<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION NOVEMBER 29, 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. 50 X
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 X
KEYSTONE HARTWELL GROWTH FUND
(formerly named Keystone America 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)
- --- on (date) pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(1)
- --- on (date) pursuant to paragraph (a)(1)
- --- 75 days after filing pursuant to paragraph (a)(2)
- --- on (date) pursuant to paragraph (a)(2) 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 22, 1995.
<PAGE>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered Unit* Price** Fee
- -----------------------------------------------------------------
Shares of
$1.00 Par 35,998 $24.15 $289,993 $100
Value
- -----------------------------------------------------------------
* Computed under Rule 457(d) on the basis of the offering price per share at the
close of business on November 16, 1995.
** The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. 206,037 shares of the
Fund were redeemed during its fiscal year ended September 30, 1995. Of such
shares, 182,047 were used for a reduction pursuant to Rule 24f-2 during the
current year. The remaining 23,990 shares are being used for a reduction
in this filing.
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 most recent
fiscal year ended September 30, 1995 was filed on November 22, 1995.
<PAGE>
KEYSTONE HARTWELL GROWTH FUND
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 50
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 50 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 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 Plans
Shareholder Services
8 How to Redeem Shares
9 Not applicable
<PAGE>
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
14 Trustees and Officers
15 Additional Information
16 Investment Adviser
Sub-Adviser
Principal Underwriter
Distribution Plans
Sales Charges
Additional Information
17 Brokerage
18 Declaration of Trust
19 Valuation of Securities
Distribution Plans
20 Dividends and Taxes
21 Principal Underwriter
22 Standardized Total Return and Yield Quotations
23 Financial Statements
<PAGE>
KEYSTONE HARTWELL GROWTH FUND
PART A
KEYSTONE HARTWELL GROWTH FUND
PROSPECTUS JANUARY 30, 1996
Keystone Hartwell Growth Fund (the "Fund") is a non-diversified, open-end
management investment company, commonly known as a mutual fund.
The Fund's investment objective is capital appreciation. The Fund pursues this
objective by investing 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 January 30,
1996, which has been filed with the Securities and Exchange Commission and is
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 GLOBAL OPPORTUNITIES 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 8
Dividends and Taxes 8
Fund Management and Expenses 9
How to Buy Shares 11
Alternative Sales Options 12
Contingent Deferred Sales Charge and
Waiver of Sales Charges 17
Distribution Plans 18
How to Redeem Shares 19
Shareholder Services 21
Performance Data 23
Fund Shares 23
Additional Information 24
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 THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
KEYSTONE 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> 5.00% in the first year 1.00% in the first
(as a percentage of the lesser of cost or market declining to 1.00% in year and 0.00%
value of shares redeemed) the sixth 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>................................ 0.78% 0.78% 0.78%
12b-1 Fees ........................................ 0.09% 1.00%<F8> 1.00%<F8>
Other Expenses .................................... 0.98% 1.00% 1.00%
---- ---- ----
Total Fund Operating Expenses ..................... 1.85% 2.78% 2.78%
---- ---- ----
---- ---- ----
EXAMPLES<F9> 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
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 .................................................................. $75.00 $112.00 $152.00 $262.00
Class B .................................................................. $78.00 $116.00 $167.00 N/A
Class C .................................................................. $38.00 $ 86.00 $147.00 $311.00
You would pay the following expenses on the same investment, assuming no
redemption at the end of each period:
Class A .................................................................. $75.00 $112.00 $152.00 $262.00
Class B .................................................................. $28.00 $ 86.00 $147.00 N/A
Class C .................................................................. $28.00 $ 86.00 $147.00 $311.00
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 purchased on or after June 1, 1995 convert tax free to Class A shares after eight years. See "Class B
Shares" for more information.
<F2> Class C shares are available only through dealers who have entered into special distribution agreements with Keystone
Investment Distributors Company, the Fund's principal underwriter.
<F3> The sales charge applied to purchases of Class A shares declines as the amount invested increases. See "Class A Shares."
<F4> Purchases of Class A shares in the amount of $1,000,000 or more and/or purchases made by certain qualifying retirement
or other plans are not subject to a sales charge but may be subject to a contingent deferred sales charge of 0.25%. See
the "Class A Shares" and "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, 1995.
<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 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, 1995 has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors. The financial highlights for the four 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 independent auditors' report of KPMG Peat Marwick
LLP, in the Fund's Annual Report. The Fund's financial statements, related
notes, and independent 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 YEAR ENDED DECEMBER 31,
-------------------------------------------------- SEPTEMBER 30, ------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . $ 20.96 $ 25.41 $ 21.73 $ 19.41 $ 16.39 $ 19.98 $ 14.82 $ 14.35 $ 12.01 $ 11.40
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment operations
Net investment loss .. (0.24) (0.33) (0.29) (0.25) (0.20) (0.19) (0.24) (0.28) (0.11) (0.21)
Net gains (losses) on
securities .......... 4.53 (1.75) 3.97 3.27 5.59 (3.40) 5.40 0.75 2.93 2.77
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from
investment
operations 4.29 (2.08) 3.68 3.02 5.39 (3.59) 5.16 0.47 2.82 2.56
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions
Distributions from
capital gains ....... (2.20) (2.37) 0 (0.70) (2.37) 0 0 0 (0.48) (1.95)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions ... (2.20) (2.37) 0 (0.70) (2.37) 0 0 0 (0.48) (1.95)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END
OF PERIOD ........... $ 23.05 $ 20.96 $ 25.41 $ 21.73 $ 19.41 $ 16.39 $ 19.98 $ 14.82 $ 14.35 $ 12.01
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN<F3> ..... 23.28% (8.72%) 16.94% 15.91% 37.88% (17.97%) 35.00% 3.14% 23.60% 24.51%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE
NET ASSETS:
Total expenses ..... 1.85%<F4> 2.05% 1.89% 2.11% 2.38% 3.00% <F2> 2.30%<F1> 3.20% 2.70% 2.90%
Net investment loss (1.15%) (1.49%) (1.27%) (1.18%) (1.15%) (1.30%)<F2> (1.30%) (2.00%) (0.90%) (1.70%)
Portfolio turnover
rate ................ 34% 27% 42% 32% 53% 80% <F2> 45% 39% 100% 102%
Net assets, end of
period (thousands) .. $20,600 $19,971 $26,198 $25,697 $17,952 $13,960 $18,590 $14,610 $25,887 $11,993
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 total expenses to average net assets" would have been 2.70% for the year ended
December 31, 1989.
<F2> Annualized.
<F3> Excluding applicable sales charge.
<F4> The annualized expense ratio includes indirectly paid expenses for the year ended September 30, 1995. Excluding
indirectly paid expenses, the annualized expense ratio would have been 1.84%.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE HARTWELL GROWTH FUND
CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
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 independent auditors' report, in the Fund's
Annual Report. The Fund's financial statements, related notes, and independent
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.
CLASS B SHARES
---------------------------------------------
AUGUST 2, 1993
YEAR ENDED SEPTEMBER 30, (DATE OF INITIAL
----------------------- PUBLIC OFFERING) TO
1995 1994 SEPTEMBER 30, 1993
---- ---- ------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $20.80 $25.41 $23.85
------ ------ ------
Income from investment
operations
Net investment loss .......... (0.41) (0.52) (0.07)
Net gains (losses) on
securities ................. 4.44 (1.72) 1.63
------ ------ ------
Total from investment
operations ................. 4.03 (2.24) 1.56
------ ------ ------
Less distributions
Distributions from capital
gains ...................... (2.20) (2.37) 0
------ ------ ------
Total distributions .......... (2.20) (2.37) 0
------ ------ ------
NET ASSET VALUE, END OF
PERIOD ..................... $22.63 $20.80 $25.41
====== ====== ======
TOTAL RETURN(b)............... 22.10% (9.40%) 6.54%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses ............. 2.78%(c) 3.04% 3.42% (a)
Net investment loss ........ (2.06%) (2.45%) (2.80%)(a)
Portfolio turnover rate ...... 34% 27% 42%
Net assets, end of period
(thousands) 1,150 $ 498 $ 44
Per share calculations for all periods are based on weighted average shares
outstanding.
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The annualized expense ratio includes indirectly paid expenses for the year
ended September 30, 1995. Excluding indirectly paid expenses, the annualized
expense ratio would have been 2.77%.
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE HARTWELL GROWTH FUND
CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
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 independent auditors' report, in the Fund's
Annual Report. The Fund's financial statements, related notes, and independent
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.
CLASS C SHARES
---------------------------------------------
AUGUST 2, 1993
YEAR ENDED SEPTEMBER 30, (DATE OF INITIAL
------------------------ PUBLIC OFFERING) TO
1995 1994 SEPTEMBER 30, 1993
---- ---- ------------------
NET ASSET VALUE, BEGINNING OF
PERIOD ...................... $20.71 $25.41 $23.85
------ ------ ------
Income from investment
operations
Net investment loss ........... (0.41) (0.51) (0.01)
Net gains (losses) on
securities .................. 4.41 (1.82) 1.57
------ ------ ------
Total from investment operations 4.00 (2.33) 1.56
------ ------ ------
Less distributions
Distributions from capital gains (2.20) (2.37) 0
------ ------ ------
Total distributions ............ (2.20) (2.37) 0
------ ------ ------
NET ASSET VALUE, END OF PERIOD . $22.51 $20.71 $25.41
====== ====== ======
TOTAL RETURN(b)................. 22.04% (9.80%) 6.54%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses ............... 2.78%(c) 3.11% 0.37%(a)
Net investment loss .......... (2.06%) (2.47%) (0.14%)(a)
Portfolio turnover rate ........ 34% 27% 42%
Net assets, end of period
(thousands) .................. $ 709 $ 224 $ 27
Per share calculations for all periods are based on weighted average shares
outstanding.
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The annualized expense ratio includes indirectly paid expenses for the year
ended September 30, 1995. Excluding indirectly paid expenses, the annualized
expense ratio would have been 2.77%.
<PAGE>
THE FUND
The Fund is a non-diversified, open-end management investment company,
commonly known as a mutual fund. The Fund was reorganized as a Massachusetts
business trust on May 30, 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 Investment Management Company (formerly
named 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 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 Keystone and the Board of Trustees
monitors 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 agreements for the purpose of investing
cash balances held by the Fund.
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.
NON-FUNDAMENTAL NATURE OF INVESTMENT OBJECTIVE
The Fund's investment objective is not fundamental and may be changed without
the vote of a majority (as defined in the Investment Company Act of 1940 ("1940
Act")) of the Fund's outstanding shares. 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.
INVESTMENT RESTRICTIONS
The Fund has adopted the fundamental restrictions set forth below, which may
not be changed without the approval of a majority (as defined in the 1940 Act)
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, except that the Fund may borrow
from banks for temporary or emergency purposes in aggregate amounts up to 10% of
the value of the Fund's total assets or, in any event, in excess of 33% of its
total assets, or enter into reverse repurchase agreements; and (2) concentrate
its investments in any particular industry.
RISK FACTORS
Like any investment, your investment in the Fund involves some degree of risk.
Before you buy shares of the Fund, you should carefully evaluate your ability to
assume the risks your investment in the Fund poses. YOU CAN LOSE MONEY BY
INVESTING IN THE FUND. YOUR INVESTMENT IS NOT GUARANTEED. A DECREASE IN THE
VALUE OF THE FUND'S PORTFOLIO SECURITIES CAN RESULT IN A DECREASE IN THE VALUE
OF YOUR INVESTMENT.
The Fund seeks to provide capital appreciation by investing principally in
equity securities of companies, whose unique characteristics or proprietary
advantages are believed to offer the best prospects for well above average
increases in revenues and earnings, and which are within industries that, from
time to time, are judged less likely to be affected by the business cycles and
to have strong prospects for revenue growth.
The Fund is best suited to patient investors who can afford to maintain their
investment over a relatively long period of time, and who are seeking a fund
which is relatively aggressive and has the potential for significant returns.
The Fund involves risk and is not an appropriate investment for conservative
investors who are seeking preservation of capital and/or income.
Certain risks related to the Fund are discussed below. To the extent not
discussed in this section, specific risks attendant to individual securities or
investment practices are discussed in "Additional Investment Information".
FUND RISKS. 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 particular market sector in which the Fund invests. Many of the securities
that management believes would have the greatest growth characteristics may be
regarded as speculative.
A need for cash due to large liquidations from the Fund when the prices of
stocks within the particular market sector in which the Fund invests are
declining could result in losses to the Fund.
Investing in the Fund involves the risk common to investing in any security,
that is that the value of the securities held by the Fund will fluctuate in
response to changes in economic conditions or public expectations about those
securities. The net asset value of the Fund's shares will change accordingly.
OTHER CONSIDERATIONS. The Fund, which is nondiversified, does not, by itself,
constitute a balanced investment plan. The Fund may be appropriate as part of an
overall investment program. Investors may wish to consult their financial
advisers when considering what portion of their total assets to invest in such a
nondiversified Fund.
Past performance should not be considered representative of results for any
future period of time.
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 October 31 of such calendar year. Any
taxable dividend declared in October, November, or December to shareholders of
record in such a month and paid by the following January 31 will be includable
in the taxable income of the shareholder as if paid on December 31 of the year
in which the dividend was declared. If the Fund qualifies and if it distributes
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 additional shares of
that class of shares upon which distribution is based or, at the shareholder's
option, in cash. Fund distributions in the form of additional shares are made at
net asset value without the imposition of a sales charge. Dividends and
distributions are taxable whether they are received in cash or in shares. Income
dividends and net short-term gains dividends are taxable as ordinary income, and
net long-term gains dividends 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 authority 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
Investments, Inc. ("Keystone Investments"), located at 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
Keystone Investments is a corporation privately owned by current and former
members of management of Keystone and its affiliates. The shares of Keystone
Investments 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, Edward F. Godfrey and Ralph J. Spuehler, Jr. Keystone Investments provides
accounting, bookkeeping, legal, personnel and general corporate services to
Keystone, its affiliates and the Keystone Investments Family of 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, 1995: 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, $92,468 in management fees;
and the Fund paid or accrued to Keystone, which has served as the Fund's
investment adviser since January 31, 1995, $68,301 in management fees, which in
the aggregate represented 0.78% of the Fund's average net assets.
The Advisory Agreement contains provisions permitting Keystone to enter into
an agreement with J.M. Hartwell Limited Partnership ("Hartwell"), under which
Hartwell, as Subadviser, may, for compensation paid by Keystone, provide
substantially all the advisory services to be provided by Keystone under the
Advisory Agreement, and may 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.
SUBADVISER
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 fee.
During the fiscal year ended September 30, 1995: Hartwell Keystone paid or
accrued to Hartwell Management Company, Inc., the former subadviser under the
then existing Subadvisory Agreement $33,449 for the period from October 1, 1994
through January 30, 1995; and Keystone paid Hartwell $34,981 for the period from
January 31, 1995 through September 30, 1995 for its services as subadviser under
the Subadvisory Agreement.
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.
PORTFOLIO MANAGER
William C. Miller, president of Hartwell, is the portfolio manager of the Fund
and has more than 27 years of investment management experience.
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 of its
Trustees; transfer, dividend disbursing and shareholder servicing agent
expenses; custodian expenses; fees of its independent auditors and legal counsel
to its Independent 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, 1995, the Fund's Class A, Class B and
Class C shares paid 1.85%, 2.78% and 2.78%, respectively, of their respective
average class net assets in expenses.
During the fiscal year ended September 30, 1995, the Fund paid or accrued to
Keystone Investor Resource Center, Inc. ("KIRC"), the Fund's transfer and
dividend disbursing agent, and Keystone Investments, $40,328 for certain
accounting and printing services and $83,519 for shareholder services. KIRC is a
wholly-owned subsidiary of Keystone.
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,
1994 and 1995 were 27% and 34%, 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
You may purchase shares of the Fund from any broker-dealer that has a selling
agreement with Keystone Investment Distributors Company (formerly named Keystone
Distributors, Inc.) (the "Principal Underwriter"), the Fund's principal
underwriter. The Principal Underwriter, 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 funds 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 the Principal Underwriter (generally as of the close
of the Exchange on that day) plus, in the case of Class A shares, the front end
sales charge. Orders received by dealers or other firms prior to the close of
the Exchange and received by the Principal Underwriter 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 front end 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 you 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 front
end 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 you received this
prospectus.
ALTERNATIVE SALES OPTIONS
Generally, 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 deferred sales charge when they are redeemed except
as follows: Class A shares purchased on or after April 10, 1995 (1) in an amount
equal to or exceeding $1,000,000 or (2) by a corporate qualified retirement plan
or a non-qualified deferred compensation plan sponsored by a corporation having
100 or more eligible employees (a "Qualifying Plan"), in either case without a
front end sales charge, will be subject to a contingent deferred sales charge
for the 24 month period following the date of purchase. Certain Class A shares
purchased prior to April 10, 1995 may be subject to a deferred sales charge upon
redemption during the one year period following the date of purchase.
CLASS B SHARES -- BACK END LOAD OPTION
Class B shares are sold without a sales charge at the time of purchase, but
are, with certain exceptions, subject to a contingent deferred sales charge if
they are redeemed. Class B shares purchased on or after June 1, 1995 are subject
to a contingent deferred sales charge if redeemed during the 72 month period
commencing with and including the month of purchase. Class B shares purchased
prior to June 1, 1995 are subject to a deferred sales charge upon redemption
during the four calendar years following purchase. Class B shares purchased on
or after June 1, 1995 that have been outstanding for eight years from and
including the month of purchase will automatically convert to Class A shares
without the imposition of a front-end sales charge or exchange fee. Class B
shares purchased prior to June 1, 1995 will retain their existing conversion
rights.
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 distribution agreements with the Principal
Underwriter.
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 daily 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:
AS A % OF CONCESSION TO
AS A % OF NET AMOUNT DEALERS AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED* OFFERING PRICE
- --------------------------------------------------------------------------------
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%
- ----------
*Rounded to the nearest one-hundredth percent.
----------------------------------------------
Purchases of the Fund's Class A shares in the amount of $1 million or more
and/or purchases of Class A shares made by a Qualifying Plan or a tax sheltered
annuity plan sponsored by a public educational entity having 5,000 or more
eligible employees (a "TSA Plan") will be at net asset value without the
imposition of a front-end sales charge (each such purchase, an "NAV Purchase").
With respect to NAV Purchases, the Principal Underwriter will pay broker/
dealers or others concessions based on (1) the investor's cumulative purchases
during the one-year period beginning with the date of the initial NAV Purchase
and (2) the investor's cumulative purchases during each subsequent one-year
period beginning with the first NAV Purchase following the end of the prior
period. For such purchases, concessions will be paid at the following rate:
1.00% of the investment amount up to $2,999,999; plus 0.50% of the investment
amount between $3,000,000 and $4,999,999; plus 0.25% of the investment amount
over $4,999,999.
With the exception of Class A shares acquired by a TSA Plan, Class A shares
acquired on or after April 10, 1995 in an NAV Purchase are subject to a
contingent deferred sales charge of 1.00% upon redemption during the 24 month
period commencing on the date the shares were originally purchased. Class A
shares acquired by a TSA Plan in an NAV Purchase are not subject to a contingent
deferred sales charge. Certain Class A shares purchased without a front-end
sales charge prior to April 10, 1995 are subject to a contingent deferred sales
charge of 0.25% upon redemption during the one year period commencing on the
date such shares were originally purchased.
The sales charge is paid to the Principal Underwriter, 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 Class A shares maintained by such recipient
outstanding on the books of the Fund for specified periods.
Upon written notice to dealers with whom it has dealer agreements, the
Principal Underwriter may reallow up to the full applicable sales charge.
Initial sales charges may be eliminated for persons purchasing Class A shares
which are included in a broker-dealer or investment adviser managed fee based
program (a "wrap account") with broker dealers or investment advisers who have
entered into special agreements with the Principal Underwriter. 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 the Principal Underwriter, 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 (1) paid a front end sales charge, or (2)
was at some time subject to, but did not actually pay, a contingent deferred
sales charge with respect to the redemption proceeds.
Since January 1, 1995 through December 31, 1995 and upon prior notification to
the Principal Underwriter, 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 (1) paid a front end sales charge, or (2) was at some time
subject to, but did not actually pay, a contingent deferred sales charge with
respect to the redemption proceeds.
CLASS A DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class A shares
(the "Class A Distribution Plan") that provides for expenditures by the Fund,
currently limited to 0.25% annually of the average daily 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 the Principal
Underwriter (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 daily net asset
value of Class A shares maintained by the recipients outstanding on the books of
the Fund for specified periods.
Since September 1, 1995 through December 31, 1995 ("Offering Period"), the
Principal Underwriter will reallow to brokers or others a commission based on
the price paid for each Class A Fund share sold, at the following rates: full
reallowance plus an additional .50% for each Class A Fund share sold with
respect to purchases in an amount not exceeding $499,999, and full reallowance
for each Class A Fund share sold with respect to purchases in an amount in
excess of $499,999. Such payments will be made to those dealers and others
selling such shares who pay to their registered representatives making such
sales a portion of the additional amount payable under this special dealer
offer, determined in accordance with their regular payment arrangements with
such persons for sales not made under a special dealer offer.
CLASS B SHARES
Class B shares are offered at net asset value, without an initial sales
charge.
With respect to Class B shares purchased on or after June 1, 1995, the Fund,
with certain exceptions, imposes a deferred sales charge in accordance with the
following schedule:
DEFERRED
SALES
CHARGE
REDEMPTION TIMING IMPOSED
- ----------------- -------
First twelve month period ........................ 5.00%
Second twelve month period ....................... 4.00%
Third twelve month period ........................ 3.00%
Fourth twelve month period ....................... 3.00%
Fifth twelve month period ........................ 2.00%
Sixth twelve month period ........................ 1.00%
No deferred sales charge is imposed on amounts redeemed thereafter.
With respect to Class B shares sold prior to June 1, 1995, the Fund, with
certain exceptions, imposes 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.
When imposed, the deferred sales charge is deducted from the redemption
proceeds otherwise payable to you. The deferred sales charge is retained by the
Principal Underwriter. Amounts received by the Principal Underwriter under the
Class B Distribution Plans are reduced by deferred sales charges retained by the
Principal Underwriter. See "Contingent Deferred Sales Charges and Waiver of
Sales Charges" below.
Class B shares purchased on or after June 1, 1995 that have been outstanding
for eight years from and including the month of purchase 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.) 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 such Class B shareholders.
In addition to the exchange privileges described in the section of the
prospectus entitled "Exchanges," Class B shares purchased prior to June 1, 1995
that have been outstanding during seven calendar years, as a general matter, may
be exchanged for Class A shares of the Fund without imposition of a front end
sales charge.
The Class B shares so converted or exchanged will no longer be subject to the
higher distribution expenses and other expenses, if any, borne by Class B
shares. Because the net asset value per share of Class A shares may be higher or
lower than that of the Class B shares at the time of conversion or exchange,
although the dollar value will be the same, a shareholder may receive more or
fewer Class A shares than the number of Class B shares converted or exchanged.
For more information on current exchange privileges, see "Exchanges."
CLASS B DISTRIBUTION PLANS
The Fund has adopted Distribution Plans with respect to its Class B shares
(the "Class B Distribution Plans") that provide for expenditures by the Fund 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 Plans are currently made to the Principal Underwriter
(which may reallow all or part to others, such as dealers) (1) as commissions
for Class B shares sold and (2) as shareholder service fees. Amounts paid or
accrued to the Principal Underwriter under (1) and (2) in the aggregate may not
exceed the annual limitation referred to above.
The Principal Underwriter generally reallows to brokers or others a commission
equal to 4.00% of the price paid for each Class B share sold plus the first
year's service fee in advance in the amount of 0.25% of the price paid for each
Class B share sold. Beginning approximately 12 months after the purchase of a
Class B share, the broker or other party will receive service fees at an annual
rate of 0.25% of the average daily net asset value of such Class B share
maintained by the recipient outstanding on the books of the Fund for specified
periods. See "Distribution Plans" below.
Since September 1, 1995 through December 31, 1995 ("Offering Period"), the
Principal Underwriter will reallow to brokers or others a commission equal to
4.75% of the price paid for each Class B Fund share sold as well as payment in
advance of a shareholder service fee at a rate of 0.25% per annum of the net
asset value of shares maintained by such recipients outstanding on the books of
the Fund for specified periods, as described in each Fund's prospectus. Such
payments will be made to those dealers and others selling such shares who pay to
their registered representatives making such sales a portion of the additional
amount payable under this special dealer offer, determined in accordance with
their regular payment arrangements with such persons for sales not made under a
special dealer offer.
CLASS C SHARES
Class C shares are offered only through dealers who have special distribution
agreements with the Principal Underwriter. Class C shares are offered at net
asset value, without an initial sales charge. With certain exceptions, the Fund
imposes 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 the Principal Underwriter. See "Contingent Deferred Sales Charges
and Waiver of Sales Charges" below.
CLASS C DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class C shares
(the "Class C Distribution Plan") that provides for expenditures by the Fund 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 the Principal Underwriter (which
may reallow all or part to others, such as dealers) (1) as commissions for Class
C shares sold and (2) as shareholder service fees. Amounts paid or accrued to
the Principal Underwriter under (1) and (2) in the aggregate may not exceed the
annual limitation referred to above.
The Principal Underwriter generally reallows to brokers or others a commission
in the amount of 0.75% of the price paid for each Class C share sold, plus the
first year's service fee in advance in the amount of 0.25% of the price paid for
each Class C share sold, and, beginning approximately fifteen months after
purchase, a commission at an annual rate of 0.75% (subject to NASD rules -- 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 Class C share
maintained by the recipients outstanding on the books of the Fund for specified
periods. See "Distribution Plans" below.
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 asset value at the time of purchase
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) certain Class A shares held for more than one
or two years, as the case may be, from the date of purchase; (4) Class B shares
held more than four consecutive calendar years or more than 72 months after the
month of purchase, as the case may be; or (5) Class C shares held for more than
one year from the date of purchase. 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.
With respect to Class A shares purchased by a Qualifying Plan at net asset
value or Class C shares purchased by a Qualifying Plan, no contingent deferred
sales charge will be imposed on any redemptions made specifically by an
individual participant in the Qualifying Plan. This waiver is not available in
the event a Qualifying Plan (as a whole) redeems substantially all of its
assets.
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; (5) automatic withdrawals under an automatic
withdrawal plan of up to 1 1/2% per month of the shareholder's initial account
balance; (6) withdrawals consisting of loan proceeds to a retirement plan
participant; (7) financial hardship withdrawals made by a retirement plan
participant; or (8) withdrawals consisting of returns of excess contributions or
excess deferral amounts made to a retirement plan participant.
The Fund may also 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 Directors, Trustees, officers and employees of the Fund and Keystone and
certain of their affiliates, to registered representatives of firms with dealer
agreements with the Principal Underwriter and to a bank or trust company acting
as a trustee for a single account.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS
The Principal Underwriter 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 Fund shares. In addition, dealers may, from time to time, receive
additional cash payments. The Principal Underwriter 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.
The Principal Underwriter 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 the Principal Underwriter. 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 periodic and may be up to 0.25% of the value of
shares sold by such dealer.
The Principal Underwriter may also pay a transaction fee (up to the level of
payments allowed to dealers for the sale of shares, as described above) to banks
and other financial services firms that facilitate transactions in shares of the
Fund for their clients.
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
As discussed above, 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.
The NASD limits the amount that a Fund may pay annually in distribution costs
for the sale of its shares and shareholder service fees. The NASD 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 also limits the aggregate amount that
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% on such amounts (less any deferred sales charges paid by shareholders to
the Principal Underwriter), remaining unpaid from time to time.
The Principal Underwriter intends, but is not obligated, to continue to pay or
accrue distribution charges incurred in connection with the Class B Distribution
Plans that exceed current annual payments permitted to be received by the
Principal Underwriter from the Fund. The Principal Underwriter 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.
If the Fund's Independent Trustees authorize such payments, the effect would
be to extend the period of time during which the Fund incurs the maximum amount
of costs allowed by a Distribution Plan. If a Distribution Plan is terminated,
the Principal Underwriter will ask the Independent Trustees to take whatever
action they deem appropriate under the circumstances with respect to payment of
such amounts.
In connection with financing its distribution costs, including commission
advances to dealers and others, the Principal Underwriter has sold to a
financial institution substantially all of its 12b-1 fee collection rights and
contingent deferred sales charge collection rights in respect of Class B shares
sold during the two-year period commencing approximately June 1, 1995. The Fund
has agreed not to reduce the rate of payment of 12b-1 fees in respect of such
Class B shares, unless it terminates such shares' Distribution Plan completely.
If it terminates such Distribution Plan, the Fund may be subject to possible
adverse distribution consequences.
