of shares investing in different portfolio securities which
seeks the highest possible current in-come, exempt from federal income taxes and
applicable state taxes.
KEYSTONE AMERICA STRATEGIC INCOME FUND - Seeks high yield and capi-tal
appreciation potential from corporate bonds, discount bonds, convertible bonds,
preferred stock and foreign bonds (up to 25%).
KEYSTONE AMERICA TAX FREE INCOME FUND - Seeks income exempt from federal income
taxes and capital preservation from the four highest grades of municipal bonds.
KEYSTONE AMERICA WORLD BOND FUND - Seeks total return from interest income,
capital gains and losses and currency exchange gains and losses from investment
in debt securities denominated in U.S. and foreign currencies.
KEYSTONE FUND OF THE AMERICAS - Seeks growth and income from a diversified
portfolio of established North American stocks, Latin American stocks and Latin
American bonds.
KEYSTONE STRATEGIC DEVELOPMENT FUND - Seeks long-term capital growth by
investing primarily in equity securities.
<PAGE>
APPENDIX
COMMON AND PREFERRED STOCK RATINGS
A. S&P'S EARNINGS AND DIVIDEND RANKINGS FOR COMMON STOCKS
Because the investment process involves assessment of various factors, such
as product and industry position, corporate resources and financial policy, with
results that make some common stocks more highly esteemed than others, S&P
believes that earnings and dividend performance is the end result of the
interplay of these factors and that, over the long run, the record of this
performance has a considerable bearing on relative quality. S&P rankings,
however, do not reflect all of the factors, tangible or intangible, that bear on
stock quality.
Growth and stability of earnings and dividends are deemed key elements in
establishing S&P earnings and dividend rankings for common stocks, which
capsulize the nature of this record in a single symbol.
S&P has established a computerized scoring system based on per share
earnings and dividend records of the most recent ten years, a period deemed long
enough to measure a company's performance under varying economic conditions. S&P
measures growth, stability within the trend line and cyclicality. The ranking
system also makes allowances for company size, since large companies have
certain inherent advantages over small ones. From these scores for earnings and
dividends are determined.
The final score for each stock is measured against a scoring matrix
determined by analysis of the scores of a large and representative sample which
is reviewed and sometimes modified with the following ladder of rankings:
A+ Highest B+ Average C Lowest
A High B Below Average D In Reorganization
A Above Average B Lower
S&P believes its rankings are not a forecast of future market price performance,
but are basically an appraisal of past performance of earnings and dividends,
and relative current standing.
B. MOODY'S COMMON STOCK RANKINGS
Moody's presents a concise statement of the important characteristics of a
company and an evaluation of the grade (quality) of its common stock. Data
presented includes: (a) capsule stock information which reveals short and long
term growth and yield afforded by the indicated dividend, based on a recent
price; (b) a long term price chart which shows patterns of monthly stock price
movements and monthly trading volumes; (c) a breakdown of a company's capital
account which aids in determining the degree of conservatism or financial
leverage in a company's balance sheet; (d) interim earnings for the current year
to date, plus three previous years; (e) dividend information; (f) company
background; (g) recent corporate developments; (h) prospects for a company in
the immediate future and the next few years; and (i) a ten-year comparative
statistical analysis.
This information provides investors with information on what a company does,
how it has performed in the past, how it is performing currently and what its
future performance prospects appear to be.
These characteristics are then evaluated and result in a grading, or
indication of quality. The grade is based on an analysis of each company's
financial strength, stability of earnings and record of dividend payments. Other
considerations include conservativeness of capitalization, depth and caliber of
management, accounting practices, technological capabilities and industry
position. Evaluation is represented by the following grades:
(1) High Grade
(2) Investment Grade
(3) Medium Grade
(4) Speculative Grade
C. MOODY'S PREFERRED STOCK RATINGS
Preferred stock ratings and their definitions are as follows:
1. Aaa: An issue which is rated "Aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
2. Aa: An issue which is rated "Aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that earnings
and asset protection will remain relatively well-maintained in the foreseeable
future.
3. A: An issue which is rated "A" is considered to be an uppermedium grade
preferred stock. While risks are judged to be somewhat greater than in the "Aaa"
and "Aa" classification, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
4. Baa: An issue which is rated "Baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
5. Ba: An issue which is rated "Ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
6. B: An issue which is rated "B" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
7. Caa: An issue which is rated "Caa" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate the
future status of payments.
8. Ca: An issue which is rated "Ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
payments.
9. C: This is the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the higher
end of its generic rating category, the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
<PAGE>
Keystone America Hartwell Growth Fund, Inc.
SCHEDULE OF INVESTMENTS--September 30, 1994
<TABLE>
<CAPTION>
Number Market
of Shares Value
<S> <C> <C>
COMMON STOCKS (91.0%)
BUSINESS SERVICES (7.7%)
General Motors Corp., Class E 15,000 $ 570,000
Reuters Holdings ADS 23,000 1,035,000
1,605,000
CABLE/MEDIA (12.4%)
Capital Cities/ABC Inc. 10,000 820,000
Tele Communications Inc.,
Class A (a) 51,800 1,149,313
Viacom Inc., Class B (a) 5,000 198,750
Viacom Inc., Class A (a) 10,000 408,750
2,576,813
CELLULAR (15.4%)
Airtouch Communications (a) 20,000 572,500
LIN Broadcasting Corp. (a) 7,884 1,096,861
Vanguard Cellular Systems Inc.,
Class A (a) 15,000 393,750
Vodafone Group ADR 36,000 1,129,500
3,192,611
CHEMICALS (21.3%)
Great Lakes Chemical Corp. 75,100 4,412,125
COMMUNICATIONS & EQUIPMENT (14.6%)
Motorola, Inc. 37,000 1,951,750
Telefonos de Mexico "L" ADS 17,000 1,062,500
3,014,250
COMPUTER SOFTWARE (4.9%)
Microsoft Corp. (a) 18,000 1,010,250
HEALTHCARE SERVICES (2.3%)
Columbia/HCA Healthcare Corp. 11,000 478,500
INSURANCE (3.9%)
American International Group Inc. 9,000 799,875
RETAIL (4.0%)
CUC International, Inc. (a) 15,000 495,000
Dollar General Corp. 12,500 325,000
820,000
SEMICONDUCTORS (4.5%)
Intel Corp. 15,000 $ 922,500
TOTAL COMMON STOCKS
(Cost--$10,414,082) $18,831,924
Maturity
Value
REPURCHASE AGREEMENT (1.7%)
State Street Bank and Trust Co.,
4.350%, purchased 9/30/94
(Collateralized by $340,000,
U.S. Treasury Bonds, 4.750%,
10/31/98) maturing 10/03/94
(Cost--$340,000) 340,123 340,000
TOTAL INVESTMENTS
(Cost--$10,754,082)(b) 19,171,924
OTHER ASSETS AND LIABILITIES--NET (7.3%) 1,520,775
NET ASSETS (100%) $20,692,699
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income-producing security.
(b) The cost of investments for federal income tax purposes is identical. Gross
unrealized appreciation and depreciation of investments, based on identified tax
cost, at September 30, 1994 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $8,425,493
Gross unrealized depreciation (7,651)
Net unrealized appreciation $8,417,842
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
January 1,
1990 through
Year Ended September 30, September 30, December 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period $ 25.41 $ 21.73 $ 19.41 $ 16.39 $ 19.98 $ 14.82 $ 14.35 $ 12.01 $ 11.40 $ 9.93
Income from investment
operations
Net investment loss (0.33) (0.29) (0.25) (0.20) (0.19) (0.24) (0.28) (0.11) (0.21) (0.14)
Net gains (losses) on
securities (1.75) 3.97 3.27 5.59 (3.40) 5.40 0.75 2.93 2.77 2.31
Total from investment
operations (2.08) 3.68 3.02 5.39 (3.59) 5.16 0.47 2.82 2.56 2.17
Less distributions
Distributions from
capital gains (2.37) -0- (0.70) (2.37) -0- -0- -0- (0.48) (1.95) (0.70)
Total distributions (2.37) -0- (0.70) (2.37) -0- -0- -0- (0.48) (1.95) (0.70)
Net asset value:
End of period $ 20.96 $ 25.41 $ 21.73 $ 19.41 $ 16.39 $ 19.98 $ 14.82 $ 14.35 $ 12.01 $11.40
Total return <F3> (8.72%) 16.94% 15.91% 37.88% (17.97%) 35.00% 3.14% 23.60% 24.51% 22.30
Ratios/supplemental
data
Ratios to average net
assets:
Operating and
management expenses 2.05% 1.89% 2.11% 2.38% 3.00%<F2> 2.30%<F1> 3.20% 2.70% 2.90% 2.70%
Net investment loss (1.49%) (1.27%) (1.18%) (1.15%) (1.30%)<F2> (1.30%) (2.00%) (0.90%) (1.70%) (1.30%)
Portfolio turnover
rate 27% 42% 32% 53% 80%<F2> 45% 39% 100% 102% 93%
Net assets, end of
period (thousands) $19,971 $26,198 $25,697 $17,952 $13,960 $18,590 $14,610 $25,887 $11,993 $10,316
Per share calculations for all periods are based on weighted average shares
outstanding.
<FN>
<F1> Figure is net of expense reimbursement by Hartwell Keystone in connection
with voluntary expense limitations. Before the expense reimbursement, the
"Ratio of operating and management expenses to average net assets" would
have been 2.70% for the year ended December 31, 1989.
<F2> Annualized.
<F3> Excluding applicable sales charges.
</TABLE>
See Notes to Financial Statements.
<PAGE>
Keystone America Hartwell Growth Fund, Inc.
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
August 2, 1993
(Date of Initial
Year Ended Public Offering)
September 30, to September 30,
1994 1993
<S> <C> <C>
Net asset value:
Beginning of period $25.41 $23.85
Income from investment operations
Net investment loss (0.52) (0.07)
Net gains (losses) on securities (1.72) 1.63
Total from investment operations (2.24) 1.56
Less distributions
Distributions from capital gains (2.37) -0-
Total distributions (2.37) -0-
Net asset value:
End of period $20.80 $25.41
Total return (b) (9.40%) 6.54%
Ratios/supplemental data
Ratios to average net assets:
Operating and management expenses 3.04% 3.42%(a)
Net investment loss (2.45%) (2.80%)(a)
Portfolio turnover rate 27% 42%
Net assets, end of period (thousands) $ 498 $ 44
</TABLE>
Per share calculations for all periods are based on weighted average shares
outstanding.
(a) Annualized for the period August 2, 1993 (Date of Initial Public Offering)
to September 30, 1993.
(b) Excluding applicable sales charges.
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
August 2, 1993
(Date of Initial
Year Ended Public Offering)
September 30, to September 30,
1994 1993
<S> <C> <C>
Net asset value:
Beginning of period $25.41 $23.85
Income from investment operations
Net investment loss (0.51) (0.01)
Net gains (losses) on securities (1.82) 1.57
Total from investment operations (2.33) 1.56
Less distributions
Distributions from capital gains (2.37) -0-
Total distributions (2.37) -0-
Net asset value:
End of period $20.71 $25.41
Total return (b) (9.80%) 6.54%
Ratios/supplemental data
Ratios to average net assets:
Operating and management expenses 3.11% 0.37%(a)
Net investment loss (2.47%) (0.14%)(a)
Portfolio turnover rate 27% 42%
Net assets, end of period (thousands) $ 224 $ 27
</TABLE>
Per share calculations for all periods are based on weighted average shares
outstanding.
(a) Annualized for the period August 2, 1993 (Date of Initial Public Offering)
to September 30, 1993.
(b) Excluding applicable sales charges.
See Notes to Financial Statements.
<PAGE>
Keystone America Hartwell Growth Fund, Inc.
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1994
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments at market value
(identified cost--$10,754,082) (Note 1) $19,171,924
Cash 4,129
Receivable for:
Investments sold 1,747,103
Dividends 10,600
Prepaid expenses 4,308
Other assets 26,109
Total assets 20,964,173
Liabilities:
Investments purchased 195,925
Payable for fund shares redeemed 10,702
Payable to Investment Adviser (Note 4) 21,320
Accrued reimbursable expenses (Note 4) 1,636
Other accrued expenses 41,891
Total liabilities 271,474
Net assets $20,692,699
Net assets represented by (Notes 1 and 3):
Paid-in capital $10,472,238
Accumulated distributions in excess of
investment income--net (352,633)
Accumulated realized gains on investment
transactions--net 2,155,252
Net unrealized appreciation on investments 8,417,842
Total net assets $20,692,699
Net asset value per share and redemption
price per share (Note 2):
Class A Shares ($20.96 on 952,694 shares
outstanding) $19,971,122
Class B Shares ($20.80 on 23,938 shares
outstanding) 497,934
Class C Shares ($20.71 on 10,801 shares
outstanding) 223,643
$20,692,699
Offering price per share:
Class A Shares (including sales charge of 5.75%)
(Notes 1 and 2) $22.24
Class B Shares $20.80
Class C Shares $20.71
</TABLE>
See Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS
Year Ended September 30, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Investment income: (Note 1)
Dividends $ 120,673
Interest 11,678
Total income 132,351
Expenses (Notes 2, 4, and 5):
Management fee $ 233,942
Transfer agent fees 72,549
Accounting, auditing and legal 44,228
Custodian fees 21,584
Printing 30,731
Distribution Plan expenses 22,992
Registration fees 55,194
Miscellaneous expenses 3,764
Total expenses 484,984
Loss from operations (352,633)
Realized and unrealized gain (loss)
on investments--net (Notes 1 and 3):
Realized gain on investments sold:
Proceeds from sales 11,744,429
Cost of investments sold 9,375,732
Realized gain on investments--net 2,368,697
Net unrealized appreciation (depreciation)
on investments:
Beginning of year 12,601,528
End of year 8,417,842
Increase (decrease) in unrealized
appreciation or depreciation--net (4,183,686)
Net loss on investments (1,814,989)
Net decrease in net assets resulting from
operations $(2,167,622)
</TABLE>
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended September 30,
1994 1993
<S> <C> <C>
Operations:
Loss from operations--net $ (352,633) $ (337,149)
Realized gain on investments--net 2,368,697 2,374,364
Increase (decrease) in unrealized
appreciation or depreciation--net (4,183,686) 2,020,917
Net increase (decrease) in net
assets resulting from operations (2,167,622) 4,058,132
Distributions to shareholders from
realized gains on investment
transactions--net (Note 5) (2,420,963) -0-
Capital share transactions (Note 2):
Proceeds from shares sold--Class A
Shares 899,593 2,400,780
Proceeds from shares sold--Class B
Shares 532,806 42,170
Proceeds from shares sold--Class C
Shares 278,625 26,387
Payments for shares redeemed--Class A
Shares (4,719,055) (5,955,910)
Payments for shares redeemed--Class B
Shares (54,343) -0-
Payments for shares redeemed--Class C
Shares (64,676) -0-
Net asset value of shares issued in
reinvestment of capital gain distributions:
Class A Shares 2,126,056 -0-
Class B Shares 10,678 -0-
Class C Shares 2,877 -0-
Net decrease in net assets
resulting from capital share
transactions (987,439) (3,486,573)
Total increase (decrease) in net
assets (5,576,024) 571,559
Net assets:
Beginning of year 26,268,723 25,697,164
End of year distributions in excess of net
investment income as follows:
September 1994--($352,633), and
September 1993--($0) $20,692,699 $26,268,723
</TABLE>
See Notes to Financial Statements.
<PAGE>
Keystone America Hartwell Growth Fund, Inc.
NOTES TO FINANCIAL STATEMENTS
(1.) Significant Accounting Policies
Hartwell Growth Fund, Inc. (the "Fund") is a non-diversified, open-end
investment company (mutual fund). The Fund was incorporated in New York on
November 30, 1965 and began operations on March 31, 1966. Hartwell Keystone
Advisers, Inc. ("Hartwell Keystone"), a wholly-owned subsidiary of Keystone
Custodian Funds, Inc. ("Keystone"), acts as the Fund's investment adviser
pursuant to an Investment Management and Advisory Agreement.
Hartwell Management Company, Inc. ("Hartwell Management") acts as subadviser to
the Fund pursuant to a Sub-Advisory Agreement with Hartwell Keystone. Subject to
the supervision of the Fund's Board of Directors and Keystone, Hartwell
Management provides the Fund and Hartwell Keystone with investment research,
advice, information and securities recommendations.
The Fund currently issues Class A, Class B, and Class C shares. Class A shares
are sold subject to a maximum sales charge of 5.75% payable at the time of
purchase. Class B shares are sold subject to a contingent deferred sales charge
payable upon redemption during the calendar year of purchase or within three
calendar years after the year of purchase. Class C shares are sold subject to a
contingent deferred sales charge payable upon redemption within one year of
purchase. Class C shares are available only through dealers who have entered
into special distribution agreements with Keystone Distributors, Inc. ("KDI"),
the Fund's principal underwriter.
Keystone is a wholly-owned subsidiary of Keystone Group, Inc. ("KGI"), a
Delaware corporation. Keystone Investor Resource Center, Inc. ("KIRC"), a
wholly-owned subsidiary of Keystone, is the Fund's transfer agent.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. Investments are usually valued at the closing sales price, or in the absence
of sales and for over-the-counter securities, the mean of bid and asked
quotations. Management values the following securities at prices it deems in
good faith to be fair: (a) securities (including restricted securities) for
which complete quotations are not readily available and (b) listed securities
if, in the opinion of management, the last sales price does not reflect a
current value, or if no sale occurred.
Short-term investments, if purchased with maturities of sixty days or less, are
valued at amortized cost (original purchase cost as adjusted for amortization of
premium or accretion of discount which when combined with accrued interest
approximates market). Short-term investments maturing in more than sixty days
for which market quotations are readily available are valued at current market
value. Short-term investments maturing in more than sixty days when purchased,
which are held on the sixtieth day prior to maturity are valued at amortized
cost (market value on the sixtieth day adjusted for amortization of premium or
accretion of discount which, when combined with accrued interest, approximates
market).
B. Securities transactions are accounted for on the trade date. Realized gains
and losses are computed on the identified cost basis. Interest income is
recorded on the accrual basis and dividend income is recorded on the ex-dividend
date. Distributions to the shareholders are recorded by the Fund at the close of
business on the record date.
C. The Fund has qualified, and intends to qualify in the future, as a regulated
investment company under the Internal Revenue Code of 1986, as amended
("Internal Revenue Code"). Thus, the Fund is relieved of any federal income or
excise tax liability by distributing all of its net taxable investment income
and net taxable capital gains, if any, to its shareholders. The Fund intends to
avoid excise tax liability by making the required distributions under the
Internal Revenue Code.
<PAGE>
D. When the Fund enters into a repurchase agreement (a purchase of securities
whereby the seller agrees to repurchase the securities at a mutually agreed upon
date and price) the repurchase price of the securities will generally equal the
amount paid by the Fund plus a negotiated interest amount. The seller under the
repurchase agreement will be required to provide securities ("collateral") to
the Fund whose value will be maintained at an amount not less than the
repurchase price, and which generally will be maintained at 101% of the
repurchase price. The Fund monitors the value of collateral on a daily basis,
and if the value of the collateral falls below required levels, the Fund intends
to seek additional collateral from the seller or terminate the repurchase
agreement. If the seller defaults, the Fund would suffer a loss to the extent
that the proceeds from the sale of the underlying securities were less than the
repurchase price. Any such loss would be increased by any cost incurred on
disposing of such securities. If bankruptcy proceedings are commenced against
the seller under the repurchase agreement, the realization on the collateral may
be delayed or limited. Repurchase agreements entered into by the Fund will be
limited to transactions with dealers or domestic banks believed to present
minimal credit risks, and the Fund will take constructive receipt of all
securities underlying repurchase agreements until such agreements expire.
E. The Fund distributes net investment income and net capital gains, if any,
annually. Distributions are determined in accordance with income tax
regulations. Distributions from taxable net investment income and net capital
gains can exceed book basis net investment income and net capital gains.
Effective October 1, 1993, the Fund adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions by Investment Companies. As a
result of this statement, the Fund changed the classification of distributions
to shareholders to better disclose the differences between financial statement
amounts and distributions determined in accordance with income tax regulations.
Accordingly, capital accounts as of September 30, 1993 have been restated to
reflect a decrease in paid-in capital of $4,919,341, an increase in accumulated
realized gains (losses) on investment transactions of $2,005,626, and an
increase in undistributed net investment income of $2,913,715.
F. Certain reclassifications have been made to prior year amounts to reflect
current year presentation. These reclassifications had no effect on the
operations of the Fund.
(2.) Capital Share Transactions
Fifteen million shares each of Class A, B, C, E, and F and fifty million shares
of Class D of the Fund, each with a par value of $1.00, are authorized for
issuance. Currently, only Class A, B, and C shares are outstanding.