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. Unpaid distribution costs at fiscal year end September
30, 1995 were: $50,304 for Class B shares purchased prior to June 1, 1995 (4.37%
of net class assets of such Class B shares); $7,163 for Class B shares purchased
on or after June 1, 1995 (0.62% of net class assets of such Class B shares); and
$45,643 for Class C shares (6.44% of Class C net class assets).
During the fiscal year ended September 30, 1995, the Fund paid the Principal
Underwriter: $15,075 under its Class A Distribution Plan, $7,699 for Class B
shares sold prior to June 1, 1995; $254 for Class B shares sold on or after June
1, 1995; and $4,351 under its Class C Distribution Plan . These amounts were
used to pay commissions and service fees. 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 or to engage in telephone transactions generally, you
must complete 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 then determined 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.
If imposed, the deferred sales charge is deducted from the redemption proceeds
otherwise payable to you.
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 up to 15 days or
more. Any delay may be avoided by purchasing shares either with a certified
check or by Federal Reserve or bank wire of funds or by EFT. Although the
mailing of a redemption check or the 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, less any applicable contingent deferred sales
charge (as described above), will be made within seven days thereafter except as
discussed herein.
You may also redeem your shares through broker-dealers. The Principal
Underwriter, 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 the Principal
Underwriter has received proper documentation, it will pay the redemption
proceeds, less any applicable deferred sales charge, to the broker-dealer
placing the order within seven days thereafter. The Principal Underwriter
charges no fee for this service. Your broker-dealer, however, 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 PERSONS ELIGIBLE TO GUARANTEE SIGNATURES UNDER THE SECURITIES
EXCHANGE ACT OF 1934 AND KIRC'S POLICIES. The Fund or KIRC may waive this
requirement, but also may require additional documents in certain cases.
Currently, the requirement for a signature guarantee has been waived on
redemptions of $50,000 or less when 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.
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.
SMALL ACCOUNTS
Due to 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. No deferred
sales charges are applied to such redemptions.
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. The Fund has obligated itself, however, under the
1940 Act to redeem for cash all shares presented for redemption by any one
shareholder up to the lesser of $250,000 or 1% of the Fund's net assets in any
90-day period. 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 upon the securities' sale.
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 the Principal
Underwriter 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 the Principal Underwriter 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.
SHAREHOLDER SERVICES
Details on all shareholder services may be obtained from KIRC by writing or by
calling toll free 1-800-343-2898.
KEYSTONE AUTOMATED RESPONSE LINE
KARL offers you specific fund account information and price and yield
quotations as well as the ability to do account transactions, including
investments, exchanges and redemptions. You may access KARL by dialing toll free
1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a week.
EXCHANGES
A shareholder who has obtained the appropriate prospectus 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, except as noted below, may be exchanged for the same type of
Class B shares of other Keystone America Funds and the same type of 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.
Class B shares purchased on or after June 1, 1995 cannot be exchanged for
Class B shares of Keystone Capital Preservation and Income Fund during the 24
month period commencing with and including the month of original purchase.
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 acquired in an NAV Purchase or otherwise without a front
end sales charge,
(ii) Class B shares that have been held for less than 72 months or four years,
as the case may be, or
(iii) Class C shares that 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
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. If the shares being tendered for exchange are still subject to a
deferred sales charge, such charge will carry over to the shares being acquired
in the exchange transaction. 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 a certain class of shares of the Fund for the corresponding
class of shares of KLT will be executed by redeeming the shares of the Fund and
purchasing the corresponding class of 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. eastern time
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. eastern time 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 available only 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
Keystone America account. Once proper authorization is given, your bank account
will be debited to purchase shares in the Fund. You will receive confirmation
from the Principal Underwriter for every transaction.
To change the amount of a Keystone America Money Line or to terminate the
service (which could take up to 30 days), you must write to KIRC and include
account numbers.
RETIREMENT PLANS
The Fund has various retirement plans available to investors, including
Individual Retirement Accounts ("IRAs"); Rollover IRAs; Simplified Employee
Pension Plans ("SEPs"); Tax Sheltered Annuity Plans ("TSAs"); 403(b) Plans;
401(k) Plans; Keogh Plans; Corporate Profit-Sharing Plans; and Money Purchase
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. Fixed withdrawal
payments are not subject to a deferred sales charge. 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 and
may result in a lower average cost per share than a less systematic investment
approach.
Prior to participating in dollar cost averaging, you must establish an account
in a Keystone America Fund or a money market fund managed or advised by
Keystone. You should designate on the application (1) the dollar amount of each
monthly or quarterly investment (minimum $100) you wish to make and (2) 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 accordingly. 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 class
Keystone America Fund shares you may own automatically invested to purchase the
same class of shares of any other Keystone America Fund. You may select this
service on your 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 in the same class of shares that you redeemed 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 current 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 in advertising or marketing the Fund's shares, such as data from Lipper
Analytical Services, Inc., Morningstar, Inc., Standard & Poor's Corporation,
Ibbotson Associates or other industry publications.
FUND SHARES
Generally, 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 series or class of shares or
other expenses that the Board of Trustees may designate as series or class
expenses from time to time, are borne solely by each series or class; (2) each
series or class of shares has exclusive voting rights with respect to its
Distribution Plan; (3) each series or class has different exchange privileges;
and (4) each series or class generally 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 additional series or 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 series or 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 presecribed 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 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.
FOREIGN SECURITIES
The Fund may invest up to 25% of its assets in securities principally traded
in securities markets outside the United States. 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, 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 United States).
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.
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. These risks are carefully
considered by Keystone prior to purchase of these securities.
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.
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.
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.
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.
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.
<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. Only Class A shares subject to
an initial or a deferred sales charge are eligible for inclusion in reduced
sales charge programs.
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 the Principal
Underwriter 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 the Principal Underwriter 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 the Principal Underwriter or KIRC that
a Letter of Intent is in effect each time a purchase is made.
<PAGE>
KEYSTONE AMERICA
FUND FAMILY
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
Omega Fund
Fund of the Americas
Strategic Development Fund
[logo]
KEYSTONE
INVESTMENTS
Keystone Investment Distributors Company
200 Berkeley Street
Boston, Massachusetts 02116-5045
HGF-P 1/96 [RECYCLE LOGO]
KEYSTONE
HARTWELL
GROWTH FUND
[LOGO]
PROSPECTUS AND
APPLICATION
<PAGE>
KEYSTONE HARTWELL GROWTH FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
KEYSTONE HARTWELL GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 30, 1996
This statement of additional information is not a prospectus, but
relates to, and should be read in conjunction with, the prospectus of Keystone
Hartwell Growth Fund (the "Fund") dated January 30, 1996. A copy of the
prospectus may be obtained from Keystone Investment Distributors Company
(formerly named Keystone Distributors, Inc.) (the "Principal Underwriter"), the
Fund's principal underwriter, 200 Berkeley Street, Boston, Massachusetts
02116-5034.
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TABLE OF CONTENTS
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Page
The Fund 2
Investment Policies 2
Investment Methods 2
Investment Restrictions 4
Distributions and Taxes 6
Valuation of Securities 6
Sales Charges 8
Distribution Plans 11
Investment Adviser 15
SubAdviser 18
Trustees and Officers 19
Principal Underwriter 23
Brokerage 24
Declaration of Trust 26
Standardized Total Return
and Yield Quotations 28
Additional Information 29
Appendix A-1
Financial Statements F-1
Independent Auditors' Report F-12
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THE FUND
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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 May 30, 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 Investment Management Company (formerly named 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 Hartwell Growth
Fund.
Certain 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.
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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.
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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 the 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.
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).
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INVESTMENT RESTRICTIONS
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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;
(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).
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DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
The Fund distributes to its shareholders dividends from net investment
income and net realized long-term and short-term capital gains annually in
shares or, at the option of the shareholder, in cash. Shareholders who have not
opted, prior to the record date for any distribution, to receive cash will have
the number of distributed shares determined on the basis of the Fund's net asset
value per share computed at the end of the day on the record date after
adjustment for the distribution. Net asset value is used in computing the number
of shares in both gains and income distribution reinvestments. 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.
Distributed long-term capital gains are taxable as such to the
shareholder regardless of the period of time Fund shares have been held by the
shareholder. However, if such shares are held less than six months and redeemed
at a loss, the shareholder will recognize a long-term capital loss on such
shares to the extent of the long-term capital gain distribution received in
connection with such shares. If the net asset value of the Fund's shares is
reduced below a shareholder's cost by a capital gains distribution, 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
profits actually realized from the sale of securities by the Fund, 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. Shareholders of the Fund will
be advised annually of the federal income tax status of distributions.
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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.
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SALES CHARGES
- --------------------------------------------------------------------------------
GENERAL
Generally, the Fund offers three classes of shares. Class A shares are
offered with a maximum sales charge of 5.75% payable at the time of purchase
("Front End Load Option"). Class B shares purchased on or after June 1, 1995 are
subject to a contingent deferred sales charge payable upon redemption during the
72 month period following the month of purchase. Class B shares purchased prior
to June 1, 1995 are subject to a contingent deferred sales charge upon
redemption during the four calendar years following the purchase ("Back End Load
Option"). Class B shares purchased on or after June 1, 1995 that have been
outstanding eight years from and including the month of purchase will
automatically convert to Class A shares without imposition of a front-end sales
charge or exchange fee. Class B shares purchased prior to June 1, 1995 that have
been outstanding during seven calendar years will similarly convert to Class A
shares. (Conversion of Class B shares represented by stock certificates will
require the return of the stock certificates to Keystone Investor Resource
Center, Inc., the Fund's transfer and dividend disbursing agent ("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 the 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 that 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 made on or after
April 10, 1995 (1) in an amount equal to or exceeding $1,000,000, and/or (2)
purchased by a corporate qualified retirement plan or a non-qualified deferred
compensation plan sponsored by a corporation having 100 or more eligible
employees (a "Qualifying Plan"), in either case without a front-end sales
charge, will be subject to a contingent deferred sales charge of 1.00% during
the 24 month period following the date of purchase. Certain Class A shares
purchased without a front-end sales charge prior to April 10, 1995 may be
subject to a contingent deferred sales charge of 0.25% upon redemption during
the one-year period commencing on the date such shares were originally
purchased. The contingent deferred sales charge will be retained by the
Principal Underwriter. See "Calculation of Contingent Deferred Sales Charge"
below.
CLASS B SHARES
With respect to Class B shares purchased on or after June 1, 1995, the
Fund, with certain exceptions, will impose a deferred sales charge as a
percentage of net asset value or net cost of such Class B shares redeemed during
succeeding twelve-month periods following the month of purchase as follows: 5%
during the first period; 4% during the second period; 3% during the third
period; 3% during the fourth period; 2% during the fifth period; and 1% during
the sixth period. No deferred sales charge is imposed on amounts redeemed
thereafter.
With respect to Class B shares purchased prior to June 1, 1995, the
Fund, with certain exceptions, may impose a deferred sales charge of 3% on
shares redeemed during the calendar year of purchase and the first calendar year
after the year of purchase; 2% on shares redeemed during the second calendar
year after the year of purchase; and 1% 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 the
Principal Underwriter. Amounts received by the Principal Underwriter under the
Class B Distribution Plans are reduced by deferred sales charges retained by the
Principal Underwriter. See "Calculation of Contingent Deferred Sales charges and
Waiver of Sales Charges" below.
CLASS C SHARES
With certain exceptions, the Fund will 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 the Principal Underwriter. See
"Calculation of Contingent Deferred Sales Charge" below.
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) certain Class A shares held for more than one
or two years, as the case may be, from the date of purchase; (4) Class B shares
held during more than four consecutive calendar years or more than 72 months
after the month of purchase, as the case may be; or (5) Class C shares held for
more than one year from the date of purchase.
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 imposition of an initial sales charge to (1) certain Directors,
Trustees, officers, full-time employees and sales representatives of the Fund,
Keystone, Keystone Investments, Inc. (formerly Keystone Group, Inc.) ("Keystone
Investments"), their subsidiaries and affiliates or the Principal Underwriter,
who have been such for not less than ninety days; (2) a pension and
profit-sharing plan established by such companies, their subsidiaries and
affiliates for the benefit of their Directors, Trustees, officers, full-time
employees and sales representatives; or (3) a registered representative of a
firm with a dealer agreement with the Principal Underwriter, 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
Fund in the Keystone Investments Family of Funds 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.
With respect to Class A shares purchased by a Qualifying Plan at net
asset value or Class C shares purchased by a Qualifying Plan, no contingent
deferred sales charge will be imposed on any redemptions made specifically by an
individual participant in the Qualifying Plan. This waiver is not available in
the event a Qualifying Plan, as a whole, redeems substantially all of its
assets.
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; (5) automatic withdrawals under an Automatic Withdrawal Plan
of up to 1 1/2% per month of the shareholder's initial account balance; (6)
withdrawals consisting of loan proceeds to a retirement plan participant; (7)
financial hardship withdrawals made by a retirement plan participant; or (8)
withdrawals consisting of returns of excess contributions or excess deferral
amounts made to a retirement plan participant.
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 up to the lesser of
$250,000 or 1% of the Fund's assets in any 90-day period.
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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.
DISTRIBUTION PLANS IN GENERAL
The NASD limits the amount that a Fund may pay annually in distribution
costs for sale of its shares and shareholder service fees. The NASD 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 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 the Principal Underwriter).
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 (currently the Principal
Underwriter) 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 and 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 maintained by such
others outstanding on the books of the Fund for specific periods.
CLASS B DISTRIBUTION PLANS. The Fund has adopted Distribution Plans for its
Class B shares. Each 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 Class B shares, including, without
limitation, expenditures consisting of payments to the principal underwriter
(currently the Principal Underwriter) (1) to enable the Principal Underwriter to
pay to others (dealers) commissions in respect of Class B shares sold since
inception of the Distribution Plans; and (2) to enable the Principal Underwriter
to pay or to have paid to others a service fee, at such intervals as the
Principal Underwriter may determine, in respect of Class B shares maintained by
any such recipients and outstanding on the books of the Fund for specified
periods.
The Principal Underwriter generally reallows to brokers or others a
commission equal to 4.00% of the price paid for each Class B share sold plus the
first year's service fee in advance in the amount of 0.25% of the price paid for
each Class B share sold. Beginning approximately 12 months after the purchase of
a Class B share, the broker or other party receives service fees at an annual
rate of 0.25% of the average daily net asset value of such Class B share
maintained by the recipient outstanding on the books of the Fund for specified
periods.
The Principal Underwriter intends, but is not obligated, to continue to
pay or accrue distribution charges incurred in connection with a Class B
Distribution Plan that exceed current annual payments permitted to be received
by the Principal Underwriter from the Fund. The Principal Underwriter intends to
seek full payment of such charges from the Fund (together with annual interest
thereon at the prime rate plus 1%) at such time in the future as, and to the
extent that, payment thereof by the Fund would be within the permitted limits.
If the Fund's Independent Trustees authorize such payments, the effect
would be to extend the period of time during which the Fund incurs the maximum
amount of costs allowed by a Class B Distribution Plan. If a Class B
Distribution Plan is terminated, the Principal Underwriter will ask the
Independent Trustees to take whatever action they deem appropriate under the
circumstances with respect to payment of such amounts.
In connection with financing its distribution costs, including
commission advances to dealers and others, the Principal Underwriter has sold to
a financial institution substantially all of its 12b-1 fee collection rights and
contingent deferred sales charge collection rights in respect of Class B shares
sold during the two-year period commencing approximately June 1, 1995. The Fund
has agreed to reduce the rate of payment of 12b-1 fees in respect of such Class
B shares unless it terminates such shares' Distribution Plan completely. If it
terminates such Distribution Plan, the Fund may be subject to possible adverse
distribution consequences.
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 Class C shares, including,
without limitation, expenditures consisting of payments to the principal
underwriter (currently the Principal Underwriter) (1) to enable the Principal
Underwriter to pay to others (dealers) commissions in respect of Class C shares
sold since inception of the Distribution Plan; and (2) to enable the Principal
Underwriter to pay or to have paid to others a service fee, at such intervals as
the Principal Underwriter may determine, in respect of Class C shares maintained
by any such recipients and outstanding on the books of the Fund for specified
periods.
The Principal Underwriter generally reallows to brokers or others a
commission in the amount of 0.75% of the price paid for each Class C share sold
plus the first year's service fee in advance in the amount of 0.25% of the price
paid for each Class C share sold. Beginning approximately fifteen months after
purchase, brokers or others receive a commission at an annual rate of 0.75%
(subject to NASD rules) plus service fees at the annual rate of 0.25% of the
average daily net asset value of each Class C share maintained by the recipients
outstanding on the books of the Fund for specified periods.
DISTRIBUTION PLANS - GENERAL
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. A portion of the Fund's
Distribution Plan expenses may be 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 the Fund's Rule 12b-1 Trustees, or by vote of a majority of the outstanding
voting shares of the respective class of Fund shares.
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
Trustees, including the Rule 12b-1 Trustees. Unpaid distribution costs at fiscal
year end September 30, 1995 were: $50,304 for Class B shares purchased prior to
June 1, 1995 (4.37% of net class assets of such Class B shares); $7,163 for
Class B shares purchased on or after June 1, 1995 (0.62% of net class assets of
such Class B shares); and $45,643 for Class C shares (6.44% of Class C net class
assets).
During the fiscal year ended September 30, 1995, the Fund paid the
Principal Underwriter: $15,075 under its Class A Distribution Plan; $7,699 for
Class B shares sold prior to June 1, 1995; $254 for Class B shares sold on or
after June 1, 1995; and $4,351 under its Class C Distribution Plan.
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 limits specified above. 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.
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.
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INVESTMENT ADVISER
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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 Investments, located at 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
Keystone Investments is a corporation privately owned by current and
former members of management and certain employees of Keystone and its
affiliates. The shares of Keystone Investments 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, Edward F. Godfrey and Ralph J.
Spuehler, Jr. Keystone Investments provides accounting, bookkeeping, legal,
personnel and general corporate services to Keystone, their affiliates and the
Keystone Investments Family of 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
objective 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 Plans; 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, 1995, the Fund had average daily net assets of $20,738,279. 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, 1993, 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, $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.
During the period from October 1, 1994 through January 30, 1995, the
Fund paid or accrued to Hartwell Keystone $92,468, which represented .45% of the
Fund's average daily net assets. During the period from January 31, 1995 through
September 30, 1995, the Fund paid or accrued to Keystone $68,301, which
represented .33% 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.
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SUBADVISER
- --------------------------------------------------------------------------------
Pursuant to the terms of the Advisory Agreement with the Fund, 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, 1993, 1994 and for the period
from October 31, 1994 through January 30, 1995, Hartwell Management Company,
Inc., Hartwell's predecessor which served as the Fund's subadviser prior to
January 30, 1995, received $172,732, $166,670 and $33,449 from Hartwell Keystone
for its services under its SubInvestment Advisory Agreement.
For the period from January 31, 1995 through September 30, 1995,
Hartwell, the Fund's Subadviser since January 31, 1995, received $34,981 for its
services under the Subinvestment Advisory Agreement.
The Fund is subject to certain annual state expense limitations, the
most restrictive of which are 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 the 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.
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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, Chief Executive Officer and
Trustee of the Fund; Chairman of the Board, President,
Director and Chief Executive Officer of Keystone Investments,
Inc. ("Keystone Investments"); President, Chief Executive
Officer and Trustee or Director of all 30 Funds in the
Keystone Investments Family of Funds; Director and Chairman of
the Board, Chief Executive Officer and Vice Chairman of
Keystone Investment Management Company ("Keystone"); Chairman
of the Board and Director of Keystone Institutional Company,
Inc. ("Keystone Institutional") (formerly named Keystone
Investment Management Corporation), and Keystone Fixed Income
Advisors ("KFIA"); Director, Chairman of the Board, Chief
Executive Officer and President of Keystone Management, Inc.
("Keystone Management"), Keystone Software Inc. ("Keystone
Software"); Director and President of Keystone Asset
Corporation, Keystone Capital Corporation, and Keystone Trust
Company; Director of Keystone Investment Distributors Company
("the Principal Underwriter"), Keystone Investor Resource
Center, Inc. ("KIRC"), and Fiduciary Investment Company, Inc.
("FICO"); Director of Boston Children's Services Association; Trustee
of Anatolia College, Middlesex School, and Middlebury College; Member,
Board of Governors, New England Medical Center; former Trustee of
Neworld Bank; former Director and President of Hartwell Keystone
Advisers, Inc. ("Hartwell Keystone"); and former Director and Vice
President of Robert Van Partners, Inc.
FREDERICK AMLING: Trustee of the Fund; Trustee or Director of all other Keystone
Investments 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: Trustee of the Fund; Trustee or Director of all other
Keystone Investments 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 Investments; Chairman of the Board and Trustee or Director of
all other Keystone Investments Funds; Director and Chairman of the
Board of Hartwell Keystone; Chairman of the Board and Trustee of
Anatolia College; Trustee of University Hospital (and Chairman of its
Investment Committee); former Chairman of the Board and Chief Executive
Officer of Keystone Investments; and former Chief Executive Officer of
the Fund.
EDWIN D. CAMPBELL: Trustee of the Fund; Trustee or Director of
all other Keystone Investments 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 Investments 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 Investments 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 Investments 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
Investments and Keystone.
F. RAY KEYSER, JR.: Trustee of the Fund; Trustee or Director of all other
Keystone Investments 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 Investments 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 Investments 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 Investments Funds; Partner, Farrell, Fritz,
Caemmerer, Cleary, Barnosky & Armentano, P.C.; former Presi-
dent, 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 Investments Funds; Director, Senior Vice President,
Chief Financial Officer and Treasurer of Keystone Investments, the
Principal Underwriter, Keystone Asset Corporation, Keystone Capital
Corporation, Keystone Trust Company; Treasurer of Keystone
Institutional and FICO; Treasurer and Director of Keystone Management,
and Keystone Software; Vice President and Treasurer of KFIA; Director
of KIRC; former Treasurer of Robert Van Partners, Inc.; and former
Treasurer and Director of Hartwell Keystone.
JAMES R. McCALL: Senior Vice President of the Fund; Senior Vice President of
all other Keystone Investments Funds; and President of Keystone.
KEVIN J. MORRISSEY: Treasurer of the Fund; Treasurer of all other Keystone
Investments Funds; Vice President of Keystone Investments; 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 Investments Funds;
Senior Vice President, General Counsel and Secretary of Keystone;
Senior Vice President, General Counsel, Secretary and Director of the
Principal Underwriter, Keystone Management and Keystone Software;
Senior Vice President and General Counsel of Keystone Institutional;
Senior Vice President, General Counsel and Director of FICO and KIRC;
Vice President and Secretary of KFIA; Senior Vice President, General
Counsel and Secretary of Keystone Investments, Keystone Asset
Corporation, Keystone Capital Corporation, and Keystone Trust Company;
and former Senior Vice President and Secretary of Hartwell Keystone and
Robert Van Partners, Inc.
* This Trustee may be considered an "interested person" within the meaning of
the 1940 Act.
Mr. Elfner and Mr. Bissell are "interested persons" by virtue of their
positions as officers and/or Directors of Keystone Investments and several of
its affiliates including Keystone, the Principal Underwriter and KIRC. Mr.
Elfner and Mr. Bissell own shares of Keystone Investments. Mr. Elfner is
Chairman of the Board, Chief Executive Officer, President and Director of
Keystone Investments. Mr. Bissell is a Director of Keystone Investments.
During the fiscal year ended September 30, 1995, no Trustee affiliated
with Keystone or any officer received any direct remuneration from the Fund.
During the same period, the unaffiliated Trustees received no retainers and fees
from the Fund. Annual retainers and meeting fees paid by all funds in the
Keystone Investments Family of Funds (which includes 30 mutual funds) for the
fiscal year ended September 30, 1995, totalled approximately $463,916. As of
October 31, 1995, the Fund's Trustees and officers beneficially owned less than
1% of the Fund's then outstanding Class A shares, Class B and Class C shares.
Except where otherwise 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.
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PRINCIPAL UNDERWRITER
- --------------------------------------------------------------------------------
The Fund has entered into Principal Underwriting Agreements (the
"Underwriting Agreements") with the Principal Underwriter, a wholly-owned
subsidiary of Keystone.
The Principal Underwriter, located at 200 Berkeley Street, Boston,
Massachusetts, 02116-5034, is a Delaware corporation. The Principal Underwriter,
as agent, currently has the right to obtain subscriptions for and to sell shares
of the Fund to the public. In so doing, the Principal Underwriter may retain and
employ representatives to promote distribution of the shares and may obtain
orders from brokers, dealers or others, acting as principals, for sales of
shares. No such representative, dealer or broker has any authority to act as
agent for the Fund. The Principal Underwriter has not undertaken to buy or to
find purchasers for any specific number of shares. The Principal Underwriter may
receive payments from the Fund pursuant to the Distribution Plans.
All subscriptions and sales of shares by the Principal Underwriter are
at the offering price of the shares, such price being in accordance with the
provisions of the Fund's Declaration of Trust, 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 Agreements, the Fund is not liable to
anyone for failure to accept any order.
The Fund has agreed under the Underwriting Agreements 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 the Principal Underwriter's judgment it could
benefit the sales of Fund shares, the Principal Underwriter 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.
The Principal Underwriter 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 that arises out of or is
alleged to arise out of any misrepresentation or omission to state a material
fact on the part of the Principal Underwriter or any other person for whose acts
the Principal Underwriter 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 Agreements will remain in effect as long as their
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 their
continuance is approved annually by vote of a majority of Trustees or by vote of
a majority of the outstanding shares.
The Underwriting Agreements 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 outstanding shares. The Underwriting Agreements will terminate automatically
upon their "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. Management
weighs such considerations 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, the Principal Underwriter 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, 1993, 1994 and 1995, the Fund
paid $18,295, $16,565 and $11,270, respectively, in brokerage commissions.
- --------------------------------------------------------------------------------
DECLARATION OF TRUST
- --------------------------------------------------------------------------------
MASSACHUSETTS BUSINESS TRUST
The Fund is a Massachusetts business trust established under a
Declaration of Trust dated March 18, 1992. A copy of the Declaration of Trust
(the "Declaration of Trust") is filed as an exhibit to the Registration
Statement of which this statement of additional information is a part. This
summary is qualified in its entirety by reference to the Declaration of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest as classes of shares, each of which 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 of the Fund based on
the relative net assets of each class. Shareholders have no preemptive or
conversion rights. Shares are redeemable and transferable. The Fund is
authorized to issue additional classes or series of shares. The Fund currently
issues three classes of shares, but may issue additional classes or series of
shares.
SHAREHOLDER LIABILITY
Pursuant to certain decisions of the Supreme Judicial Court of
Massachusetts, shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable for certain obligations of the trust.
The possibility of the shareholders being held liable appears remote because the
Fund's Declaration of Trust contains an express disclaimer of shareholder
liability for obligations of the Fund and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Fund or the Trustees. Accordingly, shareholders will not be
liable for obligations thereunder if this procedure is followed leaving only the
unlikely possibility of shareholder liability for tort liability incurred by the
Fund. In addition, the Declaration of Trust provides for indemnification out of
the Fund's property for any shareholder held personally liable for the
obligations of the Fund. The Declaration of Trust also provides that the Fund
will, upon request, assume the defense of any claim made against any shareholder
of the Fund for any act or obligation of the Fund and satisfy any judgment
thereon from the assets of the Fund.
VOTING RIGHTS
Under the terms of the Declaration of Trust, the Fund does not hold
annual meetings. At meetings called for the initial election of Trustees or to
consider other matters, shares are entitled to one vote per share. 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. No
amendment may be made to the Declaration of Trust that adversely affects any
class of shares without the approval of a majority of the shares of that class.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100% of the
Trustees to be elected at a meeting and, in such event, the holders of the
remaining 50% or less of the shares voting will not be able to elect any
Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, or until such time as less than a majority of the Trustees holding
office have been elected by shareholders, at which time, the Trustees then in
office will call a shareholders' meeting for the election of Trustees.
Except as set forth above, the Trustees shall continue to hold office
indefinitely, unless otherwise required by law, and may appoint successor
Trustees. A Trustee may be removed from or cease to hold office (as the case may
be) (1) at any time by two-thirds vote of the remaining Trustees; (2) when such
Trustee becomes mentally or physically incapacitated; or (3) at a special
meeting of shareholders by a two-thirds vote of the outstanding shares.
Any Trustee may voluntarily resign from office.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
- --------------------------------------------------------------------------------
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 returns of Class A shares of the Fund for the five
and ten year periods ended September 30, 1995 were 98.19% and 300.34%,
respectively. The compounded average annual rates of return for Class A shares
of the Fund for the one, five and ten year periods ended September 30, 1995 were
16.19%, 14.66% and 14.88%, respectively.