Transactions in shares of the Fund were as follows:
<PAGE>
Keystone America Hartwell Growth Fund, Inc.
<TABLE>
<CAPTION>
Class A Shares
Year Ended September 30,
1994 1993
<S> <C> <C>
Shares sold 40,253 104,321
Shares redeemed (214,184) (255,860)
Shares issued in reinvestment of distributions
from realized gains--net 95,596 -0-
Net decrease (78,335) (151,539)
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
August 2, 1993
(Date of Initial
Year Ended Public Offering)
September 30, to September 30,
1994 1993
<S> <C> <C>
Shares sold 24,285 1,713
Shares redeemed (2,541) -0-
Shares issued in reinvestment of distributions
from realized gains--net 481 -0-
Net increase 22,225 1,713
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
August 2, 1993
(Date of Initial
Year Ended Public Offering)
September 30, to September 30,
1994 1993
<S> <C> <C>
Shares sold 12,767 1,063
Shares redeemed (3,158) -0-
Shares issued in reinvestment of distributions
from realized gains--net 129 -0-
Net increase 9,738 1,063
</TABLE>
The Fund bears some of the costs of selling its shares under Distribution Plans
adopted with respect to its Class A, Class B, and Class C shares pursuant to
Rule 12b-1 under the Investment Company Act of 1940 ("1940 Act").
The Class A Distribution Plan provides for payments that are currently limited
to 0.25% annually of the average daily net asset value of Class A shares to pay
expenses of the distribution of Class A shares. Amounts paid by the Fund to KDI
under the Class A Distribution Plan are currently used to pay others, such as
dealers, service fees at an annual rate of 0.25% of the average net asset value
of the shares sold by such others and remaining outstanding on the books of the
Fund for specified periods.
The Class B Distribution Plan provides for payments at an annual rate of 1.00%
of the average daily net asset value of Class B shares, to pay expenses of the
distribution of Class B shares. Amounts paid by the Fund under the Class B
Distribution Plan are currently used to pay others (dealers) (i) a commission at
the time of purchase normally equal to 3.00% of the value of each share sold;
and/or (ii) service fees at an annual rate of 0.25% of the average daily net
asset value of shares sold by such others and remaining outstanding on the books
of the Fund for specified periods.
The Class C Distribution Plan provides for payments at an annual rate of up to
1.00% of the average daily net asset value of Class C shares to pay expenses of
the distribution of Class C shares. Amounts paid by the Fund under the Class C
Distribution Plan are currently used to pay others (dealers) (i) a payment at
the time of purchase normally equal to 1.00% of the value of each share sold,
such payment to consist of commission in the amount of 0.75% and the first
year's service fee in advance in the amount of 0.25%; and (ii) beginning
approximately 15 months after purchase, a commission at an annual rate of 0.75%
(subject to applicable limitations imposed by the rules of the National
Association of Securities Dealers, Inc.) and service fees at an annual rate of
0.25% of the average net asset value of each share sold by such others and
remaining outstanding on the books for specified periods.
<PAGE>
Each of the Distribution Plans may be terminated at any time by a vote of
Independent Directors or by a vote of a majority of the outstanding voting
shares of the respective class. However, after the termination of the Class B
Distribution Plan, payments to KDI will continue at the annual rate of 1.00% of
the average daily net asset value of the Class B shares, as compensation for its
services which had been earned while the Class B Distribution Plan was in
effect. Unreimbursed distribution expenses as of September 30, 1994 were $10,291
and $785 for Class B and Class C Distribution Plans, respectively.
During the year ended September 30, 1994, the Fund paid KDI $18,693, $2,821 and
$1,478 under its Class A, Class B, and Class C Distribution Plans, respectively.
Presently, the Fund's class specific expenses are limited to Distribution Plan
expenses incurred by a class of shares.
(3.) Securities Transactions
Purchases and sales of investment securities (including proceeds received at
maturity) for the year ended September 30, 1994, were as follows:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases From Sales
<S> <C> <C>
Portfolio securities $ 6,182,138 $ 11,744,429
Short-term investments 107,515,000 107,175,000
$113,697,138 $118,919,429
</TABLE>
(4.) Investment Management and Transactions with Affiliates
The Fund pays Hartwell Keystone a basic monthly advisory fee calculated by
applying percentage rates, starting at 1.0% and declining as net assets
increase, to 0.65% to the Fund's average daily net asset value during the latest
12 months (a moving average method). The basic advisory fee of the Fund is
subject to an incentive adjustment, by which the basic fee may be increased or
decreased by up to 1/2 of 1% of the average daily net asset value during the
latest 12 months (a moving average method) of the Fund depending upon the
performance of the Fund relative to the Standard and Poor's Index of 500 Stocks
(S&P 500).
During the year ended September 30, 1994, the Fund paid or accrued to Hartwell
Keystone $233,942 which represents 0.89% of average daily net assets on an
annualized basis. Of this amount $166,670 was paid or accrued to Hartwell
Management Company.
During the year ended September 30, 1994, the Fund paid or accrued $16,899 to
KIRC and KGI for reimbursement of certain accounting services. The Fund paid or
accrued $72,549 to KIRC for transfer agent fees.
The Fund is subject to certain state annual expense limits, the most restrictive
of which is as follows: 2.5% of the first $30 million of fund average net
assets; 2.0% of the next $70 million of fund average net assets; and 1.5% of
fund average net assets over $100 million.
<PAGE>
Hartwell Keystone has agreed to reimburse the Fund annually for certain
operating expenses incurred by the Fund in excess of the applicable state
expense limit. However, Hartwell Keystone is not required to make such
reimbursement to an extent which would result in the Fund's inability to qualify
as a regulated investment company under provisions of the Internal Revenue Code.
Certain officers and/or Directors of Keystone are also officers and/or Directors
of the Fund. Officers of Keystone and affiliated Directors receive no
compensation directly from the Fund.
(5.) Distributions to Shareholders
The Fund intends to distribute to its shareholders dividends from net investment
income, if any, annually and all net taxable realized long-term capital gains,
if any, at least annually. Any distribution which is declared in December and
paid before February 1, 1995 will be taxable to shareholders in the year
declared.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Directors and Shareholders
Keystone America Hartwell Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Keystone
America Hartwell Growth Fund, Inc. including the schedule of investments as of
September 30, 1994, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the four year period ended September 30, 1994 for Class A Shares and the year
ended September 30, 1994 and the period from August 2, 1993 (Date of Initial
Public Offering) to September 30, 1993 for Class B and Class C Shares. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the period from January 1, 1990 to September 30, 1990, and for
each of the years in the five-year period ended December 31, 1989, were audited
by other auditors whose report dated November 7, 1990 expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Keystone America Hartwell Growth Fund, Inc. as of September 30, 1994, the
results of its operations for the year then ended, the changes in its net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the periods referred to above in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
November 4, 1994
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). Financial Statements
All financial statements listed below are included in Registrant's Statement of
Additional Information.
Schedule of Investments September 30, 1994
Financial Highlights (All Classes) For fiscal years ended September
30, 1985 through September 30, 1994
Statement of Assets and Liabilities September 30, 1994
Statement of Operations Year ended
September 30, 1994
Statements of Changes in Net Assets Two years ended
September 30, 1994
Notes to Financial Statements
Independent Auditors' Report
dated November 4, 1994
All other schedules are omitted as the required information is inapplicable.
<PAGE>
(24)(b) Exhibits
(1) A copy of Registrant's Declaration of Trust is filed herewith.
(2) A copy of the Registrant's By-Laws is filed herewith.
(3) Not applicable.
(4) A copy of the form of share certificate evidencing Registrant's share
of beneficial interest will be filed by amendment.
(5) (A) A copy of the form of Investment Advisory and Management Agreement
between the Registrant and Keystone Custodian Funds, Inc. was filed
with Post-Effective Amendment No. 46 to Registration Statement No.
2-287194/811-1633 as Exhibit 24(b)(5)(A).
(B) A copy of the form of SubInvestment Advisory Agreement between
Keystone Custodian Funds, Inc. and J.M. Hartwell Limited Partnership
was filed with Post-Effective Amendment No. 46 to Registration
Statement No. 2-287194/811-1633 as Exhibit 24(b)(5)(B).
(6) (A) A copy of the form of Principal Underwriting Agreement between the
Registrant and Keystone Distributors, Inc. is filed herewith.
(B) A copy of the form of Dealer Agreement used by Keystone Distributors,
Inc. was filed with Post-Effective Amendment No. 40 to Registration
Statement No. 2-28719/ 811-1633 for Keystone America Hartwell Growth
Fund, Inc. as Exhibit 24(b)(6)(A) and is incorporated by reference
herein.
(7) Not applicable.
(8) A copy of the form of Registrant's Custodian, Fund Accounting and
Recordkeeping Agreement with State Street Bank and Trust Company is
filed herewith.
(9) Not applicable.
(10) An opinion and consent of counsel as to the legality of securities
registered is filed herewith.
(11) A consent as to the use of the Independent Auditors' Report was filed
with Post-Effective Amendment No. 45 to Registration Statement No.
2-25215/811-1380 for Keystone America Hartwell Growth Fund, Inc. as
Exhibit 24(b)(11) and is incorporated by reference herein.
(12) Not applicable.
(13) Not applicable.
(14) Copies of model plans used in the establishment of retirement plans in
connection with which Registrant offers its securities were filed with
Post-Effective Amendment No. 66 to Registration Statement No. 2-
10527/811-96 for Keystone America Hartwell Growth Fund, Inc. as
Exhibit 24(b)(14) and are incorporated by reference herein.
(15) A copy of the form of Registrant's Class A, Class B and Class C
Distribution Plans are filed herewith.
(16) Schedules for computation of total return were filed with
Post-Effective Amendment No. 45 to Registration Statement No.
2-25215/811-1380 for Keystone America Hartwell Growth Fund, Inc. as
Exhibit 24(b)(16) and are incorporated by reference herein.
(17) Not applicable.
(18) Powers of Attorney are filed herewith.
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
Number of Record
Title of Class Holders as of December 31, 1994
Shares of $1.00 Class A - 1,681
par value Class B - 117
Class C - 34
Item 27. Indemnification
Provisions for the indemnification of the Fund's Directors and officers are
contained in Article 4 of the Registrant's Form of By-Laws, a copy of which is
filed herewith.
Provisions for the indemnification of Keystone Distributors, Inc., the
Registrant's principal underwriter, are contained in Section 9 of the Principal
Underwriting Agreement between the Registrant and Keystone Distributors, Inc., a
copy of which is filed herewith.
Provisions for the indemnification of Keystone Custodian Funds, Inc. and
J.M. Hartwell Limited Partnership, Registrant's investment adviser and sub
adviser, respectively, are contained in Section 4 of the SubInvestment
Advisory Agreement between Keystone Custodian Funds, Inc. and J.M. Hartwell
Limited Partnership and Section 5 of the Investment Advisory and Management
Agreement between Registrant and J.M. Hartwell Limited Partnership, forms of
which are filed herewith.
Item 28. Businesses and Other Connections of Investment Advisers
The following tables list the names of the various officers and directors of
Keystone Custodian Funds, Inc. and J.M. Hartwell Limited Partnership,
Registrant's investment adviser and subadviser, respectively, and their
respective positions. For each named individual, the tables list, for at least
the past two years, (i) any other organizations with which the officer and/or
director has had or has substantial involvement; and (ii) positions held with
such organizations.
<PAGE>
LIST OF OFFICERS AND DIRECTORS OF KEYSTONE CUSTODIAN FUNDS, INC.
(1/30/95)
Position with
Keystone Custodian
Name Funds, Inc. Other Business Affiliations
Albert H. Chairman of the Board, Chairman of the Board,
Elfner, III Chief Executive Officer, Chief Executive
Vice Chairman and Officer, President
Director Director:
Keystone Group, Inc.
Keystone Management, Inc.
Keystone Software, Inc.
Keystone Asset Corporation
Keystone Capital Corp.
Chairman of the Board and
Director:
Keystone Fixed Income
Advisers, Inc.
Keystone Investment
Management Corporation
President and Director:
Keystone Trust Company
Director or Trustee:
Fiduciary Investment
Company, Inc.
Keystone Distributors, Inc.
Keystone Investor Resource
Center, Inc.
Robert Van Partners, Inc.
Boston Children's Services
Associates Fiduciary
Investment Company, Inc.
Middlesex School
Middlebury College
Formerly Trustee:
Neworld Bank
Philip M. Director President and Director:
Byrne Keystone Investment
Management Corporation
Senior Vice President:
Keystone Group, Inc.
Herbert L. Senior Vice None
Bishop, Jr. President
Donald C. Senior Vice None
Dates President
<PAGE>
Position with
Keystone Custodian
Name Funds, Inc. Other Business Affiliations
Gilman Senior Vice None
Gunn President
Edward F. Director, Director, Senior Vice
Godfrey Senior Vice Chief Financial
President, Treasurer:
Treasurer and Keystone Group, Inc.
Chief Financial Keystone Distributors,Inc.
Officer Treasurer:
Keystone Investment
Management Corporation
Keystone Management, Inc.
Keystone Software, Inc.
Fiduciary Investment
Company, Inc.
Treasurer and Director:
Hartwell Keystone
Advisers, Inc.
James R. Director and None
McCall President
Ralph J. Director President and Director:
Spuehler, Jr. Keystone Distributors,Inc.
Senior Vice President and
Director:
Keystone Group, Inc.
Treasurer:
Hartwell Emerging Growth
Fund, Inc.
Hartwell Growth Fund,Inc.
Director:
Keystone Investor
Resource Center, Inc.
Keystone Management, Inc.
Formerly President:
Keystone Management, Inc.
Formerly Treasurer:
The Kent Funds
Keystone Group, Inc.
Keystone Custodian Funds,
Inc.
<PAGE>
Position with
Keystone Custodian
Name Funds, Inc. Other Business Affiliations
Rosemary D. Senior Vice General Counsel, Senior
Van Antwerp President, Vice President and
General Counsel Secretary:
and Secretary Keystone Group, Inc.
Senior Vice President and
General Counsel:
Keystone Investment
Management Corporation
Senior Vice President,
General Counsel and
Director:
Keystone Investor Resource
Center, Inc.
Fiduciary Investment
Company, Inc.
Keystone Distributors, Inc.
Keystone Management, Inc.
Keystone Software, Inc.
Senior Vice President and
Secretary:
Hartwell Keystone
Advisers, Inc.
Vice President and
Secretary:
Keystone Fixed Income
Advisers, Inc.
Formerly Assistant
Secretary:
The Kent Funds
Harry Barr Vice President None
Robert K. Baumback Vice President None
Betsy A. Blacher Vice President None
Francis X. Claro Vice President None
Kristine R. Cloyes Vice President None
Christopher P. Vice President None
Conkey
Richard Cryan Vice President None
Maureen E. Vice President None
Cullinane
<PAGE>
Position with
Keystone Custodian
Name Funds, Inc. Other Business Affiliations
George E. Dlugos Vice President None
Antonio T. Docal Vice President None
Christopher R. Vice President None
Ely
Roland Gillis Vice President None
Robert L. Hockett Vice President None
Sami J. Karam Vice President None
Donald M. Keller Vice President None
George J. Vice President None
Kimball
JoAnn L. Vice President None
Lyndon
John C. Vice President None
Madden, Jr.
Stephen A. Vice President None
Marks
Eleanor H. Vice President None
Marsh
Walter T. Vice President None
McCormick
Barbara McCue Vice President None
Stanley M. Vice President None
Niksa
Robert E. Vice President None
O'Brien
Margery C. Vice President None
Parker
William H. Vice President None
Parsons
Daniel A. Vice President None
Rabasco
<PAGE>
Position with
Keystone Custodian
Name Funds, Inc. Other Business Affiliations
David L. Smith Vice President None
Kathy K. Wang Vice President None
Judith A. Warners Vice President None
Marcia Waterman Vice President None
J. Kevin Kenely Vice President None
Joseph J. Vice President None
Decristofaro
Jean Susan Assistant Vice President and Counsel:
Loewenberg Secretary Keystone Group, Inc.
Vice President and
Secretary:
Keystone Trust Company
Secretary:
Keystone Investor
Resource Center, Inc.
Assistant Secretary:
Keystone Asset Corporation
Keystone Capital
Corporation
Keystone Distributors, Inc.
Keystone Fixed Income
Advisers, Inc.
Keystone Management, Inc.
Keystone Software, Inc.
Hartwell Keystone
Advisers, Inc.
Clerk:
Keystone Investment
Management Corporation
Fiduciary Investment
Company, Inc.
Assistant Secretary:
Hartwell Keystone
Advisers, Inc.
Keystone Distributors, Inc.
Colleen L. Assistant Assistant Secretary:
Mette Secretary Keystone Distributors, Inc.
Keystone Group, Inc.
Kevin J. Assistant Vice President:
Morrissey Treasurer Keystone Group, Inc.
Assistant Treasurer:
Fiduciary Investment
Company, Inc.
Formerly Assistant Treasurer:
The Kent Funds
<PAGE>
LIST OF OFFICERS AND DIRECTORS OF J.M. HARTWELL LIMITED PARTNERSHIP
(1/30/95)
Position with
J.M. Hartwell
Name Limited Partnership Other Business Affiliations
William C. Director and Chief Vice President:
Miller, IV Executive Officer Hartwell Emerging Growth
Fund, Inc.
Hartwell Growth Fund, Inc.
Director:
Hartwell Distributors,Inc.
Director and President:
JMH Management Corporation
J.M. Hartawell & Co., Inc.
Harrison Director None
Augur
William Director General Partner:
J. Nutt Affiliated Manager's Group
<PAGE>
Item 29. Principal Underwriter
(a) Keystone Distributors, Inc., which acts as Registrant's principal
underwriter, also acts as principal underwriter for the following
entities:
Keystone America Hartwell Emerging Growth Fund, Inc.
Keystone Custodian Fund, Series B-1
Keystone Custodian Fund, Series B-2
Keystone Custodian Fund, Series B-4
Keystone Custodian Fund, Series K-1
Keystone Custodian Fund, Series K-2
Keystone Custodian Fund, Series S-1
Keystone Custodian Fund, Series S-3
Keystone Custodian Fund, Series S-4
Keystone America Capital Preservation and Income Fund
Keystone America Fund for Total Return
Keystone America Global Opportunities Fund
Keystone America Government Securities Fund
Keystone America Intermediate Term Bond Fund
Keystone America Omega Fund, Inc.
Keystone America State Tax Free Fund
Keystone America State Tax Free Fund - Series II
Keystone America Strategic Income Fund
Keystone America Tax Free Income Fund
Keystone America World Bond Fund
Keystone Fund of the Americas
Keystone International Fund Inc.
Keystone Liquid Trust
Keystone Precious Metals Holdings, Inc.
Keystone Strategic Development Fund
Keystone Tax Exempt Trust
Keystone Tax Free Fund
Master Reserves Trust
(b) For information with respect to each director and officer of
Registrant's acting principal underwriter, see the following pages.
<PAGE>
Item 29(b) (continued).