The cumulative total returns for Class B shares of the Fund for the
period since commencement of operations (August 2, 1993) through September 30,
1995 ("Life of the Fund") was 15.00%. The compounded average annual rates of
return for Class B shares of the Fund for the one year period ended September
30, 1995 and the Life of the Fund were 18.10% and 6.67%, respectively.
The cumulative total returns for Class C shares of the Fund for the
period since commencement of operations (August 2, 1993) until September 30,
1995 ("Life of the Fund") was 17.29%. The compounded average annual rates of
return for Class C shares of the Fund for the one year period ended September
30, 1995 and the Life of the Fund were 22.04% and 7.65%, 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
- --------------------------------------------------------------------------------
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, 99 High Street, Boston, Massachusetts
02110, 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.
As of October 31, 1995, to the best of the Fund's knowledge, no
shareholders owned 5% or more of the Fund's Class A outstanding shares.
As of October 31, 1995, Merrill Lynch Pierce Fenner & Smith, Attn: Book
Entry, 4800 Deer Lake Drive E 3rd Floor, Jacksonville, FL 32246-6484, owned
16.11% of the Fund's Class B outstanding shares. As of October 31, 1995, Kenneth
S. White, c/o Alan White, 506 W Mt. Pleasant Ave., Philadelphia, PA 19119-2929,
owned 6.39% of the Fund's Class B outstanding shares.
As of October 31, 1995, Merrill Lynch Pierce Fenner & Smith, Attn: Book
Entry, 4800 Deer Lake Drive E 3rd Floor, Jacksonville, FL 32246-6484, owned
24.50% of the Fund's Class C outstanding shares. NFSC FEBO #AEJ-103772, Luben
Christoff, 320 Seaview Ct #2002, Marco Island, FL 33937, owned 22.61% of the
Fund's Class C outstanding shares.
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 the Principal Underwriter, 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 Keystone
America Fund Family, which offers a range of choices to serve shareholder needs.
The Keystone America Fund Family consists of the following Funds having the
various investment objectives described below:
KEYSTONE CAPITAL PRESERVATION AND INCOME FUND - Seeks high current income,
consistent with low volatility of principal, by investing in adjustable rate
securities issued by the U.S. government, its agencies or instrumentalities.
KEYSTONE FUND FOR TOTAL RETURN - Seeks total return from a combination of
capital growth and income from dividend paying common stocks, preferred stocks,
convertible bonds, other fixed-income securities and foreign securities (up to
50%).
KEYSTONE GLOBAL OPPORTUNITIES FUND - Seeks long-term capital growth from foreign
and domestic securities.
KEYSTONE GOVERNMENT SECURITIES FUND - Seeks income and capital
preservation from U.S. government securities.
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC. - 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 HARTWELL GROWTH FUND - Seeks capital appreciation by investment in
securities selected for their long-term growth prospects.
KEYSTONE INTERMEDIATE TERM BOND FUND - Seeks income, capital preservation and
price appreciation potential from investment grade corporate bonds.
KEYSTONE OMEGA FUND - Seeks maximum capital growth from common stocks and
securities convertible into common stocks.
KEYSTONE 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 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 income, exempt from federal income taxes and
applicable state taxes.
KEYSTONE STRATEGIC INCOME FUND - Seeks high yield and capital appreciation
potential from corporate bonds, discount bonds, convertible bonds, preferred
stock and foreign bonds.
KEYSTONE TAX FREE INCOME FUND - Seeks income exempt from federal income taxes
and capital preservation from the four highest grades of municipal bonds.
KEYSTONE 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 long-term growth of capital through
investments in equity and debt securities in North America (the United States
and Canada) and Latin America (Mexico and countries in South and Central
America).
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 Hartwell Growth Fund
SCHEDULE OF INVESTMENTS--September 30, 1995
<TABLE>
<CAPTION>
Number
of Market
Shares Value
- --------------------------------- -------- -----------
<S> <C> <C>
COMMON STOCKS (99.4%)
BUSINESS SERVICES (13.7%)
Ceridian Corp. (a) 9,000 $ 399,375
Fritz Companies (a) 12,000 884,250
General Motors Corp., Class E 15,000 682,500
Reuters Holdings ADR B 21,000 1,110,375
- --------------------------------- ------ ---------
3,076,500
- --------------------------------- ------ ---------
CABLE/MEDIA (15.3%)
Capital Cities/ABC, Inc. 10,000 1,176,250
Lin Television Corp. (a) 3,942 122,202
Tele Communications, Inc., TCI
Group, Class A (a) 51,800 906,500
Tele Communications, Inc.,
Liberty Media Group, Class A
(a) 17,950 480,162
Viacom, Inc., Class A (a) 10,000 497,500
Viacom, Inc., Class B (a) 5,000 248,750
- --------------------------------- ------ ---------
3,431,364
- --------------------------------- ------ ---------
CELLULAR (11.0%)
Airtouch Communications (a) 20,000 612,500
Vanguard Cellular Systems, Inc.,
Class A (a) 15,000 384,375
Vodafone Group ADR 36,000 1,476,000
- --------------------------------- ------ ---------
2,472,875
- --------------------------------- ------ ---------
CHEMICALS (5.6%)
Great Lakes Chemical Corp. 18,600 1,257,825
- --------------------------------- ------ ---------
COMMUNICATIONS & EQUIPMENT (20.7%)
Cabletron Systems, Inc. (a) 21,000 1,383,375
DSC Communications Corp. (a) 17,000 1,007,250
Motorola, Inc. 29,500 2,253,063
- --------------------------------- ------ ---------
4,643,688
- --------------------------------- ------ ---------
COMPUTER SOFTWARE (9.6%)
BMC Software, Inc. (a) 10,000 460,000
Indigo N.V. (a) 3,200 74,000
Microsoft Corp. (a) 18,000 1,629,000
- --------------------------------- ------ ---------
2,163,000
- --------------------------------- ------ ---------
FINANCIAL SERVICES (9.6%)
Federal Home Loan Mortgage Corp. 10,700 $ 739,638
Federal National Mortgage
Association 7,000 724,500
MGIC Investment Corporation 12,000 687,000
- --------------------------------- ------ ---------
2,151,138
- --------------------------------- ------ ---------
HEALTHCARE SERVICES (1.3%)
Apria Healthcare (a) 12,000 297,000
- --------------------------------- ------ ---------
INSURANCE (4.6%)
American International Group,
Inc. 12,000 1,020,000
- --------------------------------- ------ ---------
SEMICONDUCTOR (8.0%)
Intel Corp. 30,000 1,803,750
- --------------------------------- ------ ---------
TOTAL COMMON STOCKS
(Cost--$12,822,923) 22,317,140
- --------------------------------- ------ ---------
Maturity
Value
- --------------------------------- ------ ---------
REPURCHASE AGREEMENTS (0.6%)
State Street Bank and Trust Co.,
5.250%, purchased 09/29/95
(Collateralized by $115,000,
U.S. Treasury Bonds, 8.875%,
02/15/19) maturing 10/02/95
(Cost--$140,000) $140,061 140,000
- --------------------------------- ------ ---------
TOTAL INVESTMENTS
(Cost--$12,962,923) (b) 22,457,140
OTHER ASSETS AND LIABILITIES--NET
(0.0%) 2,299
- --------------------------------- ------ ---------
NET ASSETS (100%) $22,459,439
- --------------------------------- ------ ---------
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income-producing security.
(b) The cost of investments for federal income tax purposes is $12,980,476.
Gross unrealized appreciation and depreciation of investments, based on
identified tax cost, at September 30, 1995 are as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $9,611,777
Gross unrealized depreciation (135,113)
----------
Net unrealized appreciation $9,476,664
==========
</TABLE>
See Notes to Financial Statements.
<PAGE>
PAGE 9
------------------------------------------------------------------
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,
1995 1994 1993 1992 1991 1990
- ------------------------------------- ------ ------ ------ ------ ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value beginning of period $ 20.96 $ 25.41 $ 21.73 $ 19.41 $ 16.39 $ 19.98
- ------------------------------------- ---- ---- ---- ---- ---- ------------
Income from investment operations:
Net investment loss (0.24) (0.33) (0.29) (0.25) (0.20) (0.19)
Net gains (losses) on securities 4.53 (1.75) 3.97 3.27 5.59 (3.40)
- ------------------------------------- ---- ---- ---- ---- ---- ------------
Total from investment operations 4.29 (2.08) 3.68 3.02 5.39 (3.59)
- ------------------------------------- ---- ---- ---- ---- ---- ------------
Less distributions:
Distributions from capital gains (2.20) (2.37) 0.00 (0.70) (2.37) 0.00
- ------------------------------------- ---- ---- ---- ---- ---- ------------
Total distributions (2.20) (2.37) 0.00 (0.70) (2.37) 0.00
- ------------------------------------- ---- ---- ---- ---- ---- ------------
Net asset value end of period $ 23.05 $ 20.96 $ 25.41 $ 21.73 $ 19.41 $ 16.39
- ------------------------------------- ---- ---- ---- ---- ---- ------------
Total return (c) 23.28% (8.72%) 16.94% 15.91% 37.88% (17.97%)
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.85%(d) 2.05% 1.89% 2.11% 2.38% 3.00%(b)
Net investment loss (1.15%) (1.49%) (1.27%) (1.18%) (1.15%) (1.30%)(b)
Portfolio turnover rate 34% 27% 42% 32% 53% 80%
- ------------------------------------- ---- ---- ---- ---- ---- ------------
Net assets end of period (thousands) $20,600 $19,971 $26,198 $25,697 $17,952 $13,960
- ------------------------------------- ---- ---- ---- ---- ---- ------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1989 1988 1987 1986
- ------------------------------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Net asset value beginning of period $ 14.82 $ 14.35 $ 12.01 $ 11.40
- ------------------------------------- -------- -------- -------- ----------
Income from investment operations:
Net investment loss (0.24) (0.28) (0.11) (0.21)
Net gains (losses) on securities 5.40 0.75 2.93 2.77
- ------------------------------------- -------- -------- -------- ----------
Total from investment operations 5.16 0.47 2.82 2.56
- ------------------------------------- -------- -------- -------- ----------
Less distributions:
Distributions from capital gains 0.00 0.00 (0.48) (1.95)
- ------------------------------------- -------- -------- -------- ----------
Total distributions 0.00 0.00 (0.48) (1.95)
- ------------------------------------- -------- -------- -------- ----------
Net asset value end of period $ 19.98 $ 14.82 $ 14.35 $ 12.01
- ------------------------------------- -------- -------- -------- ----------
Total return (c) 35.00% 3.14% 23.60% 24.51%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.30%(a) 3.20% 2.70% 2.90%
Net investment loss (1.30%) (2.00%) (0.90%) (1.70%)
Portfolio turnover rate 45% 39% 100% 102%
- ------------------------------------- -------- -------- -------- ----------
Net assets end of period (thousands) $18,590 $14,610 $25,887 $11,993
- ------------------------------------- -------- -------- -------- ----------
</TABLE>
Per share calculations for all periods are based on weighted average shares
outstanding.
(a) Figure is net of expense reimbursement by Hartwell Keystone in connection
with voluntary expense limitations. Before the expense reimbursement, the
"Ratio of total expenses to average net assets" would have been 2.70% for
the year ended December 31, 1989.
(b) Annualized.
(c) Excluding applicable sales charges.
(d) The annualized expense ratio includes indirectly paid expenses for the year
ended September 30, 1995. Excluding indirectly paid expenses, the annualized
expense ratio would have been 1.84%.
See Notes to Financial Statements.
<PAGE>
PAGE 10
------------------------------------------------------------------
Keystone Hartwell Growth Fund
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
August 2, 1993
(Date of Initial
Year Ended September 30, Public Offering) to
1995 1994 September 30, 1993
- ------------------------------------- ---------- ---------- --------------------
<S> <C> <C> <C>
Net asset value beginning of period $20.80 $25.41 $23.85
- ------------------------------------- -------- -------- ------------------
Income from investment operations:
Net investment loss (0.41) (0.52) (0.07)
Net gains (losses) on securities 4.44 (1.72) 1.63
- ------------------------------------- -------- -------- ------------------
Total from investment operations 4.03 (2.24) 1.56
- ------------------------------------- -------- -------- ------------------
Less distributions:
Distributions from capital gains (2.20) (2.37) 0.00
- ------------------------------------- -------- -------- ------------------
Total distributions (2.20) (2.37) 0.00
- ------------------------------------- -------- -------- ------------------
Net asset value end of period $22.63 $20.80 $25.41
- ------------------------------------- -------- -------- ------------------
Total return (b) 22.10% (9.40%) 6.54%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.78%(c) 3.04% 3.42%(a)
Net investment loss (2.06%) (2.45%) (2.80%)(a)
Portfolio turnover rate 34% 27% 42%
- ------------------------------------- -------- -------- ------------------
Net assets end of period (thousands) $1,150 $498 $44
- ------------------------------------- -------- -------- ------------------
</TABLE>
Per share calculations for all periods are based on weighted average shares
outstanding.
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The annualized expense ratio includes indirectly paid expenses for the year
ended September 30, 1995. Excluding indirectly paid expenses, the annualized
expense ratio would have been 2.77%.
See Notes to Financial Statements.
<PAGE>
PAGE 11
------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
August 2, 1993
(Date of Initial
Year Ended September 30, Public Offering) to
1995 1994 September 30, 1993
- ------------------------------------- ---------- ---------- --------------------
<S> <C> <C> <C>
Net asset value beginning of period $20.71 $25.41 $23.85
- ------------------------------------- -------- -------- ------------------
Income from investment operations:
Net investment loss (0.41) (0.51) (0.01)
Net gains (losses) on securities 4.41 (1.82) 1.57
- ------------------------------------- -------- -------- ------------------
Total from investment operations 4.00 (2.33) 1.56
- ------------------------------------- -------- -------- ------------------
Less distributions:
Distributions from capital gains (2.20) (2.37) 0.00
- ------------------------------------- -------- -------- ------------------
Total distributions (2.20) (2.37) 0.00
- ------------------------------------- -------- -------- ------------------
Net asset value end of period $22.51 $20.71 $25.41
- ------------------------------------- -------- -------- ------------------
Total return (b) 22.04% (9.80%) 6.54%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.78%(c) 3.11% 0.37%(a)
Net investment loss (2.06%) (2.47%) (0.14%)(a)
Portfolio turnover rate 34% 27% 42%
- ------------------------------------- -------- -------- ------------------
Net assets end of period (thousands) $709 $224 $27
- ------------------------------------- -------- -------- ------------------
</TABLE>
Per share calculations for all periods are based on weighted average shares
outstanding.
(a) Annualized
(b) Excluding applicable sales charges.
(c) The annualized expense ratio includes indirectly paid expenses for the year
ended September 30, 1995. Excluding indirectly paid expenses, the annualized
expense ratio would have been 2.77%.
See Notes to Financial Statements.
<PAGE>
PAGE 12
------------------------------------------------------------------
Keystone Hartwell Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C>
-------------------------------------------------------------------
Assets:
Investments at market value (identified cost--
$12,962,923) (Note 1) $22,457,140
Cash 2,149
Receivable for:
Fund shares sold 3,000
Dividends and interest 8,860
Prepaid expenses and other assets 27,576
-------------------------------------------------------------------
Total assets 22,498,725
-------------------------------------------------------------------
Liabilities:
Payable for:
Fund shares redeemed 6,835
Due to Investment Adviser (Note 4) 21,860
Accrued reimbursable expenses (Note 4) 2,008
Other accrued expenses 8,583
-------------------------------------------------------------------
Total liabilities 39,286
-------------------------------------------------------------------
Net assets $22,459,439
-------------------------------------------------------------------
Net assets represented by (Notes 1 and 3):
Paid-in-capital $ 9,823,811
Accumulated net realized gains (losses) on
investment transactions 3,141,411
Net unrealized appreciation (depreciation) on
investments 9,494,217
-------------------------------------------------------------------
Total net assets $22,459,439
-------------------------------------------------------------------
Net asset value (Notes 1 and 2):
Class A Shares
Net assets of $20,600,309 / 893,553 shares
outstanding $23.05
Offering price per share ($23.05 / 0.9425) (based
on sales charge of 5.75% of the offering price
at September 30, 1995) $24.46
Class B Shares
Net assets of $1,150,095 / 50,813 shares
outstanding $22.63
Class C Shares
Net assets of $709,035 / 31,500 shares outstanding $22.51
-------------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividends (less foreign withholding
tax of $6,730) $ 116,114
Interest 26,850
-----------------------------------------------------------
Total income 142,964
-----------------------------------------------------------
Expenses (Notes 2, 4, and 5):
Management fee $160,769
Transfer agent fees 83,519
Accounting, auditing, and legal 28,917
Printing 22,027
Custodian fees 22,908
Distribution Plan expenses 27,379
Registration fees 47,148
Miscellaneous expenses 1,502
-----------------------------------------------------------
Total expenses 394,169
Less: Expenses paid indirectly
(Note 4) (2,174)
-----------------------------------------------------------
Net expenses 391,995
-----------------------------------------------------------
Net loss from operations (249,031)
-----------------------------------------------------------
NetRealized and unrealized gain (loss) on investment transactions (Notes 1 and
3):
Net realized gain (loss) on
investment transactions 3,551,166
-----------------------------------------------------------
Net change in unrealized
appreciation (depreciation) on
investment transactions: 1,076,375
-----------------------------------------------------------
Net gain on investments 4,627,541
-----------------------------------------------------------
Net increase in net assets
resulting from operations $4,378,510
-----------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
PAGE 13
------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended September 30,
1995 1994
========================================================================================================
<S> <C> <C>
Operations:
Net loss from operations $ (249,031) $ (352,633)
Net realized gain on investment transactions 3,551,166 2,368,697
Net change in unrealized appreciation (depreciation) on investments 1,076,375 (4,183,686)
--------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 4,378,510 (2,167,622)
--------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on investment transactions
(Note 5):
Class A Shares (2,039,209) (2,402,151)
Class B Shares (59,908) (11,026)
Class C Shares (25,743) (7,786)
--------------------------------------------------------------------------------------------------------
Total distributions to shareholders (2,124,860) (2,420,963)
--------------------------------------------------------------------------------------------------------
Capital share transactions (Note 2):
Proceeds from shares sold
Class A Shares 556,392 899,593
Class B Shares 718,805 532,806
Class C Shares 564,290 278,625
Payments for shares redeemed
Class A Shares (3,781,942) (4,719,055)
Class B Shares (242,274) (54,343)
Class C Shares (181,910) (64,676)
Net asset value of shares issued in reinvestment of dividends and distributions:
Class A Shares 1,798,447 2,126,056
Class B Shares 57,500 10,678
Class C Shares 23,782 2,877
--------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from capital share transactions (486,910) (987,439)
--------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 1,766,740 (5,576,024)
Net assets:
Beginning of year 20,692,699 26,268,723
--------------------------------------------------------------------------------------------------------
End of year [including accumulated distribution in excess of net investment
income as follows: September 1995--$0 and September 1994--($352,633)] $22,459,439 $20,692,699
========================================================================================================
</TABLE>
See Notes to Financial Statements.
<PAGE>
PAGE 14
- -------------------------------------
Keystone Hartwell Growth Fund
NOTES TO FINANCIAL STATEMENTS
(1.) Significant Accounting Policies
Keystone Hartwell Growth Fund (formerly Keystone America Hartwell Growth
Fund, Inc.) (the "Fund") is a nondiversified, open-end investment company
(mutual fund). The Fund was incorporated in New York on November 30, 1965 and
began operations on March 31, 1966. Prior to January 30, 1995, Hartwell
Keystone Advisers, Inc. ("Hartwell Keystone"), a wholly-owned subsidiary of
Keystone Investment Management Co. (formerly Keystone Custodian Funds, Inc.)
("Keystone") was the Fund's investment adviser. Effective January 30, 1995
Keystone became the Fund's investment adviser. On May 30, 1995, the Fund was
reorganized as a Massachusetts Business Trust.
J.M. Hartwell Limited Partnership (formerly Hartwell Management Company,
Inc.) ("Hartwell") acts as subadviser to the Fund pursuant to a Sub- Advisory
Agreement with Keystone. Subject to the supervision of the Fund's Board of
Trustees and Keystone, Hartwell provides the Fund and Keystone with
investment research, advice, information and securities recommendations.
The Fund currently issues three classes of 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 which
varies depending on when shares were purchased and how long they have been held.
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 Investment Distributors Company (formerly Keystone Distributors, Inc.)
("KIDC"), the Fund's principal underwriter.
Keystone is a wholly-owned subsidiary of Keystone Investments, Inc.
(formerly Keystone Group, Inc.) ("KII"), a Delaware corporation. KII is
privately owned by an investor group consisting of current and former members
of management of Keystone. 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
<PAGE>
PAGE 15
------------------------------------------------------------------
or accretion of discount) which, when combined with accrued interest,
approximates market.
B. Securities transactions are accounted for on the day following 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.
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. The significant difference between financial statement amounts
available for distribution and distributions made in accordance with income tax
regulations is due to the differing treatment of net operating losses for
financial statement and federal income tax purposes.
(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:
<TABLE>
<CAPTION>
Class A Shares
--------------------------
Year Ended September 30,
1995 1994
================================================================
<S> <C> <C>
Shares sold 26,726 40,253
Shares redeemed (184,792) (214,184)
Shares issued in reinvestment of
dividends and distributions 98,925 95,596
----------------------------------------------------------------
Net decrease (59,141) (78,335)
----------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 16
------------------------------------------------------------------
Keystone Hartwell Growth Fund
<TABLE>
<CAPTION>
Class B Shares
--------------------------
Year Ended September 30,
1995 1994
================================================================
<S> <C> <C>
Shares sold 35,697 24,285
Shares redeemed (12,016) (2,541)
Shares issued in reinvestment of
dividends and distributions 3,194 481
----------------------------------------------------------------
Net increase 26,875 22,225
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
--------------------------
Year Ended September 30,
1995 1994
================================================================
<S> <C> <C>
Shares sold 28,600 12,767
Shares redeemed (9,229) (3,158)
Shares issued in reinvestment of
dividends and distributions 1,328 129
----------------------------------------------------------------
Net increase 20,699 9,738
----------------------------------------------------------------
</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 KIDC 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) a commission at the
time of purchase normally equal to 4.00% of the price paid for each share sold
plus the first year's service fee in advance of 0.25% of the price paid for each
Class B share sold. Beginning approximately 12 months after the purchase of a
Class B share, the dealer or other party will receive service fees at an annual
rate of 0.25% of the average daily net asset value of such Class B shares
maintained by such others and remaining outstanding on the Fund's books for
specified periods. A contingent deferred sales charge will be imposed, if
applicable, on Class B shares purchased on or after June 1, 1995 at rates
ranging from a maximum of 5% of amounts redeemed during the first 12 months
following the date of purchase to 1% of amounts redeemed during the sixth
twelve-month period following the date of purchase. Class B shares purchased on
or after June 1, 1995 that have been outstanding for eight years following the
month of purchase will automatically convert to Class A shares without a front
end sales charge or exchange fee. Class B shares purchased prior to June 1, 1995
will retain their existing conversion rights.
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) a commission at
the time of purchase in the amount of 0.75% of the price paid for each Class C
share sold, plus the first year's service fee in advance in the amount of 0.25%
of the price paid for each Class C share. Beginning approximately 15 months
after purchase, the dealer or other party will receive a commission at an annual
rate of 0.75% (subject to applicable limitations imposed by
<PAGE>
PAGE 17
- ------------------------------------------------------------------
the rules of the National Association of Securities Dealers, Inc.) ("NASD Rule")
plus service fees at an annual rate of 0.25%, respectively, of the average net
asset value of each Class C share maintained by such others and remaining
outstanding on the Fund's books for specified periods.
Each of the Distribution Plans may be terminated at any time by a vote of the
Independent Trustees or by a vote of a majority of the outstanding voting shares
of the respective class. However, after the termination of any Distribution
Plan, at the discretion of the Board of Trustees, payments to KIDC may continue
as compensation for its services which had been earned while the Distribution
Plan was in effect.
During the year ended September 30, 1995, the Fund paid KIDC $15,075 under
its Class A Distribution Plan. The Fund paid KIDC $7,699 for Class B shares sold
prior to June 1, 1995, and $254 for Class B shares sold on or after June 1,
1995. The Fund paid KIDC $4,351 under its Class C Distribution Plan.
Under the NASD Rule, the maximum uncollected amounts for which KIDC may seek
payment from the Fund under its Class B Distribution Plans were $50,304 for
Class B shares purchased prior to June 1, 1995, and $7,163 for Class B shares
purchased on or after June 1, 1995. The maximum uncollected amount for which
KIDC may seek payment from the Fund under its Class C Distribution Plan was
$45,643 as of September 30, 1995.
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, 1995, were as follows:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases From Sales
======================================================
<S> <C> <C>
Portfolio securities $ 6,851,081 $ 7,993,406
Short-term investments 149,583,000 149,783,000
------------------------------------------------------
$156,434,081 $157,776,406
------------------------------------------------------
</TABLE>
(4.) Investment Management Agreement and Other Transactions
The Fund pays 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 period from October 1, 1994 through January 31, 1995 the Fund paid
or accrued to Hartwell Keystone $92,468 of which $33,449 was paid to Hartwell
Management Company, Inc., the former subadviser. During the period from January
31, 1995 through September 30, 1995 the Fund paid or accrued to Keystone $68,301
of which $34,981 was paid to Hartwell.
During the year ended September 30, 1995, the Fund paid or accrued $18,301 to
KIRC and KII for reimbursement of certain accounting services. The Fund paid or
accrued $83,519 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
<PAGE>
PAGE 18
------------------------------------------------------------------
Keystone Hartwell Growth Fund
net assets; and 1.5% of fund average net assets over $100 million.
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, 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.
The Fund has entered into an expense offset arrangement with its custodian.
For the year ended September 30, 1995, the Fund paid custody fees in the amount
of $20,734 and received a credit of $2,174 pursuant to the expense offset
arrangement, resulting in a total expense of $22,908. The assets deposited with
the custodian under the expense offset arrangement could have been invested in
income-producing assets.
Certain officers and/or Directors of Keystone are also officers and/or
Trustees of the Fund. Officers of Keystone and affiliated Trustees receive no
compensation directly from the Fund. Currently the Independent Trustees receive
no compensation for their services.
(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 of the following year will be taxable to shareholders in
the year declared.
(6.) Shareholder Meeting
A Special Meeting of Shareholders was held on January 30, 1995. The following is
a brief description of the matters which were submitted to shareholders, and
certain information about how shareholders voted:
1. Proposal 1 was to approve the reorganization of the Fund as a
Massachusetts business trust, pursuant to which the existing Board of Directors
would become the Board of Trustees of the new entity, and the present adviser
and subadviser to the Fund would remain the same.*
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -------------- --------- ----------
710,302.605 43,874.511 37,893.274
</TABLE>
2. Proposal 2 was to approve an Investment Advisory Agreement between the
Fund and Keystone.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -------------- --------- ----------
633,178.701 33,372.556 55,037.624
</TABLE>
3. Proposal 3 was to approve a SubAdvisory Agreement between Keystone and
Hartwell Management.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -------------- --------- ----------
616,559.841 46,770.513 58,258.527
</TABLE>
4. Proposal 4 was to select KPMG Peat Marwick LLP as the independent public
accountant of the Fund for the 1995 fiscal year.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- -------------- --------- ----------
667,577.826 12,108.043 41,903.012
</TABLE>
*Action on Proposal 1 was postponed and the meeting adjourned until March 29,
1995, at which time the required vote was received and the proposal approved.
<PAGE>
PAGE 19
------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders
Keystone Hartwell Growth Fund
We have audited the accompanying statement of assets and liabilities of Keystone
Hartwell Growth Fund (formerly Keystone America Hartwell Growth Fund, Inc.),
including the schedule of investments as of September 30, 1995, 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 five-year period ended
September 30, 1995 for Class A Shares and for each of the years in the two-year
period ended September 30, 1995 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 Class A
financial highlights for the period from January 1, 1990 to September 30, 1990,
and for each of the years in the four-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, 1995 by correspondence with the custodian. 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 Hartwell Growth Fund as of September 30, 1995, 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 specified in the first paragraph above in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
October 27, 1995
-----------------------------------------------------------------------------
FEDERAL TAX STATUS--FISCAL 1995 DISTRIBUTIONS (Unaudited)
A distribution of $2.20 per share of net long-term capital gains was paid
during the fiscal year ended September 30, 1995.
In January of 1996 we will send you complete information on distributions
paid during the calendar year 1995 to help you in completing your federal tax
return.
<PAGE>
KEYSTONE 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, 1995
Financial Highlights (All Classes) For the fiscal years
ended September 30,
1986 through
September 30, 1995
Statement of Assets and Liabilities September 30, 1995
Statement of Operations Year ended
September 30, 1995
Statements of Changes in Net Assets Two years ended
September 30, 1995
Notes to Financial Statements
Independent Auditors' Report
dated October 27, 1995
All other schedules are omitted as the required information is inapplicable.
<PAGE>
(24)(b) Exhibits
(1) A copy of Registrant's form of Declaration of Trust was filed with
Post-Effective Amendment No. 47 to Registration Statement No.
2-25215/811-1380 and is incorporated by reference herein. A copy of
Registrant's form of First Supplemental Declaration of Trust is filed
herewith as Exhibit 24(b)(1).
(2) A copy of the Registrant's form of By-Laws was filed with
Post-Effective Amendment No. 47 to Registration Statement No.
2-25215/811-1380 and is incorporated by reference herein.
(3) Not applicable.
(4) Not applicable.
(5) (A) A copy of the form of Investment Advisory and Management
Agreement between the Registrant and Keystone Investment
Management Company (formerly named Keystone Custodian Funds,
Inc.) was filed with Post-Effective Amendment No. 46 to
Registration Statement No. 2-25215/811-1380 as Exhibit 24(b)
(5)(A).
(B) A copy of the form of SubInvestment Advisory Agreement between
Keystone Investment Management Company (formerly named
Keystone Custodian Funds, Inc.) and J.M. Hartwell Limited
Partnership was filed with Post-Effective Amendment No. 46 to
Registration Statement No. 2-25215/811-1380 as Exhibit 24(b)
(5)(B)
(6) (A) Copies of forms of the Principal Underwriting Agreements
between the Registrant and Keystone Investment Distributors
Company (formerly named Keystone Distributors, Inc.) are filed
herewith as Exhibit 24(b)(6)(A). A copy of the First Amendment
to Class A and Class C Principal Underwriting Agreement is
filed herewith as Exhibit 24(b)(6)(A).
(B) Copies of the forms of Dealer Agreements used by Keystone
Investment Distributors Company (formerly named Keystone
Distributors, Inc.) are filed herewith as Exhibit 24(b)(6)(B).
(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 was
filed with Post Effective Amendment No. 47 to Registration Statement
No. 2-25215/811-1380 as Exhibit 24(b)(8) and is incorported by
reference herein.
(9) Not applicable.
(10) An opinion and a consent of counsel as to the legality of the
securities registered by the Fund was filed by 24f-2 on November 22,
1995 and is incorporated by reference herein. An opinion and consent of
counsel with respect to the registration of additional shares of the
Fund pursuant to Section 24(e)(1) of the 1940 Act is filed herewith as
a part of Exhibit 24(b)(10).
(11) A consent as to the use of the Independent Auditors' Report is filed
herewith as Exhibit 24(b)(11) and is incorporated by reference herein.
(12) Not applicable.
(13) Not applicable.
(14) Copies of forms 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 Balanced Fund (K-1) as Exhibit
24(b)(14) and are incorporated by reference herein.
(15) Copies of the forms of Registrant's Distribution Plans are filed
herewith as Exhibit 24(b)(15).
(16) Schedules for computation of total return are filed herewith as Exhibit
24(b)(16).
(17) Financial Data Schedules are filed herewith as Exhibit 27.
(18) A copy of the form of Registrant's Multiple Class Plan was filed with
Post Effective Amendment No. 48 and are incorporated by reference
herein.
(19) Powers of Attorney are filed herewith as Exhibit 24(b)(19).
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 October 31, 1995
-------------- ------------------------------
Shares of Beneficial Class A - 1,451
Interest, without Class B - 175
par value Class C - 62
Item 27. Indemnification
Provisions for the indemnification of the Fund's Trustees and officers
are contained in Article 4 of the Registrant's Form of By-laws, a copy of which
was filed with Post-Effective Amendment No. 47 to Registration Statement No.
2-25215/811-1380 and is incorporated by reference herein.
Provisions for the indemnification of Keystone Investment Distributors
Company, the Registrant's principal underwriter, are contained in Section 9 of
the Principal Underwriting Agreement between the Registrant and Keystone
Investment Distributors Company, a copy of which is filed herewith as Exhibit
24(b)(6)(A).
Provisions for the indemnification of Keystone Investment Management
Company and J.M. Hartwell Limited Partnership, Registrant's investment adviser
and subadviser, respectively, are contained in Section 5 of the Investment
Advisory and Management Agreement between Registrant and Keystone Investment
Management Company and Section 4 of the SubInvestment Advisory Agreement between
Keystone Investment Management Company and J.M. Hartwell Limited Partnership,
forms of which were filed with Post-Effective Amendment No. 46 to Registration
Statement No. 2-25215/811-1380 and are incorporated by reference herein.
Item 28. Businesses and Other Connections of Investment Advisers
The following tables list the names of the various officers and
directors of Keystone Investment Management Company 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 INVESTMENT MANAGEMENT COMPANY
Position with
Keystone
Investment
Name Management Company Other Business Affiliations
- ---- ------------------ ---------------------------
Albert H. Elfner, III Chairman of Chairman of the Board,
the Board, Chief Executive Officer,
Chief Executive President and Director:
Officer,and Keystone Investments, Inc.
Director Keystone Management, Inc.
Keystone Software, Inc.
Keystone Asset Corporation
Keystone Capital
Corporation
Chairman of the Board and
Director:
Keystone Fixed Income
Advisers, Inc.
Keystone Institutional
Company, Inc.
President and Director:
Keystone Trust Company
Director or Trustee:
Fiduciary Investment
Company, Inc.
Keystone Investment
Distributors Company
Keystone Investor
Resource Center, Inc.
Boston Children's
Services Associates
Middlesex School
Middlebury College
Former Trustee or Director:
Neworld Bank
Robert Van Partners, Inc.
Philip M. Byrne Director President and Director:
Keystone Institutional
Company, Inc.
Senior Vice President:
Keystone Investments, Inc.
Herbert L. Bishop, Jr. Senior Vice None
President
Donald C. Dates Senior Vice None
President
Gilman Gunn Senior Vice None
President
Edward F. Godfrey Director, Director, Senior Vice
Senior Vice President
President, Chief Financial Officer and
Treasurer and Treasurer:
Chief Financial Keystone Investments, Inc.
Officer Keystone Investment
Distributors Company
Treasurer:
Keystone Institutional
Company, Inc.
Keystone Management, Inc.
Keystone Software, Inc.
Fiduciary Investment
Company, Inc.
Former Treasurer and
Director:
Hartwell Keystone
Advisers, Inc.
James R. McCall Director and None
President
Ralph J. Spuehler, Jr. Director President and Director:
Keystone Investment
Distributors Company
Senior Vice President and
Director:
Keystone Investments, Inc.
Chairman and Director:
Keystone Investor
Resource Center, Inc.
Keystone Management, Inc.
Formerly President:
Keystone Management, Inc.
Formerly Treasurer:
The Kent Funds
Keystone Investments, Inc.
Keystone Investment
Management Company
Rosemary D. Van Antwerp Senior Vice General Counsel, Senior
President, Vice President and
General Counsel Secretary:
and Secretary Keystone Investments, Inc.
Senior Vice President and
General Counsel:
Keystone Institutional
Company, Inc.
Senior Vice President,
General Counsel and
Director:
Keystone Investor
Resource Center, Inc.
Fiduciary Investment
Company, Inc.
Keystone Investment
Distributors Company
Senior Vice President,
General Counsel, Director
and Secretary:
Keystone Management, Inc.
Keystone Software, Inc.
Former Senior Vice
President and Secretary:
Hartwell Keystone
Advisers, Inc.
Vice President and
Secretary:
Keystone Fixed Income
Advisers, Inc.
Harry Barr Vice President None
Robert K. Baumback Vice President None
Betsy A. Blacher Senior Vice None
President
Francis X. Claro Vice President None
Kristine R. Cloyes Vice President None
Christopher P. Conkey Senior Vice None
President
Richard Cryan Senior Vice None
President
Maureen E. Cullinane Senior Vice None
President
George E. Dlugos Vice President None
Antonio T. Docal Vice President None
Christopher R. Ely Senior Vice None
President
Robert L. Hockett Vice President None
Sami J. Karam Vice President None
Donald M. Keller Senior Vice None
President
George J. Kimball Vice President None
JoAnn L. Lyndon Vice President None
John C. Madden, Jr. Vice President None
Stephen A. Marks Vice President None
Eleanor H. Marsh Vice President None
Walter T. McCormick Senior Vice None
President
Barbara McCue Vice President None
Stanley M. Niksa Vice President None
Robert E. O'Brien Vice President None
Margery C. Parker Vice President None
William H. Parsons Vice President None
Daniel A. Rabasco Vice President None
David L. Smith Vice President None
Kathy K. Wang Vice President None
Judith A. Warners Vice President None
J. Kevin Kenely Vice President None
and Controller
Joseph J. Decristofaro Asst. Vice President None
<PAGE>
LIST OF OFFICERS AND DIRECTORS OF
JMH MANAGEMENT CORPORATION -
J.M. HARTWELL LP
Position with
J.M. Hartwell
Limited
Name Partnership Other Business Affiliations
- ---- ------------- ---------------------------
John M. Hartwell Founder None
William C. Miller, IV Director and Vice President:
Chief Executive Hartwell Emerging Growth
Officer Fund, Inc.
Hartwell Growth Fund
Director:
Hartwell Distributors,
Inc.
Harrison Augur Director General Partner:
CA Partners
Director:
ILC Technology
William J. Nutt Director President and Chief
Executive Officer:
Affiliated Managers Group
<PAGE>
Item 29. Principal Underwriter
(a) Keystone Investment Distributors Company, (formerly named
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 Quality Fund (B-1)
Keystone Diversified Bond Fund (B-2)
Keystone High Income Bond Fund (B-4)
Keystone Balanced Fund (K-1)
Keystone Strategic Growth Fund (K-2)
Keystone Growth and Income Fund (S-1)
Keystone Mid-Cap Growth Fund (S-3)
Keystone Small Company Growth Fund (S-4)
Keystone Capital Preservation and Income Fund
Keystone Fund for Total Return
Keystone Global Opportunities Fund
Keystone Government Securities Fund
Keystone Intermediate Term Bond Fund
Keystone America Omega Fund, Inc.
Keystone State Tax Free Fund
Keystone State Tax Free Fund - Series II
Keystone Strategic Income Fund
Keystone Tax Free Income Fund
Keystone 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.
Item 29(c). - Not applicable
Position and Offices with Position and
Name and Principal Keystone Investment Offices with
Business Address Distributors Company 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
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
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 30. Location of Accounts and Records
200 Berkeley Street
Boston, Massachusetts 02116-5034
J.M. Hartwell Limited Partnership
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
Upon request and without charge, Registrant hereby undertakes to
furnish a copy of its latest annual report to shareholders to each
person to whom a copy of the Registrant's prospectus is delivered.
<PAGE>
SIGNATURES
Pursuant to the requirements of 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 29 day of November,
1995.
KEYSTONE HARTWELL GROWTH FUND
By: /s/ George S. Bissell
-----------------------------
George S. Bissell*
Chairman of the Board
*By:
-----------------------------
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 29 day of November, 1995.
SIGNATURES TITLE
- ---------- -----
/s/ George S. Bissell Chairman of the Board and Trustee
George S. Bissell*
/s/ Albert H. Elfner, III President, Chief Executive Officer
Albert H. Elfner, III* and Trustee
/s/ Kevin J. Morrissey Treasurer (Principal Financial
Kevin J. Morrissey and Accounting Officer)
*By:
-----------------------------
Melina M.T. Murphy**
Attorney-in-Fact
<PAGE>
SIGNATURES TITLE
- ---------- -----
/s/ Frederick Amling Trustee
Frederick Amling*
/s/ Charles A. Austin, III Trustee
Charles A. Austin, III*
/s/ Edwin D. Campbell Trustee
Edwin D. Campbell*
/s/ Charles F. Chapin Trustee
Charles F. Chapin*
/s/ Leroy Keith, Jr. Trustee
Leroy Keith, Jr.*
/s/ K. Dun Gifford Trustee
K. Dun Gifford*
/s/ F. Ray Keyser, Jr. Trustee
F. Ray Keyser, Jr.*
/s/ David M. Richardson Trustee
David M. Richardson*
/s/ Richard J. Shima Trustee
Richard J. Shima*
/s/ Andrew J. Simons Trustee
Andrew J. Simons*
*By:
-----------------------------
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)(19).
<PAGE>
INDEX TO EXHIBITS
Page Number
in Sequential
Exhibit Number Exhibit Numbering System
- -------------- ------- ----------------
1 Declaration of Trust\3/
First Supplemental Declaration of Trust
2 By-Laws\3/
5 (A) Investment Advisory and Management Agreement\2/
(B) SubInvestment Advisory Agreement\2/
6 (A) Principal Underwriting Agreement
(B) Dealers Agreement
8 Custodian, Fund Accounting and
Recordkeeping Agreement\3/
10 Opinion and Consent of Counsel
11 Independent Auditors Consent
14 Copies of Model Retirement Plans\1/
15 Distribution Plans (Class A & C)
Distribution Plans (Class B-1 and B-2)
16 Performance Data Schedules
17 Financial Data Schedules (filed as Exhibit 27)
18 Form of 18f-3 Plan\4/
19 Powers of Attorney
- --------------------------------------------------------
\1/ Incorporated by reference herein to Post-Effective Amendment No. 66
to Registration Statement No. 2-10527/811-96 for Keystone Balanced Fund (K-1).
\2/ Incorporated by reference herein to Registrant's Post-Effective
Amendment No. 46 to Registration Statement No. 2-25215/811-1380.
\3/ Incorporated by reference herein to Post-Effective Amendment No. 47
to Registration Statement No. 2-25215/811-1380.
\4/ Incorporated by reference herein to Post-Effective Amendment No. 48
to Registration Statement No. 2-25215/811-1380.
<PAGE>
KEYSTONE AMERICA HARTWELL GROWTH FUND
FIRST SUPPLEMENTAL
DECLARATION OF TRUST
EFFECTIVE MAY 1, 1995
FIRST SUPPLEMENTAL DECLARATION OF TRUST dated March 15, 1995 made by
George S. Bissell, Albert H. Elfner, III, Frederick Amling, Charles A. Austin,
III, Edwin D. Campbell, Charles F. Chapin, Leroy Keith, Jr., K. Dun Gifford, F.
Ray Keyser, Jr., David M. Richardson, Richard J. Shima and Andrew J. Simons
(hereinafter with their successors referred to as the "Trustees") to DECLARATION
OF TRUST dated March 18, 1992.
WHEREAS, the Trustees have determined to change the name of the Trust
and to change the designation of its principal office to 200 Berkeley Street,
Boston, Massachusetts 02116.
NOW, THEREFORE, the Trustees hereby declare that they will amend the
Declaration of Trust of this Trust as hereinafter set forth:
ARTICLE I, Name and Definitions, Section 1. Name., is hereby amended to
read as follows:
"This Trust shall be known as the "Keystone 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."
This Amendment shall become effective as of May 1, 1995.
All other provisions of the Declaration of Trust shall continue as
originally stated.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have caused this First Supplemental Declaration of Trust to be executed
on the 15th day of March, 1995.
<PAGE>
/s/ George S. Bissell, Trustee
- -----------------------------------
George S. Bissell, Trustee
/s/ Albert H. Elfner, III, Trustee
- -----------------------------------
Albert H. Elfner, III, Trustee
/s/ Frederick Amling, Trustee
- -----------------------------------
Frederick Amling, Trustee
/s/ Charles A. Austin, III, Trustee
- -----------------------------------
Charles A. Austin, III, Trustee
/s/ Edwin D. Campbell, Trustee
- -----------------------------------
Edwin D. Campbell, Trustee
/s/ Charles F. Chapin, Trustee
- -----------------------------------
Charles F. Chapin, Trustee
/s/ K. Dun Gifford, Trustee
- -----------------------------------
K. Dun Gifford, Trustee
/s/ Leroy Keith, Jr., Trustee
- -----------------------------------
Leroy Keith, Jr., Trustee
/s/ F. Ray Keyser, Jr., Trustee
- -----------------------------------
F. Ray Keyser, Jr., Trustee
/s/ David M. Richardson, Trustee
- -----------------------------------
David M. Richardson, Trustee
/s/ Richard J. Shima, Trustee
- -----------------------------------
Richard J. Shima, Trustee
/s/ Andrew J. Simons, Trustee
- -----------------------------------
Andrew J. Simons, Trustee
10140385
<PAGE>
FIRST AMENDMENT
TO
PRINCIPAL UNDERWRITING AGREEMENT
OF
KEYSTONE HARTWELL GROWTH FUND
FIRST AMENDMENT (the "Amendment") made as of the 31st day of May 1995
to AGREEMENT (the "Agreement") made the 19th day of August 1993 by and between
Keystone Hartwell Growth Fund, a Massachusetts business trust, ("Fund"), and
Keystone Investment Distributors Company, a Delaware corporation (the "Principal
Underwriter").
1. This Amendment is made by the Fund, individually and/or on behalf of
its series if any, referred to above in the title of this Amendment, to
which series, if any, this Amendment shall relate, as applicable (the
"Fund"). The Fund and the Principal Underwriter mutually agree that
Section 1 of the Agreement is amended as follows:
" 1. The Fund hereby appoints the Principal Underwriter a
principal underwriter of the Class A and Class C 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, the
Principal Underwriter will act as agent for the Fund and not
as principal."
2. In all other respects the Agreement is unchanged.
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 HARTWELL GROWTH FUND
By: /s/ Albert H. Elfner, III
--------------------------------
Albert H. Elfner, III
Title: President
KEYSTONE INVESTMENT DISTRIBUTORS
COMPANY
By: /s/ Ralph J. Spuehler, Jr.
--------------------------------
Ralph J. Spuehler, Jr.
Title: President
#100C021A
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
KEYSTONE HARTWELL GROWTH FUND
AGREEMENT made this 30th day of May, 1995 by and between Keystone
Hartwell Growth Fund, a Massachusetts business trust ("Fund"), and Keystone
Investment Distributors Company, 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.
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 (60) 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.
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 HARTWELL GROWTH FUND
By: /s/ Albert H. Elfner, III
--------------------------------
Albert H. Elfner, III
Title:
KEYSTONE INVESTMENT DISTRIBUTORS
COMPANY
By: /s/ Ralph J. Spuehler, Jr.
--------------------------------
Ralph J. Spuehler, Jr.
Title: President
#101505b6
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-1 SHARES
OF
KEYSTONE HARTWELL GROWTH FUND
AGREEMENT made this 31st day of May 1995 by and between Keystone Hartwell
Growth Fund, a Massachusetts business trust, ("Fund"), and Keystone Investment
Distributors Company, a Delaware corporation (the "Principal Underwriter").
The Fund, individually and/or on behalf of its series, if any, referred to
above in the title of this Agreement, to which series, if any, this Agreement
shall relate, as applicable (the Fund ), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the 1940 Act ). Accordingly, it is hereby mutually agreed
as follows:
1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class B-1 shares of beneficial interest of the Fund ("B-1
Shares") as an independent contractor upon the terms and conditions hereinafter
set forth. The general term "Shares" as used herein has the same meaning as is
provided therefor in Schedule I hereto. Except as the Fund may from time to time
agree, the Principal Underwriter will act as agent for the Fund and not as
principal.
2. The Principal Underwriter will use its best efforts to find purchasers
for the B-1 Shares and to promote distribution of the B-1 Shares and may obtain
orders from brokers, dealers or other persons for sales of B-1 Shares to them.
No such dealer, broker or other person shall have any authority to act as agent
for the Fund; such dealer, broker or other person shall act only as principal in
the sale of B-1 Shares.
3. Sales of B-1 Shares by Principal Underwriter shall be at the 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 B-2 Shares. 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 B-1 Shares the Fund shall receive the current net asset
value. The Fund shall pay the Principal Underwriter Distribution Fees (as
defined in Section 14 hereof), as commissions for the sale of B-1 Shares and
other Shares, which shall be paid in conjunction with distribution fees paid to
the Principal Underwriter by other classes of Shares of the Fund to the extent
required in order to comply with Section 14 hereof, and shall pay over to the
Principal Underwriter CDSCs (as defined in Section 14 hereof) as set forth in
the Fund's current prospectus and statement of additional information, and as
required by Section 14 hereof. The Principal Underwriter shall also receive
payments consisting of shareholder service fees ("Service Fees") at the rate of
.25% per annum of the average daily net asset value of the Class B-1 Shares. The
Principal Underwriter may allow all or a part of said Distribution Fees and
CDSCs received by it (not paid to others as hereinafter provided) to such
brokers, dealers or other persons as Principal Underwriter may determine.
5. Payment to the Fund for B-1 Shares shall be in New York or Boston
Clearing House funds received by the Principal Underwriter within three 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 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
issue of the B-1 Shares.
6. The Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the B-1 Shares any representations concerning the B-1
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 the Principal Underwriter in reasonable quantities upon
request.
7. The Principal Underwriter agrees to comply with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (as defined in
the Purchase and Sale Agreement, dated as of May 31, 1995 (the Purchase
Agreement ), between the Principal Underwriter, Citibank, N.A. and Citicorp
North America, Inc., as agent (the "Rules of Fair Practice")).
8. The Fund appoints the Principal Underwriter as its agent to accept
orders for redemptions and repurchases of B-1 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 and Trustees 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 the Principal Underwriter
for the purpose of qualifying the B-1 Shares for sale under the so-called "blue
sky" laws of any state or for registering B-1 Shares under the 1933 Act or the
Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal
Underwriter shall bear the expenses of preparing, printing and distributing
advertising, sales literature, prospectuses, and statements of additional
information. The Fund shall bear the expense of registering B-1 Shares under the
1933 Act and the Fund under the 1940 Act, qualifying B-1 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 holders of B-1 Shares, and the direct expenses of the issue of
B-1 Shares.
12. The Principal Underwriter shall, at the request of the Fund, provide to
the Board of Trustees or Directors (together herein called the Directors ) of
the Fund in connection with sales of B-1 Shares not less than quarterly a
written report of the amounts received from the Fund therefor and the purpose
for which such expenditures by the Fund 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 one year.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the outstanding voting securities of
Class B-1 of the Fund or by a majority of the Directors of the Fund and a
majority of the Directors who are not parties to this Agreement or "interested
persons", as defined in the Investment Company Act of 1940 (the 1940 Act ), of
any such party and who have no direct or indirect financial interest in the
operation of the Fund's Rule 12b-1 plan for Class B-1 Shares or in any
agreements related to the plan 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 Directors of the Fund, or a majority of
such Directors who are not parties to this Agreement or "interested persons", as
defined in the 1940 Act, of any such party and who have no direct or indirect
financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-1
Shares or in any agreement related to the plan or by a vote of a majority of the
outstanding voting securities of Class B-1 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), which shall not
include assignment of the Principal Underwriter's (as hereinafter defined)
provided for hereunder and/or rights related to such Allocable Portions.
14. The provisions of this Section 14 shall be applicable to the extent
necessary to enable the Fund to comply with the obligation of the Fund to pay
the Principal Underwriter its Allocable Portion of Distribution Fees paid in
respect of Shares while the Fund is required to do so pursuant the Principal
Underwriting Agreement, of even date herewith, in respect of Class B-2 Shares,
and shall remain in effect so long as any payments are required to be made by
the Fund pursuant to the irrevocable payment instruction (as defined in the
Purchase Agreement (the Irrevocable Payment Instruction )).
14.1 The Fund shall pay to the Principal Underwriter the Principal
Underwriter's Allocable Portion (as hereinafter defined) of a fee (the
"Distribution Fee") at the rate of .75% per annum of the average daily net asset
value of the Shares, subject to the limitation on the maximum aggregate amount
of such fees under the Rules of Fair Practice as applicable to such Distribution
Fee on the date hereof.
14.2 The Principal Underwriter's Allocable Portion of Distribution Fees
paid by the Fund in respect of Shares shall be equal to the portion of the Asset
Based Sales Charge allocable to Distributor Shares (as defined in Schedule I
hereto to this Agreement) in accordance with Schedule I hereto. The Fund agrees
to cause its transfer agent to maintain the records and arrange for the payments
on behalf of the Fund at the times and in the amounts and to the accounts
required by Schedule I hereto, as the same may be amended from time to time. It
is acknowledged and agreed that by virtue of the operation of Schedule I hereto
the Principal Underwriter's Allocable Portion of Distribution Fees paid by the
Fund in respect of Shares, may, to the extent provided in Schedule I hereto,
take into account Distribution Fees payable by the Fund in respect of other
existing and future classes and/or sub-classes of shares of the Fund which would
be treated as "Shares" under Schedule I hereto. The Fund will limit amounts paid
to any subsequent principal underwriters of Shares to the portion of the Asset
Based Sales Charge paid in respect of Shares which is allocable to
Post-distributor Shares (as defined in Schedule I hereto) in accordance with
Schedule I hereto. The Fund's payments to the Principal Underwriter in
consideration of its services in connection with the sale of B-1 Shares shall be
the Distribution Fees attributable to B-1 Shares which are Distributor Shares
(as defined in Schedule I hereto) and all other amounts constituting the
Principal Underwriter's Allocable Portion of Distribution Fees shall be the
Distribution Fees related to the sale of other Shares which are Distributor
Shares (as defined in Schedule I hereto).
The Fund shall cause its transfer agent and sub-transfer agents to withhold
from redemption proceeds payable to holders of Shares on redemption thereof the
contingent deferred sales charges payable upon redemption thereof as set forth
in the then current prospectus and/or statement of additional information of the
Fund ("CDSCs") and to pay over to the Principal Underwriter The Principal
Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which
shall be equal to the portion thereof allocable to Distributor Shares (as
defined in Schedule I hereto) in accordance with Schedule I hereto.
14.3 The Principal Underwriter shall be considered to have completely
earned the right to the payment of its Allocable Portion of the Distribution Fee
and the right to payment over to it of its' Allocable Portion of the CDSC in
respect of Shares as provided for hereby upon the completion of the sale of each
Commission Share (as defined in Schedule I hereto) taken into account as a
Distributor Share in computing the Principal Underwriter's Allocable Portion in
accordance with Schedule I hereto.
14.4 Except as provided in Section 14.5 hereof in respect of Distribution
Fees only, the Fund's obligation to pay the Principal Underwriter the
Distribution Fees and to pay over to the Principal Underwriter CDSCs provided
for hereby shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Principal Underwriter
and enforce such claims against any assets (other than the Principal
Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs
(the "Collection Rights") of the Principal Underwriter).
14.5 Notwithstanding anything in this Agreement to the contrary, the Fund
shall pay to the Principal Underwriter its Allocable Portion of Distribution
Fees provided for hereby notwithstanding its termination as Principal
Underwriter for the Shares or any termination of this Agreement and such payment
of such Distribution Fees, and that obligation and the method of computing such
payment, shall not be changed or terminated except to the extent required by any
change in applicable law, including, without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the Rules
of Fair Practice, in each case enacted or promulgated after June 1, 1995, or in
connection with a Complete Termination (as hereinafter defined). For the
purposes of this Section 14.5, "Complete Termination" means a termination of the
Fund's Rule 12b-1 plan for B-2 Shares involving the cessation of payments of the
Distribution Fees, and the cessation of payments of distribution fees pursuant
to every other Rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the
offering of every existing or future B-Class-of-Shares, which conditions shall
be deemed satisfied when they are first complied with hereafter and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-2 Shares which are Distributor Shares pursuant to Schedule I
hereto shall have been redeemed or converted or (ii) June 1, 2005. For purposes
of this Section 14.5, the term B-Class-of-Shares means each of the B-1 Class of
Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of
shares of the Fund hereafter issued which would be treated as Shares under
Schedule I hereto or which has substantially similar economic characteristics to
the B-1 or B-2 Classes of Shares taking into account the total sales charge,
CDSC or other similar charges borne directly or indirectly by the holder of the
shares of such class. The parties agree that the existing C Class of Shares of
the Fund does not have substantially similar economic characteristics to the B-1
or B-2 Classes of Shares taking into account the total sales charge, CDSC or
other similar charges borne directly or indirectly by the holder of such shares.
For purposes of clarity the parties to this agreement hereby state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing B-1 or B-2 Classes of Shares taking
into account the total sale charge, CDSC or other similar charges borne directly
or indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares.
14.6 The Principal Underwriter may assign any part of its Allocable
Portions and obligations of the Fund related thereto (but not the Principal
Underwriter's obligations to the Fund provided for in this Agreement) to any
person (an "Assignee") and any such assignment shall be effective as to the Fund
upon written notice to the Fund by the Principal Underwriter. In connection
therewith the Fund shall pay all or any amounts in respect of its Allocable
Portions directly to the Assignee thereof as directed in a writing by the
Principal Underwriter in the Irrevocable Payment Instruction, as the same may be
amended from time to time with the consent of the Fund, and the Fund shall be
without liability to any person if it pays such amounts when and as so directed,
except for underpayments of amounts actually due, without any amount payable as
consequential or other damages due to such underpayment and without interest
except to the extent that delay in payment of Distribution Fees and CDSCs
results in an increase in the maximum Sales Charge allowable under the Rules of
Fair Practice, which increases daily at a rate of prime plus one percent per
annum.