Position and
Name and Principal Position and Offices with Offices with
Business Address Keystone Distributors, Inc. the Fund
Ralph J. Spuehler* Director, President None
Edward F. Godfrey* Director, Senior Vice Senior Vice
President, Treasurer President
and Chief Financial
Officer
Rosemary D. Van Antwerp Director, Senior Vice Senior Vice
President, General Counsel President
and Secretary
Albert H. Elfner, III* Director President
Charles W. Carr* Senior Vice President None
Peter M. Delehanty* Senior Vice President None
J. Kevin Kenely* Vice President and None
Controller
Frank O. Gebhardt Divisional Vice None
2626 Hopeton President
San Antonio, TX 78230
C. Kenneth Molander Divisional Vice None
8 King Edward Drive President
Londenderry, NH 03053
David S. Ashe Regional Manager and None
32415 Beaconsfield Vice President
Birmingham, MI 48025
David E. Achzet Regional Vice President None
60 Lawn Avenue -
Greenway 27
Stamford, CT 06902
William L. Carey, Jr. Regional Manager and None
4 Treble Lane Vice President
Malvern, PA 19355
John W. Crites Regional Manager and None
2769 Oakland Circle W. Vice President
Aurora, CO 80014
<PAGE>
Item 29(b) continued
Position and
Name and Principal Position and Offices with Offices with
Business Address Keystone Distributors, Inc. the Fund
Richard J. Fish Regional Vice President None
309 West 90th Street
New York, NY 10024
Michael E. Gathings Regional Manager and None
245 Wicklawn Way Vice President
Roswell, GA 30076
Robert G. Holz, Jr. Regional Manager and None
313 Meadowcrest Drive Vice President
Richardson, Texas 75080
Todd L. Kobrin Regional Manager and None
20 Iron Gate Vice President
Metuchen, NJ 08840
Ralph H. Johnson Regional Manager and None
345 Masters Court, #2 Vice President
Walnut Creek, CA 94598
Paul J. McIntyre Regional Manager and None
Vice President
Dale M. Pelletier Regional Manager and None
464 Winnetka Ave. Vice President
Winnetka, IL 60093
Juliana Perkins Regional Manager and None
2348 West Adrian Street Vice President
Newbury Park, CA 91320
Matthew D. Twomey Regional Manager and None
9627 Sparrow Court Vice President
Ellicott City, MD 21042
Mitchell I. Weiser Regional Manager and None
7031 Ventura Court Vice President
Parkland, FL 33067
Welden L. Evans Regional Banking Officer None
490 Huntcliff Green and Vice President
Atlanta, GA 30350
Russell A. Haskell* Vice President None
Robert J. Matson* Vice President None
<PAGE>
Item 29(b) continued
Position and
Name and Principal Position and Offices with Offices with
Business Address Keystone Distributors, Inc. the Fund
John M. McAllister* Vice President None
Gregg A. Mahalich Vice President None
14952 Richards Drive W.
Minnetonka, MN 55345
Burton Robbins Vice President None
1586 Folkstone Terrace
Westlake Village, CA
91361
Thomas E. Ryan, III* Vice President None
Peter Willis* Vice President None
Raymond P. Ajemian* Manager and Vice President None
Joan M. Balchunas* Assistant Vice President None
Thomas J. Gainey* Assistant Vice President None
Eric S. Jeppson* Assistant Vice President None
Julie A. Robinson* Assistant Vice President None
Peter M. Sullivan Assistant Vice President None
21445 Southeast 35th Way
Issaquah, WA 98027
Jean S. Loewenberg* Assistant Secretary Assistant
Secretary
Colleen L. Mette* Assistant Secretary Assistant
Secretary
Dorothy E. Bourassa* Assistant Secretary Assistant
Secretary
* Located at 200 Berkeley Street, Boston, Massachusetts 02116-5034
Item 29(c). - Not applicable
<PAGE>
Item 30. Location of Accounts and Records
200 Berkeley Street
Boston, Massachusetts 02116-5034
Hartwell Management Company, Inc.
515 Madison Avenue
New York, New York 10022
Keystone Investor Resource Center, Inc.
101 Main Street
Cambridge, MA 02142-1519
Data Vault, Inc.
3431 Sharp Slot Road
Swansea, MA 02277
State Street Bank and Trust Company
1776 Heritage Drive
Quincy, Massachusetts 02171
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Registrant hereby undertakes to furnish to each person to whom a copy
of Registrant's prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston, in The Commonwealth of Massachusetts, on
the 20th day of March, 1995.
KEYSTONE AMERICA HARTWELL GROWTH FUND
By: /s/ George S. Bissell
---------------------------------
George S. Bissell*
Chairman of the Board
*By: /s/ Melina M.T. Murphy
---------------------------------
Melina M.T. Murphy**
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registrant's Registration Statement has been signed below by the following
persons in the capacities indicated on the 20th day of March, 1995.
SIGNATURES TITLE
/s/ George S. Bissell Director and Chairman of the Board
- -------------------------
George S. Bissell*
/s/ Albert H. Elfner, III President, Chief Executive Officer
- ------------------------- and Director
Albert H. Elfner, III*
/s/ Kevin J. Morrissey Treasurer (Principal Financial
- ------------------------- and Accounting Officer)
Kevin J. Morrissey
*By: /s/ Melina M.T. Murphy
---------------------------------
Melina M.T. Murphy**
Attorney-in-Fact
<PAGE>
SIGNATURES TITLE
/s/ Frederick Amling Director
- --------------------------
Frederick Amling*
/s/ Charles A. Austin, III Director
- --------------------------
Charles A. Austin, III*
/s/ Edwin D. Campbell Director
- --------------------------
Edwin D. Campbell*
/s/ Charles F. Chapin Director
- --------------------------
Charles F. Chapin*
/s/ Leroy Keith, Jr. Director
- --------------------------
Leroy Keith, Jr.*
/s/ K. Dun Gifford Director
- --------------------------
K. Dun Gifford*
/s/ F. Ray Keyser, Jr. Director
- --------------------------
F. Ray Keyser, Jr.*
/s/ David M. Richardson Director
- --------------------------
David M. Richardson*
/s/ Richard J. Shima Director
- --------------------------
Richard J. Shima*
/s/ Andrew J. Simons Director
- --------------------------
Andrew J. Simons*
*By: /s/ Melina M.T. Murphy
---------------------------------
Melina M.T. Murphy**
Attorney-in-Fact
** Melina M.T. Murphy, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons and attached hereto as Exhibit 24(b)(18).
<PAGE>
INDEX TO EXHIBITS
Page Number
in Sequential
Exhibit Number Exhibit Numbering System
1 Declaration of Trust
2 By-Laws
5 (A) Form of Investment Advisory and
Management Agreement
(B) Form of SubInvestment Advisory Agreement
6 (A) Principal Underwriting Agreement
(B) Dealers Agreement(1)
8 Custodian, Fund Accounting
and Recordkeeping Agreement
Amendments to Custody Agreement
10 Legal Opinion
11 Independent Auditors Consent(2)
14 Model Retirement Plans(3)
15 Distribution Plan
Form of Class B/C Distribution Plan
Form of Class B Distribution Plan
16 Performance Data Schedules(2)
18 Powers of Attorney
- -----------
(1) Incorporated by reference herein to Post-Effective Amendment No. 40 to
Registration Statement No. 2-25215/811-1380 for Keystone America Hartwell
Growth Fund.
(2) Incorporated by reference herein to Post-Effective Amendment No. 45 to
Registration Statement No. 2-25215/811-1380 for Keystone America Hartwell
Growth Fund.
(3) Incorporated by reference herein to Post-Effective Amendment No. 66 to
Registration Statement No. 2-10527/811-96 for Keystone America Hartwell
Growth Fund.
<PAGE>
EXHIBIT 99.24(b)(1)
KEYSTONE AMERICA HARTWELL GROWTH FUND
DECLARATION OF TRUST
Dated March 18, 1992
This DECLARATION OF TRUST of Keystone America Hartwell Growth Fund, made at
Boston, Massachusetts on April , 1995 by George S. Bissell, K. Dun Gifford, John
M. Haffenreffer, Philip B. Harley, F. Ray Keyser, Jr., Everett P. Pope, James A.
Reed, John W. Sharp, Spencer R. Stuart, Russel R. Taylor, Rodney M. Vining and
Charles M. Williams (hereinafter with their successors referred to as the
"Trustees").
WITNESSETH:
WHEREAS the Trustees have agreed to manage all property received by them as
Trustees in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the holders from time
to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1. Name. This Trust shall be known as Keystone America Hartwell
Growth Fund and the Trustees shall conduct the business of this Trust under that
name or any other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided
(a) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person" and "Principal Underwriter" shall have the meanings
given them in the 1940 Act;
(b) The "Trust" refers to the Massachusetts business trust established
by and under this Declaration of Trust;
(c) "Declaration of Trust" shall mean this Declaration of Trust as
amended or restated from time to time;
(d) "Net Asset Value Per Share" means the net asset value per share of
the Trust determined in the manner provided or authorized in Article VI,
Section 4;
(e) "Shareholder" means a record owner of Shares of the Trust;
(f) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time or,
if more than one series ("Series") or more than one class ("Class") of
Shares is authorized by the Trustees, the equal proportionate units into
which each such Series or Class of Shares shall be divided from time to
time, and includes where appropriate fractions of a Share as well as a whole
Share, unless the Trustees provide that there shall be no fractions of any
particular Shares.
(g) "Trustees" refers to the Trustee or Trustees of the Trust who become
such in accordance with Article IV and where appropriate means a majority or
other portion of them acting in accordance with this Declaration of Trust or
the By-laws of the Trust; and
(h) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to provide investors a continuous source of
managed investments.
<PAGE>
ARTICLE III
BENEFICIAL INTEREST
Section 1. Shares of Beneficial Interest. The beneficial interest in the
Trust shall at all times be divided into transferable Shares, without par value,
each of which shall represent an equal proportionate interest in the Trust with
each other Share outstanding, none having priority or preference over another,
except to the extent modified by the Trustees under the provisions of this
Section. The number of Shares which may be issued is unlimited. The Trustees may
from time to time divide or combine the outstanding Shares into a greater or
lesser number without thereby changing the proportionate beneficial interests in
the Trust. Contributions to the Trust may be accepted for, and Shares shall be
redeemed as, whole Shares and/or fractions.
From time to time, as they deem appropriate, the Trustees may create
additional Series and/or Classes of Shares, in addition to the Shares initially
created under this instrument ("Original Series"). References in this
Declaration of Trust to Shares of the Trust shall apply, as appropriate, to each
such Series of Shares and to each such Class of Shares.
Any additional Series of Shares created hereunder shall represent the
beneficial interest in the assets (and related liabilities) allocated by the
Trustees to such Series of Shares and acquired by the Trust only after creation
of the respective Series of Shares and only on account of such Series. If the
Trustees create any additional Series of Shares hereunder, then the Original
Series shall be deemed a separate Series of Shares. Upon creation of each Series
of Shares, the Trustees may designate it appropriately and determine the
investment policies with respect to the assets allocated to such Series of
Shares, redemption rights, dividend policies, conversion rights, liquidation
rights, voting rights, and such other rights and restrictions as the Trustees
deem appropriate, to the extent not inconsistent with the provisions of this
Declaration of Trust.
The Trustees may divide any Series (including the Original Series) into more
than one Class of Shares. Upon creation of each additional Class of Shares the
Trustees may designate it appropriately and determine its rights and
restrictions (including without limitation such redemption rights, dividend
rights, conversion rights, liquidation rights, voting rights, and such other
rights and restrictions as the Trustees deem appropriate).
Section 2. Ownership of Shares. The ownership of Shares shall be recorded in
the books of the Trust or a transfer agent or a similar agent. The Trustees may
make such rules as they consider appropriate for the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer agent or similar agent, as the case may be, shall be conclusive as to
who are the holders of Shares of each Series or Class and as to the number of
Shares of each Series or Class held from time to time by each.
Section 3. Investments in the Trust. The Trustees shall accept investments
in the Trust from such persons and on such terms and, subject to any
requirements of law, for such consideration as the Trustees from time to time
authorize and may cease offering Shares to the public at any time. After such
acceptance, the number of Shares of the appropriate Series or Class to represent
the contribution may in the Trustees' discretion be considered as outstanding
and the amount receivable by the Trustees on account of the contribution may be
treated as an asset of the Series or Class.
Section 4. No Preemptive Rights. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
Section 5. Provisions Relating to Series or Classes of Shares. Whenever no
Shares of a Series or Class are outstanding, then the Trustees may abolish such
Series or Class. Whenever more than one Series or Class of Shares is
outstanding, then the following provisions shall apply:
(a) ASSETS BELONGING TO EACH SERIES OR CLASS. All consideration received
by the Trust for the issue or sale of Shares of a particular Series or
Class, together with all assets in which such consideration is invested or
reinvested, all income, earnings and proceeds thereof, and any funds derived
from any reinvestment of such proceeds, shall, except to the extent
specifically otherwise provided in the provisions adopted by the Board of
Trustees establishing the Series or Class, irrevocably belong to that Series
or Class for all purposes, subject only to the rights of creditors, and
shall be so recorded upon the books of the Trust. In the event there are
assets, income, earnings, and proceeds thereof which are not readily
identifiable as belonging to a particular Series or Class, then the Trustees
shall allocate such items to the various Series or Classes then existing, in
such manner and on such basis as they, in their sole discretion, deem fair
and equitable. The amount of each such item allocated to a particular Series
or Class by the Trustees shall then belong to that Series or Class, and each
such allocation shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes.
(b) LIABILITIES BELONGING TO EACH SERIES OR CLASS. The assets belonging
to each particular Series or Class shall, except to the extent specifically
otherwise provided in the provisions adopted by the Board of Trustees
establishing the Series or Class, be charged with the liabilities, expenses,
costs and reserves of the Trust attributable to that Series or Class; and
any general liabilities, expenses, costs and reserves of the Trust which are
not readily identifiable as attributable to a particular Series or Class
shall be allocated by the Trustees to the various Series or Classes then
existing, in such manner and on such basis as they, in their sole
discretion, deem fair and equitable. Each such allocation shall be
conclusive and binding upon the Shareholders of all Series or Classes for
all purposes.
(c) SERIES OR CLASSES OF SHARES, DIVIDENDS AND LIQUIDATION. Each Share
of each respective Class or Series shall, except to the extent specifically
otherwise provided in the provisions adopted by the Board of Trustees
establishing the Series or Class, have the same rights and pro rata
beneficial interest in the assets and liabilities of the Series or Class as
any other such Share. Any dividends paid on the Shares of any Series or
Class shall, except to the extent specifically otherwise provided in the
provisions adopted by the Board of Trustees establishing the Series or
Class, only be payable from and to the extent of the assets (net of
liabilities) belonging to that Series or Class. In the event of liquidation
of a Series or Class, only the assets (less provision for liabilities) of
that Series or Class shall be distributed to the holders of the Shares of
that Series or Class.
(d) VOTING BY SERIES OR CLASS. Except as provided in this Section or as
limited by the rights and restrictions of any Series or Class, each Share of
the Trust may vote with and in the same manner as any other Share on matters
submitted to a vote of the Shareholders entitled to vote thereon, without
differentiation among votes from the separate Series or Classes; provided,
however, that (i) as to any matter with respect to which a separate vote of
any Series or Class is required by the 1940 Act, or otherwise by applicable
law, such requirement as to a separate vote shall apply in lieu of the
voting described above; (ii) in the event that the separate vote
requirements referred to in (i) above apply with respect to one or more
Series or Classes, then, subject to (iii) below, the Shares of all other
Series or Classes shall vote without differentiation among their votes; and
(iii) as to any matter which does not affect the interest of any particular
Series or Class, only the holders of Shares of the one or more affected
Series or Classes shall be entitled to vote.
Section 6. Limitation of Personal Liability. The Trustees shall have no
power to bind any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription to
any Shares or otherwise. Every note, bond, contract or other undertaking issued
by or on behalf of the Trust or the Trustees relating to the Trust shall include
a recitation limiting the obligation represented thereby to the Trust and its
assets (but the omission of such a recitation shall not operate to bind any
Shareholder).
ARTICLE IV
THE TRUSTEES
Section 1. Number of Trustees. The number of Trustees shall initially be
such number as shall be elected as such by a vote of the shareholders of the
Trust and thereafter shall be such number as shall be fixed from time to time by
action of a majority of the Trustees.
Section 2. Election or Appointment and Term. The initial Trustees shall be
the individuals signing this Declaration in that capacity, who shall have been
previously elected by a vote of the shareholders of the Trust. Thereafter,
subject to Section 16(a) of the 1940 Act, the Trustees may elect themselves or
their successors at such intervals, as they deem proper, and may appoint
Trustees to fill vacancies as provided in Section 4 hereof; provided, that
Trustees shall be elected by vote of a majority of Shares voting thereon at such
time or times as the Trustees shall determine that such action is advisable.
Subject to Section 3 hereof, the Trustees shall have the power to set and alter
the terms of office of the Trustees, and they may at any time lengthen or
shorten their own terms or make their terms of unlimited duration; provided,
that the term of office of any incumbent Trustee shall continue until
terminated, as provided in Section 4 hereof or, if not so terminated, until the
election of such Trustee's successor in office has become effective in
accordance with this Section 2.
Section 3. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees, and such resignation shall be
effective upon such delivery or at any later date according to the terms of the
instrument. Any Trustee may be removed by the action of two-thirds of the
remaining Trustees. Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver such documents
as the remaining Trustees shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust property held in his name. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence. However, the execution and delivery of such
documents by a former Trustee or his legal representative shall not be requisite
to the vesting of title to the Trust property in the remaining Trustees.
Section 4. Vacancies. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of such Trustee's death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of Trustee. No such vacancy shall operate to annul this
Declaration of Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. In the case of an existing vacancy,
including a vacancy existing by reason of an increase in the number of Trustees,
subject to applicable law, the remaining Trustees or, if only one Trustee shall
then remain in office, the sole remaining Trustee, shall appoint such individual
to fill such vacancy as they or he, in their or his discretion, shall see fit.
An appointment of a Trustee may be made in anticipation of a vacancy to occur at
a later date by reason of retirement or resignation of a Trustee or an increase
in the number of Trustees; provided, that such appointment shall not become
effective prior to such retirement or resignation or such increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 4, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by this Declaration
of Trust in the manner provided by this Declaration of Trust. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees shall be conclusive evidence of the existence of such vacancy.
Section 5. Management of the Trust. Subject to the provisions of this
Declaration of Trust, the business and affairs of the Trust shall be managed by
the Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility. Action by the Trustees may be taken by majority vote of
the Trustees at a meeting at which a quorum (which shall be a majority of the
Trustees then in office) shall be present, or by a writing signed by a majority
of the Trustees in office.
Without limiting the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of the
business of the Trust and may amend and repeal them to the extent that they do
not reserve that right to any Shareholders; they may elect and remove such
officers and appoint and terminate such agents as they consider appropriate;
they may appoint from their own number and terminate any one or more committees;
they may employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities,
retain a transfer agent or a Shareholder servicing agent, or both, provide for
the distribution of Shares by the Trust, through one or more principal
underwriters or otherwise, set, or otherwise provide for the setting of, record
dates, and in general delegate such authority to do any or all things which the
Trustees may do in the operation of the business of the Trust as they consider
desirable to any officers of the Trust and committees of the Trustees and to any
agent or employee, custodian or underwriter. Any action relating to the
operation of the Trust provided for herein to be taken by the Trustees may be
taken by any other person under authority granted by the Trustees whether or not
specifically so stated, and unless specifically so stated to the contrary. A
specific statement indicating that the Trustees may delegate any authority shall
not give rise to any contrary implication with respect to any provision of this
Declaration of Trust.
Without limiting the foregoing, the Trustees in addition to all powers
granted by law shall have power and authority:
(a) To invest and reinvest cash, and to hold cash uninvested, without in
anywise being bound or limited by any present or future law or custom in
regard to investments by trustees;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate or lease any
or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property, and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such power and
discretion with relation to securities or property as the Trustees shall
deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in the Trust's
own name or in the name of a custodian or subcustodian or a nominee or
nominees or otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which
is held in the Trust; to consent to any contract, lease, mortgage, purchase
or sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust;
(g) To join with other security holders in acting through a committee,
depository, voting trustee or otherwise, and in that connection to deposit
any security with, or transfer any security to, any such committee,
depository or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of
the expenses and compensation of such committee, depository or trustee as
the Trustees shall deem proper;
(h) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust for any matter in controversy, including but not limited
to claims for taxes; and
(i) To borrow funds.
The Trustees shall not be required to obtain any court order to deal with
any assets of the Trust or take any other action hereunder.
Section 6. Ownership of Assets of the Trust. The assets of the Trust shall
be held separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or by any successor Trustees.
All of the assets of the Trust shall at all times be considered as vested in the
Trustees. No Shareholder shall be deemed to have a severable ownership in any
individual asset of the Trust or any right of partition or possession thereof,
but each Shareholder shall have a proportionate undivided beneficial interest in
the assets of the Series or Class of Shares of which he is a holder, subject to
any rights or restrictions applicable to any Series or Class of Shares of which
he is a holder.
Section 7. Payment of Expenses. The Trustees shall pay or cause to be paid
out of the principal or income of the Trust, or partly out of principal and
partly out of income, as they deem fair, all expenses, charges, taxes and
liabilities incurred or arising in connection with the Trust, or in connection
with the management thereof, including but not limited to the Trustees'
compensation and such expenses and charges for the services of the Trust's
investment adviser or manager, administrator, auditor, counsel, custodian,
transfer agent, Shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as the Trustees may
deem necessary or proper to incur.
Section 8. Investment Management and Other Services. Without limiting the
generality of the powers of the Trustees, subject to applicable law, the
Trustees may enter into a contract with any person or persons, including any
firm, corporation, trust or association in which any Trustee, Shareholder or
officer of the Trust may be interested, to act as investment advisers and/or
managers of the Trust and to provide such investment advice and/or management as
the Trustees may from time to time consider appropriate ("Adviser"). Any such
contract may authorize the Adviser to determine from time to time what
securities shall be acquired, held or disposed of by the Trust and what portion
of assets of the Trust shall be held uninvested and to take, on behalf of the
Trust, actions which the Adviser deems necessary to implement the investment
policies of the Trust, including the placement of all orders for the purchase,
sale or loan of portfolio securities for the Trust's account with brokers or
dealers or others selected by the Adviser and the giving of instructions to the
custodian of the Trust's assets as to deliveries of securities and payments of
cash for the account of the Trust.
Without limiting the generality of the powers of the Trustees, subject to
applicable law, the Adviser may enter into an agreement to retain at its own
expense any person or persons, including any firm, corporation, trust or
association in which any Trustee, Shareholder or officer of the Trust may be
interested, to provide the Trust investment advice and/or management and any
person or persons so retained may be granted all authority which has been
granted to the Adviser under the contract which the Adviser entered into
pursuant to the preceding paragraph.
Without limiting the generality of the powers of the Trustees, the Trustees
may enter into a contract with any person or persons, including any firm,
corporation, trust or association in which any Trustee, Shareholder or officer
of the Trust may be interested, to act as principal underwriter for the Shares.
Section 9. Affiliations of Trustees or Officers, Etc. The fact that (i) any
of the Shareholders, Trustees or officers of the Trust is a shareholder,
Director, officer, partner, Trustee, employee, manager, adviser or distributor
of or for any partnership, corporation, trust, association or other organization
or for any parent or affiliate of any organization, with which any contract
including, without limitation, contracts for services as manager, investment
adviser, distributor, principal underwriter, custodian, transfer agent or
dividend disbursing agent or for related services may have been or may hereafter
be made, or that any such organization, or any parent or affiliate thereof, is a
Shareholder of or has an interest in the Trust, or that (ii) any partnership,
corporation, trust, association or other organization with which a contract
referred to in (i) above may have been or may hereafter be made also has any one
or more of such contracts with one or more other partnerships, corporations,
trusts, associations or other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote only (i)
for the election of Trustees as provided in Section 2 of Article IV hereof and
the removal of Trustees to the extent provided in Section 16(c) of the 1940 Act,
(ii) with respect to approval or termination in accordance with the 1940 Act of
any investment advisory or management agreement described in Article IV hereof,
(iii) with respect to any amendment of this Declaration of Trust to the extent
and as provided in Section 7 of Article IX hereof, (iv) to the same extent as
the stockholders of a Massachusetts corporation as to whether or not a court
action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
and (v) with respect to such additional matters relating to the Trust as may be
required by this Declaration of Trust or the By-Laws, or as to which the
Trustees in their discretion shall determine such Shareholder vote to be
required by law or otherwise to be necessary, appropriate or advisable.
Each whole Share shall be entitled to one vote as to any matter on which it
is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. Until Shares are issued, the Trustees
may exercise all rights of Shareholders and may take any action required by law,
this Declaration of Trust or any By-Laws of the Trust to be taken by
Shareholders.
Section 2. Meetings. Meetings of Shareholders shall be held at such times at
the principal office of the Trust or such other place as the Trustees may
designate. Meetings of the Shareholders may be called by the Trustees or such
other person or persons as may be specified in the By-laws. Shareholders shall
be entitled to at least seven days' notice of any meeting.
Section 3. Quorum and Required Vote. Except as otherwise provided by law, to
constitute a quorum for the transaction of business at a Shareholders' meeting
there must be present, in person or by proxy, holders of a majority of the total
number of Shares of the Trust then outstanding and entitled to vote at the
meeting, but any lesser number shall be sufficient for adjournment, and any
adjourned session or sessions may be held within 90 days after the date set for
the original meeting without the necessity of further notice. Subject to any
applicable requirements of law, a majority of the Shares present and entitled to
vote on a question or election shall decide such question or election, except
when a larger vote is required by any provision of this Declaration of Trust,
the By-Laws of the Trust or any applicable provision of law.
Section 4. Action by Written Consent. Except as otherwise required by law,
any action required or permitted to be taken at any meeting may be taken without
a meeting if a consent in writing setting forth such action is signed by the
Shareholders entitled to vote on the subject matter thereof holding a majority
of the Shares entitled to vote thereon.
Section 5. Additional Provisions. The By-Laws may include further provisions
for Shareholders' votes and meetings and related matters.
ARTICLE VI
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees may, but need not, each year
distribute to the Shareholders of each Series or Class such income and gains as
the Trustees may determine, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with generally accepted accounting practices. The Trustees shall
have full discretion to determine which items shall be treated as income and
which items as capital and their determination shall be binding upon the
Shareholders. Distributions of each year's income of each Series or Class, if
any be made, may be made in one or more payments, which shall be in Shares, in
cash or otherwise and on a date or dates and as of a record date or dates
determined by or under the authority of the Trustees. At any time and from time
to time in their discretion the Trustees may distribute to the Shareholders of
any one or more Series or Class as of a record date or dates determined by or
under the authority of the Trustees, in Shares, in cash or otherwise, all or
part of any gain realized on the sale or disposition of property of the Trust or
otherwise, or all or part of any other principal of the Trust. Each distribution
pursuant to this Section 1 shall be made ratably according to the number of
Shares of the Series or Class held by the several Shareholders on the applicable
record date thereof, provided that no distribution need be made on Shares
purchased pursuant to orders received or for which payment is made after such
time or times as may be determined by or under the authority of the Trustees.
Any such distribution paid in Shares will be paid at the net asset value thereof
as determined in accordance with Section 4 hereof.
Section 2. Redemptions. Upon offer by any Shareholder of all or part of the
Shares held by the Shareholder for redemption hereunder, in accordance with such
methods, upon such terms and subject to such conditions as from time to time may
be determined by or under the authority of the Trustees, the Trust shall redeem
the Shares so offered by distributing to the Shareholder the Net Asset Value per
Share thereof determined as of a time fixed by or under the authority of the
Trustees. The Trust shall have the right at its option and at any time to redeem
the Shares of any Shareholder for their Net Asset Value per Share if the
Shareholder owns Shares of a Series or Class having an aggregate net asset value
of less than such minimum amount as may from time to time be prescribed by or
under the authority of the Trustees or if ownership of such Shares by the
Shareholder could create adverse tax consequences for the Trust or any Series or
Class thereof. With respect to all Shares or any Series or Class of Shares, the
right to redemption or the date for payment may, however, be delayed or
suspended by the Trustees if there is an extraordinary closing or restriction of
trading on the New York Stock Exchange as determined under rules and regulations
of the Commission, or an emergency exists as a result of which it is not
reasonably practicable for the Trust to dispose of securities or fairly to
determine the value of its net assets, or as the Commission may permit. The
completion of such distribution on redemption of Shares shall constitute a full
discharge of the Trust and Trustees with respect to such Shares, and the
Trustees may require that any certificate or certificates issued by the Trust to
evidence the ownership of the Shares shall be surrendered to the Trustees for
cancellation or notation. Shares so redeemed shall be cancelled or held by the
Trust for reissue, as the Trustees may from time to time determine.
Section 3. Payment in Kind. Subject to any generally applicable limitation
imposed by the Trustees, any distribution on redemption may, if authorized by
the Trustees, be made wholly or partly in kind, instead of in cash. Such
distribution in kind shall be made by distributing investments constituting, in
the opinion of the Trustees, a fair representation of the various types of
securities then held by the Series or Class of Shares being redeemed (but not
necessarily including a portion of each particular investment) and in each case
having an aggregate value equal to the amount of cash instead of which such
distribution in kind is made.
Section 4. Determination of Net Asset Value per Share. Subject to applicable
law, the Net Asset Value per Share of each Series or Class shall be computed as
of such times as may be determined by or under authority of the Trustees by
determining the value of all the investments of such Series or Class in such
manner as may be determined by or under authority of the Trustees, adding any
other assets of such Series or Class, subtracting all liabilities of such Series
or Class and dividing the result by the number of Shares of such Series or Class
outstanding.
Determination of Net Asset Value per Share so made in good faith and
pursuant to the provisions of the 1940 Act shall be binding on all parties
concerned.
Section 5. Automatic Redemption from Small Accounts. The Trustees shall have
the power to redeem shares at a redemption price determined in accordance with
Section 4 of this Article if at any time the total investment in an account does
not have a value of at least $1,000 or such other minimum amount as the Trustees
may from time to time determine. Before redeeming such Shares, the Shareholder
will be notified that the value of his account is less than the required minimum
amount and be allowed 60 days or such period as is permitted by law to make an
additional investment to bring the total value of such account to such amount or
more.
Section 6. Power to Modify Foregoing Procedures. Notwithstanding any of the
foregoing provisions of this Article VI, the Trustees may prescribe, in their
absolute discretion, such other bases and times for the declaration and payment
of dividends and distributions as they may deem desirable or necessary to enable
the Trust to comply with any provision of the 1940 Act or the Internal Revenue
Code, including any rule or regulation adopted by the Commission or any
securities association registered under the Securities Exchange Act of 1934, or
any order of exemption issued by the Commission or any rule or regulation issued
under the Internal Revenue Code, all as in effect now or as hereafter amended or
modified.
ARTICLE VII
COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES
Section 1. Compensation. The Trustees shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
Section 2. Limitation of Liability. Provided they have exercised reasonable
care in their selection, the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee or Adviser
of the Trust nor shall any Trustee be responsible for the act or omission of any
other Trustee, but nothing herein contained shall protect any Trustee against
any liability to which he would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Every note, bond, contract, instrument, certificate, share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in their or his capacity
as Trustees or Trustee, and such Trustees or Trustee shall not be personally
liable thereon.
The Trustees shall use their best efforts to ensure that every note, bond,
contract, instrument, certificate or undertaking made or issued by the Trustees
or by any officers shall give notice of the existence of this Declaration of
Trust and shall recite to the effect that the same was executed or made by or on
behalf of the Trust or by them as Trustees or officers, and not individually,
and is not binding upon any of them or the Shareholders individually, but is
binding only upon the Trust property, or the assets of the particular Series or
Class in question, as the case may be, but the omission thereof shall not
operate to bind any Trustee or officer or Shareholder individually, or to
subject the assets of any Series or Class to the obligations of any other Series
or Class.
ARTICLE VIII
INDEMNIFICATION
Section 1. Trustees, Officers, etc. The Trust shall indemnify each of its
present and former Trustees and officers and may indemnify any of its present or
former employees or agents, and shall indemnify any persons who serve or have
served at the Trust's request as Directors, officers or Trustees of another
organization, and may indemnify persons who serve or have served at the Trust's
request as employees or agents of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise (hereinafter referred to as
a "Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any such Covered Person
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office, employed or acting as agent, or thereafter, by
reason of being or having been such a Trustee, officer, Director, employee or
agent, except with respect to any matter as to which such Covered Person shall
have been finally adjudicated in any such action, suit or other proceeding not
to have acted in good faith in the reasonable belief that such Covered Person's
action was in the best interest of the Trust and except that no person shall be
indemnified against any liability to the Trust or its Shareholders to which such
Covered Person shall otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. Expenses, including counsel fees so incurred by any
Covered Person, may in the discretion of the Trustees be paid from time to time
by the Trust in advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Covered Person
to repay amounts so paid to the Trust if it is ultimately determined that
indemnification against such expenses is not authorized under this Article.
Except as otherwise provided by law, the Trust shall have power to purchase
and maintain insurance on behalf of a Covered Person against any liability
asserted against him and incurred by him in his capacity as a Covered Person, or
arising out of his status as such, whether or not the Trust would have the power
to indemnify him against the liability under the provisions of this Section.
Section 2. Compromise Payment. As to any matter disposed of by a compromise
payment by any Covered Person referred to in Section 1 above, pursuant to a
consent decree or otherwise, no such indemnification either for such payment or
for any other expenses shall be provided unless such compromise shall be
approved as in the best interests of the Trust, after notice that it involved
such indemnification, (a) by a disinterested majority of the Trustees then in
office; or (b) by a majority of the disinterested Trustees then in office; or
(c) by any disinterested person or persons to whom the question may be referred
by the Trustees, provided that in the case of approval pursuant to clause (b) or
(c) there has been obtained an opinion in writing of independent legal counsel
to the effect that such Covered Person appears to have acted in good faith in
the reasonable belief that his action was in the best interests of the Trust and
that such indemnification would not protect such person against any liability to
the Trust to which such person would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office; or (d) by vote of a majority of the
Shares voting thereon, exclusive of any Shares beneficially owned by any
interested Covered Person. Approval by the Trustees pursuant to clause (a) or
(b) or any disinterested person or persons pursuant to clause (c) of this
Section shall not prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with any such clauses as
indemnification if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the reasonable belief
that such person's action was in the best interests of the Trust or to have been
liable to the Trust or its Shareholders by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
Section 3. Indemnification Not Exclusive. The right of indemnification
hereby provided shall not be exclusive or affect any other rights to which any
such Covered Person may be entitled. As used in this Article VIII, the term
"Covered Person" shall include such person's heirs, executors and
administrators. An "interested Covered Person" is one against whom the action,
suit or other proceeding in question or another action, suit or other proceeding
on the same or similar grounds is then or has been pending, and a "disinterested
person" is a person against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article shall
affect any rights to indemnification to which personnel of the Trust other than
Trustees and officers or other persons may be entitled by contract or otherwise
under law.
Section 4. Shareholders. In case any Shareholder or former Shareholder shall
be held to be personally liable solely by reason of his being or having been a
Shareholder and not because of his acts or omissions or for some other reason,
the Shareholder or former Shareholder (or his heirs, executors, administrators
or other legal representatives or in the case of a corporation or other entity,
its corporate or other successor) shall be entitled out of the assets of the
Trust to be held harmless from and indemnified against all loss and expense
arising from such liability.
ARTICLE IX
MISCELLANEOUS
Section 1. Trust Not a Partnership. It is hereby expressly declared that a
trust and not a partnership is created hereby. Neither the Trust nor the
Trustees, nor any officer, employee or agent of the Trust shall have any power
to bind personally either the Trust's Trustees or officers or any Shareholders.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim, and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Declaration of
Trust shall protect any Trustee against any liability to which such Trustee
would otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee hereunder.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder in good
faith and with reasonable care under the circumstances then prevailing shall be
binding upon everyone interested. Subject to the provisions of Section 1 of this
Article IX, a Trustee shall be liable for his own wilful defaults, and for
nothing else, and shall not be liable for errors of judgment or mistakes of fact
or law. The Trustees may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust, and subject to the
provisions of said Section 1 shall be under no liability for any act or omission
in accordance with such advice or for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees pursuant hereto
or to see to the application of any payments made or property transferred to the
Trust or upon its order.
Section 4. Duration; Termination of Trust; Amendments; Mergers, etc.
(a) This Trust shall continue without limitation of time but subject to
the provisions of this Section 4.
(b) The Trust (as used in this Section 4 the term "Trust" specifically
also means any Series or Class) may be terminated by action of the Trustees.
(c) Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the purpose of
winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust
and all of the powers of the Trustees under this Declaration of Trust
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust,
collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust property to
one or more persons at public or private sale for consideration which
may consist in whole or in part of cash, securities or other property of
any kind, discharge or pay its liabilities, and to do all other acts
appropriate to liquidate its business.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection, the
Trusteees shall distribute the remaining Trust property, in cash or in
kind or partly each, among the Shareholders according to their
respective rights and interests.
(d) After termination of the Trust and distribution to the Shareholders
as herein provided, a majority of the Trustees shall execute and lodge among
the records of the Trust an instrument in writing setting forth the fact of
such termination, and the Trustees shall thereupon be discharged from all
further liabilities and duties hereunder, and the rights and interests of
all Shareholders shall thereupon cease.
(e) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in paragraphs (c) and (d), the Trust shall
terminate and the Trustees shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties shall be canceled and discharged.
Section 5. Filing of Copies, References, Headings. The original or a copy of
this instrument and of each Declaration of Trust supplemental hereto or
Amendment hereof shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any Supplemental
Declaration of Trust or Amendments have been made and as to any matters in
connection with the trust hereunder; and, with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be a copy
of this instrument or of any such Supplemental Declaration of Trust or
Amendment. In this instrument or in any such Amendment or Supplemental
Declaration of Trust, references to this instrument, and all expressions such as
"herein," "hereof," and "hereunder," shall be deemed to refer to this instrument
as amended or affected by any such Supplemental Declaration of Trust or
Amendment. Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this instrument, rather than the headings,
shall control. This instrument may be executed in any number of counterparts
each of which shall be deemed an original.
Section 6. Applicable Law. The Trust set forth in this instrument is made in
The Commonwealth of Massachusetts, and it is created under and is to be governed
by and construed and administered according to the laws of such Commonwealth.
The Trust shall be of the type commonly called a Massachusetts business trust,
and, without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
Section 7. Amendments. (a) This Declaration of Trust may be amended by a
vote or written consent of the Trustees. However, if such amendment adversely
affects the rights of any Shares of any Series or any Class with respect to
matters to which such amendment is applicable, such amendment shall be subject
to approval by holders of a majority of the Shares of such Series or Class. An
amendment or other action which provides for an additional Series of Shares
(and/or Class thereof), which Series may vote together with Shares of other
Series (and/or Classes thereof) and makes other provisions with respect to such
Series (and/or Class thereof) and its relation to existing Series (and/or
Classes thereof), shall not be deemed to adversely affect the rights of any
other Series of Shares or Class thereof. The Trustees may also amend this
Declaration of Trust without any Shareholder approval to change the name of the
Trust, to supply any omission, to cure, correct or supplement any ambiguous,
defective or inconsistent provision hereof, or, if they deem it necessary, to
conform this Declaration of Trust to the requirements of applicable federal laws
or regulations or the requirements of the Internal Revenue Code, or to eliminate
or reduce any federal, state or local taxes which are or may be payable by the
Trust or the Shareholders, but the Trustees shall not be liable for failing to
do so.
(b) Nothing contained in this Declaration of Trust shall permit the
amendment of this Declaration of Trust to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the Secretary
or any Assistant Secretary of the Trust, setting forth an amendment by reciting
that it was duly adopted by the Shareholders or by the Trustees as aforesaid, or
a copy of the Declaration of Trust as amended, and executed by a majority of the
Trustees or certified by the Secretary or any Assistant Secretary of the Trust,
shall be conclusive evidence of such amendment when lodged among the records of
the Trust.
Section 8. Merger, Consolidation and Sale of Assets. The Trust may merge
into or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust property, including its good will, upon such terms and conditions and for
such consideration when and as authorized by the Trustees.
Section 9. Incorporation. The Trustees may cause to be organized or assist
in organizing a corporation or corporations under the laws of any jurisdiction
or any other trust, partnership, association or other organization to take over
all the Trust property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring the
Trust property to such organizations or entities.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
in the City of Boston, Massachusetts, for themselves and their assigns, as of
the day and year first above written.
-------------------------------------------------------------
George S. Bissell
-------------------------------------------------------------
K. Dun Gifford
-------------------------------------------------------------
John M. Haffenreffer
-------------------------------------------------------------
Philip B. Harley
-------------------------------------------------------------
F. Ray Keyser, Jr.
-------------------------------------------------------------
Everett P. Pope
-------------------------------------------------------------
James A. Reed
-------------------------------------------------------------
John W. Sharp
-------------------------------------------------------------
Spencer R. Stuart
-------------------------------------------------------------
Russel R. Taylor
-------------------------------------------------------------
Rodney M. Vining
-------------------------------------------------------------
Charles M. Williams
<PAGE>
EXHIBIT 99.24(b)(2)
FORM OF
BY-LAWS
KEYSTONE AMERICA HARTWELL GROWTH FUND
ARTICLE 1.
Trust Agreement and Principal Office
1.1 Trust Agreement. These By-laws are adopted pursuant to and are subject to
the terms of the Declaration of Trust ("Trust Agreement") of Keystone America
Hartwell Growth Fund ("Fund").
1.2 Principal Office of the Fund. The principal office of the Fund shall be
located in Boston, Massachusetts, or such other place as the Trustees may
designate from time to time.
ARTICLE 2.
Meetings of Shareholders
2.1 Meetings. Meetings may be called by the Trustees or by the President or by
any other officers designated for the purpose by the Trustees. The portion of
this Section 2.1 relating to special meetings to be called by shareholders may
be altered, amended or repealed by the Trustees without action by the
shareholders.
2.2 Business to be Transacted. At any meeting of shareholders, such business may
be transacted as is referred to in the notice of the meeting, and any other
business considered appropriate by or under authority of the Trustees.