14.7 The Fund will not, to the extent it may otherwise be empowered to do
so, change or waive any CDSC with respect to B-1 Shares, except as provided in
the Fund's prospectus or statement of additional information without the
Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding
anything to the contrary in this Agreement or any termination of this Agreement
or the Principal Underwriter as principal underwriter for the Shares of the
Fund, the Principal Underwriter shall be entitled to be paid its Allocable
Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-1 Shares is
terminated and whether or not any such termination is a Complete Termination, as
defined above.
15. 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.
16. The Fund is a Massachusetts business trust established under a
Declaration of Trust, as it may be amended from time to time. The obligations of
the Fund are not personally binding upon, nor shall recourse be had against the
private property of any of the Trustees, shareholders, officers, employees or
agents of the Fund, but only the property of the Fund shall be bound.
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 HARTWELL GROWTH FUND
By: /s/ Rosemary D. Van Antwerp
--------------------------------
Title: Senior Vice President
KEYSTONE INVESTMENT DISTRIBUTORS, INC.
By: /s/ Ralph J. Spuehler, Jr.
--------------------------------
Title: President
<PAGE>
SCHEDULE I
TO
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-1 SHARES
OF
KEYSTONE HARTWELL GROWTH FUND
TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING
AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES
Amounts (in respect of Asset Based Sales Charges (as hereinafter defined)
and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined)
of each Fund (as hereinafter defined) shall be allocated between Distributor
Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter
defined) of such Fund in accordance with the rules set forth in clauses (B) and
(C). Clause (B) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account (as hereinafter defined)
in maintaining records relating to Distributor Shares and Post-distributor
Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account in determining what
portion of the Asset Based Sales Charge (as hereinafter defined) payable in
respect of each class of Shares of such Fund and what portion of the CDSC (as
hereinafter defined) payable by the holders of Shares of such Fund is
attributable to Distributor Shares and Post-distributor Shares, respectively.
(A) DEFINITIONS:
Generally, for purposes of this Schedule I, defined terms shall be used
with the meaning assigned to them in the Agreement, except that for purposes of
the following rules the following definitions are also applicable:
"Agreement" shall mean the Principal Underwriting Agreement for Class B-1
Shares of the Instant Fund dated as of June 1, 1995 between the Instant Fund and
the Distributor.
"Asset Based Sales Charge" shall have the meaning set forth in Section
26(b)(8)(C) of the Rules of Fair Practice it being understood that for purposes
of this Exhibit I such term does not include the Service Fee.
"Business Day" shall mean any day on which the banks and the New York Stock
Exchange are not authorized or required to close in New York City.
"Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a
Dividend in respect of such Share which is designated by such Fund as being a
"capital gain dividend" as such term is defined in Section 852 of the Internal
Revenue Code of 1986, as amended.
"CDSC" shall mean with respect to any Fund, the contingent deferred sales
charge payable, either directly or by withholding from the proceeds of the
redemption of the Shares of such Fund, by the shareholders of such Fund on any
redemption of Shares of such Fund in accordance with the Prospectus relating to
such Fund.
"Commission Share" shall mean, in respect of any Fund, a Share of such Fund
issued under circumstances where a CDSC would be payable upon the redemption of
such Share if such CDSC is not waived or shall have not otherwise expired.
"Date of Original Purchase" shall mean, in respect of any Commission Share
of any Fund, the date on which such Commission Share was first issued by such
Fund; provided, that if such Share is a Commission Share and such Fund issued
the Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Date
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the date on which the Commission Share (or portion thereof) of the
other Fund was first issued by such other Fund (unless such Commission Share (or
portion thereof) was also issued by such other Fund in a Free Exchange, in which
case this proviso shall apply to that Free Exchange and this application shall
be repeated until one reaches a Commission Share (or portion thereof) which was
issued by a Fund other than in a Free Exchange).
"Distributor" shall mean Keystone Investment Distributors Company, its
successors and assigns.
"Distributor's Account" shall mean the account of the Distributor, account
no. 9903-584-2, ABA No. 011 0000 28, entitled "General Account" maintained with
State Street Bank & Trust Company or such other account as the Distributor may
designate in a notice to the Transfer Agent.
"Distributor Inception Date" shall mean, in respect of any Fund, the date
identified as the date Shares of such Fund are first sold by the Distributor.
"Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund,
the date identified as the last sale of a Commission Share during the period the
Distributor served as principal underwriter under the Agreement.
"Distributor Shares" shall mean, in respect of any Fund, all Shares of such
Fund the Month of Original Purchase of which occurs on or after the Inception
Date for such Fund and on or prior to the Distributor Last Sale Cut-off Date in
respect of such Fund.
"Dividend" shall mean, in respect of any Share of any Fund, any dividend or
other distribution by such Fund in respect of such Share.
"Free Exchange" shall mean any exchange of a Commission Share (or portion
thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of
another Fund (the "Issuing Fund"), under any arrangement which defers the
exchanging Shareholder's obligation to pay the CDSC in respect of the Commission
Share (or portion thereof) of the Redeeming Fund so exchanged until the later
redemption of the Share (or portion thereof) of the Issuing Fund received in
such exchange.
"Free Share" shall mean, in respect of any Fund, each Share of such Fund
other than a Commission Share, including, without limitation: (i) Shares issued
in connection with the automatic reinvestment of Capital Gain Dividends or Other
Dividends by such Fund, (ii) Special Free Shares issued by such Fund and (iii)
Shares (or portion thereof) issued by such Fund in connection with an exchange
whereby a Free Share (or portion thereof) of another Fund is redeemed and the
Net Asset Value of such redeemed Free Share (or portion thereof) is invested in
such Shares (or portion thereof) of such Fund.
"Fund" shall mean each of the regulated investment companies or series or
portfolios of regulated investment companies identified in Schedule II to the
Irrevocable Payment Instruction, as the same may be amended from time to time in
accordance with the terms thereof.
"Instant Fund" shall mean [Keystone Equity Fund].
"ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus
Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer
agent.
"Month of Original Purchase" shall mean, in respect of any Share of any
Fund, the calendar month in which such Share was first issued by such Fund;
provided, that if such Share is a Commission Share and such Fund issued the
Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Month
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the calendar month in which the Commission Share (or portion thereof)
of the other Fund was first issued by such other Fund (unless such Commission
Share (or portion thereof) was also issued by such other Fund in a Free
Exchange, in which case this proviso shall apply to that Free Exchange and this
application shall be repeated until one reaches a Commission Share (or portion
thereof) which was issued by a Fund other than in a Free Exchange); provided,
further, that if such Share is a Free Share and such Fund issued such Free Share
in connection with the automatic reinvestment of dividends in respect of other
Shares of such Fund, the Month of Original Purchase of such Free Share shall be
deemed to be the Month of Original Purchase of the Share in respect of which
such dividend was paid; provided, further, that if such Share is a Free Share
and such Fund issued such Free Share in connection with an exchange whereby a
Free Share (or portion thereof) of another Fund is redeemed and the Net Asset
Value of such redeemed Free Share (or portion thereof) is invested in a Free
Share (or portion thereof) of such Fund, the Month of Original Issue of such
Free Share shall be the Month of Original Issue of the Free Share of such other
Fund so redeemed (unless such Free Share of such other Fund was also issued by
such other Fund in such an exchange, in which case this proviso shall apply to
that exchange and this application shall be repeated until one reaches a Free
Share which was issued by a Fund other than in such an exchange); and provided,
finally, that for purposes of this Schedule I each of the following periods
shall be treated as one calendar month for purposes of applying the rules of
this Schedule I to any Fund: (i) the period of time from and including the
Distributor Inception Date for such Fund to and including the last day of the
calendar month in which such Distributor Inception Date occurs; (ii) the period
of time commencing with the first day of the calendar month in which the
Distributor Last Sale Cutoff Date in respect of such Fund occurs to and
including such Distributor Last Sale Cutoff Date; and (iii) the period of time
commencing on the day immediately following the Distributor Last Sale Cutoff
Date in respect of such Fund to and including the last day of the calendar month
in which such Distributor Last Sale Cut-off Date occurs.
"Omnibus Account" shall mean any Shareholder Account the record owner of
which is a registered broker-dealer which has agreed with the Transfer Agent to
provide sub-transfer agent functions relating to each Sub-shareholder Account
within such Shareholder Account as contemplated by this Schedule I in respect of
each of the Funds.
"Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect
of each Omnibus Account, the Business Day next following the twentieth day of
each calendar month for the calendar month immediately preceding such date so
long as the record owner is able to allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund as contemplated by this Schedule I no
more frequently than monthly; provided, that at such time as the record owner of
such Omnibus Account is able to provide information sufficient to allocate the
Asset Based Sales Charge accruing in respect of such Shares of such Fund owned
of record by such Omnibus Account as contemplated by this Schedule I on a weekly
or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a
weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date
as in the case of Asset Based Sales Charges accruing in respect of Shareholder
Accounts other than Omnibus Accounts, as the case may be.
"Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus
Account, the third Business Day of each calendar week for the calendar week
immediately preceding such date so long as the record owner of such Omnibus
Account is able to allocate the CDSCs accruing in respect of any Shares of any
Fund as contemplated by this Schedule I for no more frequently than weekly;
provided, that at such time as the record owner of such Shares of such Fund
owned of record by such Omnibus Account is able to provide information
sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as
contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement
Date for such Omnibus Account shall be a daily date as in the case of CDSCs
accruing in respect of Shareholder Accounts other than Omnibus Accounts.
"Original Purchase Amount" shall mean, in respect of any Commission Share
of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date),
on the Date of Original Purchase in respect of such Commission Share, by such
Shareholder Account or Sub-shareholder Account for such Commission Share;
provided, that if such Fund issued the Commission Share (or portion thereof) in
question in connection with a Free Exchange for a Commission Share (or portion
thereof) of another Fund, the Original Purchase Amount for the Commission Share
(or portion thereof) in question shall be the Original Purchase Amount in
respect of such Commission Share (or portion thereof) of such other Fund (unless
such Commission Share (or portion thereof) was also issued by such other Fund in
a Free Exchange, in which case this proviso shall apply to that Free Exchange
and this application shall be repeated until one reaches a Commission Share (or
portion thereof) which was issued by a Fund other than in a Free Exchange).
"Other Dividend" shall mean in respect of any Share, any Dividend paid in
respect of such Share other than a Capital Gain Dividend.
"Post-distributor Shares" shall mean, in respect of any Fund, all Shares of
such Fund the Month of Original Purchase of which occurs after the Distributor
Last Sale Cut-off Date for such Fund.
"Program Agent" shall mean Citicorp North America, Inc., as Program Agent
under the Purchase Agreement, and its successors and assigns in such capacity.
"Purchase Agreement" shall mean that certain Purchase and Sale Agreement
dated as of May 31, 1995, among Keystone Investment Distributors Company, as
Seller, Citibank, N.A., as Purchaser, and Citicorp North America, Inc., as
Program Agent.
"Share" shall mean in respect of any Fund any share of the classes of
shares specified in Schedule II to the Irrevocable Payment Instruction opposite
the name of such Fund, as the same may be amended from time to time by notice
from the Distributor and the Program Agent to the Fund and the Transfer Agent;
provided, that such term shall include, after the Distributor Last Sale Cut-off
Date, a share of a new class of shares of such Fund: (i) with respect to each
record owner of Shares which is not treated in the records of each Transfer
Agent and Sub-transfer Agent for such Fund as an entirely separate and distinct
class of shares from the classes of shares specified Schedule II to the
Irrevocable Payment Instruction or (ii) the shares of which class may be
exchanged for shares of another Fund of the classes of shares specified on
Schedule II to the Irrevocable Payment Instruction of any class existing on or
prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on which can
be reinvested in shares of the classes specified on Schedule II to the
Irrevocable Payment Instruction under the automatic dividend reinvestment
options; or (iv) which is otherwise treated as though it were of the same class
as the class of shares specified on Schedule II to the Irrevocable Payment
Instruction.
"Shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Special Free Share" shall mean, in respect of any Fund, a Share (other
than a Commission Share) issued by such Fund other than in connection with the
automatic reinvestment of Dividends and other than in connection with an
exchange whereby a Free Share (or portion thereof) of another Fund is redeemed
and the Net Asset Value of such redeemed Share (or portion thereof) is invested
in a Share (or portion thereof) of such Fund.
"Sub-shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the
record owner thereof.
(B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND AND THE
RECORD OWNER OF EACH OMNIBUS ACCOUNT:
The Transfer Agent shall maintain Shareholder Accounts, and shall cause
each record owner of each Omnibus Account to maintain Sub-shareholder Accounts,
each in accordance with the following rules:
(1) SHAREHOLDER ACCOUNTS AND SUB-SHAREHOLDER ACCOUNTS. The Transfer Agent
shall maintain a separate account (a "Shareholder Account") for each record
owner of Shares of each Fund. Each Shareholder Account (other than Omnibus
Accounts) will represent a record owner of Shares of such Fund, the records of
which will be kept in accordance with this Schedule I. In the case of an Omnibus
Account, the Transfer Agent shall require that the record owner of the Omnibus
Account maintain a separate account (a "Sub-shareholder Account") for each
record owner of Shares which are reflected in the Omnibus Account, the records
of which will be kept in accordance with this Schedule I. Each such Shareholder
Account and Sub-shareholder Account shall relate solely to Shares of such Fund
and shall not relate to any other class of shares of such Fund.
(2) COMMISSION SHARES. For each Shareholder Account (other than an Omnibus
Account), the Transfer Agent shall maintain daily records of each Commission
Share of such Fund which records shall identify each Commission Share of such
Fund reflected in such Shareholder Account by the Month of Original Purchase of
such Commission Share.
For each Omnibus Account, the Transfer Agent shall require that the
Sub-transfer Agent in respect thereof maintain daily records of such
Sub-shareholder Account which records shall identify each Commission Share of
such Fund reflected in such Sub-shareholder Account by the Month of Original
Purchase; provided, that until the Sub-transfer Agent in respect of the ML
Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain daily records of
Sub-shareholder Accounts which identify each Commission Share of such Fund
reflected in such Sub-shareholder Account by the Date of Original Purchase. Each
such Commission Share shall be identified as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such
Commission Share (or in the case of a Sub-shareholder Account within the ML
Omnibus Account, based upon the Date of Original Purchase).
(3) FREE SHARES. The Transfer Agent shall maintain daily records of each
Shareholder Account (other than an Omnibus Account) in respect of any Fund so as
to identify each Free Share (including each Special Free Share) reflected in
such Shareholder Account by the Month of Original Purchase of such Free Share.
In addition, the Transfer Agent shall require that each Shareholder Account
(other than an Omnibus Account) have in effect separate elections relating to
reinvestment of Capital Gain Dividends and relating to reinvestment of Other
Dividends in respect of any Fund. Either such Shareholder Account shall have
elected to reinvest all Capital Gain Dividends or such Shareholder Account shall
have elected to have all Capital Gain Dividends distributed. Similarly, either
such Shareholder Account shall have elected to reinvest all Other Dividends or
such Shareholder Account shall have elected to have all Other Dividends
distributed.
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain daily records for each Sub-shareholder Account in
the manner described in the immediately preceding paragraph for Shareholder
Accounts (other than Omnibus Accounts); provided, that until the Sub-transfer
Agent in respect of the ML Omnibus Account develops the data processing
capability to conform to the foregoing requirements, such Sub-transfer Agent
shall not be obligated to conform to the foregoing requirements. Each
Sub-shareholder Account shall also have in effect Dividend reinvestment
elections as described in the immediately preceding paragraph.
The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus
Account shall identify each Free Share as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such Free
Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, the Transfer Agent shall require such Sub-transfer Agent to
identify each Free Share of a given Fund in the ML Omnibus Account as a
Distributor Share, or Post-distributor Share, as follows:
(a) Free Shares of such Fund which are outstanding on the Distributor Last
Sale Cut-off Date for such Fund shall be identified as Distributor
Shares.
(b) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a Free Share of another Fund) to the
ML Omnibus Account during any calendar month (or portion thereof)
after the Distributor Last Sale Cut-off Date for such Fund shall be
identified as Distributor Shares in a number computed as follows:
A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus Account during
such calendar month (or portion thereof)
B = Number of Commission Shares and Free Shares of such Fund in the
ML Omnibus Account identified as Distributor Shares and
outstanding as of the close of business in the last day of the
immediately preceding calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares of such Fund
in the ML Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof).
(c) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a free share of another Fund) to the
ML Omnibus Account during any calendar month (or portion thereof)
after the Distributor Last Sale Cut-off Date for such Fund shall be
identified as Post-distributor Shares in a number computed as follows:
(A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus Account during
such calendar month (or portion thereof)
B = Number of Commission Shares and Free Shares of such Fund in the
ML Omnibus Account identified as Post-distributor Shares and
outstanding as of the close of business in the last day of the
immediately preceding calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares of such Fund
in the ML Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof).
(d) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a Class A Share of
such Fund) from the ML Omnibus Account in any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date for such
Fund shall be identified as Distributor Shares in a number computed as
follows:
A X (B/C)
Where:
A = Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A share
of such Fund) from the ML Omnibus Account during such calendar
month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account identified as
Distributor Shares and outstanding as of the close of business on
the last day of the immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on the last
day of the immediately preceding calendar month.
(e) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account in any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date for such
Fund shall be identified as Post-distributor Shares in a number
computed as follows:
A X (B/C)
where:
A = Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A share
of such Fund) from the ML Omnibus Account during such calendar
month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account identified as
Post-distributor Shares and outstanding as of the close of
business on the last day of the immediately preceding calendar
month.
C = Total number of Free Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on the last
day of the immediately preceding calendar month.
(4) APPRECIATION AMOUNT AND COST ACCUMULATION AMOUNT. The Transfer Agent
shall maintain on a daily basis in respect of each Shareholder Account (other
than Omnibus Accounts) a Cost Accumulation Amount representing the total of the
Original Purchase Amounts paid by such Shareholder Account for all Commission
Shares reflected in such Shareholder Account as of the close of business on each
day. In addition, the Transfer Agent shall maintain on a daily basis in respect
of each Shareholder Account (other than Omnibus Accounts) sufficient records to
enable it to compute, as of the date of any actual or deemed redemption or Free
Exchange of a Commission Share reflected in such Shareholder Account an amount
(such amount an "Appreciation Amount") equal to the excess, if any, of the Net
Asset Value as of the close of business on such day of the Commission Shares
reflected in such Shareholder Account minus the Cost Accumulation Amount as of
the close of business on such day. In the event that a Commission Share (or
portion thereof) reflected in a Shareholder Account is redeemed or under these
rules is deemed to have been redeemed (whether in a Free Exchange or otherwise),
the Appreciation Amount for such Shareholder Account shall be reduced, to the
extent thereof, by the Net Asset Value of the Commission Share (or portion
thereof) redeemed, and if the Net Asset Value of the Commission Share (or
portion thereof) being redeemed equals or exceeds the Appreciation Amount, the
Cost Accumulation Amount will be reduced to the extent thereof, by such excess.
If the Appreciation Amount for such Shareholder Account immediately prior to any
redemption of a Commission Share (or portion thereof) is equal to or greater
than the Net Asset Value of such Commission Share (or portion thereof) deemed to
have been tendered for redemption, no CDSCs will be payable in respect of such
Commission Share (or portion thereof).
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain on a daily basis in respect of each
Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation
Amount and sufficient records to enable it to compute, as of the date of any
actual or deemed redemption or Free Exchange of a Commission Share reflected in
such Sub-shareholder Account an Appreciation Amount in accordance with the
preceding paragraph and to apply the same to determine whether a CDSC is payable
(as though such Sub-shareholder Account were a Shareholder Account other than an
Omnibus Account; provided, that until the Sub-transfer Agent in respect of the
ML Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain for each
Sub-shareholder Account a separate Cost Accumulation Amount and a separate
Appreciation Amount for each Date of Original Purchase of any Commission Share
which shall be applied as set forth in the preceding paragraph as if each Date
of Original Purchase were a separate Month of Original Purchase.
(5) NASD CAP. On the date the distribution fees paid in respect of any
class of Shares equals the maximum amount thereon under the Rules of Fair
Practice, in respect of such class, all outstanding Shares of such class of such
Fund shall be converted into Class A shares of such Fund and will be deemed to
have been redeemed for their Net Asset Value for purposes of this Schedule I.
(6) IDENTIFICATION OF REDEEMED SHARES. If a Shareholder Account (other than
an Omnibus Account) tenders a Share of a Fund for redemption (other than in
connection with an exchange of such Share for a Share of another Fund or in
connection with the conversion of such Share pursuant to a Conversion Feature),
such tendered Share will be deemed to be a Free Share if there are any Free
Shares reflected in such Shareholder Account immediately prior to such tender.
If there is more than one Free Share reflected in such Shareholder Account
immediately prior to such tender, such tendered Share will be deemed to be the
Free Share with the earliest Month of Original Purchase. If there are no Free
Shares reflected in such Shareholder Account immediately prior to such tender,
such tendered Share will be deemed to be the Commission Share with the earliest
Month of Original Purchase reflected in such Shareholder Account.
If a Sub-shareholder Account reflected in an Omnibus Account tenders a
Share for redemption (other than in connection with an Exchange of such Share
for a Share of another Fund or in connection with the conversion of such Share
pursuant to a Conversion Feature), the Transfer Agent shall require that the
record owner of each Omnibus Account supply the Transfer Agent sufficient
records to enable the Transfer Agent to apply the rules of the preceding
paragraph to such Sub-shareholder Account (as though such Sub-shareholder
Account were a Shareholder Account other than an Omnibus Account); provided,
that until the Sub-transfer Agent in respect of the ML Omnibus Account develops
the data processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
regarding Free Shares (and the Transfer Agent shall account for such Free Shares
as provided in (3) above) but shall apply the foregoing rules to each Commission
Share with respect to the Date of Original Purchase of any Commission Share as
though each such Date were a separate Month of Original Purchase.
(7) IDENTIFICATION OF EXCHANGED SHARES. When a Shareholder Account (other
than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for
redemption where the proceeds of such redemption are to be automatically
reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange
(whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund:
(1) such Shareholder Account will be deemed to have tendered Shares (or portions
thereof) of the Redeeming Fund with each Month of Original Purchase represented
by Shares of the Redeeming Fund reflected in such Shareholder Account
immediately prior to such tender in the same proportion that the number of
Shares of the redeeming Fund with such Month of Original Purchase reflected in
such Shareholder immediately prior to such tender bore to the total number of
Shares of the Redeeming Fund reflected in such Shareholder Account immediately
prior to such tender, and on that basis the tendered Shares of the Redeeming
Fund will be identified as Distributor Shares or Post-distributor Shares; (2)
such Shareholder Account will be deemed to have tendered Commission Shares (or
portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of
each category (i.e., Distributor Shares or Post-distributor Shares) in the same
proportion that the number of Commission Shares or Free Shares (as the case may
be) of the Redeeming Fund in such category reflected in such Shareholder Account
bore to the total number of Shares of the Redeeming Fund in such category
reflected in such Shareholder Account immediately prior to such tender, (3) the
Shares (or portions thereof) of the Issuing Fund issued in connection with such
exchange will be deemed to have the same Months of Original Purchase as the
Shares (or portions thereof) of the Redeeming Fund so tendered and will be
categorized as Distributor Shares and Post-distributor Shares accordingly, and
(4) the Shares (or portions thereof) of each Category of the Issuing Fund issued
in connection with such exchange will be deemed to be Commission Shares and Free
Shares in the same proportion that the Shares of such Category of the Redeeming
Fund were Commission Shares and Free Shares.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account); provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
relating to Free Shares (and the Sub-transfer Agent shall account for such Free
Shares as provided in (3) above) and shall apply a first-in-first-out procedure
(based upon the Date of Original Purchase) to determine which Commission Shares
(or portions thereof) of a Redeeming Fund were redeemed in connection with an
exchange.
(8) IDENTIFICATION OF CONVERTED SHARES. The Transfer Agent records
maintained for each Shareholder Account (other than an Omnibus Account) will
treat each Commission Share of a Fund as though it were redeemed at its Net
Asset Value on the date such Commission Share converts into a class A share of
such Fund in accordance with an applicable Conversion Feature applied with
reference to its Month of Original Purchase and will treat each Free Share of
such Fund with a given Month of Original Purchase as though it were redeemed at
its Net Asset Value when it is simultaneously converted to a class A share at
the time the Commission Shares of such Fund with such Month of Original Purchase
are so converted.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account) ; provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall apply the foregoing rules to Commission Shares with
reference to the Date of Original Issue of each Commission Share (as though each
such date were a separate Month of Original Issue) and shall not be required to
apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall
account for such Free Shares as provided in (3) above).
(C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCS AMONG DISTRIBUTOR
SHARES AND POST-DISTRIBUTOR SHARES:
The Transfer Agent shall use the following rules to allocate the amounts of
Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares
between Distributor Shares and Post-distributor Shares:
(1) RECEIVABLES CONSTITUTING CDSCS: CDSCs will be treated as relating to
Distributor Shares or Post-distributor Shares depending upon the Month of
Original Purchase of the Commission Share the redemption of which gives rise to
the payment of a CDSC by a Shareholder Account.
The Transfer Agent shall cause each Sub-transfer Agent to apply the
foregoing rule to each Sub-shareholder Account based on the records maintained
by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in
respect of the ML Omnibus Account develops the data processing capability to
conform to the foregoing requirements, such Sub-transfer Agent shall apply the
foregoing rules to each Sub-shareholder Account with respect to the Date of
Original Purchase of any Commission Share as though each such date were a
separate Month of Original Purchase.
(2) RECEIVABLES CONSTITUTING ASSET BASED SALES CHARGES:
The Asset Based Sales Charges accruing in respect of each Shareholder
Account (other than an Omnibus Account) shall be allocated to each Share
reflected in such Shareholder Account as of the close of business on such day on
an equal per share basis. For example, the Asset Based Sales Charges
attributable to Distributor Shares on any day shall be computed and allocated as
follows:
A X (B/C)
where:
A. = Total amount of Asset Based Sales Charge accrued in respect of such
Shareholder Account (other than an Omnibus Account) on such day.
B. = Number of Distributor Shares reflected in such Shareholder Account
(other than an Omnibus Account) on the close of business on such day
C. = Total number of Distributor Shares and Post-Distributor Shares
reflected in such Shareholder Account (other than an Omnibus Account)
and outstanding as of the close of business on such day.
The Portion of the Asset Based Sales Charges of such Fund accruing in respect of
such Shareholder Account for such day allocated to Post-distributor Shares will
be obtained using the same formula but substituting for "B" the number of
Post-distributor Shares, as the case may be, reflected in such Shareholder
Account and outstanding on the close of business on such day. The foregoing
allocation formula may be adjusted from time to time by notice to the Fund and
the transfer agent for the Fund from the Seller and the Program Agent pursuant
to Section 8.18 of the Purchase Agreement.
The Transfer Agent shall, based on the records maintained by the record
owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in
respect of each Omnibus Account on each day among all Sub-shareholder Accounts
reflected in such Omnibus Account on an equal per share basis based upon the
total number of Distributor Shares and Post-distributor Shares reflected in each
such Sub-shareholder Account as of the close of business on such day. In
addition, the Transfer Agent shall apply the foregoing rules to each
Sub-shareholder Account (as though it were a Shareholder Account other than an
Omnibus Account), based on the records maintained by the record owner, to
allocate the Asset Based Sales Charge so allocated to any Sub-shareholder
Account among the Distributor Shares and Post-distributor Shares reflected in
each such Sub-shareholder Account in accordance with the rules set forth in the
preceding paragraph; provided, that until the Sub-transfer Agent in respect of
the ML Omnibus Account develops the data processing capacity to apply the rules
of this Schedule I as applicable to Sub-shareholder Accounts other than ML
Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund in the ML Omnibus Account during any
calendar month (or portion thereof) among Distributor Shares and
Post-distributor Shares as follows:
(a) The portion of such Asset Based Sales Charge allocable to Distributor
Shares shall be computed as follows:
A X ((B + C)/2)
-----------
((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued during such
calendar month (or portion thereof) in respect of Shares of such
Fund in the ML Omnibus Account
B = Shares of such Fund in the ML Omnibus Account and identified as
Distributor Shares and outstanding as of the close of business on
the last day of the immediately preceding calendar month (or
portion thereof), times Net Asset Value per Share as of such time
C = Shares of such Fund in the ML Omnibus Account and identified as
Distributor Shares and outstanding as of the close of business on
the last day of such calendar month (or portion thereof), times
Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
the immediately preceding calendar month (or portion thereof),
times Net Asset Value per Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
such calendar month (or portion thereof), times Net Asset Value
per Share as of such time.