2.3 Notice. A written notice of each meeting of the shareholders, specifying the
time, place and purposes thereof, shall be given as hereinafter provided by the
Secretary of the Fund or any Assistant Secretary or by a person or persons
designated by either of them, to each shareholder who is entitled to vote
thereat at least seven (7) days (including Sundays and holidays) before such
meeting. Notice of a meeting need not be given to any shareholder if a written
waiver of notice, executed by the shareholder or his attorney thereunto duly
authorized before or after the meeting, is filed with the records of the
meeting, or to any shareholder who attends the meeting either in person or by
proxy without protesting, prior thereto or at its commencement, the lack of
notice to such shareholder. Every notice to any shareholder required or provided
for herein may be given to him personally or by mailing it to him postage
prepaid, addressed to him at his address specified in the records of the Trust.
Notice shall be deemed to have been given at the time when it is so mailed. In
respect of any share held jointly by several persons notice so given to any one
of them shall be sufficient notice to all of them.
Any notice so sent to the address of any shareholder shall be deemed to
have been duly sent in respect of any such share whether held by him solely or
jointly with others, notwithstanding he be then deceased or be bankrupt or
insolvent or legally incompetent, and whether or not the Trustees or any person
sending such notice have knowledge of his death, bankruptcy or insolvency or
legal incompetence, until some other person or persons shall be registered as
holders. The certificate of the person or persons giving such notice shall be
sufficient evidence thereof, and shall protect all persons acting in good faith
in reliance on such certificate.
2.5 Voting. Shares may be voted in person by the shareholder or by proxy in form
reasonably acceptable to the Trust. If the holder of any share is a minor or a
person of unsound mind, or subject to guardianship or to the legal control of
any other person as regards the charge or management of such share, he may vote
by his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy.
2.6 Record Dates. For the purpose of determining the shareholders who are
entitled to vote or act at any meeting or any adjournment thereof, or who are
entitled to receive payment of any dividend or of any other distribution, the
Trustees may from time to time fix or authorize the fixing by others of a time
as the record date for determining the shareholders having the right to notice
of and to vote at such meeting and any adjournment thereof or the right to
receive such dividend or distribution, and in such case only shareholders of
record on such record date shall have such right, notwithstanding any transfer
of shares on the books of the Fund after the record date; or without fixing such
record date the Trustees may for any of such purposes close the register or
transfer books for all or any part of such period.
ARTICLE 3.
Meetings of Trustees
3.1 Regular Meetings. Regular meetings of the Trustees may be held without call
or notice at such places and at such times as the Trustees may from time to time
determine.
3.2 Special Meetings. Special meetings of the Trustees may be held at any time
and at any place designated in the call of the meeting when called by the
Chairman, the President or the Treasurer, or by any other officer authorized by
the Trustees to do so, or by two or more Trustees, sufficient notice thereof
being given to each Trustee by the Secretary or an Assistant Secretary or by the
officer or one of the Trustees calling the meeting.
3.3 Notice. It shall be sufficient notice to a Trustee of a special meeting to
send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any Trustee if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any Trustee
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.4 Quorum. At any meeting of the Trustees a majority of the Trustees then in
office shall constitute a quorum. Any meeting may be adjourned from time to time
by a majority of the votes cast upon the question, whether or not a quorum is
present and the meeting may be held as adjourned without further notice.
3.5 Action by Vote. When a quorum is present at any meeting, a majority of the
Trustees present may take any action, except when a larger vote is required by
the Trust Agreement or any applicable law.
3.6 Participation by Conference Telephone. The Trustees may participate in a
meeting of the Trustees by means of conference telephone or similar
communications equipment. Participation by such means shall constitute presence
in person at a meeting.
3.7 Action by Writing. The Trustees may act without a meeting, and the action of
a majority of the Trustees then in office evidenced by a writing signed by such
a majority shall be valid and binding as the action of the Trustees.
ARTICLE 4.
Trustees
4.1 Term. A Trustee shall serve until his death, retirement, resignation or
removal from office or until his successor is elected and qualifies.
ARTICLE 5.
Officers
5.1 Election. The President, the Treasurer and the Secretary shall be elected
annually by the Trustees and shall serve until their successors are elected and
qualified or until their earlier deaths, resignations or removals. Other
officers, if any, including if desired a Controller, may be elected or appointed
by the Trustees at the meeting or at any other time. A Chairman of the Board may
be elected or appointed by the Trustees at the meeting or at any other time.
Vacancies in any office may be filled at any time by the Trustees.
5.2 Tenure. Each officer and each agent shall hold office at the pleasure of the
Trustees.
5.3 Powers. Subject to law and to the other provisions of these By-laws, each
officer shall have, in addition to any duties and powers set forth herein and in
the Trust Agreement, such duties and powers as are commonly incident to the
office occupied by him as if the Fund were organized as a Pennsylvania business
corporation and such other duties and powers as the Trustees may from time to
time designate.
5.4 President. Unless the Trustees otherwise provide, the President shall
preside at all meetings of shareholders and of the Trustees and the President
shall be the chief executive officer.
5.5 Treasurer. The Treasurer shall be the chief financial officer of the Fund.
In the absence of the Treasurer, or if there is then no person serving in such
office, the Controller of the Fund shall be the chief financial officer of the
Fund. He shall, subject to the provisions of the Trust Agreement and subject to
any arrangement made by the Trustees with a bank or other trust company or
organization as custodian, be in charge of valuable papers, books of account and
accounting records, and shall have such other duties and powers as may be
designated from time to time by the Trustees or by the President.
5.6 Secretary. The Secretary shall record all proceedings of the shareholders
and Trustees in books to be kept therefor, which books shall be kept at the
principal office of the Fund. In the absence of the Secretary, an Assistant
Secretary, or if there be none or if he is absent, a temporary Secretary chosen
by the shareholders or the Trustees, as the case may be, shall record the
proceedings in the aforesaid books.
5.7 Resignation and Removals. Any Trustee or officer may resign at any time by
written instrument signed by him and deposited with the Trustees by delivering
such resignation to the President or the Secretary or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. The Trustees may remove any officer elected by
them with or without cause by vote of a majority of the Trustees then in office.
Except to the extent expressly provided in a written agreement with the Fund, no
Trustee or officer resigning and no officer removed shall have any right to
compensation for any period following his resignation or removal, or any right
to damages on account of such removal.
ARTICLE 6.
Committees
6.1 General. The Trustees may appoint from their number an executive committee
to serve during their pleasure. The executive committee may, when the Trustees
are not in session at a meeting, exercise such of the powers and authority of
the Trustees as may be conferred from time to time by the Trustees. Rules
governing the actions of the executive committee may be adopted by the Trustees
from time to time as they deem appropriate. The Trustees may appoint from their
number such other committees from time to time as they deem appropriate. The
number composing such committees, the powers and authority conferred upon such
committees and the rules governing the actions of such committees shall be
determined by the Trustees at their discretion.
6.2 Quorum; Voting. A majority of the members of any committee of the Trustees
shall constitute a quorum for the transaction of business, and any action of
such a committee may be taken at a meeting by a vote of a majority of the
members present (a quorum being present) or evidenced by one or more writings
signed by such a majority. Members of a committee may participate in a meeting
of such committee by means of conference telephone or similar communications
equipment. Participation by such means shall constitute presence in person at a
meeting.
ARTICLE 7.
Fiscal Year and Seal
7.1 Fiscal Year. The fiscal year of the Fund shall end on the last day of
September in each year.
7.2 Seal. The seal of the Fund shall consist of a flat-faced die with the name
of the Fund and 1995 cut or engraved thereon.
ARTICLE 8.
Amendments
8.1 Amendment by Trustees. These By-laws may also be altered, amended or
repealed by the Trustees, except with respect to any provision which by law, the
Trust Agreement or these By-laws requires action by the shareholders.
<PAGE>
EXHIBIT 99.24(b)(5)(A)
FORM OF
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 30th day of January 1995, by and between KEYSTONE AMERICA
HARTWELL GROWTH FUND, INC., a New York corporation ("Fund"), and KEYSTONE
CUSTODIAN FUNDS, INC., a Delaware corporation ("Adviser").
WHEREAS, the Fund and the Adviser wish to enter into a SubInvestment
Advisory Agreement setting forth the terms on which the Adviser will perform
certain services for the Fund.
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Fund and the Adviser agree as follows:
1. The Fund hereby employs the Adviser to manage and administer the
operation of the Fund, to supervise the provision of services to the Fund by
others, and to manage the investment and reinvestment of the assets of the Fund
in conformity with the Fund's then current objectives and restrictions as may be
set forth from time to time in the Fund's then current prospectus and statement
of additional information, if any, and other governing documents, all subject to
the supervision of the Board of Directors of the Fund, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
2. The Adviser shall place all orders for the purchase and sale of portfolio
securities for the account of the Fund with broker-dealers selected by the
Adviser. In executing portfolio transactions and selecting broker-dealers, the
Adviser will use its best efforts to seek best execution on behalf of the Fund.
In assessing the best execution available for any transaction, the Adviser shall
consider all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker-dealer, and the reasonableness of the commission, if
any (all for the specific transaction and on a continuing basis). In evaluating
the best execution available, and in selecting the broker-dealer to execute a
particular transaction, the Adviser may also consider the brokerage and research
services (as those terms are used in Section 28(c) of the Securities Exchange
Act of 1934 ("1934 Act") provided to the Fund and/or other accounts over which
the Adviser, an affiliate of the Adviser (to the extent permitted by law) or
another investment adviser of the Fund exercises investment discretion. The
Adviser is authorized to cause the Fund to pay a broker-dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Fund which is in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction if, but only if,
the Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer viewed in terms of that particular transaction or in terms of all
of the accounts over which investment discretion is so exercised.
3. The Adviser, at its own expense, shall furnish to the Fund office space
in the offices of the Adviser or in such other place as may be agreed upon by
the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Fund, for members of the Adviser's organization to serve without
salaries from the Fund as officers or, as may be agreed from time to time, as
agents of the Fund. lie Adviser assumes and shall pay or reimburse the Fund for:
(1) the compensation (if any) of the Directors of the Fund who are affiliated
with the Adviser or with its affiliates and of all officers of the Fund as such,
and (2) all expenses of the Adviser incurred in connection with its services
hereunder. The Fund assumes and shall pay all other expenses of the Fund,
including, without limitation: (1) all charges and expenses of any custodian or
depository appointed by the Fund for the safekeeping of its cash, securities and
other property; (2) all charges and expenses for bookkeeping and auditors; (3)
all charges and expenses of any transfer agents and registrars appointed by the
Fund; (4) all fees of all Directors of the Fund who are not affiliated with the
Adviser or any of its affiliates; (5) all broker's fees, expenses and
commissions and issue and transfer taxes chargeable to the Fund in connection
with transactions involving securities and other property to which the Fund is a
party; (6) all costs and expenses of distribution of its shares of common stock
("shares") incurred pursuant to a Plan of Distribution adopted under Rule 12b-1
under the Investment Company Act of 1940 ("1940 Act"); (7) all taxes and
corporation fees payable by the Fund to federal, state or other governmental
agencies; (8) all costs of certificates representing shares of the Fund; (9) all
fees and expenses involved in registering and maintaining registrations of the
Fund and of its shares with the Securities and Exchange Commission
("Commission") and registering or quailing its shares under state or other
securities laws, including, without limitation, the preparation and printing of
registration statements, prospectuses and statements of additional information
for filing with the Commission and other authorities; (10) expenses of
preparing, printing and mailing prospectuses and statements of additional
information to shareholders of the Fund; (11) all expenses of shareholders' and
Directors' meetings and of preparing, printing and mailing notices, reports and
proxy materials to shareholders of the Fund; (12) all charges and expenses of
legal counsel for the Fund and for Directors of the Fund in connection with
legal matters relating to the Fund, including, without limitation, legal
services rendered in connection with the Fund's existence, corporate and
financial structure and relations with its shareholders, registrations and
qualifications of securities under federal, state and other laws, issues of
securities, expenses which the Fund has herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Fund, its Directors, officers, employees or agents; (13) all
charges and expenses of filing annual and other reports with the Commission and
other authorities; and (14) all extraordinary expenses and charges of the Fund.
In the event that the Adviser provides any of these services or pays any of
these expenses, the Fund will promptly reimburse the Adviser therefor.
The services of the Adviser to the Fund hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to others.
4. As compensation for the Adviser's services to the Fund during the period
of this Agreement, the Fund will pay to the Adviser a fee: calculated and paid
pursuant to the provisions of this Paragraph 4. The fee described below will be
calculated and paid monthly. The period which forms the basis for each monthly
fee calculation shall be the twelve months ending with the month for which such
fee calculation is made, and each such twelve-month period shall be referred to
below as the "fee period".
(a) BASIC FEE. As primary compensation for the services rendered and the
expenses assumed by the Adviser, the Fund shall pay the Adviser a monthly basic
advisory fee, based on the net asset value of the Fund averaged daily over the
fee period ("average daily net asset value"), in an amount equal to one twelfth
of (i) 1.0% of that portion of the average daily net asset value during the fee
period up to and including $100,000,000, (ii) .90% of that portion of the
average daily net asset value during the fee period exceeding $100,000,000 up to
and including $200,000,000, (iii) .80% of that portion of the average daily net
asset value during the fee period exceeding $200,000,000 up to and including
$300,000,000, (iv) .70% of that portion of the average daily net asset value
during the fee period exceeding $300,000,000 up to and including $400,000,000
and (v) .65% of that portion of the average daily net asset value during the fee
period exceeding $400,000,000. The average daily net asset value will be
computed by averaging the net asset values of the Fund at the close of each
business day during the fee period.
(b) INCENTIVE FEE. The monthly basic advisory fee shall be subject to an
incentive adjustment, depending on the investment performance of the Fund
relative to the Standard & Poor's Index of 500 Stocks (herein called the
"Index") during the fee period. The incentive adjustment, if any, shall be
computed as of the end of each fee period, shall be added to or subtracted from
the monthly basic advisory fee calculated for such fee period and shall be
calculated as follows:
(i) There shall be added to the net asset value of a share of the Fund
outstanding at the close of business on the last business day of the fee
period: (A) the value of all cash distributions per share of the Fund made
during such fee period, accumulated to the end of such fee period, which
amount shall be treated as if reinvested in shares of the Fund at the net
asset value per share, after giving effect to any such distributions, in
effect at,the close of business on the respective record date or dates for
the payment thereof, and (B) the value of capital gains taxes per share of
the Fund paid or payable on undistributed realized long-term capital gains
during the fee period, accumulated to the end of such fee period, which
amount shall be treated as reinvested in shares of the Fund at the net asset
value per share, after giving effect to such taxes, in effect at the close
of business on the date on which provision is made therefor. The adjusted
net asset value per share of the Fund, as so calculated, shall then be
compared with the net asset value of a share of the Fund at the close of
business on the business day immediately preceding the first day of the fee
period. The difference between such adjusted net asset value of a share at
the close of business on the last day of the fee period and the net asset
value of a share at the close of business on the day immediately preceding
the first day of the fee period shall then be expressed as a percentage of
the net asset value of a share of the Fund at the close of business on the
day immediately preceding the first day of the fee period (such percentage
being herein referred to as the "net asset value percentage change").
(ii) There shall be added to the level of the Index at the close of
business on the last business day of the fee period, in accordance with
Commission guidelines, the value, computed consistently with the Index, of
cash distributions made during the fee period and accumulated to the end of
such fee period, by companies whose securities comprise the Index. For this
purpose cash distributions on the securities which comprise the Index made
during the fee period shall be treated as reinvested in the Index at the
close of business on the last day of each month following the payment of
such distribution. The adjusted level of the Index thus obtained shall then
be compared to the level of the Index at the close of business on the
business day immediately preceding the first day of the fee period and the
difference in the two levels shall be expressed as a percentage of the Index
level at the close of business on the business day immediately preceding the
first day of the fee period (such percentage being herein referred to as the
"Index percentage change").
(iii) The Index percentage change will then be subtracted from the net
asset value percentage change to determine the performance differential, it
being understood that at any time either the percentage change and/or the
performance differential could result in a negative figure. To the extent
that the performance differential, positive or negative, exceeds 5
percentage points, there shall be an excess performance differential (herein
referred to as the "excess performance differential"). If the performance
differential is 5 percentage points (or less), there shall be no excess
performance differential and no incentive adjustment shall be applied to the
basic advisory fee for that period.
(iv) The incentive adjustment for each fee period shall be an amount
equal to one twelfth of 5% of the excess performance differential multiplied
by the average daily net asset value for the fee period provided, however,
that in no event shall the incentive adjustment for any fee period exceed
one twelfth of of 1% of the average daily net asset value during such fee
period.
(v) For purposes hereof the incentive adjustment shall be computed in
accordance with any applicable rules, regulations and interpretive releases
promulgated by the Commission.
(c) Notwithstanding the provisions of Article 2(b) above, the Adviser agrees
to reimburse the Fund for its actual expenses incurred, exclusive of brokerage
commissions, interest, taxes, dividends on short sales and the positive
incentive adjustment, if any, in excess of the lowest expense maximum permitted
by the state securities commissions of the states in which the Fund currently
has registered its securities for sale (hereinafter called the "maximum expense
limitation").
(d) ACCRUAL AND PAYMENT OF FEE. The Fund's expenses (including the monthly
basic advisory fee) and the incentive adjustment for each fee period will be
computed and accrued daily and taken into account in computing the daily net
asset value of a Fund share. However, expenses in excess of the maximum expense
limitation shall not be accrued for the purpose of computing the daily net asset
value of a Fund share. The incentive adjustment for any fee period will not be
accrued for the purpose of calculating the basic advisory fee or the incentive
adjustment for such period or for the purpose of determining the performance
differential for such period. The amount of the basic advisory fee and any
incentive adjustment will be determined monthly promptly after the close of a
fee period, and the fee for such fee period will be paid after such
determination.
(e) PRORATED PAYMENT. For any partial month in which this Agreement
commences or terminates, as the case may be, there shall be a proration of the
basic fee and the incentive adjustment, if any. Upon termination, the basic fee
and the incentive adjustment, if any, will be calculated as described in
Paragraph 4(a) and Paragraph 4(b) above, except that the fee period shall
consist of the twelve month period ending with the date of termination of this
Agreement.
5. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the performance of
this Agreement, except a loss resulting from the Adviser's willful misfeasance,
bad faith, gross negligence or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also an officer,
Director, partner, employee, or agent of the Adviser, who may be or become an
officer, Director, employee or agent of the Fund, shall be deemed, when
rendering services to the Fund or acting on any business of the Fund (other than
services or business in connection with the Adviser's duties hereunder), to be
rendering such services to or acting solely for the Fund and not as an officer,
Director, partner, employee, or agent or one under the control or direction of
the Adviser even though paid by it.
6. The Fund shall cause its books and accounts to be audited at least once
each year by a reputable independent public accountant or organization of public
accountants who shall render a report to the Fund.
7. Subject to and in accordance with the Certificate of Incorporation of the
Fund and the Certificate of Incorporation of the Adviser, it is understood that
Directors, officers, agents and shareholders of the Fund are or may be
interested in the Adviser (or any successor thereof as Directors and officers of
the Adviser or its affiliates, as stockholders of Keystone Group, Inc., J.M.
Hartwell Limited Partnership or otherwise; that Directors, officers and agents
of the Adviser and its affiliates, or stockholders of Keystone Group, Inc. are
or may be interested in the Fund as Directors, officers, shareholders or
otherwise; that the Adviser (or any such successor) is or may be interested in
the Fund as shareholder, or otherwise, and that the effect of any such adverse
interests shall be governed by said Certificate of Incorporation of the Fund and
Certificate of Incorporation of the Adviser.
8. The Adviser may enter into an agreement to retain at its own expense any
other firm or firms to provide the Fund investment advisory services, if such
agreement is approved by a vote of a majority of the outstanding voting
securities of the Fund and by the vote of a majority of the Directors of the
Fund who are not parties to such agreement or interested persons, as that term
is defined in the 1940 Act, of the Fund or of any such party, cast in person at
a meeting called for the purpose of voting on such approval.
9. This Agreement shall continue in effect for a one year period from the
date set forth above and after such date only so long as (1) such continuance is
specifically approved at least annually by the Board of Directors of the Fund or
by a vote of a majority of the outstanding voting securities of the Fund, and
(2) such renewal has been approved by the vote of a majority of Directors of the
Fund who are not interested persons, as that term is defined in the 1940 Act, of
the Adviser or of the Fund, cast in person at a meeting called for the purpose
of voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Directors of the Fund or by vote of the holders of a majority of the outstanding
voting securities of the Fund; and on sixty days' written notice to the Fund,
this Agreement may be terminated at any time without the payment of any penalty
by the Adviser. This Agreement shall automatically terminate upon its assignment
(as that term is defined in the 1940 Act). Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed postage prepaid, to the
other party at the main office of such party.
11. This Agreement may be amended at any time by an instrument in writing
executed by both parties hereto or their respective successors, provided that
with regard to amendments of substance such execution by the Fund shall have
been first approved by the vote of the holders of a majority of the outstanding
voting securities of the Fund and by the vote of a majority of Directors of the
Fund who are not interested persons (as that term is defined in the 1940 Act) of
the Adviser or of any predecessor of the Adviser, or of the Fund, cast in person
at a meeting called for the purpose of voting on such approval. A "majority of
the outstanding voting securities of the Fund" shall have, for all purposes of
this Agreement, the meaning provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period other
than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
KEYSTONE AMERICA
HARTWELL GROWTH FUND, INC.
By:_________________________
Kevin J. Morrissey
Title: Treasurer
KEYSTONE CUSTODIAN FUNDS, INC.
By:_________________________
Albert H. Elfner, III
Title: Chairman
<PAGE>
EXHIBIT 99.24(b)(5)(B)
FORM OF
SUBINVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 30th day of January 1995 by and between KEYSTONE
CUSTODIAN FUNDS, INC. ("KCF"), a Delaware corporation, and J.M. HARTWELL LIMITED
PARTNERSHIP ("JMH"), a New York limited partnership.
WITNESSETH:
WHEREAS, KCF provides investment and management services to Keystone America
Hartwell Growth Fund, Inc. ("Fund"), a New York Corporation, under an investment
advisory and management agreement dated January 30, 1995 ("Advisory Agreement")
pursuant to which KCF has agreed to manage the investment and reinvestment of
the assets of the Fund, subject to the supervision of the Board of Directors of
the Fund, for the period and on the terms set forth in the Advisory Agreement;
WHEREAS, KCF and JMH wish to enter into an agreement for JMH's investment
advisory services to the Fund.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, KCF and JMH agree as follows:
1. Consistent with the investment objectives and policies of the Fund from
time to time and subject to the supervision of the Board of Directors of the
Fund and KCF, JMH will regularly provide the Fund with investment research,
advice and supervision and will furnish continuously an investment program for
the Fund's portfolio. JMH will recommend securities to be purchased for, or sold
from, the portfolio of the Fund and win recommend what portion of the Fund's
assets shall be held uninvested. JMH shall advise and assist the officers of the
Fund and KCF in taking such steps as are necessary or appropriate to carry out
the decisions of the Fund's Board of Directors and the appropriate committees of
such Board regarding the foregoing matters. JMH will furnish to KCF from time to
time, as needed or requested, investment research and advice concerning the
purchase or sale by the Fund of such portfolio securities and other assets. Such
recommendations and services are also to include advice on the selection of such
securities to be purchased or sold, the price(s) and size of each transaction
and what portion of the Fund's assets shall be held uninvested. JMH will direct
the trading of all securities and all other transactions.
2. JMH shall place all orders for the purchase and sale of portfolio
securities for the account of the Fund with broker-dealers selected by JMH. In
executing portfolio transactions and selecting broker-dealers, JMH will use its
best efforts to seek best execution on behalf of the Fund. In assessing the best
execution available for any transaction, JMH shall consider all factors it deems
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker-dealer
and the reasonableness of the commission, if any (all for the specific
transaction and on a continuing basis). In evaluating the best execution
available, and in selecting the broker-dealer to execute a particular
transaction, JMH may also consider the brokerage and research services (as those
terms are used in Section 28(e) of the Securities Exchange Act of 1934) provided
to the Fund and or other accounts over which JMH or KCF or an affiliate of
either (to the extent permitted by law) exercises investment discretion. JMH is
authorized to cause the Fund to pay a broker-dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for the
Fund which is in excess of the amount of commission another broker-dealer would
have charged for effecting that transaction if, but only if, JMH determines in
good faith that such commission was reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer viewed in terms
of that particular transaction or in terms of all of the accounts over which
investment discretion is so exercised.
3. For its services for each calendar month, JMH will receive promptly after
calculation of each monthly fee due KCF a fee calculated in accordance with the
following:
a. 40% of KCF's basic fee for such month, as defined in the Advisory
Agreement ("Basic Fee"), for the net assets of the Fund ("Base Assets"),
plus
b. 60% of KCF's Incentive Fee for such month, as defined in the
Advisory Agreement ("Incentive Fee"), on all Assets; provided, however that
JMH's total fee will always equal 25% of the combined total fee paid by the
Fund to KCF pursuant to the Advisory Agreement.
4. JMH shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the performance of this
Agreement, except a loss resulting from JMH's willful misfeasance, bad faith,
gross negligence or from reckless disregard by it of its obligations and duties
under this Agreement. Any person, even though also an officer, Director,
partner, employee, or agent of JMH, who may be or become an officer, Director,
employee or agent of the Fund, shall be deemed, when rendering services to the
Fund or acting on any business of the Fund (other than services or business in
connection with JMH's duties hereunder), to be rendering such services to or
acting solely for the Fund and not as an officer, Director, partner, employee,
or agent or one under the control or direction of JMH even though paid by it.
5. This Agreement shall continue in effect for a one year period from the
date set forth above and shall be automatically renewed for successive one-year
periods unless JMH or KCF has given the other at least sixty days' written
notice of its intention to terminate this Agreement at the end of the contract
period then in effect; provided, however, that the continuation of this
Agreement for more than two years shall be subject to the receipt of annual
approvals of the Fund's Directors or shareholders in accordance with the Act and
the rules thereunder. Notwithstanding the foregoing, this Agreement may be
terminated at any time, without a payment of any penalty, by vote of the Fund's
Board of Directors or a majority of the Fund's outstanding voting securities
(within the meaning of the Investment Company Act of 1940 ("Act")) on not more
than sixty days' written notice to JMH. In addition, this Agreement shall
terminate automatically if it is assigned (within the meaning of the Act) by
either party.
6. JMH acknowledges that it has copies of the Fund's Certificate of
Incorporation, By-Laws, Prospectus and Statement of Additional Information and
undertakings provided under state securities laws as of the date hereof. So long
as this Agreement remains in effect, KCF shall promptly furnish to JMH any
amendments or supplements to these documents which may hereafter be adopted.
7. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if personally served on the party to whom notice is to be given,
or on the second day after mailing if mailed to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows:
If to JMH: William C. Miller, IV, Chief Executive
J.M. Hartwell Limited Partnership
515 Madison Avenue
New York, New York 10022
If to KCF: Keystone Custodian Funds, Inc.
200 Berkeley Street
Boston, MA 02116
Attention: President
8. This Agreement constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations and understandings of the parties
hereto relating to the subject matter hereof. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date and year first above written.
KEYSTONE CUSTODIAN J. M. HARTWELL LIMITED
FUNDS, INC. PARTNERSHIP
By: -------------------------- By: --------------------------
Albert H. Elfner, III William C. Miller, IV
Title: Chairman Title: President
and Chief Executive
PRINCIPAL UNDERWRITING AGREEMENT
KEYSTONE AMERICA HARTWELL GROWTH FUND
AGREEMENT made this __ day of __, 1995 by and between Keystone America
Hartwell Growth Fund, a Massachusetts business trust ("Fund"), and Keystone
Distributors, Inc., a Delaware corporation
("Principal Underwriter").
It is hereby mutually agreed as follows:
1. The Fund hereby appoints Principal Underwriter a principal
underwriter of the shares of beneficial interest of the Fund ("Shares") as an
independent contractor upon the terms and conditions hereinafter set forth.
Except as the Fund may from time to time agree, Principal Underwriter will act
as agent for the Fund and not as principal.
2. Principal Underwriter will use its best efforts to find purchasers
for the Shares, to promote distribution of the Shares and may obtain orders from
brokers, dealers or other persons for sales of Shares to them. No such brokers,
dealers or other persons shall have any authority to act as agent for the Fund;
such brokers, dealers or other persons shall act only as principal in the sale
of Shares.
3. Sales of Shares by Principal Underwriter shall be at the applicable
public offering price determined in the manner set forth in the prospectus
and/or statement of additional information of the Fund current at the time of
the Fund's acceptance of the order for Shares; provided that Principal
Underwriter also shall have the right to sell Shares at net asset value, if such
sale is permissible under and consistent with applicable statutes, rules,
regulations and orders. All orders shall be subject to acceptance by the Fund,
and the Fund reserves the right, in its sole discretion, to reject any order
received. The Fund shall not be liable to anyone for failure to accept any
order.
4. On all sales of Shares, the Fund shall receive the current net asset
value, and Principal Underwriter shall be entitled to receive payments in
accordance with the 12b-1 Plan(s) and as set forth in the then current
prospectus and/or statement of additional information of the Fund, and to the
contingent deferred sales charges as set forth in the then current prospectus
and/or statement of additional information of the Fund. Principal Underwriter
may reallow all or a part of the 12b-1 payments to such brokers, dealers or
other persons as Principal Underwriter may determine.
<PAGE>
5. Payment to the Fund for Shares shall be in New York or Boston
Clearing House funds received by Principal Underwriter within ten (10) business
days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such ten-day period, the Fund reserves the right,
without further notice, forthwith to cancel its acceptance of any such order.
The Fund shall pay such issue taxes as may be required by law in connection with
the issuance of the Shares.
6. Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the Shares any representations concerning the Shares
except those contained in the then current prospectus and/or statement of
additional information covering the Shares and in printed information approved
by the Fund as information supplemental to such prospectus and statement of
additional information. Copies of the then current prospectus and statement of
additional information and any such printed supplemental information will be
supplied by the Fund to Principal Underwriter in reasonable quantities upon
request.
7. Principal Underwriter agrees to comply with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
8. The Fund appoints Principal Underwriter as its agent to accept
orders for redemptions and repurchases of Shares at values and in the manner
determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a) any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including
amendments and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement, prospectus
or statement of additional information necessary to make the
statements therein not misleading, provided, however, that insofar as
losses, claims, damages, liabilities or expenses arise out of or are
based upon any such untrue statement or omission or alleged untrue
statement or omission made in reliance and in conformity with
information furnished to the Fund by the Principal Underwriter for use
in the Fund's registration statement, prospectus or statement of
additional information, such indemnification is not applicable. In no
case shall the Fund indemnify the Principal Underwriter or its
controlling person as to any amounts incurred for any liability
arising out of or based upon any action for which the Principal
Underwriter, its officers and Directors or any controlling person
would otherwise be subject to liability by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of the reckless disregard of its obligations and
duties under this Agreement.
10. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers, Directors and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any legal fees incurred
in connection therewith) which the Fund, its officers, Directors or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
a) may be based upon any wrongful act by the Principal
Underwriter or any of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's registration
statement, prospectus or statement of additional information
(including amendments and supplements thereto), or any omission or
alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon information
furnished or confirmed in writing to the Fund by the Principal
Underwriter.
11. The Fund agrees to execute such papers and to do such acts and
things as shall from time to time be reasonably requested by Principal
Underwriter for the purpose of qualifying the Shares for sale under the
so-called "blue sky" laws of any state or for registering Shares under the 1933
Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). Principal
Underwriter shall bear the expense of preparing, printing and distributing
advertising, sales literature, prospectuses and statements of additional
information. The Fund shall bear the expense of registering Shares under the
1933 Act and the Fund under the 1940 Act, qualifying Shares for sale under the
so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to shareholders of the Fund, and the direct expenses of the issuance
of Shares.
12. To the extent required by any 12b-1 Plan of the Fund, Principal
Underwriter shall provide to the Board of Trustees of the Fund in connection
with the 12b-1 Plan, not less than quarterly, a written report of the amounts
expended pursuant to such 12b-1 Plan and the purposes for which such
expenditures were made.
13. The term of this Agreement shall begin on the date hereof and,
unless sooner terminated or continued as provided below, shall expire after two
years. This Agreement shall continue in effect after such term if its
continuance is specifically approved by a majority of the Trustees of the Fund
and a majority of the 12b-1 Trustees referred to in any 12b-1 Plan of the Fund
("Rule 12b-1 Trustees") at least annually in accordance with the 1940 Act and
the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of a
majority of the Fund's outstanding Shares on not more than sixty days written
notice to any other party to the Agreement; and shall terminate automatically in
the event of its assignment (as defined in the 1940 Act).
14. This Agreement shall be construed in accordance with the laws of
The Commonwealth of Massachusetts. All sales hereunder are to be made, and title
to the Shares shall pass, in Boston, Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, on the day and year first written above.
KEYSTONE AMERICA HARTWELL GROWTH FUND
By:
Title:
KEYSTONE DISTRIBUTORS, INC.
By:
Title:
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
KEYSTONE AMERICA HARTWELL GROWTH FUND
AND
STATE STREET BANK AND TRUST COMPANY
Agreement made as of this day of , 1995 by and between KEYSTONE AMERICA
HARTWELL GROWTH FUND, a Massachusetts business trust, ("Fund") having its
principal place of business at 200 Berkeley Street, Boston, Massachusetts,
02116, and STATE STREET BANK AND TRUST COMPANY, a Massachusetts banking
corporation ("State Street"), having its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110.
In consideration of the mutual agreements herein contained, the Fund
and State Street agree as follows:
1. The Fund appoints State Street as its Custodian, subject to the
provisions hereof. State Street hereby accepts such appointment as Custodian. As
such Custodian, State Street shall retain all securities, cash and other assets
now owned or hereafter acquired by the Fund, and the Fund shall deliver and pay
or cause to be delivered and paid to State Street, as Custodian, all securities,
cash and other assets now owned or hereafter acquired by the Fund during the
period of this Agreement.
2. All securities delivered to State Street (other than in bearer form)
shall be properly endorsed and in proper form for transfer into or in the name
of the Fund, of a nominee of State Street for the exclusive use of the Fund or
of such other nominee as may be mutually agreed upon by State Street and the
Fund.
3. The Fund shall deliver to State Street certified or authenticated
copies of its Declaration of Trust and By-Laws, all amendments thereto, a
certified copy of the resolution of the Fund's Board of Trustees appointing
State Street to act in the capacities covered by this Agreement and authorizing
the signing of this Agreement and copies of such resolutions of its Board of
Trustees, contracts and other documents as may be reasonably required by State
Street in the performance of its duties hereunder.
4. As Custodian, State Street shall promptly:
A. Safekeeping. Keep safely in a separate account the
securities and other assets of the Fund, including without limitation all
securities in bearer form, other than (a) securities which are maintained
pursuant to paragraph 4B in a Securities System (as defined in paragraph 4B) and
(b) commercial paper of an issuer for which State Street Bank and Trust Company
acts as issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of State Street pursuant to paragraph 4C,
and, on behalf of the Fund, receive delivery of certificates, including without
limitation all securities in bearer form, for safekeeping and keep such
certificates physically segregated at all times from those of any other person.
State Street shall maintain records of all receipts, deliveries and locations of
such securities, together with a current inventory thereof and shall conduct
periodic physical inspections of certificates representing bonds and other
securities held by it under this Agreement at least annually in such manner as
State Street shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. State Street shall provide the Fund with
copies of any reports of its internal count or other verification of the
securities of the Fund held in its custody, including reports on its own system
of internal accounting control. In addition, if and when independent certified
public accountants retained by State Street shall count or otherwise verify the
securities of the Fund held in State Street's custody, State Street shall
provide the Fund with a copy of the report of such accountants. With respect to
securities held by any agent or Subcustodian appointed pursuant to paragraph 7C
hereof, State Street may rely upon certificates from such agent or Subcustodian
as to the holdings of such agent or Subcustodian, it being understood that such
reliance in no way releases State Street of its responsibilities or liabilities
under this Agreement. State Street shall promptly report to the Fund the results
of such inspections, indicating any shortages or discrepancies uncovered
thereby, and take appropriate action to remedy any such shortages or
discrepancies.
B. Deposit of Fund Assets in Securities Systems.
Notwithstanding any other provision of this Agreement, State Street may deposit
and/or maintain securities owned by the Fund in Depository Trust Company, a
clearing agency registered with the Securities and Exchange Commission
("Commission") under Section 17A of the Securities Exchange Act of 1934
("Exchange Act"), which acts as a securities depository, in any other clearing
agency registered under Section 17A of the Exchange Act and which has been
authorized by the Fund's Board of Trustees, in the book-entry system authorized
by the U.S. Department of the Treasury and certain federal agencies or in any
other book entry system which the Commission has authorized for use by
investment companies as a securities depository by order or interpretive or
no-action letter and which has been authorized by the Fund's Board of Trustees,
collectively referred to herein as "Securities System(s)," in accordance with
applicable Federal Reserve Board and Commission rules and regulations, if any,
and subject to the following provisions:
1) State Street may keep securities of the Fund in a
Securities System provided that such securities are deposited in an account
("Account") of State Street in the Securities System which shall not include any
assets of State Street other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of State Street with respect to securities of
the Fund which are maintained in a Securities System shall identify by book
entry those securities belonging to the Fund;
3) State Street shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the Securities System that
such securities have been transferred to the Account, and (ii) the making of an
entry on the records of State Street to reflect such payment and transfer for
the account of the Fund. State Street shall transfer securities sold for the
account of the Fund upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account, and (ii) the
making of an entry on the records of State Street to reflect such transfer and
payment for the account of the Fund. Copies of all advices from the Securities
System of transfers of securities for the account of the Fund shall identify the
Fund, be maintained for the Fund State Street and be provided to the Fund at its
request. State Street shall furnish the Fund confirmation of each transfer to or
from the account of the Fund in the form of a written advice or notice and shall
furnish to the Fund copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the Fund on the next
business day;
4) State Street shall promptly provide the Fund with any
report obtained by State Street on the Securities System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Securities System. State Street shall promptly provide the Fund with any
report on State Street's accounting system, internal accounting control and
procedures for safeguarding securities deposited with State Street which is
reasonably requested by the Fund;
5) Anything to the contrary in this Agreement
notwithstanding, State Street shall be liable to the Fund for any claim, loss,
liability, damage or expense to the Fund, including attorney's fees, resulting
from use of a Securities System by reason of any negligence, misfeasance or
misconduct of State Street, its agents or any of its or their employees or from
failure of State Street or any such agent to enforce effectively such rights as
it may have against a Securities System. At the election of the Fund, it shall
be entitled to be subrogated to the rights of State Street or its agents with
respect to any claim against the Securities System or any other person which
State Street or its agents may have as a consequence of any such claim, loss,
liability, damage or expense if and to the extent that the Fund has not been
made whole for any such loss or damage.
C. Assets Held in State Street's Direct Paper System. State
Street may deposit and/or maintain securities owned by the Fund in the Direct
Paper System of State Street subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions;
2) State Street may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an account ("Account")
of State Street in the Direct Paper System which shall not include any assets of
State Street other than assets held as a fiduciary, custodian or otherwise for
customers;
3) The records of State Street with respect to securities of
the Fund which are maintained in the Direct Paper System shall identify by
book-entry those securities belonging to the Fund;
4) State Street shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records of State Street
to reflect such payment and transfer of securities to the account of the Fund.
State Street shall transfer securities sold for the account of the Fund upon the
making of an entry on the records of State Street to reflect such transfer and
receipt of payment for the account of the Fund;
5) State Street shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a written advice or
notice, of Direct Paper on the next business day following such transfer and
shall furnish to the Fund copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account of the Fund;
6) State Street shall provide the Fund with any report on its
system of internal accounting control as the Fund may reasonably request from
time to time.
D. State Street's Records. The records of State Street (and
its agents and Subcustodians) with respect to its services for the Fund shall at
all times during the regular business hours of State Street (or its agents or
Subcustodians) be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Commission.
E. Delivery of Securities. State Street shall release and
deliver securities owned by the Fund held by State Street or in a Securities
System account of State Street or in State Street's Direct Paper book entry
system account ("Direct Paper System Account") only upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, and only in the cases specified in paragraphs 4F, 4G, 4H, 4I, 4J,
4K, 4L, 4M, 4N and 4O hereof.
F. Registered Name, Nominee. Register securities of the Fund
held by State Street in the name of the Fund, of a nominee of State Street for
the exclusive use of the Fund, or of such other nominee as may be mutually
agreed upon, or of any mutually acceptable nominee of any agent or Subcustodian
appointed pursuant to paragraph 7C hereof.