(b) The portion of such Asset Based Sales Charge allocable to
Post-distributor Shares shall be computed s follows:
A X ((B + C)/2)
-----------
((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued during such
calendar month (or portion thereof) in respect of Shares of such
Fund in the ML Omnibus Account
B = Shares of such Fund in the ML Omnibus Account and identified as
Post-distributor Shares and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof), times Net Asset Value per Share as of
such time
C = Shares of such Fund in the ML Omnibus Account and identified as
Post-distributor Shares and outstanding as of the close of
business on the last day of such calendar month (or portion
thereof), times Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
the immediately preceding calendar month (or portion thereof),
times Net Asset Value per Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus Account
outstanding as of the close of business on the last day of such
calendar month, times Net Asset Value per Share as of such time.
(3) PAYMENTS ON BEHALF OF EACH FUND.
On the close of business on each day the Transfer Agent shall cause payment to
be made of the amount of the Asset Based Sales Charge and CDSCs accruing on such
day in respect of the Shares of such Fund owned of record by Shareholder
Accounts (other than Omnibus Accounts) by two separate wire transfers, directly
from accounts of such Fund as follows:
1. The Asset Based Sales Charge and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to
the Distributor's Account, unless the Distributor otherwise instructs the
Fund in any irrevocable payment instruction; and
2. The Asset Based Sales Charges and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Post-distributor Shares in accordance with the preceding rules shall be
paid in accordance with direction received from any future distributor of
Shares of the Instant Fund.
On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund
shall cause the applicable Sub-transfer Agent to cause payment to be made of the
amount of the CDSCs accruing during the period to which such Omnibus CDSC
Settlement Date relates in respect of the Shares of such Fund owned of record by
each Omnibus Account by two separate wire transfers directly from the account of
such Fund maintained by such Transfer Agent, as follows:
1. The CDSCs accruing in respect of such Omnibus Account and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to
the Distributor's Account, unless the Distributor otherwise instructs the
Fund in any irrevocable payment instruction; and
2. The CDSCs accruing in respect of such Omnibus Account and allocable to
Post-distributor Shares in accordance with the preceding rules shall be
paid in accordance with direction received from any future distributor of
Shares of the Instant Fund.
On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent
for each Fund shall cause payment to be made of the amount of the Asset Based
Sales Charge accruing for the period to which such Omnibus Asset Based Sales
Charge Settlement Date relates in respect of the Shares of such Fund owned of
record by each Omnibus Account by two separate wire transfers directly from
accounts of such Fund as follows:
1. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Distributor Shares shall be paid to the Distributor's
Collection Account, unless the Distributor otherwise instructs the Fund in
any irrevocable payment instruction; and
2. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Post-Distributor Shares shall be paid in accordance with
direction received from any future distributor of Shares of the Instant
Fund.
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-2 SHARES
OF
KEYSTONE HARTWELL GROWTH FUND
AGREEMENT made this 31st day of May 1995 by and between Keystone Hartwell
Growth Fund, a Massachusetts business trust, ("Fund"), and Keystone Investment
Distributors Company, a Delaware corporation (the "Principal Underwriter").
The Fund, individually and/or on behalf of its series, if any, referred to
above in the title of this Agreement, to which series, if any, this Agreement
shall relate, as applicable (the Fund ), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the 1940 Act ). Accordingly, it is hereby mutually agreed
as follows:
1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class B-2 shares of beneficial interest of the Fund ("B-2
Shares") as an independent contractor upon the terms and conditions hereinafter
set forth. The general term "Shares" as used herein has the same meaning as is
provided therefor in Schedule I hereto. Except as the Fund may from time to time
agree, the Principal Underwriter will act as agent for the Fund and not as
principal.
2. The Principal Underwriter will use its best efforts to find purchasers
for the B-2 Shares and to promote distribution of the B-2 Shares and may obtain
orders from brokers, dealers or other persons for sales of B-2 Shares to them.
No such dealer, broker or other person shall have any authority to act as agent
for the Fund; such dealer, broker or other person shall act only as principal in
the sale of B-2 Shares.
3. Sales of B-2 Shares by Principal Underwriter shall be at the 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 B-2 Shares. 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 B-2 Shares the Fund shall receive the current net asset
value. The Fund shall pay the Principal Underwriter Distribution Fees (as
defined in Section 14 hereof), as commissions for the sale of B-2 Shares and
other Shares, which shall be paid in conjunction with distribution fees paid to
the Principal Underwriter by other classes of Shares of the Fund to the extent
required in order to comply with Section 14 hereof, and shall pay over to the
Principal Underwriter CDSCs (as defined in Section 14 hereof) as set forth in
the Fund's current prospectus and statement of additional information, and as
required by Section 14 hereof. The Principal Underwriter shall also receive
payments consisting of shareholder service fees ("Service Fees") at the rate of
.25% per annum of the average daily net asset value of the Class B-2 Shares. The
Principal Underwriter may allow all or a part of said Distribution Fees and
CDSCs received by it (not paid to others as hereinafter provided) to such
brokers, dealers or other persons as Principal Underwriter may determine.
5. Payment to the Fund for B-2 Shares shall be in New York or Boston
Clearing House funds received by the Principal Underwriter within three 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 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
issue of the B-2 Shares.
6. The Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the B-2 Shares any representations concerning the B-2
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 the Principal Underwriter in reasonable quantities upon
request.
7. The Principal Underwriter agrees to comply with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (as defined in
the Purchase and Sale Agreement, dated as of May 31, 1995 (the Purchase
Agreement ), between the Principal Underwriter, Citibank, N.A. and Citicorp
North America, Inc., as agent (the "Rules of Fair Practice")).
8. The Fund appoints the Principal Underwriter as its agent to accept
orders for redemptions and repurchases of B-2 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 and Trustees 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 the Principal Underwriter
for the purpose of qualifying the B-2 Shares for sale under the so-called "blue
sky" laws of any state or for registering B-2 Shares under the 1933 Act or the
Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal
Underwriter shall bear the expenses of preparing, printing and distributing
advertising, sales literature, prospectuses, and statements of additional
information. The Fund shall bear the expense of registering B-2 Shares under the
1933 Act and the Fund under the 1940 Act, qualifying B-2 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 holders of B-2 Shares, and the direct expenses of the issue of
B-2 Shares.
12. The Principal Underwriter shall, at the request of the Fund, provide to
the Board of Trustees or Directors (together herein called the Directors ) of
the Fund in connection with sales of B-2 Shares not less than quarterly a
written report of the amounts received from the Fund therefor and the purpose
for which such expenditures by the Fund 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 one year.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the outstanding voting securities of
Class B-2 of the Fund or by a majority of the Directors of the Fund and a
majority of the Directors who are not parties to this Agreement or "interested
persons", as defined in the Investment Company Act of 1940 (the 1940 Act ), of
any such party and who have no direct or indirect financial interest in the
operation of the Fund's Rule 12b-1 plan for Class B-2 Shares or in any
agreements related to the plan 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 Directors of the Fund, or a majority of
such Directors who are not parties to this Agreement or "interested persons", as
defined in the 1940 Act, of any such party and who have no direct or indirect
financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-2
Shares or in any agreement related to the plan or by a vote of a majority of the
outstanding voting securities of Class B-2 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), which shall not
include assignment of the Principal Underwriter's (as hereinafter defined)
provided for hereunder and/or rights related to such Allocable Portions.
14. The provisions of this Section 14 shall be applicable to the extent
necessary to enable the Fund to comply with the obligation of the Fund to pay
the Principal Underwriter its Allocable Portion of Distribution Fees paid in
respect of Shares while the Fund is required to do so pursuant the Principal
Underwriting Agreement, of even date herewith, in respect of Class B-2 Shares,
and shall remain in effect so long as any payments are required to be made by
the Fund pursuant to the irrevocable payment instruction (as defined in the
Purchase Agreement (the Irrevocable Payment Instruction )).
14.1 The Fund shall pay to the Principal Underwriter the Principal
Underwriter's Allocable Portion (as hereinafter defined) of a fee (the
"Distribution Fee") at the rate of .75% per annum of the average daily net asset
value of the Shares, subject to the limitation on the maximum aggregate amount
of such fees under the Rules of Fair Practice as applicable to such Distribution
Fee on the date hereof.
14.2 The Principal Underwriter's Allocable Portion of Distribution Fees
paid by the Fund in respect of Shares shall be equal to the portion of the Asset
Based Sales Charge allocable to Distributor Shares (as defined in Schedule I
hereto to this Agreement) in accordance with Schedule I hereto. The Fund agrees
to cause its transfer agent to maintain the records and arrange for the payments
on behalf of the Fund at the times and in the amounts and to the accounts
required by Schedule I hereto, as the same may be amended from time to time. It
is acknowledged and agreed that by virtue of the operation of Schedule I hereto
the Principal Underwriter's Allocable Portion of Distribution Fees paid by the
Fund in respect of Shares, may, to the extent provided in Schedule I hereto,
take into account Distribution Fees payable by the Fund in respect of other
existing and future classes and/or sub-classes of shares of the Fund which would
be treated as "Shares" under Schedule I hereto. The Fund will limit amounts paid
to any subsequent principal underwriters of Shares to the portion of the Asset
Based Sales Charge paid in respect of Shares which is allocable to
Post-distributor Shares (as defined in Schedule I hereto) in accordance with
Schedule I hereto. The Fund's payments to the Principal Underwriter in
consideration of its services in connection with the sale of B-2 Shares shall be
the Distribution Fees attributable to B-2 Shares which are Distributor Shares
(as defined in Schedule I hereto) and all other amounts constituting the
Principal Underwriter's Allocable Portion of Distribution Fees shall be the
Distribution Fees related to the sale of other Shares which are Distributor
Shares (as defined in Schedule I hereto).
The Fund shall cause its transfer agent and sub-transfer agents to withhold
from redemption proceeds payable to holders of Shares on redemption thereof the
contingent deferred sales charges payable upon redemption thereof as set forth
in the then current prospectus and/or statement of additional information of the
Fund ("CDSCs") and to pay over to the Principal Underwriter The Principal
Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which
shall be equal to the portion thereof allocable to Distributor Shares (as
defined in Schedule I hereto) in accordance with Schedule I hereto.
14.3 The Principal Underwriter shall be considered to have completely
earned the right to the payment of its Allocable Portion of the Distribution Fee
and the right to payment over to it of its' Allocable Portion of the CDSC in
respect of Shares as provided for hereby upon the completion of the sale of each
Commission Share (as defined in Schedule I hereto) taken into account as a
Distributor Share in computing the Principal Underwriter's Allocable Portion in
accordance with Schedule I hereto.
14.4 Except as provided in Section 14.5 hereof in respect of Distribution
Fees only, the Fund's obligation to pay the Principal Underwriter the
Distribution Fees and to pay over to the Principal Underwriter CDSCs provided
for hereby shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Principal Underwriter
and enforce such claims against any assets (other than the Principal
Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs
(the "Collection Rights") of the Principal Underwriter).
14.5 Notwithstanding anything in this Agreement to the contrary, the Fund
shall pay to the Principal Underwriter its Allocable Portion of Distribution
Fees provided for hereby notwithstanding its termination as Principal
Underwriter for the Shares or any termination of this Agreement and such payment
of such Distribution Fees, and that obligation and the method of computing such
payment, shall not be changed or terminated except to the extent required by any
change in applicable law, including, without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the Rules
of Fair Practice, in each case enacted or promulgated after May 31, 1995, or in
connection with a Complete Termination (as hereinafter defined). For the
purposes of this Section 14.5, "Complete Termination" means a termination of the
Fund's Rule 12b-1 plan for B-2 Shares involving the cessation of payments of the
Distribution Fees, and the cessation of payments of distribution fees pursuant
to every other Rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the
offering of every existing or future B-Class-of-Shares, which conditions shall
be deemed satisfied when they are first complied with hereafter and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-2 Shares which are Distributor Shares pursuant to Schedule I
hereto shall have been redeemed or converted or (ii) May 31, 2005. For purposes
of this Section 14.5, the term B-Class-of-Shares means each of the B-1 Class of
Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of
shares of the Fund hereafter issued which would be treated as Shares under
Schedule I hereto or which has substantially similar economic characteristics to
the B-1 or B-2 Classes of Shares taking into account the total sales charge,
CDSC or other similar charges borne directly or indirectly by the holder of the
shares of such class. The parties agree that the existing C Class of Shares of
the Fund does not have substantially similar economic characteristics to the B-1
or B-2 Classes of Shares taking into account the total sales charge, CDSC or
other similar charges borne directly or indirectly by the holder of such shares.
For purposes of clarity the parties to this agreement hereby state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing B-1 or B-2 Classes of Shares taking
into account the total sale charge, CDSC or other similar charges borne directly
or indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares.
14.6 The Principal Underwriter may assign any part of its Allocable
Portions and obligations of the Fund related thereto (but not the Principal
Underwriter's obligations to the Fund provided for in this Agreement) to any
person (an "Assignee") and any such assignment shall be effective as to the Fund
upon written notice to the Fund by the Principal Underwriter. In connection
therewith the Fund shall pay all or any amounts in respect of its Allocable
Portions directly to the Assignee thereof as directed in a writing by the
Principal Underwriter in the Irrevocable Payment Instruction, as the same may be
amended from time to time with the consent of the Fund, and the Fund shall be
without liability to any person if it pays such amounts when and as so directed,
except for underpayments of amounts actually due, without any amount payable as
consequential or other damages due to such underpayment and without interest
except to the extent that delay in payment of Distribution Fees and CDSCs
results in an increase in the maximum Sales Charge allowable under the Rules of
Fair Practice, which increases daily at a rate of prime plus one percent per
annum.
14.7 The Fund will not, to the extent it may otherwise be empowered to do
so, change or waive any CDSC with respect to B-2 Shares, except as provided in
the Fund's prospectus or statement of additional information without the
Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding
anything to the contrary in this Agreement or any termination of this Agreement
or the Principal Underwriter as principal underwriter for the Shares of the
Fund, the Principal Underwriter shall be entitled to be paid its Allocable
Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-2 Shares is
terminated and whether or not any such termination is a Complete Termination, as
defined above.
15. 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.
16. The Fund is a Massachusetts business trust established under a
Declaration of Trust, as it may be amended from time to time. The obligations of
the Fund are not personally binding upon, nor shall recourse be had against the
private property of any of the Trustees, shareholders, officers, employees or
agents of the Fund, but only the property of the Fund shall be bound.
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 HARTWELL GROWTH FUND
By: /s/ Rosemary D. Van Antwerp
--------------------------------
Title: Senior Vice President
KEYSTONE INVESTMENT DISTRIBUTORS, INC.
By: /s/ Ralph J. Spuehler, Jr.
--------------------------------
Title: President
<PAGE>
SCHEDULE I
TO
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-2 SHARES
OF
KEYSTONE HARTWELL GROWTH FUND
TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING
AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES
Amounts (in respect of Asset Based Sales Charges (as hereinafter defined)
and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined)
of each Fund (as hereinafter defined) shall be allocated between Distributor
Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter
defined) of such Fund in accordance with the rules set forth in clauses (B) and
(C). Clause (B) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account (as hereinafter defined)
in maintaining records relating to Distributor Shares and Post-distributor
Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account in determining what
portion of the Asset Based Sales Charge (as hereinafter defined) payable in
respect of each class of Shares of such Fund and what portion of the CDSC (as
hereinafter defined) payable by the holders of Shares of such Fund is
attributable to Distributor Shares and Post-distributor Shares, respectively.
(A) DEFINITIONS:
Generally, for purposes of this Schedule I, defined terms shall be used
with the meaning assigned to them in the Agreement, except that for purposes of
the following rules the following definitions are also applicable:
"Agreement" shall mean the Principal Underwriting Agreement for Class B-2
Shares of the Instant Fund dated as of June 1, 1995 between the Instant Fund and
the Distributor.
"Asset Based Sales Charge" shall have the meaning set forth in Section
26(b)(8)(C) of the Rules of Fair Practice it being understood that for purposes
of this Exhibit I such term does not include the Service Fee.
"Business Day" shall mean any day on which the banks and the New York Stock
Exchange are not authorized or required to close in New York City.
"Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a
Dividend in respect of such Share which is designated by such Fund as being a
"capital gain dividend" as such term is defined in Section 852 of the Internal
Revenue Code of 1986, as amended.
"CDSC" shall mean with respect to any Fund, the contingent deferred sales
charge payable, either directly or by withholding from the proceeds of the
redemption of the Shares of such Fund, by the shareholders of such Fund on any
redemption of Shares of such Fund in accordance with the Prospectus relating to
such Fund.
"Commission Share" shall mean, in respect of any Fund, a Share of such Fund
issued under circumstances where a CDSC would be payable upon the redemption of
such Share if such CDSC is not waived or shall have not otherwise expired.
"Date of Original Purchase" shall mean, in respect of any Commission Share
of any Fund, the date on which such Commission Share was first issued by such
Fund; provided, that if such Share is a Commission Share and such Fund issued
the Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Date
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the date on which the Commission Share (or portion thereof) of the
other Fund was first issued by such other Fund (unless such Commission Share (or
portion thereof) was also issued by such other Fund in a Free Exchange, in which
case this proviso shall apply to that Free Exchange and this application shall
be repeated until one reaches a Commission Share (or portion thereof) which was
issued by a Fund other than in a Free Exchange).
"Distributor" shall mean Keystone Investment Distributors Company, its
successors and assigns.
"Distributor's Account" shall mean the account of the Distributor, account
no. 9903-584-2, ABA No. 011 0000 28, entitled "General Account" maintained with
State Street Bank & Trust Company or such other account as the Distributor may
designate in a notice to the Transfer Agent.
"Distributor Inception Date" shall mean, in respect of any Fund, the date
identified as the date Shares of such Fund are first sold by the Distributor.
"Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund,
the date identified as the last sale of a Commission Share during the period the
Distributor served as principal underwriter under the Agreement.
"Distributor Shares" shall mean, in respect of any Fund, all Shares of such
Fund the Month of Original Purchase of which occurs on or after the Inception
Date for such Fund and on or prior to the Distributor Last Sale Cut-off Date in
respect of such Fund.
"Dividend" shall mean, in respect of any Share of any Fund, any dividend or
other distribution by such Fund in respect of such Share.
"Free Exchange" shall mean any exchange of a Commission Share (or portion
thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of
another Fund (the "Issuing Fund"), under any arrangement which defers the
exchanging Shareholder's obligation to pay the CDSC in respect of the Commission
Share (or portion thereof) of the Redeeming Fund so exchanged until the later
redemption of the Share (or portion thereof) of the Issuing Fund received in
such exchange.
"Free Share" shall mean, in respect of any Fund, each Share of such Fund
other than a Commission Share, including, without limitation: (i) Shares issued
in connection with the automatic reinvestment of Capital Gain Dividends or Other
Dividends by such Fund, (ii) Special Free Shares issued by such Fund and (iii)
Shares (or portion thereof) issued by such Fund in connection with an exchange
whereby a Free Share (or portion thereof) of another Fund is redeemed and the
Net Asset Value of such redeemed Free Share (or portion thereof) is invested in
such Shares (or portion thereof) of such Fund.
"Fund" shall mean each of the regulated investment companies or series or
portfolios of regulated investment companies identified in Schedule II to the
Irrevocable Payment Instruction, as the same may be amended from time to time in
accordance with the terms thereof.
"Instant Fund" shall mean [Keystone Equity Fund].
"ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus
Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer
agent.
"Month of Original Purchase" shall mean, in respect of any Share of any
Fund, the calendar month in which such Share was first issued by such Fund;
provided, that if such Share is a Commission Share and such Fund issued the
Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Month
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the calendar month in which the Commission Share (or portion thereof)
of the other Fund was first issued by such other Fund (unless such Commission
Share (or portion thereof) was also issued by such other Fund in a Free
Exchange, in which case this proviso shall apply to that Free Exchange and this
application shall be repeated until one reaches a Commission Share (or portion
thereof) which was issued by a Fund other than in a Free Exchange); provided,
further, that if such Share is a Free Share and such Fund issued such Free Share
in connection with the automatic reinvestment of dividends in respect of other
Shares of such Fund, the Month of Original Purchase of such Free Share shall be
deemed to be the Month of Original Purchase of the Share in respect of which
such dividend was paid; provided, further, that if such Share is a Free Share
and such Fund issued such Free Share in connection with an exchange whereby a
Free Share (or portion thereof) of another Fund is redeemed and the Net Asset
Value of such redeemed Free Share (or portion thereof) is invested in a Free
Share (or portion thereof) of such Fund, the Month of Original Issue of such
Free Share shall be the Month of Original Issue of the Free Share of such other
Fund so redeemed (unless such Free Share of such other Fund was also issued by
such other Fund in such an exchange, in which case this proviso shall apply to
that exchange and this application shall be repeated until one reaches a Free
Share which was issued by a Fund other than in such an exchange); and provided,
finally, that for purposes of this Schedule I each of the following periods
shall be treated as one calendar month for purposes of applying the rules of
this Schedule I to any Fund: (i) the period of time from and including the
Distributor Inception Date for such Fund to and including the last day of the
calendar month in which such Distributor Inception Date occurs; (ii) the period
of time commencing with the first day of the calendar month in which the
Distributor Last Sale Cutoff Date in respect of such Fund occurs to and
including such Distributor Last Sale Cutoff Date; and (iii) the period of time
commencing on the day immediately following the Distributor Last Sale Cutoff
Date in respect of such Fund to and including the last day of the calendar month
in which such Distributor Last Sale Cut-off Date occurs.
"Omnibus Account" shall mean any Shareholder Account the record owner of
which is a registered broker-dealer which has agreed with the Transfer Agent to
provide sub-transfer agent functions relating to each Sub-shareholder Account
within such Shareholder Account as contemplated by this Schedule I in respect of
each of the Funds.
"Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect
of each Omnibus Account, the Business Day next following the twentieth day of
each calendar month for the calendar month immediately preceding such date so
long as the record owner is able to allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund as contemplated by this Schedule I no
more frequently than monthly; provided, that at such time as the record owner of
such Omnibus Account is able to provide information sufficient to allocate the
Asset Based Sales Charge accruing in respect of such Shares of such Fund owned
of record by such Omnibus Account as contemplated by this Schedule I on a weekly
or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a
weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date
as in the case of Asset Based Sales Charges accruing in respect of Shareholder
Accounts other than Omnibus Accounts, as the case may be.
"Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus
Account, the third Business Day of each calendar week for the calendar week
immediately preceding such date so long as the record owner of such Omnibus
Account is able to allocate the CDSCs accruing in respect of any Shares of any
Fund as contemplated by this Schedule I for no more frequently than weekly;
provided, that at such time as the record owner of such Shares of such Fund
owned of record by such Omnibus Account is able to provide information
sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as
contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement
Date for such Omnibus Account shall be a daily date as in the case of CDSCs
accruing in respect of Shareholder Accounts other than Omnibus Accounts.
"Original Purchase Amount" shall mean, in respect of any Commission Share
of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date),
on the Date of Original Purchase in respect of such Commission Share, by such
Shareholder Account or Sub-shareholder Account for such Commission Share;
provided, that if such Fund issued the Commission Share (or portion thereof) in
question in connection with a Free Exchange for a Commission Share (or portion
thereof) of another Fund, the Original Purchase Amount for the Commission Share
(or portion thereof) in question shall be the Original Purchase Amount in
respect of such Commission Share (or portion thereof) of such other Fund (unless
such Commission Share (or portion thereof) was also issued by such other Fund in
a Free Exchange, in which case this proviso shall apply to that Free Exchange
and this application shall be repeated until one reaches a Commission Share (or
portion thereof) which was issued by a Fund other than in a Free Exchange).
"Other Dividend" shall mean in respect of any Share, any Dividend paid in
respect of such Share other than a Capital Gain Dividend.
"Post-distributor Shares" shall mean, in respect of any Fund, all Shares of
such Fund the Month of Original Purchase of which occurs after the Distributor
Last Sale Cut-off Date for such Fund.
"Program Agent" shall mean Citicorp North America, Inc., as Program Agent
under the Purchase Agreement, and its successors and assigns in such capacity.
"Purchase Agreement" shall mean that certain Purchase and Sale Agreement
dated as of May 31, 1995, among Keystone Investment Distributors Company, as
Seller, Citibank, N.A., as Purchaser, and Citicorp North America, Inc., as
Program Agent.
"Share" shall mean in respect of any Fund any share of the classes of
shares specified in Schedule II to the Irrevocable Payment Instruction opposite
the name of such Fund, as the same may be amended from time to time by notice
from the Distributor and the Program Agent to the Fund and the Transfer Agent;
provided, that such term shall include, after the Distributor Last Sale Cut-off
Date, a share of a new class of shares of such Fund: (i) with respect to each
record owner of Shares which is not treated in the records of each Transfer
Agent and Sub-transfer Agent for such Fund as an entirely separate and distinct
class of shares from the classes of shares specified Schedule II to the
Irrevocable Payment Instruction or (ii) the shares of which class may be
exchanged for shares of another Fund of the classes of shares specified on
Schedule II to the Irrevocable Payment Instruction of any class existing on or
prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on which can
be reinvested in shares of the classes specified on Schedule II to the
Irrevocable Payment Instruction under the automatic dividend reinvestment
options; or (iv) which is otherwise treated as though it were of the same class
as the class of shares specified on Schedule II to the Irrevocable Payment
Instruction.
"Shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Special Free Share" shall mean, in respect of any Fund, a Share (other
than a Commission Share) issued by such Fund other than in connection with the
automatic reinvestment of Dividends and other than in connection with an
exchange whereby a Free Share (or portion thereof) of another Fund is redeemed
and the Net Asset Value of such redeemed Share (or portion thereof) is invested
in a Share (or portion thereof) of such Fund.
"Sub-shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the
record owner thereof.
(B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND AND THE
RECORD OWNER OF EACH OMNIBUS ACCOUNT:
The Transfer Agent shall maintain Shareholder Accounts, and shall cause
each record owner of each Omnibus Account to maintain Sub-shareholder Accounts,
each in accordance with the following rules:
(1) SHAREHOLDER ACCOUNTS AND SUB-SHAREHOLDER ACCOUNTS. The Transfer Agent
shall maintain a separate account (a "Shareholder Account") for each record
owner of Shares of each Fund. Each Shareholder Account (other than Omnibus
Accounts) will represent a record owner of Shares of such Fund, the records of
which will be kept in accordance with this Schedule I. In the case of an Omnibus
Account, the Transfer Agent shall require that the record owner of the Omnibus
Account maintain a separate account (a "Sub-shareholder Account") for each
record owner of Shares which are reflected in the Omnibus Account, the records
of which will be kept in accordance with this Schedule I. Each such Shareholder
Account and Sub-shareholder Account shall relate solely to Shares of such Fund
and shall not relate to any other class of shares of such Fund.
(2) COMMISSION SHARES. For each Shareholder Account (other than an Omnibus
Account), the Transfer Agent shall maintain daily records of each Commission
Share of such Fund which records shall identify each Commission Share of such
Fund reflected in such Shareholder Account by the Month of Original Purchase of
such Commission Share.
For each Omnibus Account, the Transfer Agent shall require that the
Sub-transfer Agent in respect thereof maintain daily records of such
Sub-shareholder Account which records shall identify each Commission Share of
such Fund reflected in such Sub-shareholder Account by the Month of Original
Purchase; provided, that until the Sub-transfer Agent in respect of the ML
Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain daily records of
Sub-shareholder Accounts which identify each Commission Share of such Fund
reflected in such Sub-shareholder Account by the Date of Original Purchase. Each
such Commission Share shall be identified as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such
Commission Share (or in the case of a Sub-shareholder Account within the ML
Omnibus Account, based upon the Date of Original Purchase).
(3) FREE SHARES. The Transfer Agent shall maintain daily records of each
Shareholder Account (other than an Omnibus Account) in respect of any Fund so as
to identify each Free Share (including each Special Free Share) reflected in
such Shareholder Account by the Month of Original Purchase of such Free Share.
In addition, the Transfer Agent shall require that each Shareholder Account
(other than an Omnibus Account) have in effect separate elections relating to
reinvestment of Capital Gain Dividends and relating to reinvestment of Other
Dividends in respect of any Fund. Either such Shareholder Account shall have
elected to reinvest all Capital Gain Dividends or such Shareholder Account shall
have elected to have all Capital Gain Dividends distributed. Similarly, either
such Shareholder Account shall have elected to reinvest all Other Dividends or
such Shareholder Account shall have elected to have all Other Dividends
distributed.
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain daily records for each Sub-shareholder Account in
the manner described in the immediately preceding paragraph for Shareholder
Accounts (other than Omnibus Accounts); provided, that until the Sub-transfer
Agent in respect of the ML Omnibus Account develops the data processing
capability to conform to the foregoing requirements, such Sub-transfer Agent
shall not be obligated to conform to the foregoing requirements. Each
Sub-shareholder Account shall also have in effect Dividend reinvestment
elections as described in the immediately preceding paragraph.