G. Purchases. Upon receipt of proper instructions (as defined
in paragraph 6A hereof; hereafter "Proper Instructions") and insofar as cash is
available for the purpose, pay for and receive all securities purchased for the
account of the Fund, payment being made only upon receipt of the securities by
State Street (or any bank, banking firm, responsible commercial agent or trust
company doing business in the United States and appointed pursuant to paragraph
7C hereof as State Street's agent or Subcustodian for this purpose) registered
as provided in paragraph 4F hereof or in form for transfer satisfactory to State
Street, or, in the case of repurchase agreements entered into between the Fund
and a bank or a dealer, delivery of the securities either in certificate form or
through an entry crediting State Street's account at the Federal Reserve Bank
with such securities, or, upon receipt by State Street of a facsimile copy of a
letter of understanding with respect to a time deposit account of the Fund
signed by any bank, whether domestic or foreign, and pursuant to Proper
Instructions from the Fund, for transfer to the time deposit account of the Fund
in such bank; such transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank or in the case of a purchase involving
the Direct Paper System, in accordance with the conditions set forth in
paragraph 4C. All securities accepted by State Street shall be accompanied by
payment of, or a "due bill" for, any dividends, interest or other distributions
of the issuer due the purchaser. In any and every case of a purchase of
securities for the account of the Fund where payment is made by State Street in
advance of receipt of the securities purchased, State Street shall be absolutely
liable to the Fund for such securities to the same extent as if the securities
had been received by State Street, except that in the case of repurchase
agreements entered into by the Fund with a bank which is a member of the Federal
Reserve System, State Street may transfer funds to the account of such bank
prior to the receipt of written evidence that the securities subject to such
repurchase agreement have been transferred by book-entry into a segregated
nonproprietary account of State Street maintained with the Federal Reserve Bank
of Boston, provided that such securities have in fact been so transferred by
book-entry; provided, further, however, that State Street and the Fund agree to
use their best efforts to insure receipt by State Street of copies of
documentation for each such transaction as promptly as possible.
H. Exchanges. Upon receipt of Proper Instructions, exchange
securities, interim receipts or temporary securities held by it or by any agent
or Subcustodian appointed by it pursuant to paragraph 7C hereof for the account
of the Fund for other securities alone or for other securities and cash, and
expend cash insofar as cash is available in connection with any merger,
consolidation, reorganization, recapitalization, split-up of shares, changes of
par value, conversion or in connection with the exercise of warrants,
subscription or purchase rights, or otherwise, and deliver securities to the
designated depository or other receiving agent or Subcustodian in response to
tender offers or similar offers to purchase received in writing; provided that
in any such case the securities and/or cash to be received as a result of any
such exchange, expenditure or delivery are to be delivered to State Street (or
its agents or Subcustodians). State Street shall give notice as provided under
paragraph 14 hereof to the Fund in connection with any transaction specified in
this paragraph and at the same time shall specify to the Fund whether such
notice relates to securities held by an agent or Subcustodian appointed pursuant
to paragraph 7C hereof, so that the Fund may issue to State Street Proper
Instructions for State Street to act thereon prior to any expiration date (which
shall be presumed to be two business days prior to such date unless State Street
has previously advised the Fund of a different period). The Fund shall give to
State Street full details of the time and method of submitting securities in
response to any tender or similar offer, exercising any subscription or purchase
right or making any exchange pursuant to this paragraph. When such securities
are in the possession of an agent or Subcustodian appointed by State Street
pursuant to paragraph 7C hereof, the Proper Instructions referred to in the
preceding sentence must be received by State Street in timely enough fashion
(which shall be presumed to be three business days unless State Street has
advised the Fund in writing of a different period) for State Street to notify
the agent or Subcustodian in sufficient time to permit such agent to act prior
to any expiration date.
I. Sales. Upon receipt of Proper Instructions and upon
receipt of full payment therefor, release and deliver securities which have been
sold for the account of the Fund. At the time of delivery all such payments are
to be made in cash, by a certified check upon or a treasurer's or cashier's
check of a bank, by effective bank wire transfer through the Federal Reserve
Wire System or, if appropriate, outside of the Federal Reserve Wire System and
subsequent credit to the Fund's custodian account, or, in case of delivery
through a stock clearing company, by book-entry credit by the stock clearing
company in accordance with the then current "street" custom.
J. Purchases by Issuer. Upon receipt of Proper Instructions,
release and deliver securities owned by the Fund to the issuer thereof or its
agent when such securities are called, redeemed, retired or otherwise become
payable; provided that in any such case, the cash or other consideration is to
be delivered to State Street.
K. Changes of Name and Denomination. Upon receipt of Proper
Instructions, release and deliver securities owned by the Fund to the issuer
thereof or its agent for transfer into the name of the Fund or of a nominee of
State Street or of the Fund for the exclusive use of the Fund or for exchange
for a different number of bonds, certificates or other evidence representing the
same aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions if any; provided that in any such case, the
new securities are to be delivered to State Street.
L. Street Delivery. In connection with delivery in New York
City and upon receipt of Proper Instructions, which in the case of registered
securities may be standing instructions, release securities owned by the Fund
upon receipt of a written receipt for such securities to the broker selling the
same for examination in accordance with the existing "street delivery" custom.
In every instance, either payment in full for such securities shall be made or
such securities shall be returned to State Street that same day. In the event
existing "street delivery" custom is modified, State Street shall obtain
authorization from the Board of Trustees of the Fund prior to any use of such
modified "street delivery" custom.
M. Release of Securities for Use as Collateral. Upon receipt
of Proper Instructions and subject to the Declaration of Trust, release
securities belonging to the Fund to any bank or trust company for the purpose of
pledge, mortgage or hypothecation to secure any loan incurred by the Fund;
provided, however, that securities shall be released only upon payment to State
Street of the monies borrowed, except that in cases where additional collateral
is required to secure a borrowing already made, subject to proper prior
authorization from the Fund, further securities may be released for that
purpose. Upon receipt of Proper Instructions, pay such loan upon redelivery to
it of the securities pledged or hypothecated therefor and upon surrender of the
note or notes evidencing the loan.
N. Compliance with Applicable Rules and Regulations of The
Options Clearing Corporation and National Securities or Commodities Exchanges or
Commissions. Upon receipt of Proper Instructions, deliver securities of the Fund
in accordance with the provisions of any agreement among the Fund, State Street
and a broker-dealer registered under the Exchange Act and a member of the
National Association of Securities Dealers, Inc. ("NASD") relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Fund; or, upon receipt of Proper Instructions, deliver securities in accordance
with the provisions of any agreement among the Fund, State Street, and a Futures
Commission Merchant registered under the Commodity Exchange Act relating to
compliance with the rules of the Commodity Futures Trading Commission and/or any
contract market, or any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund.
O. Release or Delivery of Securities for Other Purposes. Upon
receipt of Proper Instructions, release or deliver any securities held by it for
the account of the Fund for any other purpose (in addition to those specified in
paragraphs 4E, 4F, 4G, 4H, 4I, 4J, 4K, 4L, 4M and 4N hereof) which the Fund
declares is a proper corporate purpose pursuant to Proper Instructions.
P. Proxies, Notices, Etc. State Street shall, upon receipt,
promptly forward to the Fund all forms of proxies and all notices of meetings
and any other notices or announcements affecting or relating to the securities,
including without limitation, notices relating to class action claims and
bankruptcy claims, and upon receipt of Proper Instructions execute and deliver
or cause its nominee to execute and deliver such proxies or other authorizations
as may be required. State Street, its nominee or its agents or Subcustodian
shall not vote upon any of the securities or execute any proxy to vote thereon
or give any consent or take any other action with respect thereto (except as
otherwise herein provided) unless ordered to do so by Proper Instructions. State
Street shall require its agents and Subcustodians appointed pursuant to
paragraph 7C hereof to forward any such announcements and notices to State
Street upon receipt.
Q. Segregated Account. State Street shall, upon receipt of
Proper Instructions, establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by State
Street pursuant to paragraph 4B hereof, (i) in accordance with the provisions of
any agreement among the Fund, State Street and a broker-dealer registered under
the Exchange Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the Fund, (iii) for
the purposes of compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or releases
of the Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate purposes,
but only, in the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board of Trustees signed
by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
R. Property of the Fund Held Outside of the United States.
(1) Appointment of Foreign Subcustodians. State Street is authorized
and instructed to employ as Subcustodians for the Fund's securities and other
assets maintained outside of the United States, the foreign banking institutions
and foreign securities depositories designated on Schedule B hereto as revised
from time to time ("Foreign Subcustodians"). Upon receipt of Proper
Instructions, together with a certified resolution of the Fund's Board of
Trustees, State Street and the Fund may agree to amend Schedule B hereto from
time to time to designate additional foreign banking institutions and foreign
securities depositories to act as Foreign Subcustodians. Upon receipt of Proper
Instructions, the Fund may instruct State Street to cease the employment of any
one or more of such Subcustodians for maintaining custody of the Fund's assets.
(2) Assets to be Held. State Street shall limit the securities and
other assets maintained in the custody of the Foreign Subcustodians to: (a)
"foreign securities," as defined in paragraph (c)(1) of Rule 17f-5 under the
Investment Company Act of 1940 ("1940 Act"), and (b) cash and cash equivalents
in such amounts as State Street or the Fund may determine to be reasonably
necessary to effect the Fund's foreign securities transactions.
(3) Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by State Street and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Foreign Subcustodians
pursuant to the terms hereof.
(4) Segregation of Securities. State Street shall identify on its books
as belonging to the Fund the foreign securities of the Fund held by each Foreign
Subcustodian. Each agreement pursuant to which State Street employs a foreign
banking institution shall require that such institution establish a custody
account for State Street on behalf of the Fund and physically segregate in that
account securities and other assets of the Fund, and, in the event that such
institution deposits the Fund's securities in a foreign securities depository,
that it shall identify on its books as belonging to State Street, as agent for
the Fund, the securities so deposited (all collectively referred to as the
"account").
(5) Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set forth in
Schedule C hereto and shall provide that: (a) the Fund's assets will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of the foreign banking institution or its creditors or agent, except a
claim of payment for their safe custody or administration; (b) the Foreign
Subcustodian shall maintain insurance covering the Fund's assets; (c) beneficial
ownership of the Fund's assets will be freely transferable without the payment
of money or value other than for custody or administration; (d) adequate records
will be maintained identifying the assets as belonging to the Fund; (e) officers
or auditors employed by, or other representatives of State Street, including, to
the extent permitted under applicable law, the independent public accountants
for the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with State
Street; (f) assets of the Fund held by the Foreign Subcustodian will be subject
only to the instructions of State Street or its agents; and (g) the Foreign
Subcustodian will provide periodic reports with respect to the safekeeping of
the Fund's assets, including notification of any transfer to or from the Fund's
account.
(6) Access of Independent Accountants of the Fund. Upon request of the
Fund, State Street will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a Foreign Subcustodian insofar as such
books and records relate to the performance of such foreign banking institution
under its agreement with State Street.
(7) Reports by State Street. State Street will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Fund held by Foreign Subcustodians, including, but not
limited to, an identification of entities having possession of the Fund's
securities and other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a foreign banking
institution for State Street on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical possession of
such securities.
(8) Transactions in Foreign Custody Account. (a) Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, State Street shall make or cause its Foreign Subcustodians to
transfer, exchange or deliver foreign securities owned by the Fund, but, except
to the extent explicitly provided in paragraph 4R(8)(b), only in any of the
cases specified in this Agreement. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the parties, State
Street shall pay out or cause its Foreign Subcustodians to pay out monies of the
Fund, but, except to the extent explicitly provided in paragraph 4R(8)(b), only
in any of the cases specified in this Agreement.
(b) Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of the Fund and
delivery of securities maintained for the account of the Fund may be effected in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer. Securities maintained in the
custody of a Foreign Subcustodian may be maintained in the name of such entity's
nominee to the same extent as set forth in paragraphs 2 and 4F of this
Agreement, and the Fund agrees to hold any such nominee harmless from any
liability as a holder of record of such securities.
(9) Liability of Foreign Subcustodians. Each agreement pursuant to
which State Street employs a foreign banking institution as a Foreign
Subcustodian shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, State Street and
Fund from and against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's performance of such
obligations. At the election of the Fund, it shall be entitled to be subrogated
to the rights of State Street with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made whole
for any such loss, damage, cost, expense, liability or claim.
(10) Liability of State Street. State Street shall be liable to the
Fund for the acts or omissions of a foreign banking institution appointed
pursuant to these provisions to the same extent that such foreign banking
institution is liable to State Street as provided under paragraph 4R(9);
provided however that State Street shall not be liable to the Fund for any loss
resulting from or caused by nationalization, expropriation, currency
restrictions, acts of war or terrorism or other similar events or acts.
(11) Monitoring Responsibilities. State Street shall furnish annually
to the Fund, during the month of June, information concerning the Foreign
Subcustodians employed by State Street. Such information shall be similar in
kind and scope to that furnished to the Fund in connection with the initial
approval of this Agreement. In addition, State Street will promptly inform the
Fund in the event that State Street learns of a material adverse change in the
financial condition of a Foreign Subcustodian or any material loss in the assets
of the Fund, or is notified by a foreign banking institution employed as a
Foreign Subcustodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders equity has declined below $200
million (in each case computed in accordance with generally accepted U.S.
accounting principles).
(12) Branches of U.S. Banks. Except as otherwise set forth in this
Agreement, the provisions hereof shall not apply where the custody of the Fund's
assets are maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the 1940 Act and which meets the
qualifications set forth in Section 26(a) of the 1940 Act. The appointment of
any such branch as a subcustodian shall be governed by paragraph 7C of this
Agreement.
S. Miscellaneous. In general, attend to all nondiscretionary details in
connection with the sale, exchange, substitution, purchase, transfer or other
dealing with such securities or property of the Fund, except as otherwise
directed by the Fund pursuant to Proper Instructions. State Street shall render
to the Fund daily a report of all monies received or paid on behalf of the Fund,
an itemized statement of the securities and cash for which it is accountable to
the Fund under this Agreement and an itemized statement of security transactions
which settled the day before and shall render to the Fund weekly an itemized
statement of security transactions which failed to settle as scheduled. At the
end of each week State Street shall provide a list of all security transactions
that remain unsettled at such time.
5. Additionally, as Custodian, State Street shall promptly:
A. Bank Account. Retain safely all cash of the Fund, other than cash
maintained by the Fund in a bank account established and used in accordance with
Rule 17f-3 under the 1940 Act, in the banking department of State Street in a
separate account or accounts in the name of the Fund, subject only to draft or
order by State Street acting pursuant to the terms of this Agreement. If and
when authorized by Proper Instructions in accordance with a vote of the Board of
Trustees of the Fund, State Street may open and maintain an additional account
or accounts in such other bank or trust companies as may be designated by such
instructions, such account or accounts, however, to be solely in the name of
State Street in its capacity as Custodian and subject only to its draft or order
in accordance with the terms of this Agreement. State Street shall furnish to
the Fund, not later than thirty (30) calendar days after the last business day
of each month, a statement reflecting the current status of its internal
reconciliation of the closing balance as of that day in all accounts described
in this paragraph to the balance shown on the daily cash report for that day
rendered to the Fund.
B. Collections. Unless otherwise instructed by receipt of Proper
Instructions, collect, receive and deposit in the bank account or accounts
maintained pursuant to paragraph 5A hereof all income and other payments with
respect to the securities held hereunder, execute ownership and other
certificates and affidavits for all federal and state tax purposes in connection
with the collection of bond and note coupons, do all other things necessary or
proper in connection with the collection of such income, and without waiving the
generality of the foregoing:
1) present for payment on the date of payment all coupons and other
income items requiring presentation;
2) present for payment all securities which may mature or be called,
redeemed, retired or otherwise become payable on the date such
securities become payable;
3) endorse and deposit for collection, in the name of the Fund, checks,
drafts or other negotiable instruments on the same day as received.
In any case in which State Street does not receive any such due and
unpaid income within a reasonable time after it has made proper demands for the
same (which shall be presumed to consist of at least three demand letters and at
least one telephonic demand), it shall so notify the Fund in writing, including
copies of all demand letters, any written responses thereto, and memoranda of
all oral responses thereto and to telephonic demands, and await proper
instruction; State Street shall not be obliged to take legal action for
collection unless and until reasonably indemnified to its satisfaction for the
reasonable costs of such legal action for collection. It shall also notify the
Fund as soon as reasonably practicable whenever income due on securities is not
collected in due course.
C. Sale of Shares of the Fund. Make such arrangements with the Transfer
Agent of the Fund as will enable State Street to make certain it receives the
cash consideration due to the Fund for shares of beneficial interest ("shares")
of the Fund as may be issued or sold from time to time by the Fund, all in
accordance with the Fund's Declaration of Trust and By-Laws, as amended.
D. Dividends and Distributions. Upon receipt of Proper Instructions,
release or otherwise apply cash insofar as cash is available for the purpose of
the payment of dividends or other distributions to shareholders of the Fund.
E. Redemption of Shares of the Fund. From such funds as may be
available for the purpose, but subject to the limitation of the Fund's
Declaration of Trust and By-Laws, as amended, and applicable resolutions of the
Board of Trustees of the Fund pursuant thereto, make funds available for payment
to shareholders who have delivered to the Transfer Agent a request for
redemption of their shares by the Fund pursuant to such Declaration of Trust, as
amended.
In connection with the redemption of shares of the Fund pursuant to the
Fund's Declaration of Trust and By-Laws, as amended, State Street is authorized
and directed upon receipt of Proper Instructions from the Transfer Agent of the
Fund to make funds available for transfer through the Federal Reserve Wire
System or by other bank wire to a commercial bank account designated by the
redeeming stockholder.
F. Stock Dividends, Rights, Etc. Receive and collect all stock
dividends, rights and other items of like nature; and deal with the same
pursuant to Proper Instructions relative thereto.
G. Disbursements. Upon receipt of Proper Instructions, make or cause to
be made, insofar as cash is available for the purpose, disbursements for the
payment on behalf of the Fund of its expenses, including without limitation,
interest, taxes and fees or payment of any such expenses.
H. Other Proper Corporate Purposes. Upon receipt of Proper
Instructions, make or cause to be made, insofar as cash is available for the
purpose, disbursements for any other purpose (in addition to the purposes
specified in paragraphs 4G, 4H, 5D, 5E, and 5G of this Agreement) which the Fund
declares is a proper corporate purpose.
I. Records. Create, maintain and retain all records relating to its
activities and obligations under this Agreement in such manner as shall meet the
obligations of the Fund under the 1940 Act, particularly Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder or as reasonably requested from time to time by
the Fund. All records maintained by State Street in connection with the
performance of its duties under this Agreement shall remain the property of the
Fund, and, in the event of termination of this Agreement, shall be delivered in
accordance with the terms of paragraph 10 below.
J. Miscellaneous. Assist generally in the preparation of routine
reports to holders of shares of the Fund, to the Commission, including form
N-SAR, to state "Blue Sky" authorities, to others in the auditing of accounts
and in other matters of like nature and as otherwise reasonably requested by the
Fund.
K. Fund Accounting and Net Asset Value Computation. State Street shall
maintain the general ledger and all other books of account of the Fund,
including the accounting of the Fund. In addition, upon receipt of Proper
Instructions, which may be deemed to be continuing instructions, State Street
shall daily compute the net asset value of the shares of the Fund and the total
net asset value of the Fund. State Street shall, in addition, perform such other
services incidental to its duties hereunder as may be reasonably requested from
time to time by the Fund.
6. State Street and the Fund further agree as follows:
A. Proper Instructions. State Street shall be deemed to have received
Proper Instructions upon receipt of written instructions signed by the Fund's
Trustees or by one or more person or persons as the Fund's Board of Trustees
shall have from time to time authorized to give the particular class of
instructions for different purposes. Different persons may be authorized to give
instructions for different purposes. A copy of a resolution or action of the
Trustees certified by the Secretary or an Assistant Secretary of the Fund may be
received and accepted by State Street as conclusive evidence of the instruction
of the Fund's Board of Trustees and/or the authority of any person or persons to
act on behalf of the Fund and may be considered as in full force and effect
until receipt of written notice to the contrary.
Such instruction may be general or specific in terms. Oral instructions
will be considered Proper Instructions if State Street reasonably believes them
to have been given by a person authorized by the Board of Trustees to give such
oral instructions with respect to the class of instruction involved. The Fund
shall cause all oral instructions to be confirmed in writing. Proper
instructions may include communications effected directly between
electromechanical or electronic devices provided that the Fund and State Street
are satisfied that such procedures afford adequate safeguards for the assets of
the Fund. Use by the Fund of such communication systems shall constitute
approval by the Fund of the safeguards available therewith.
B. Investments, Limitations. In performing its duties generally, and
more particularly in connection with the purchase, sale and exchange of
securities made by or for the Fund, State Street may take cognizance of the
provisions of the Declaration of Trust of the Fund, as amended; provided,
however, that except as otherwise expressly provided herein, State Street may
assume unless and until notified in writing to the contrary that instructions
purporting to be Proper Instructions received by it are not in conflict with or
in any way contrary to any provision of the Declaration of Trust of the Fund, as
amended, or resolutions or proceedings of the Board of Trustees of the Fund.
7. State Street and the Fund further agree as follows:
A. Indemnification. State Street, as Custodian, shall be entitled to
receive and act upon advice of counsel (who may be counsel for the Fund) and
shall be without liability for any action reasonably taken or thing reasonably
done pursuant to such advice; provided that such action is not in violation of
applicable federal or state laws or regulations or contrary to written
instructions received from the Fund, and shall be indemnified by the Fund and
without liability for any action taken or thing done by it in carrying out the
terms and provisions of this Agreement in good faith and without negligence,
misfeasance or misconduct. In order that the indemnification provision contained
in this paragraph shall apply, however, if the Fund is asked to indemnify or
save State Street harmless, the Fund shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and State Street shall use
all reasonable care to identify and notify the Fund fully and promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Fund. The Fund shall
have the option to defend State Street against any claim which may be the
subject of this indemnification, and, in the event that the Fund so elects, it
will so notify State Street, and thereupon the Fund shall take over complete
defense of the claim, and State Street shall initiate no further legal or other
expenses for which it shall seek indemnification under this paragraph. State
Street shall in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify State Street except with the Fund's
prior written consent.
B. Expenses Reimbursement. State Street shall be entitled to receive
from the Fund on demand reimbursement for its cash disbursements, expenses and
charges, excluding salaries and usual overhead expenses with respect to the
Fund, as set forth in Schedule A.
C. Appointment of Agents and Subcustodians. State Street, as Custodian,
may appoint (and may remove), only in compliance with the terms and conditions
of the Fund's Declaration of Trust and By- Laws, as amended, any other bank,
trust company or responsible commercial agent as its agent or Subcustodian to
carry out such of the provisions of this Agreement as State Street may from time
to time direct; provided, however, that the appointment of any such agent or
Subcustodian shall not relieve State Street of any of its responsibilities under
this Agreement.
D. Reliance on Documents. So long as and to the extent that it is in
good faith and in the exercise of reasonable care, State Street, as Custodian,
shall not be responsible for the title, validity or genuineness of any property
or evidence of title thereto received by it or delivered by it pursuant to this
Agreement, shall be protected in acting upon any instructions, notice, request,
consent, certificate or other instrument or paper reasonably believed by it to
be genuine and to constitute Proper Instructions under this Agreement and shall,
except as otherwise specifically provided in this Agreement, be entitled to
receive as conclusive proof of any fact or matter required to be ascertained by
it hereunder a certificate signed by the Fund's Trustees, the Secretary or an
Assistant Secretary of the Fund or any other person expressly authorized by the
Board of Trustees of the Fund.
E. Access to Records. Subject to security requirements of State Street
applicable to its own employees having access to similar records within State
Street and such regulations as to the conduct of such monitors as may be
reasonably imposed by State Street after prior consultation with an authorized
officer of the Fund, books and records of State Street pertaining to its actions
under this Agreement shall be open to inspection and audit at reasonable times
by the Trustees of, attorneys for, auditors employed by the Fund or any other
person as the Fund's Board of Trustees shall direct.
F. Recordkeeping. State Street shall maintain such records as shall
enable the Fund to comply with the requirements of all federal and state laws
and regulations applicable to the Fund with respect to the matters covered by
this Agreement.
8. If the Fund requires State Street to advance cash or securities for
any purpose or in the event that State Street or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay State Street promptly, State
Street shall be entitled to utilize available cash and to dispose of the Fund's
assets to the extent necessary to obtain reimbursement; provided, however, that
the total value of any property of the Fund which at any time is security for
any payment by State Street hereunder shall not exceed 15% of the Fund's total
net asset value.
9. The Fund shall pay State Street for its services as Custodian such
compensation as shall be specified on the attached Schedule A. Such compensation
shall remain fixed until the parties hereto shall agree in writing to such other
compensation, which shall appear on a revised schedule A to be attached hereto,
unless this Agreement is terminated as provided in paragraph 10.
10. State Street and the Fund further agree as follows:
A. Effective Period, Termination, Amendment and Interpretive and
Additional Provisions. This Agreement shall become effective as of the date of
its execution, shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid, to the other party, such termination to
take effect sixty (60) days after the date of such delivery or mailing; and
further provided that the Fund may, by action of the Fund's Board of Trustees,
substitute another bank or trust company for State Street by giving notice as
provided above to State Street, provided, however that State Street shall not
act under paragraphs 4B or 4C hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Fund has approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Trustees has reviewed the use by the Fund of such
Securities System, as required in each case by Rule 17f-4 under the 1940 Act,
and that State Street shall not act under paragraph 4C hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has approved the initial use of the Direct Paper
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Trustees has reviewed the use by the Fund of the
Direct Paper System. The Fund or State Street shall not amend or terminate this
Agreement in contravention of any applicable federal or state laws or
regulations, or any provision of the Declaration of Trust of the Fund, as
amended; provided, however, that in the event of such termination State Street
shall remain as Custodian hereunder for a reasonable period thereafter if the
Fund after using its best efforts is unable to find a Successor Custodian.
In connection with the operation of this Agreement, State Street and
the Fund may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement, any such interpretive or
additional provision to be signed by both parties and annexed hereto, provided
that no such interpretive or additional provisions shall contravene any
applicable federal or state laws or regulations, or any provision of the Fund's
Declaration of Trust as amended. No interpretive provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
B. Successor Custodian. Upon termination hereof or the inability of
State Street to continue to serve hereunder, the Fund shall pay to State Street
such compensation as may be due for services through the date of such
termination and shall likewise reimburse State Street for its costs, expenses
and disbursements incurred prior to such termination in accordance with
paragraph 7B hereof and such reasonable costs, expenses and disbursements as may
be incurred by State Street in connection with such termination.
If a Successor Custodian is appointed by the Board of Trustees of the
Fund in accordance with the Fund's Declaration of Trust, State Street shall,
upon termination, deliver to such Successor Custodian at the office of State
Street, properly endorsed and in proper form for transfer, all securities then
held hereunder, all cash and other assets of the Fund deposited with or held by
it hereunder.
If no such Successor Custodian is appointed, State Street shall, in
like manner at its office, upon receipt of a certified copy of a resolution of
the shareholders pursuant to the Fund's Declaration of Trust and By-Laws, as
amended, deliver such securities, cash and other properties in accordance with
such resolutions.
In the event that no written order designating a Successor Custodian or
certified copy of a resolution of the shareholders shall have been delivered to
State Street on or before the date when such termination shall become effective,
then State Street shall have the right to deliver to a bank or trust company
doing business in Boston, Massachusetts of its own selection, having an
aggregate capital, surplus and undivided profits, as shown by its last published
report, of not less than $5,000,000, all securities, cash and other properties
held by State Street and all instruments held by it relative thereto and all
other property held by it under this Agreement. Thereafter, such bank or trust
company shall be the Successor of State Street under this Agreement and subject
to the restrictions, limitations and other requirements of the Fund's
Declaration of Trust and By-Laws, both as amended.
In the event that securities, funds, and other properties remain in the
possession of State Street after the date of termination hereof owing to failure
of the Fund to procure the certified copy above referred to, or of the Fund's
Board of Trustees to appoint a Successor Custodian, State Street shall be
entitled to fair compensation for its services during such period, and the
provisions of this Agreement relating to the duties and obligations of State
Street shall remain in full force and effect.
C. Duplicate Records and Backup Facilities. State Street shall not be
liable for loss of data occurring by reason of circumstances beyond its control,
including but not limited to acts of civil or military authority, national
emergencies, fire, flood or catastrophe, acts of God, insurrection, war, riots
or failure of transportation, communication or power supply. However, State
Street shall keep in a separate and safe place additional copies of all records
required to be maintained pursuant to this Agreement or additional tapes, disks
or other sources of information necessary to reproduce all such records.
Furthermore, at all times during this Agreement, State Street shall maintain a
contractual arrangement whereby State Street will have a back-up computer
facility available for its use in providing the services required hereunder in
the event circumstances beyond State Street's control result in State Street not
being able to process the necessary work at its principal computer facility,
State Street shall, from time to time, upon request from the Fund provide
written evidence and details of its arrangement for obtaining the use of such a
back-up computer facility. State Street shall use its best efforts to minimize
the likelihood of all damage, loss of data, delays and errors resulting from an
uncontrollable event, and should such damage, loss of data, delays or errors
occur, State Street shall use its best efforts to mitigate the effects of such
occurrence. Representatives of the Fund shall be entitled to inspect the State
Street premises and operating capabilities within reasonable business hours upon
reasonable notice to State Street, and, upon request of such representative or
representatives, State Street shall from time to time as appropriate, furnish to
the Fund a letter setting forth the insurance coverage thereon, any changes in
such coverage which may occur and any claim relating to the Fund which State
Street may have made under such insurance.
D. Confidentiality. State Street agrees to treat all records and other
information relative to the Fund confidentially and State Street, on behalf of
itself and its officers, employees and agents, agrees to keep confidential all
such information, except after prior notification to and approval by the Fund
(which approval shall not be unreasonably withheld and may not be withheld where
State Street may be exposed to civil or criminal contempt proceedings), when
requested to divulge such information by duly constituted authorities or when so
requested by a properly authorized person.
State Street and the Fund agree that they, their officers, employees
and agents shall maintain all information disclosed to them by the other in
connection with this Agreement in confidence and will not disclose any such
information to any other person, nor use such information for their own benefit
or for the benefit of third parties without the consent in writing of the other;
provided, however, that each party shall have the right to use any such
information for its own necessary internal purposes while this Agreement is in
effect. The provisions of the paragraph shall not apply to information which (i)
is in or becomes part of the public domain, or (ii) is demonstrably known
previously to the party to whom it is disclosed, or (iii) is independently
developed outside this Agreement by the party to whom it is disclosed or (iv) is
rightfully obtained from third parties by the party to whom it is disclosed.
11. The Fund shall not circulate any printed matter which contains any
reference to State Street without the prior written approval of State Street,
excepting solely such printed matter as merely identifies State Street as
Custodian. The Fund will submit printed matter requiring approval to State
Street in draft form, allowing sufficient time for review by State Street and
its counsel prior to any deadline for printing.
12. In the event of a reorganization of the Fund through a merger,
consolidation, sale of assets or other reorganization, State Street, at the
request of the Fund, shall act as Custodian for shares of any investment company
or other company obtained in any such reorganization by the Fund for
distribution to those Fund shareholders whose shares are represented by
certificates. The Fund shall give notice to each such shareholder of his or her
right to exchange his or her Fund shares represented by certificates for shares
held by State Street upon surrender to State Street of his or her certificates
representing such Fund shares properly endorsed and in proper form for transfer.
Upon the surrender of such Fund certificates, State Street will issue a
certificate or certificates to the surrendering shareholder for an approximate
number of shares held by State Street, unless such shareholder establishes an
Open Account Plan or other similar account at that time in which case such
shares will be credited to his or her account. State Street shall not be
required to issue certificates for any fractional shares held by it. Instead,
fractional interests in such shares shall be distributed to the shareholder in
cash at their then current market value or, if the fractional share represents
an interest in an investment company, it shall be redeemed by State Street at
the then current redemption price for such shares and the proceeds of such
redemption shall be distributed to such shareholder in cash. State Street shall
not release to any shareholder any such shares held by it until such shareholder
has properly surrendered for exchange his or her Fund shares represented by
certificates.
13. This Agreement is executed and delivered in The Commonwealth of
Massachusetts and shall be subject to and be construed in accordance with the
laws of the Commonwealth.
14. Notices and other writings delivered or mailed postage prepaid to
Keystone America Hartwell Growth Fund, c/o Keystone Custodian Funds, Inc., 200
Berkeley Street, Boston, Massachusetts 02116, or to State Street at 225 Franklin
Street, Boston, Massachusetts 02110, or to such other address as the Fund or
State Street may hereafter specify, shall be deemed to have been properly
delivered or given hereunder to the respective address.
15. This Agreement shall be binding upon and shall inure to the benefit
of the Fund and State Street and their respective successors or assigns.
16. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
17. This Agreement is made on behalf of the Fund by an officer or
Trustee of the Fund, not individually but solely as an officer or Trustee under
the Fund's Declaration of Trust, and the obligations under this Agreement are
not binding upon, nor shall resort be had to the property of any of the
Trustees, shareholders, officers, employees or agents of the fund personally,
but are binding only on the property of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by a duly authorized
officer as of the day and year first above written.
ATTEST: KEYSTONE AMERICA HARTWELL GROWTH FUND
By: _______________________________________
Treasurer
ATTEST: STATE STREET BANK AND TRUST COMPANY
By: _______________________________________
Vice President
March , 1995
Keystone America Hartwell Growth Fund
200 Berkeley Street
Boston, MA 02116-5034
Gentlemen:
You have asked for my opinion with respect to the issuance of Class A,
B and C shares of Keystone America Hartwell Growth Fund (the "Fund") under the
Declaration of Trust of the Fund. A prospectus and statement of additional
information are expected to be filed with the Securities and Exchange Commission
as part of the Fund's Registration Statement covering the registration of the
Fund as an investment company and the public offering and sale of the Fund's
Class A, B and C shares. In my opinion, after the effectiveness of the
Registration Statement, such shares, when issued and sold, will be legally
issued, fully paid and non-assessable by the Fund, entitling the holders thereof
to the rights set forth in the Declaration of Trust, and subject to the
limitations stated therein.
My opinion is based upon my examination of the Funds Declaration of
Trust and the Fund's prospectus and statement of additional information as they
are proposed to be filed in the Registration Statement.
I hereby consent to the use of this opinion in connection with the
registration of the Fund and its shares with the Securities and Exchange
Commission.
Very truly yours,
/s/ Rosemary D. Van Antwerp
Rosemary D. Van Antwerp
General Counsel
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND
CLASS A DISTRIBUTION PLAN
SECTION 1. Keystone America Hartwell Growth Fund ("Fund") may act as
the distributor of securities of which it is the issuer, pursuant to Rule 12b-1
under the Investment Company Act of 1940 ("Act") according to the terms of this
Distribution Plan ("Plan").
SECTION 2. Amounts not exceeding in the aggregate a maximum amount
equal to 0.35% of the average of the daily aggregate net asset value of Class A
shares of the Fund during each fiscal year of the Fund elapsed after the
inception of the Plan may be paid by the Fund to the Principal Underwriter at
any time after the inception of the Plan in order to pay to the Principal
Underwriter for efforts expended in respect of or in furtherance of sales of
Class A shares of the Fund and to enable the Principal Underwriter to pay or to
have paid to others who sell or have sold Class A shares, a service or other
fee, at such intervals as the Principal Underwriter may determine, in respect of
Class A shares previously sold by any such others at any time and remaining
outstanding during the period in respect of which such fee is or has been paid.
SECTION 3. This Plan shall not take effect until it has been approved
by a vote of at least a majority (as defined in the Act) of the outstanding
Class A shares of the Fund.
SECTION 4. This Plan shall not take effect until it has been approved,
together with any related agreements of the Fund, by votes of a majority of both
(a) the Trustees of the Fund and (b) those Trustees who are not "interested
persons" of the Fund as defined in the 1940 Act and who have no direct or
indirect financial interest in the operation of this Plan or any agreements of
the Fund or any other person related to this Plan (the "Rule 12b-1 Trustees"),
cast in person at a meeting called for the purpose of voting on this Plan or
such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 8, this Plan
shall continue in effect for a period of one year from the date it takes effect
and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4.
<PAGE>
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board, and the Board shall review at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 7. This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees, or by vote of a majority of the Fund's
outstanding Class A shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
A. That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule 12b-1
Trustees or by a vote of majority of the Fund's outstanding Class
A shares on not more than sixty days written notice to any other
party to the agreement; and
B. That such agreement shall terminate automatically in the
event of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 3 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided in Section 4 hereof.
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND
CLASS B DISTRIBUTION PLAN
SECTION 1. Keystone America Hartwell Growth Fund (the "Fund") may act
as the distributor of securities of which it is the issuer pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the
terms of this Distribution Plan ("Plan").
SECTION 2. The Fund may expend daily amounts at an annual rate of 1.00%
of the average daily net asset value of the Fund attributable to the Fund's
Class B shares to finance any activity that is principally intended to result in
the sale of Class B shares, including, without limitation, expenditures
consisting of payments to a principal underwriter of the Fund ("Principal
Underwriter") or others as sales commissions or other compensation for their
services that have been earned or as reimbursement for expenses that have been
incurred or accrued at any time during which this Plan has been in effect,
together with interest at a rate approved from time to time by the Rule 12b-1
Trustees (as defined below) on any such amounts; provided that, at the time any
such payment is made, whether or not this Plan continues in effect, the making
thereof will not cause the limitation upon such payments established by this
Plan to be exceeded.
SECTION 3. This Plan shall not take effect until it has been approved
by a vote of at least a majority (as defined in the 1940 Act) of the outstanding
Class B shares.
SECTION 4. This Plan shall not take effect until it has been approved,
together with any related agreements of the Fund, by votes of a majority of both
(a) the Board of Trustees of the Fund and (b) those Trustees of the Fund who are
not "interested persons" of the Fund (as said term is defined in the 1940 Act)
and who have no direct or indirect financial interest in the operation of this
Plan or any agreements of the Fund or any other person related to this Plan (the
"Rule 12b-1 Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan or such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 7 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4 hereof.
<PAGE>
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board of Trustees, and the Board shall review at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
SECTION 7. This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or by vote of a majority of the outstanding
Class B shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees or by a vote of a majority of the outstanding
Class B shares on not more than sixty days written notice to
any other party to the agreement; and
(b) That such agreement shall terminate automatically in the event
of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 3 hereof, and no
material amendment to this Plan shall be made unless approved in the manner
provided in Section 4 hereof.
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND
CLASS C DISTRIBUTION PLAN
SECTION 1. Keystone America Hartwell Growth Fund (the "Fund") may act
as the distributor of securities of which it is the issuer pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the
terms of this Distribution Plan ("Plan").
SECTION 2. The Fund may expend daily amounts at an annual rate of 1.00%
of the average daily net asset value of the Fund attributable to the Fund's
Class C shares to finance any activity that is principally intended to result in
the sale of Class C shares, including, without limitation, expenditures
consisting of payments to a principal underwriter of the Fund ("Principal
Underwriter") or others as sales commissions or other compensation for their
services that have been earned or as reimbursement for expenses that have been
incurred or accrued at any time during which this Plan has been in effect
together with interest at a rate approved from time to time by the Rule 12b-1
Trustees (as defined below) on any such amounts.
SECTION 3. This Plan shall not take effect until it has been approved
by a vote of at least a majority (as defined in the 1940 Act) of the outstanding
Class C shares.
SECTION 4. This Plan shall not take effect until it has been approved,
together with any related agreements of the Fund, by votes of a majority of both
(a) the Board of Trustees of the Fund and (b) those Trustees of the Fund who are
not "interested persons" of the Fund (as said term is defined in the 1940 Act)
and who have no direct or indirect financial interest in the operation of this
Plan or any agreements of the Fund or any other person related to this Plan (the
"Rule 12b-1 Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan or such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 7 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4 hereof.
<PAGE>
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board of Trustees, and the Board shall review at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
SECTION 7. This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or by vote of a majority of the outstanding
Class C shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees or by a vote of a majority of the outstanding
Class C shares on not more than sixty days written notice to
any other party to the agreement; and
(b) That such agreement shall terminate automatically in the event
of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 3 hereof, and no
material amendment to this Plan shall be made unless approved in the manner
provided in Section 4 hereof.
<PAGE>
EXHIBIT 99.24(b)(18)
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and/or Chairman of the Board and Chief
Executive Officer and for which Keystone Custodian Funds, Inc. serves as Adviser
or Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and in my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
/s/ George S. Bissell
--------------------------
George S. Bissell
Director/Trustee,
Chairman of the Board
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and/or Chief Executive Officer and for
which Keystone Custodian Funds, Inc. serves as Adviser or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and in my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
/s/ Albert H. Elfner, III
--------------------------
Albert H. Elfner, III
Director/Trustee,
President and Chief
Executive Officer
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director, Trustee or officer and for which Keystone
Custodian Funds, Inc. serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and in my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Kevin J. Morrissey
--------------------------
Kevin J. Morrissey
Treasurer
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Frederick Amling
--------------------------
Frederick Amling
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Charles A. Austin III
--------------------------
Charles A. Austin III
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Edwin D. Campbell
--------------------------
Edwin D. Campbell
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Charles F. Chapin
_________________
Charles F. Chapin
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ K. Dun Gifford
--------------------------
K. Dun Gifford
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Leroy Keith, Jr.
--------------------------
Leroy Keith, Jr.
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ F. Ray Keyser, Jr.
--------------------------
F. Ray Keyser, Jr.
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ David M. Richardson
--------------------------
David M. Richardson
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Richard J. Shima
--------------------------
Richard J. Shima
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Andrew J. Simons
--------------------------
Andrew J. Simons
Director/Trustee
Dated: December 14, 1994