The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus
Account shall identify each Free Share as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such Free
Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, the Transfer Agent shall require such Sub-transfer Agent to
identify each Free Share of a given Fund in the ML Omnibus Account as a
Distributor Share, or Post-distributor Share, as follows:
(a) Free Shares of such Fund which are outstanding on the Distributor Last
Sale Cut-off Date for such Fund shall be identified as Distributor
Shares.
(b) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a Free Share of another Fund) to the
ML Omnibus Account during any calendar month (or portion thereof)
after the Distributor Last Sale Cut-off Date for such Fund shall be
identified as Distributor Shares in a number computed as follows:
A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus Account
during such calendar month (or portion thereof)
B = Number of Commission Shares and Free Shares of such Fund in the
ML Omnibus Account identified as Distributor Shares and
outstanding as of the close of business in the last day of the
immediately preceding calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares of such Fund
in the ML Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof).
(c) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a free share of another Fund) to the
ML Omnibus Account during any calendar month (or portion thereof)
after the Distributor Last Sale Cut-off Date for such Fund shall be
identified as Post-distributor Shares in a number computed as follows:
(A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus Account
during such calendar month (or portion thereof)
B = Number of Commission Shares and Free Shares of such Fund in the
ML Omnibus Account identified as Post-distributor Shares and
outstanding as of the close of business in the last day of the
immediately preceding calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares of such Fund
in the ML Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof).
(d) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a Class A Share of
such Fund) from the ML Omnibus Account in any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date for such
Fund shall be identified as Distributor Shares in a number computed as
follows:
A X (B/C)
Where:
A = Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A
share of such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account identified
as Distributor Shares and outstanding as of the close of business
on the last day of the immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on the last
day of the immediately preceding calendar month.
(e) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account in any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date for such
Fund shall be identified as Post-distributor Shares in a number
computed as follows:
A X (B/C)
where:
A = Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A
share of such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account identified
as Post-distributor Shares and outstanding as of the close of
business on the last day of the immediately preceding calendar
month.
C = Total number of Free Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on the last
day of the immediately preceding calendar month.
(4) APPRECIATION AMOUNT AND COST ACCUMULATION AMOUNT. The Transfer Agent
shall maintain on a daily basis in respect of each Shareholder Account (other
than Omnibus Accounts) a Cost Accumulation Amount representing the total of the
Original Purchase Amounts paid by such Shareholder Account for all Commission
Shares reflected in such Shareholder Account as of the close of business on each
day. In addition, the Transfer Agent shall maintain on a daily basis in respect
of each Shareholder Account (other than Omnibus Accounts) sufficient records to
enable it to compute, as of the date of any actual or deemed redemption or Free
Exchange of a Commission Share reflected in such Shareholder Account an amount
(such amount an "Appreciation Amount") equal to the excess, if any, of the Net
Asset Value as of the close of business on such day of the Commission Shares
reflected in such Shareholder Account minus the Cost Accumulation Amount as of
the close of business on such day. In the event that a Commission Share (or
portion thereof) reflected in a Shareholder Account is redeemed or under these
rules is deemed to have been redeemed (whether in a Free Exchange or otherwise),
the Appreciation Amount for such Shareholder Account shall be reduced, to the
extent thereof, by the Net Asset Value of the Commission Share (or portion
thereof) redeemed, and if the Net Asset Value of the Commission Share (or
portion thereof) being redeemed equals or exceeds the Appreciation Amount, the
Cost Accumulation Amount will be reduced to the extent thereof, by such excess.
If the Appreciation Amount for such Shareholder Account immediately prior to any
redemption of a Commission Share (or portion thereof) is equal to or greater
than the Net Asset Value of such Commission Share (or portion thereof) deemed to
have been tendered for redemption, no CDSCs will be payable in respect of such
Commission Share (or portion thereof).
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain on a daily basis in respect of each
Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation
Amount and sufficient records to enable it to compute, as of the date of any
actual or deemed redemption or Free Exchange of a Commission Share reflected in
such Sub-shareholder Account an Appreciation Amount in accordance with the
preceding paragraph and to apply the same to determine whether a CDSC is payable
(as though such Sub-shareholder Account were a Shareholder Account other than an
Omnibus Account; provided, that until the Sub-transfer Agent in respect of the
ML Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain for each
Sub-shareholder Account a separate Cost Accumulation Amount and a separate
Appreciation Amount for each Date of Original Purchase of any Commission Share
which shall be applied as set forth in the preceding paragraph as if each Date
of Original Purchase were a separate Month of Original Purchase.
(5) NASD CAP. On the date the distribution fees paid in respect of any
class of Shares equals the maximum amount thereon under the Rules of Fair
Practice, in respect of such class, all outstanding Shares of such class of such
Fund shall be converted into Class A shares of such Fund and will be deemed to
have been redeemed for their Net Asset Value for purposes of this Schedule I.
(6) IDENTIFICATION OF REDEEMED SHARES. If a Shareholder Account (other than
an Omnibus Account) tenders a Share of a Fund for redemption (other than in
connection with an exchange of such Share for a Share of another Fund or in
connection with the conversion of such Share pursuant to a Conversion Feature),
such tendered Share will be deemed to be a Free Share if there are any Free
Shares reflected in such Shareholder Account immediately prior to such tender.
If there is more than one Free Share reflected in such Shareholder Account
immediately prior to such tender, such tendered Share will be deemed to be the
Free Share with the earliest Month of Original Purchase. If there are no Free
Shares reflected in such Shareholder Account immediately prior to such tender,
such tendered Share will be deemed to be the Commission Share with the earliest
Month of Original Purchase reflected in such Shareholder Account.
If a Sub-shareholder Account reflected in an Omnibus Account tenders a
Share for redemption (other than in connection with an Exchange of such Share
for a Share of another Fund or in connection with the conversion of such Share
pursuant to a Conversion Feature), the Transfer Agent shall require that the
record owner of each Omnibus Account supply the Transfer Agent sufficient
records to enable the Transfer Agent to apply the rules of the preceding
paragraph to such Sub-shareholder Account (as though such Sub-shareholder
Account were a Shareholder Account other than an Omnibus Account); provided,
that until the Sub-transfer Agent in respect of the ML Omnibus Account develops
the data processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
regarding Free Shares (and the Transfer Agent shall account for such Free Shares
as provided in (3) above) but shall apply the foregoing rules to each Commission
Share with respect to the Date of Original Purchase of any Commission Share as
though each such Date were a separate Month of Original Purchase.
(7) IDENTIFICATION OF EXCHANGED SHARES. When a Shareholder Account (other
than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for
redemption where the proceeds of such redemption are to be automatically
reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange
(whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund:
(1) such Shareholder Account will be deemed to have tendered Shares (or portions
thereof) of the Redeeming Fund with each Month of Original Purchase represented
by Shares of the Redeeming Fund reflected in such Shareholder Account
immediately prior to such tender in the same proportion that the number of
Shares of the redeeming Fund with such Month of Original Purchase reflected in
such Shareholder immediately prior to such tender bore to the total number of
Shares of the Redeeming Fund reflected in such Shareholder Account immediately
prior to such tender, and on that basis the tendered Shares of the Redeeming
Fund will be identified as Distributor Shares or Post-distributor Shares; (2)
such Shareholder Account will be deemed to have tendered Commission Shares (or
portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of
each category (i.e., Distributor Shares or Post-distributor Shares) in the same
proportion that the number of Commission Shares or Free Shares (as the case may
be) of the Redeeming Fund in such category reflected in such Shareholder Account
bore to the total number of Shares of the Redeeming Fund in such category
reflected in such Shareholder Account immediately prior to such tender, (3) the
Shares (or portions thereof) of the Issuing Fund issued in connection with such
exchange will be deemed to have the same Months of Original Purchase as the
Shares (or portions thereof) of the Redeeming Fund so tendered and will be
categorized as Distributor Shares and Post-distributor Shares accordingly, and
(4) the Shares (or portions thereof) of each Category of the Issuing Fund issued
in connection with such exchange will be deemed to be Commission Shares and Free
Shares in the same proportion that the Shares of such Category of the Redeeming
Fund were Commission Shares and Free Shares.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account); provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
relating to Free Shares (and the Sub-transfer Agent shall account for such Free
Shares as provided in (3) above) and shall apply a first-in-first-out procedure
(based upon the Date of Original Purchase) to determine which Commission Shares
(or portions thereof) of a Redeeming Fund were redeemed in connection with an
exchange.
(8) IDENTIFICATION OF CONVERTED SHARES. The Transfer Agent records
maintained for each Shareholder Account (other than an Omnibus Account) will
treat each Commission Share of a Fund as though it were redeemed at its Net
Asset Value on the date such Commission Share converts into a class A share of
such Fund in accordance with an applicable Conversion Feature applied with
reference to its Month of Original Purchase and will treat each Free Share of
such Fund with a given Month of Original Purchase as though it were redeemed at
its Net Asset Value when it is simultaneously converted to a class A share at
the time the Commission Shares of such Fund with such Month of Original Purchase
are so converted.
The Transfer Agent shall require that each record owner of an
Omnibus Account maintain records relating to each Sub-shareholder Account in
such Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account) ; provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall apply the foregoing rules to Commission Shares with
reference to the Date of Original Issue of each Commission Share (as though each
such date were a separate Month of Original Issue) and shall not be required to
apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall
account for such Free Shares as provided in (3) above).
(C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCS AMONG DISTRIBUTOR
SHARES AND POST-DISTRIBUTOR SHARES:
The Transfer Agent shall use the following rules to allocate the amounts of
Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares
between Distributor Shares and Post-distributor Shares:
(1) RECEIVABLES CONSTITUTING CDSCS: CDSCs will be treated as relating to
Distributor Shares or Post-distributor Shares depending upon the Month of
Original Purchase of the Commission Share the redemption of which gives rise to
the payment of a CDSC by a Shareholder Account.
The Transfer Agent shall cause each Sub-transfer Agent to apply the
foregoing rule to each Sub-shareholder Account based on the records maintained
by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in
respect of the ML Omnibus Account develops the data processing capability to
conform to the foregoing requirements, such Sub-transfer Agent shall apply the
foregoing rules to each Sub-shareholder Account with respect to the Date of
Original Purchase of any Commission Share as though each such date were a
separate Month of Original Purchase.
(2) RECEIVABLES CONSTITUTING ASSET BASED SALES CHARGES:
The Asset Based Sales Charges accruing in respect of each Shareholder
Account (other than an Omnibus Account) shall be allocated to each Share
reflected in such Shareholder Account as of the close of business on such day on
an equal per share basis. For example, the Asset Based Sales Charges
attributable to Distributor Shares on any day shall be computed and allocated as
follows:
A X (B/C)
where:
A. = Total amount of Asset Based Sales Charge accrued in respect of such
Shareholder Account (other than an Omnibus Account) on such day.
B. = Number of Distributor Shares reflected in such Shareholder Account
(other than an Omnibus Account) on the close of business on such day
C. = Total number of Distributor Shares and Post-Distributor Shares
reflected in such Shareholder Account (other than an Omnibus Account)
and outstanding as of the close of business on such day.
The Portion of the Asset Based Sales Charges of such Fund accruing in respect of
such Shareholder Account for such day allocated to Post-distributor Shares will
be obtained using the same formula but substituting for "B" the number of
Post-distributor Shares, as the case may be, reflected in such Shareholder
Account and outstanding on the close of business on such day. The foregoing
allocation formula may be adjusted from time to time by notice to the Fund and
the transfer agent for the Fund from the Seller and the Program Agent pursuant
to Section 8.18 of the Purchase Agreement.
The Transfer Agent shall, based on the records maintained by the record
owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in
respect of each Omnibus Account on each day among all Sub-shareholder Accounts
reflected in such Omnibus Account on an equal per share basis based upon the
total number of Distributor Shares and Post-distributor Shares reflected in each
such Sub-shareholder Account as of the close of business on such day. In
addition, the Transfer Agent shall apply the foregoing rules to each
Sub-shareholder Account (as though it were a Shareholder Account other than an
Omnibus Account), based on the records maintained by the record owner, to
allocate the Asset Based Sales Charge so allocated to any Sub-shareholder
Account among the Distributor Shares and Post-distributor Shares reflected in
each such Sub-shareholder Account in accordance with the rules set forth in the
preceding paragraph; provided, that until the Sub-transfer Agent in respect of
the ML Omnibus Account develops the data processing capacity to apply the rules
of this Schedule I as applicable to Sub-shareholder Accounts other than ML
Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund in the ML Omnibus Account during any
calendar month (or portion thereof) among Distributor Shares and
Post-distributor Shares as follows:
(a) The portion of such Asset Based Sales Charge allocable to Distributor
Shares shall be computed as follows:
A X ((B + C)/2)
((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued during such
calendar month (or portion thereof) in respect of Shares of such
Fund in the ML Omnibus Account
B = Shares of such Fund in the ML Omnibus Account and identified as
Distributor Shares and outstanding as of the close of business on
the last day of the immediately preceding calendar month (or
portion thereof), times Net Asset Value per Share as of such time
C = Shares of such Fund in the ML Omnibus Account and identified as
Distributor Shares and outstanding as of the close of business on
the last day of such calendar month (or portion thereof), times
Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
the immediately preceding calendar month (or portion thereof),
times Net Asset Value per Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
such calendar month (or portion thereof), times Net Asset Value
per Share as of such time.
(b) The portion of such Asset Based Sales Charge allocable to
Post-distributor Shares shall be computed s follows:
A X ((B + C)/2)
-----------
((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued during such
calendar month (or portion thereof) in respect of Shares of such
Fund in the ML Omnibus Account
B = Shares of such Fund in the ML Omnibus Account and identified as
Post-distributor Shares and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof), times Net Asset Value per Share as of
such time
C = Shares of such Fund in the ML Omnibus Account and identified as
Post-distributor Shares and outstanding as of the close of
business on the last day of such calendar month (or portion
thereof), times Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
the immediately preceding calendar month (or portion thereof),
times Net Asset Value per Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus Account
outstanding as of the close of business on the last day of such
calendar month, times Net Asset Value per Share as of such time.
(3) PAYMENTS ON BEHALF OF EACH FUND.
On the close of business on each day the Transfer Agent shall cause payment to
be made of the amount of the Asset Based Sales Charge and CDSCs accruing on such
day in respect of the Shares of such Fund owned of record by Shareholder
Accounts (other than Omnibus Accounts) by two separate wire transfers, directly
from accounts of such Fund as follows:
1. The Asset Based Sales Charge and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to
the Distributor's Account, unless the Distributor otherwise instructs the
Fund in any irrevocable payment instruction; and
2. The Asset Based Sales Charges and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Post-distributor Shares in accordance with the preceding rules shall be
paid in accordance with direction received from any future distributor of
Shares of the Instant Fund.
On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund
shall cause the applicable Sub-transfer Agent to cause payment to be made of the
amount of the CDSCs accruing during the period to which such Omnibus CDSC
Settlement Date relates in respect of the Shares of such Fund owned of record by
each Omnibus Account by two separate wire transfers directly from the account of
such Fund maintained by such Transfer Agent, as follows:
1. The CDSCs accruing in respect of such Omnibus Account and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to
the Distributor's Account, unless the Distributor otherwise instructs the
Fund in any irrevocable payment instruction; and
2. The CDSCs accruing in respect of such Omnibus Account and allocable to
Post-distributor Shares in accordance with the preceding rules shall be
paid in accordance with direction received from any future distributor of
Shares of the Instant Fund.
On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent
for each Fund shall cause payment to be made of the amount of the Asset Based
Sales Charge accruing for the period to which such Omnibus Asset Based Sales
Charge Settlement Date relates in respect of the Shares of such Fund owned of
record by each Omnibus Account by two separate wire transfers directly from
accounts of such Fund as follows:
1. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Distributor Shares shall be paid to the Distributor's
Collection Account, unless the Distributor otherwise instructs the Fund in
any irrevocable payment instruction; and
2. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Post-Distributor Shares shall be paid in accordance with
direction received from any future distributor of Shares of the Instant
Fund.
<PAGE>
[LOGO] KEYSTONE
INVESTMENTS
200 Berkeley Street
Boston, Massachusetts 02116-5034
Dealer No._________________________________________________________
(Please indicate Exchange Membership(s), if any.)__________________
-------------------------------------------------------------------
Effective Date_____________________________________________________
CLASS A AND B SHARES
To Whom It May Concern:
Keystone Investment Distributors Company ("the Company"), principal
underwriter, invites you to participate in the distribution of shares of the
Keystone Fund Family, Classes A and B shares of the Keystone America Fund Family
and other Funds ("Funds") designated by us which are currently or hereafter
underwritten by the Company, subject to the following terms:
1. In the distribution and sale of shares, you shall not have authority to act
as agent for the issuer, the Company or any other dealer in any respect in such
transactions. All orders are subject to acceptance by us and become effective
only upon confirmation by us. The Company reserves the unqualified right not to
accept any specific order for the purchase or exchange of shares.
2. You will offer and sell shares of the Funds other than Class A shares of the
Keystone America Funds only at their respective net asset values in accordance
with the terms and conditions of a current prospectus of the Fund whose shares
you offer. With respect to Class A shares of the Keystone America Funds and
other Funds designated by us, you will offer and sell such shares at the public
offering price described in a current prospectus of the Fund whose shares you
offer. You will offer shares only on a forward pricing basis, i.e. orders for
the purchase or repurchase of shares accepted by you prior to the close of the
New York Stock Exchange and placed with us the same day prior to the close of
our business day, 5:00 p.m. Eastern Time, and orders to exchange shares of one
Fund for shares of another Fund eligible for exchange placed with us prior to
3:00 p.m. Eastern Time, shall be confirmed at the closing price for that
business day. You agree to place orders for shares only with us and at such
closing price. You further agree to confirm the transaction with your customer
at the price confirmed in writing by us. In the event of a difference between
verbal and written price confirmations, the written confirmations shall be
considered final. Prices of the Funds' shares are computed by and are subject to
withdrawal by the Funds in accordance with their current respective
prospectuses. You agree to place orders with us only through your central order
department unless we accept your written Power of Attorney authorizing others to
place orders on your behalf.
3. So long as this agreement remains in effect, we will pay you commissions on
sales of shares of the Funds and service fees, all in accordance with the
Schedule of Commissions and Service Fees ("Schedule") attached hereto and made a
part hereof, effective June 1, 1995, which Schedule may be modified from time to
time or rescinded by us, in either case without prior notice. You shall have no
vested right to receive any continuing service fees, other fees, or other
commissions which we may elect to pay to you from time to time on shares
previously sold by you. You agree not to share or rebate any portion of such
commissions or to otherwise grant any concessions, discounts or other allowances
to any person who is not a broker or dealer actually engaged in the investment
banking or securities business. You will receive commissions in accordance with
the attached Schedule on all purchase transactions in shareholder accounts
(excluding reinvestment of income dividends and capital gains distributions) for
which you are designated as Dealer of Record except where we determine that any
such purchase was made with the proceeds of a redemption or repurchase of shares
of the same Fund or another Fund whether or not the transaction constitutes the
exercise of the exchange privilege. Commissions will be paid to you twice a
month.
You hereby authorize us to act as your agent in connection with all
transactions in shareholder accounts in which you are designated as Dealer of
Record. All designations of Dealer of Record and all authorizations of the
Company to act as your Agent shall cease upon the termination of this Agreement,
or upon the shareholder's instruction to transfer his or her account to another
Dealer of Record.
4. Payment for all shares purchased from us shall be made to the Company and
shall be received by the Company within ten business days after the acceptance
of your order or such shorter time as may be required by law. If such payment is
not received by us, we reserve the right, without prior notice, forthwith to
cancel the sale, or, at our option, to sell the shares ordered by you back to
the Fund concerned in which latter case we may hold you responsible for any
loss, including loss of profit, suffered by us or by the Fund resulting from
your failure to make payment as aforesaid.
5. You agree to purchase shares of the Funds only from us or from your
customers. If you purchase shares from us, you agree that all such purchases
shall be made only to cover orders already received by you from your customers,
or for your own bonafide investment without a view to resale. If you purchase
shares from your customers, you agree to pay such customers the applicable net
asset value per share less any contingent deferred sales charge that would be
applicable if such shares were then tendered for redemption in accordance with
the then current applicable prospectus ("repurchase price").
6. You will sell shares only --
(a) to your clients at the prices described in paragraph 2 above; or
(b) to us as agent for the Funds at the repurchase price. In such a
sale to us, you may act either as principal for your own account or as
agent for your customer. If you act as principal for your own account
in purchasing shares for resale to us, you agree to pay your customer
not less than nor more than the repurchase price which you receive
from us. If you act as agent for your customer in selling shares to
us, you agree not to charge your customer more than a fair commission
for handling the transaction.
7. You shall not withhold placing with us orders received from your customers so
as to profit yourself as a result of such withholding.
8. We will not accept from you any conditional orders for shares.
9. If any shares sold to you under the terms of this agreement are repurchased
by a Fund, or are tendered for redemption, within seven business days after the
date of our confirmation of the original purchase by you, it is agreed that you
shall forfeit your right to any commissions on such sales even though the
shareholder may be charged a contingent deferred sales charge by the Fund.
We will notify you of any such repurchase or redemption within the next ten
business days after the date on which the certificate or written request for
redemption is delivered to us or to the Fund, and you shall forthwith refund to
us the full amount of any commission you received on such sale. We agree, in the
event of any such repurchase or redemption, to refund to the Fund any commission
we retained on such sale and, upon receipt from you of the commissions paid to
you, to pay such commissions forthwith to the Fund.
10. Shares sold to you hereunder shall not be issued in certificate form or
otherwise until payment has been received by the Fund concerned. If transfer
instructions are not received from you within 15 days after our acceptance of
your order, the Company reserves the right to instruct the transfer agent for
the Fund concerned to register a certificate for the shares sold to you in your
name and forward such certificate to you. You agree to hold harmless and
indemnify the Company, the Fund and its transfer agent for any loss or expense
resulting from such registration.
11. No person is authorized to make any representations concerning shares of the
Funds except those contained in the current applicable prospectuses and in sales
literature issued by us supplemental to such prospectuses. In purchasing shares
from us you shall rely solely on the representations contained in the
appropriate prospectus and in such sales literature. We will furnish additional
copies of the current prospectuses and such sales literature and other releases
and information issued by us in reasonable quantities upon request. You agree
that you will in all respects duly conform with all laws and regulations
applicable to the sale of shares of the Funds and will indemnify and hold
harmless the Funds, their directors and trustees and the Company from any damage
or expenses on account of any wrongful act by you, your representatives, agents
or sub-agents in connection with any orders or solicitation of orders of shares
of the Funds by you, your representatives, agents or sub-agents.
12. Each party hereto represents that it is a member of the National Association
of Securities Dealers, Inc., and agrees to notify the other should it cease to
be a member of such Association and agrees to the automatic termination of this
agreement at that time. It is further agreed that all rules or regulations of
said Association now in effect or hereafter adopted, which are binding upon
underwriters and dealers in the distribution of the securities of open-end
investment companies, shall be deemed to be a part of this agreement to the same
extent as if set forth in full herein.
13. You will not offer the Funds for sale in any State where they are not
qualified for sale under the Blue Sky Laws and regulations of such State or
where you are not qualified to act as a dealer, except for States in which they
are exempt from qualification.
14. This agreement supersedes and cancels any prior agreement with respect to
the sales of shares of any of the Funds underwritten by the Company and the
Company reserves the right to amend this agreement at any time and from time to
time.
15. This agreement shall be effective upon acceptance by us in Boston,
Massachusetts and all sales hereunder are to be made, and title to shares of the
Funds shall pass, in Boston. This agreement is made in the Commonwealth of
Massachusetts and shall be interpreted in accordance with the laws of
Massachusetts.
16. All communications to the Company should be sent to the above address. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
17. Either party may terminate this agreement at any time by written notice to
the other party.
Signed: Accepted:
- ---------------------------------- Boston, MA (USA) as of June 1, 1995
Dealer or Broker Name
- ---------------------------------- KEYSTONE INVESTMENT DISTRIBUTORS COMPANY
Address 200 Berkeley Street, Boston, MA 02116-5034
- ---------------------------------- -----------------------------------------
Authorized Signature Authorized Signature
<PAGE>
[LOGO] KEYSTONE
INVESTMENTS
200 Berkeley Street
Boston, Massachusetts 02116-5034
Dealer No._________________________________________________________
(Please indicate Exchange Membership(s), if any.)__________________
-------------------------------------------------------------------
Effective Date_____________________________________________________
CLASS C SHARES
To Whom It May Concern:
Keystone Investment Distributors Company ("the Company"), principal
underwriter, invites you to participate in the distribution of Class C shares of
the Keystone America Fund Family, Keystone Liquid Trust and other Funds
("Funds") designated by us which are currently or hereafter underwritten by the
Company, subject to the following terms:
1. In the distribution and sale of shares, you shall not have authority to act
as agent for the issuer, the Company or any other dealer in any respect in such
transactions. All orders are subject to acceptance by us and become effective
only upon confirmation by us. The Company reserves the unqualified right not to
accept any specific order for the purchase or exchange of shares.
2. You will offer and sell Class C shares of the Funds only at their respective
net asset values in accordance with the terms and conditions of a current
prospectus of the Fund whose shares you offer. You will offer shares only on a
forward pricing basis i.e. orders for the purchase or repurchase of shares
accepted by you prior to the close of the New York Stock Exchange and placed
with us the same day prior to the close of our business day, 5:00 p.m. Eastern
Time, and orders to exchange shares of one Fund for shares of another Fund
eligible for exchange placed with us prior to 3:00 p.m. Eastern Time, shall be
confirmed at the closing price for that business day. You agree to place orders
for shares only with us and at such closing price. You further agree to confirm
the transaction with your customer at the price confirmed in writing by us. In
the event of a difference between verbal and written price confirmations shall
be considered final. Prices of the Funds' shares are computed by and are subject
to withdrawal by the Funds in accordance with their current respective
prospectuses. You agree to place orders with us only through your central order
department unless we accept your written Power of Attorney authorizing others to
place orders on your behalf.
3. So long as this agreement remains in effect, we will pay you commissions on
sales of shares of the Funds and service fees, all in accordance with the
Schedule of Commissions and Service Fees ("Schedule") attached hereto and made a
part hereof, effective June 1, 1995, which Schedule may be modified from time to
time or rescinded by us, in either case without prior notice. You shall have no
vested right to receive any continuing service fees, other fees, or other
commissions which we may elect to pay to you from time to time on shares
previously sold by you. You agree not to share or rebate any portion of such
commissions or to otherwise grant any concessions, discounts or other allowances
to any person who is not a broker or dealer actually engaged in the investment
banking or securities business. You will receive commissions in accordance with
the attached Schedule on all purchase transactions in shareholder accounts
(excluding reinvestment of income dividends and capital gains distributions) for
which you are designated as Dealer of Record except where we determine that any
such purchase was made with the proceeds of a redemption or repurchase of shares
of the same Fund or another Fund whether or not the transaction constitutes the
exercise of the exchange privilege. Commissions will be paid to you twice a
month.
You hereby authorize us to act as your agent in connection with all
transaction in shareholder accounts in which you are designated as Dealer of
Record. All designations of Dealer of Record and all authorizations of the
Company to act as your Agent shall cease upon the termination of this Agreement,
or upon the shareholder's instruction to transfer his or her account to another
Dealer of Record.
4. Payment for all shares purchased from us shall be made to the Company and
shall be received by the Company within ten business days after the acceptance
of your order or such shorter time as may be required by law. If such payment is
not received by us, we reserve the right, without prior notice, forthwith to
cancel the sale, or, at our option, to sell the shares ordered by you back to
the Fund concerned in which latter case we may hold you responsible for any
loss, including loss of profit, suffered by us or by the Fund resulting from
your failure to make payment as aforesaid.
5. You agree to purchase shares of the Funds only from us or from your
customers. If you purchase shares from us, you agree that all such purchases
shall be made only to cover orders already received by you from your customers,
or for your own bonafide investment without a view to resale. If you purchase
shares from your customers, you agree to pay such customers the applicable net
asset value per share less any contingent deferred sales charge that would be
applicable if such shares were then tendered for redemption in accordance with
the then current applicable prospectus ("repurchase price").
6. You will sell share only --
(a) to your clients at the prices described in paragraph 2 above; or
(b) to us as agent for the Funds at the repurchase price. In such a
sale to us, you may act either as principal for your own account or as
agent for your customer. If you act as principal for your own account
in purchasing shares for resale to us, you agree to pay your customer
not less than nor more than the repurchase price which you receive
from us. If you act as agent for your customer in selling shares to
us, you agree not to charge your customer more than a fair commission
for handling the transaction.
7. You shall not withhold placing with us orders received from your customers so
as to profit yourself as a result of such withholding.
8. We will not accept from you any conditional orders for shares.
9. If any shares sold to you under the terms of this agreement are repurchased
by a Fund, or are tendered for redemption, within seven business days after the
date of our confirmation of the original purchase by you, it is agreed that you
shall forfeit your right to any commissions on such sales even though the
shareholder may be charged a contingent deferred sales charge by the Fund.
We will notify you of any such repurchase or redemption within the next ten
business days after the date on which the certificate or written request for
redemption is delivered to us or to the Fund, and you shall forthwith refund to
us the full amount of any commission you received on such sale. We agree, in the
event of any such repurchase or redemption, to refund to the Fund any commission
we retained on such sale and, upon receipt from you of the commissions paid to
you, to pay such commissions forthwith to the Fund.
10. Shares sold to you hereunder shall not be issued in certificate form or
otherwise until payment has been received by the Fund concerned. If transfer
instructions are not received from you within 15 days after our acceptance of
your order, the Company reserves the right to instruct the transfer agent for
the Fund concerned to register a certificate for the shares sold to you in your
name and forward such certificate to you. You agree to hold harmless and
indemnify the Company, the Fund and its transfer agent for any loss or expense
resulting from such registration.
11. No person is authorized to make any representations concerning shares of the
Funds except those contained in the current applicable prospectuses and in sales
literature issued by us supplemental to such prospectuses. In purchasing shares
from us you shall rely solely on the representations contained in the
appropriate prospectus and in such sales literature. We will furnish additional
copies of the current prospectuses and such sales literature and other releases
and information issued by us in reasonable quantities upon request. You agree
that you will in all respects duly conform with all laws and regulations
applicable to the sale of shares of the Funds and will indemnify and hold
harmless the Funds, their directors and trustees and the Company from any damage
or expenses on account of any wrongful act by you, your representatives, agents
or sub-agents in connection with any orders or solicitation of orders of shares
of the Funds by you, your representatives, agents or sub-agents.
12. Each party hereto represents that it is a member of the National Association
of Securities Dealers, Inc., and agrees to notify the other should it cease to
be a member of such Association and agrees to the automatic termination of this
agreement at that time. It is further agreed that all rules or regulations of
said Association now in effect or hereafter adopted, which are binding upon
underwriters and dealers in the distribution of the securities of open-end
investment companies, shall be deemed to be a part of this agreement to the same
extent as if set forth in full herein.
13. You will not offer the Funds for sale in any State where they are not
qualified for sale under the Blue Sky Laws and regulations of such State or
where you are not qualified to act as a dealer, except for States in which they
are exempt from qualification.
14. This agreement supersedes and cancels any prior agreement with respect to
the sales of shares of any of the Funds underwritten by the Company and the
Company reserves the right to amend this agreement at any time and from time to
time.
15. This agreement shall be effective upon acceptance by us in Boston,
Massachusetts and all sales hereunder are to be made, and title to shares of the
Funds shall pass, in Boston. This agreement is made in the Commonwealth of
Massachusetts and shall be interpreted in accordance with the laws of
Massachusetts.
16. All communications to the Company should be sent to the above address. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
17. Either party may terminate this agreement at any time by written notice to
the other party.
Signed: Accepted:
- ---------------------------------- Boston, MA (USA) as of June 1, 1995
Dealer or Broker Name
- ---------------------------------- KEYSTONE INVESTMENT DISTRIBUTORS COMPANY
Address 200 Berkeley Street, Boston, MA 02116-5034
- ---------------------------------- -----------------------------------------
Authorized Signature Authorized Signature
<PAGE>
November 29, 1995
Keystone Hartwell Growth Fund
200 Berkeley Street
Boston, Massachusetts 02116-5034
Gentlemen:
I am a Senior Vice President of and General Counsel to Keystone
Investment Management Company (formerly named Keystone Custodian Funds, Inc.)
investment adviser to Keystone Hartwell Growth Fund (the "Fund"). You have asked
for my opinion with respect to the proposed issuance of 35,998 additional
shares of the Fund.
To my knowledge, a Prospectus is on file with the Securities and
Exchange Commission (the "Commission") as part of Post-Effective Amendment No.
50 to the Fund's Registration Statement, which covers the public offering and
sale of the Fund shares currently registered with the Commission.
In my opinion, such additional shares, if issued and sold in accordance
with the Fund's Declaration of Trust Agreement, as amended and restated,
("Declaration of Trust") and offering Prospectus, will be legally issued, fully
paid, and nonassessable by the Fund, entitling the holders thereof to the rights
set forth in the Declaration of Trust and subject to the limitations set forth
therein.
My opinion is based upon my examination of the Fund's Declaration of
Trust and By-Laws; a review of the minutes of the Fund's Board of Trustees
authorizing the issuance of such additional shares; and the Fund's Prospectus.
In my examination of such documents, I have assumed the genuineness of all
signatures and the conformity of copies to originals.
I hereby consent to the use of this opinion in connection with
Post-Effective Amendment No. 50 to the Fund's Registration Statement, which
covers the registration of such additional shares.
Very truly yours,
Rosemary D. Van Antwerp
Senior Vice President and
General Counsel
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Trustees
Keystone Hartwell Growth Fund
(formerly named Keystone America Hartwell Growth Fund, Inc.)
We consent to the use of our report dated October 27, 1995, included
herein and to the references to our firm under the captions "FINANCIAL
HIGHLIGHTS" in the prospectus and "ADDITIONAL INFORMATION" in the statement of
additional information.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 29, 1995
KEYSTONE HARTWELL GROWTH FUND
CLASS A DISTRIBUTION PLAN
SECTION 1. Keystone 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. The Fund may expend daily amounts at an annual rate of 0.75%
of the average daily net asset value of Class A shares of the Fund to finance
any activity which is principally intended to result in the sale of Class A
shares of the Fund, including, without limitation, expenditures consisting of
payments to a principal underwriter of the Fund (Principal Underwriter) in order
(i) to enable the Principal Underwriter to pay to others commissions in respect
of sales of Class A shares since inception of the Plan; (ii) to enable the
Principal Underwriter to pay or to have paid to others who sell Class A shares a
maintenance or other fee, at such intervals as the Principal Underwriter may
determine, in respect of Class A shares previously sold by any such others and
remaining outstanding during the period in respect of which such fee is or has
been paid; and/or (iii) to compensate the Principal Underwriter for its efforts
in respect of sales of Class A shares of the Fund since inception of the Plan.
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.
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.
#101505ae
<PAGE>
DISTRIBUTION PLAN
FOR
CLASS B-1 SHARES
OF
KEYSTONE HARTWELL GROWTH FUND
Section 1. Keystone Hartwell Growth Fund, individually and/or on behalf of
its series, if any, referred to above in the title of this 12b-1 Plan (the
"Plan"), to which series this Plan shall then relate, as applicable (the
"Fund"), may act as the distributor of certain 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.
Section 2. The Fund may expend daily amounts at an annual rate of up to
1.00% of the average daily net asset value of the Fund attributable to the
Fund's Class B-1 shares (the "Shares"). Such amounts may be expended to finance
any activity that is principally intended to result in the sale of Shares,
including, without limitation, expenditures consisting of payments to a
principal underwriter of the Fund or others as sales commissions or other
compensation for services provided or to be provided ("Distribution Fees") or as
reimbursement for expenses that are incurred or accrued at any time during which
this Plan is in effect, together with interest on any such amounts, at rates
approved by the Rule 12b-1 Directors (as defined below) in the manner referred
to below, all whether or not this Plan has been otherwise terminated, if such
payment of such expenditures is for services theretofore provided or for
reimbursement of expenses theretofore incurred or accrued prior to termination
of this Plan in other respects and if such payment is or has been so approved by
such Rule 12b-1 Directors, or agreed to by the Fund with such approval, all
subject to such specific implementation as such 12b-1 Directors may approve;
provided that, at the time any such payment is made, whether or not this Plan
has been otherwise terminated, the making of such payment will not cause the
limitation upon such payments set forth in the preceding sentence to be
exceeded. Without limiting the generality of the foregoing, the Fund may pay to,
or on the order of, any person who has served from time to time as principal
underwriter (a "Principal Underwriter") amounts for distribution services
pursuant to a principal underwriting agreement or otherwise. No principal
underwriting agreement or other agreement shall be an agreement related to this
Plan, as referred to in Rule 12b-1 of the Securities and Exchange Commission,
unless it specifically states that it is such a related agreement. Any such
principal underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B-1 Shares
and/or other specified classes of shares of the Fund (together the
"B-Class-of-Shares"), a fee which may be designated a Distribution Fee and may
be paid at a rate per annum up to .75% of the average daily net asset value of
such B-Class-of-Shares of the Fund and may, but need not, also provide: (I) that
a Principal Underwriter will be deemed to have fully earned its "Allocable
Portion" of the Distribution Fee upon the sale of the Commission Shares (as
defined in the Allocation Schedule) taken into account in determining its
Allocable Portion; (II) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall be absolute and
unconditional and shall not be subject to dispute, offset, counterclaim or any
defense whatsoever (it being understood that such provision is not a waiver of
the Fund's right to pursue such Principal Underwriter and enforce such claims
against the assets of such Principal Underwriter other than its right to its
Allocable Portion of the Distribution Fees and CDSCs (as defined below) (III)
that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fees shall not be changed or terminated except to
the extent required by any change in applicable law, including without
limitation, the Investment Company Act of 1940, the Rules promulgated thereunder
by the Securities and Exchange Commission and the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., in each case enacted or
promulgated after June 1, 1995, or in connection with a "Complete Termination"
(as hereinafter defined); (IV) that the Fund will not waive or change any
contingent deferred sales charge ("CDSC") in respect of the Distributor's
Allocable Portion thereof, except as provided in the Fund's prospectus or
statement of additional information without the consent of the Principal
Underwriter or any assignee of such Principal Underwriter's rights to its
Allocable Portion; (V) that the termination of the Principal Underwriter, the
principal underwriting agreement or this Plan will not terminate such Principal
Underwriter's rights to its Allocable Portion of the CDSCs; and (VI) that any
Principal Underwriter may assign its rights to its Allocable Portion of the
Distribution Fees and CDSCs (but not such Principal Underwriter's obligations to
the Fund under its principal underwriting agreement) to raise funds to make
expenditures described in Section 2 above and in connection therewith, and upon
receipt of notice of such assignment, the Fund shall pay to the assignee such
portion of the Principal Underwriter's Allocable Portion of the Distribution
Fees and CDSCs so assigned. For purposes of such principal underwriting
agreement, the term Allocable Portion of Distribution Fees as applied to any
Principal Underwriter may mean the portion of the Distribution Fee allocable to
Distributor Shares in accordance with the "Allocation Schedule" attached to such
Principal Underwriter's principal underwriting agreement. For purposes of such
principal underwriting agreement, the term Allocable Portion of CDSCs as applied
to any Principal Underwriter may mean the portion of the CDSCs allocable to
Distributor Shares in accordance with the Allocation Schedule attached to such
Principal Underwriter's principal underwriting agreement. For purposes of such
principal underwriting agreement, the term "Complete Termination" may mean a
termination of this Plan involving the cessation of payments of the Distribution
Fees thereunder, the cessation of payments of distribution fees pursuant to
every other rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares and the cessation of the offering by the Fund of existing or
future B-Class-of-Shares, which conditions shall be deemed to be satisfied when
they are first complied with and so long thereafter as they are complied with
prior to the earlier of (i) the date upon which all of the B-2 Shares which are
Distributor Shares pursuant to the Allocation Schedule shall have been redeemed
or converted or (ii) a specified date, after either of which times such
conditions need no longer be complied with. For purposes of such principal
underwriting agreement, the term "B-Class-of-Shares" may mean each of the B-1
Class of Shares of the Fund, the B-2 Class of Shares of the Fund and each other
class of shares of the Fund hereafter issued which would be treated as "Shares"
under such Allocation Schedule or which has economic characteristics
substantially similar to those of the B-1 or B-2 Classes of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of the shares of such classes. The parties may agree
that the existing C Class of Shares of the Fund does not have substantially
similar economic characteristics to the B-1 or B-2 Classes of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares. For purposes of clarity the parties to
such principal underwriting agreement may state that they intend that a new
installment load class of shares which may be authorized by amendments to Rule
6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it
has economic characteristics substantially similar to the economic
characteristics of the existing B-1 or B-2 Classes of Shares taking into account
the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares. For purposes of such
principal underwriting agreement, "Allocation Schedule" may mean a schedule
which shall be approved by Directors (as defined below) in connection with their
required approval of such principal underwriting agreement as assigning to each
Principal Underwriter of Shares the portion of the total Distribution Fees
payable by the Fund under such principal underwriting agreement which has been
earned by such Principal Underwriter to the extent necessary so that the
continued payments thereof if such Principal Underwriter ceases to serve in that
capacity does not penalize the Fund by requiring it to pay for services that
have not been earned.
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
Shares.
Section 4. This Plan, and the specific implementation of expenditures
provided for under this Plan, shall not take effect until this Plan, and such
implementation, have been approved, together with any related agreements of the
Fund, by votes of both (a) a majority of the Board of Trustees or Directors
(together the "Directors") of the Fund and (b) a majority of those Directors 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 Directors"), 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, except that, if terminated except for payments
provided to be made after termination of other aspects of this Plan, such
payments may be made pursuant to approvals made, and or agreements approved, as
provided above.
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 Directors, 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, in whole or in part, at any time by
vote of a majority of the Rule 12b-1 Directors or by vote of a majority of the
outstanding Shares, with the effects provided for in Section 2, as applicable.
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 Directors or by a
vote of a majority of the outstanding 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 for
in Section 4 hereof.
<PAGE>
DISTRIBUTION PLAN
FOR
CLASS B-2 SHARES
OF
KEYSTONE HARTWELL GROWTH FUND
Section 1. Keystone Hartwell Growth Fund, individually and/or on behalf of
its series, if any, referred to above in the title of this 12b-1 Plan (the
"Plan"), to which series this Plan shall then relate, as applicable (the
"Fund"), may act as the distributor of certain 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.
Section 2. The Fund may expend daily amounts at an annual rate of up to
1.00% of the average daily net asset value of the Fund attributable to the
Fund's Class B-2 shares (the "Shares"). Such amounts may be expended to finance
any activity that is principally intended to result in the sale of Shares,
including, without limitation, expenditures consisting of payments to a
principal underwriter of the Fund or others as sales commissions or other
compensation for services provided or to be provided ("Distribution Fees") or as
reimbursement for expenses that are incurred or accrued at any time during which
this Plan is in effect, together with interest on any such amounts, at rates
approved by the Rule 12b-1 Directors (as defined below) in the manner referred
to below, all whether or not this Plan has been otherwise terminated, if such
payment of such expenditures is for services theretofore provided or for
reimbursement of expenses theretofore incurred or accrued prior to termination
of this Plan in other respects and if such payment is or has been so approved by
such Rule 12b-1 Directors, or agreed to by the Fund with such approval, all
subject to such specific implementation as such 12b-1 Directors may approve;
provided that, at the time any such payment is made, whether or not this Plan
has been otherwise terminated, the making of such payment will not cause the
limitation upon such payments set forth in the preceding sentence to be
exceeded. Without limiting the generality of the foregoing, the Fund may pay to,
or on the order of, any person who has served from time to time as principal
underwriter (a "Principal Underwriter") amounts for distribution services
pursuant to a principal underwriting agreement or otherwise. No principal
underwriting agreement or other agreement shall be an agreement related to this
Plan, as referred to in Rule 12b-1 of the Securities and Exchange Commission,
unless it specifically states that it is such a related agreement. Any such
principal underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B-2 Shares
and/or other specified classes of shares of the Fund (together the
"B-Class-of-Shares"), a fee which may be designated a Distribution Fee and may
be paid at a rate per annum up to .75% of the average daily net asset value of
such B-Class-of-Shares of the Fund and may, but need not, also provide: (I) that
a Principal Underwriter will be deemed to have fully earned its "Allocable
Portion" of the Distribution Fee upon the sale of the Commission Shares (as
defined in the Allocation Schedule) taken into account in determining its
Allocable Portion; (II) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall be absolute and
unconditional and shall not be subject to dispute, offset, counterclaim or any
defense whatsoever (it being understood that such provision is not a waiver of
the Fund's right to pursue such Principal Underwriter and enforce such claims
against the assets of such Principal Underwriter other than its right to its
Allocable Portion of the Distribution Fees and CDSCs (as defined below); (III)
that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fees shall not be changed or terminated except to
the extent required by any change in applicable law, including without
limitation, the Investment Company Act of 1940, the Rules promulgated thereunder
by the Securities and Exchange Commission and the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., in each case enacted or
promulgated after June 1, 1995, or in connection with a "Complete Termination"
(as hereinafter defined); (IV) that the Fund will not waive or change any
contingent deferred sales charge ("CDSC") in respect of the Distributor's
Allocable Portion thereof, except as provided in the Fund's prospectus or
statement of additional information without the consent of the Principal
Underwriter or any assignee of such Principal Underwriter's rights to its
Allocable Portion; (V) that the termination of the Principal Underwriter, the
principal underwriting agreement or this Plan will not terminate such Principal
Underwriter's rights to its Allocable Portion of the CDSCs; and (VI) that any
Principal Underwriter may assign its rights to its Allocable Portion of the
Distribution Fees and CDSCs (but not such Principal Underwriter's obligations to
the Fund under its principal underwriting agreement) to raise funds to make
expenditures described in Section 2 above and in connection therewith, and upon
receipt of notice of such assignment, the Fund shall pay to the assignee such
portion of the Principal Underwriter's Allocable Portion of the Distribution
Fees and CDSCs so assigned. For purposes of such principal underwriting
agreement, the term Allocable Portion of Distribution Fees as applied to any
Principal Underwriter may mean the portion of the Distribution Fee allocable to
Distributor Shares in accordance with the "Allocation Schedule" attached to such
Principal Underwriter's principal underwriting agreement. For purposes of such
principal underwriting agreement, the term Allocable Portion of CDSCs as applied
to any Principal Underwriter may mean the portion of the CDSCs allocable to
Distributor Shares in accordance with the Allocation Schedule attached to such
Principal Underwriter's principal underwriting agreement. For purposes of such
principal underwriting agreement, the term "Complete Termination" may mean a
termination of this Plan involving the cessation of payments of the Distribution
Fees thereunder, the cessation of payments of distribution fees pursuant to
every other rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares and the cessation of the offering by the Fund of existing or
future B-Class-of-Shares, which conditions shall be deemed to be satisfied when
they are first complied with and so long thereafter as they are complied with
prior to the earlier of (i) the date upon which all of the B-2 Shares which are
Distributor Shares pursuant to the Allocation Schedule shall have been redeemed
or converted or (ii) a specified date, after either of which times such
conditions need no longer be complied with. For purposes of such principal
underwriting agreement, the term "B-Class-of-Shares" may mean each of the B-1
Class of Shares of the Fund, the B-2 Class of Shares of the Fund and each other
class of shares of the Fund hereafter issued which would be treated as "Shares"
under such Allocation Schedule or which has economic characteristics
substantially similar to those of the B-1 or B-2 Classes of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of the shares of such classes. The parties may agree
that the existing C Class of Shares of the Fund does not have substantially
similar economic characteristics to the B-1 or B-2 Classes of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares. For purposes of clarity the parties to
such principal underwriting agreement may state that they intend that a new
installment load class of shares which may be authorized by amendments to Rule
6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it
has economic characteristics substantially similar to the economic
characteristics of the existing B-1 or B-2 Classes of Shares taking into account
the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares. For purposes of such
principal underwriting agreement, "Allocation Schedule" may mean a schedule
which shall be approved by Directors (as defined below) in connection with their
required approval of such principal underwriting agreement as assigning to each
Principal Underwriter of Shares the portion of the total Distribution Fees
payable by the Fund under such principal underwriting agreement which has been
earned by such Principal Underwriter to the extent necessary so that the
continued payments thereof if such Principal Underwriter ceases to serve in that
capacity does not penalize the Fund by requiring it to pay for services that
have not been earned.
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
Shares.
Section 4. This Plan, and the specific implementation of expenditures
provided for under this Plan, shall not take effect until this Plan, and such
implementation, have been approved, together with any related agreements of the
Fund, by votes of both (a) a majority of the Board of Trustees or Directors
(together the "Directors") of the Fund and (b) a majority of those Directors 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 Directors"), 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, except that, if terminated except for payments
provided to be made after termination of other aspects of this Plan, such
payments may be made pursuant to approvals made, and or agreements approved, as
provided above.
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 Directors, 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, in whole or in part, at any time by
vote of a majority of the Rule 12b-1 Directors or by vote of a majority of the
outstanding Shares, with the effects provided for in Section 2, as applicable.
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 Directors or by a
vote of a majority of the outstanding 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 for
in Section 4 hereof.
<PAGE>
KEYSTONE HARTWELL GROWTH FUND
CLASS C DISTRIBUTION PLAN
SECTION 1. Keystone 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 Under-
writer") 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.
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.
#101505b2
<TABLE>
<CAPTION>
KAHGF CLASS A MTD YTD ONE YEAR THREE YEAR THREE YEAR
29-Sep-95 TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C>
5.75% LOAD 15.86% 16.19% 24.02% 7.44%
no load 1.95% 22.93% 23.28% 31.58% 9.58%
Beg dates 31-Aug-95 30-Dec-94 30-Sep-94 30-Sep-92 30-Sep-92
Beg Value (LOAD) 148,851 123,439 123,092 115,325 115,325
Beg Value (no load) 140,292 116,341 116,015 108,694 108,694
End Value 143,022 143,022 143,022 143,022 143,022
<CAPTION>
KAHGF CLASS A FIVE YEAR FIVE YEAR TEN YEAR TEN YEAR
29-Sep-95 TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C>
5.75% LOAD 98.19% 14.66% 300.34% 14.88%
no load 110.28% 16.03% 324.77% 15.56%
Beg dates 28-Sep-90 28-Sep-90 30-Sep-85 30-Sep-85
Beg Value (LOAD) 72,165 72,165 35,725 35,725
Beg Value (no load) 68,015 68,015 33,671 33,671
End Value 143,022 143,022 143,022 143,022
TIME 3 5 10
INCEPTION DATE 31-Dec-77
</TABLE>
KAHGF CLASS A
29-Sep-95
BEGINNING DATE INPUT: ESTIMATED EDIT
MONTH/YR ACTUAL DATE
MTD Aug-95 31-Aug-95
YTD Dec-94 30-Dec-94
1 YEAR Sep-94 30-Sep-94
3 YEAR Sep-92 30-Sep-92
5 YEAR Sep-90 28-Sep-90
10 YEAR Sep-85 30-Sep-85
<PAGE>
<TABLE>
<CAPTION>
KAHGF-B MTD YTD ONE YEAR THREE YEAR
29-Sep-95 TOTAL RETURN
<S> <C> <C> <C> <C>
with cdsc N/A 17.06% 18.10% 15.00%
W/O CDSC 1.85% 22.06% 22.10% 17.85%
Beg dates 31-Aug-95 30-Dec-94 30-Sep-94 02-Aug-93
Beg Value (no load) 11,571 9,655 9,652 10,000
End Value (W/O CDSC) 11,785 11,785 11,785 11,785
End Value (with cdsc) 11,302 11,399 11,500
beg nav 22.22 18.54 20.80 23.85
end nav 22.63 22.63 22.63 22.63
shares originally purchased 520.77 520.77 464.05 419.29
<CAPTION>
KAHGF-B THREE YEAR FIVE YEAR FIVE YEAR TEN YEAR TEN YEAR
29-Sep-95 COMPOUNDED TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C>
with cdsc 6.67% NA NA NA NA
W/O CDSC 7.89% NA NA NA NA
Beg dates 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93
Beg Value (no load) 10,000 10,000 10,000 10,000 10,000
End Value (W/O CDSC) 11,785 11,785 11,785 11,785 11,785
End Value (with cdsc) 11,500 11,690 11690.0509944 11,785 11784.9356904
beg nav 23.85 23.85 23.85 23.85 23.85
end nav 22.63 22.63 22.63 22.63 22.63
shares originally purchased 419.29 419.29 419.29 419.29 419.29
5% cdsc thru date=> 31-Jul-94
TIME 4% cdsc thru date=> 31-Jul-95
INCEPTION DATE 02-Aug-93 3% cdsc effect. date=> 31-Jul-97
2% cdsc effect. date=> 31-Jul-98
1% cdsc effect. date=> 31-Jul-99
TIME 2.1638888889 2.1638888889 2.1638888889
INCEPTION DATE 1% cdsc thru date^ 31-Dec-96
Compound Return Time Period: BEGINNING Dec-94
Through Sep-95
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KAHGF-C MTD YTD ONE YEAR THREE YEAR
29-Sep-95 TOTAL RETURN
<S> <C> <C> <C> <C>
with cdsc N/A 21.01% 22.04% 17.29%
W/O CDSC 1.90% 22.01% 22.04% 17.29%
Beg dates 31-Aug-95 30-Dec-94 30-Sep-94 02-Aug-93
Beg Value (no load) 11,510 9,613 9,610 10,000
End Value (W/O CDSC) 11,729 11,729 11,729 11,729
End Value (with cdsc) 11,633 11,729 11,729
beg nav 22.09 18.45 20.71 23.85
end nav 22.51 22.51 22.51 22.51
shares originally purchased 521.05 521.05 464.05 419.29
<CAPTION>
KAHGF-C THREE YEAR FIVE YEAR FIVE YEAR TEN YEAR TEN YEAR
29-Sep-95 COMPOUNDED TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C>
with cdsc 7.65% NA NA NA NA
W/O CDSC 7.65% NA NA NA NA
Beg dates 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93
Beg Value (no load) 10,000 10,000 10,000 10,000 10,000
End Value (W/O CDSC) 11,729 11,729 11,729 11,729 11,729
End Value (with cdsc) 11,729 11,729 11728.8593514 11,729 11728.8593514
beg nav 23.85 23.85 23.85 23.85 23.85
end nav 22.51 22.51 22.51 22.51 22.51
shares originally purchased 419.29 419.29 419.29 419.29 419.29
TIME
INCEPTION DATE 02-Aug-93 1% cdsc effect. date=> 01-Jan-96
TIME 2.1638888889 2.1638888889 2.1638888889
INCEPTION DATE 1% cdsc thru date^ 31-Dec-96
Compound Return Time Period: BEGINNING Dec-94
Through Sep-95
# Months # Years
</TABLE>
<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 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
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, 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
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> KEYSTONE HARTWELL GROWTH FUND CLASS A
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 12,962,923
<INVESTMENTS-AT-VALUE> 22,457,140
<RECEIVABLES> 38,417
<ASSETS-OTHER> 3,168
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,498,725
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,286
<TOTAL-LIABILITIES> 39,286
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,196,412
<SHARES-COMMON-STOCK> 893,553
<SHARES-COMMON-PRIOR> 952,694
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (7,628)
<ACCUMULATED-NET-GAINS> 2,964,417
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,447,108
<NET-ASSETS> 20,600,309
<DIVIDEND-INCOME> 109,221
<INTEREST-INCOME> 25,017
<OTHER-INCOME> 0
<EXPENSES-NET> (358,174)
<NET-INVESTMENT-INCOME> (223,936)
<REALIZED-GAINS-CURRENT> 3,323,384
<APPREC-INCREASE-CURRENT> 996,051
<NET-CHANGE-FROM-OPS> 4,095,499
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2,039,209)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,726
<NUMBER-OF-SHARES-REDEEMED> (184,792)
<SHARES-REINVESTED> 98,925
<NET-CHANGE-IN-ASSETS> 629,187
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,094,347
<OVERDISTRIB-NII-PRIOR> (349,757)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (150,952)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (364,484)
<AVERAGE-NET-ASSETS> 19,511,236
<PER-SHARE-NAV-BEGIN> 20.96
<PER-SHARE-NII> (0.24)
<PER-SHARE-GAIN-APPREC> 4.53
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.20)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 23.05
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> KEYSTONE HARTWELL GROWTH FUND CLASS B
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 12,962,923
<INVESTMENTS-AT-VALUE> 22,457,140
<RECEIVABLES> 38,417
<ASSETS-OTHER> 3,168
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,498,725
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,286
<TOTAL-LIABILITIES> 39,286
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,006,075
<SHARES-COMMON-STOCK> 50,813
<SHARES-COMMON-PRIOR> 23,938
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 4,399
<ACCUMULATED-NET-GAINS> 104,822
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 34,800
<NET-ASSETS> 1,150,096
<DIVIDEND-INCOME> 4,442
<INTEREST-INCOME> 1,128
<OTHER-INCOME> 0
<EXPENSES-NET> (21,938)
<NET-INVESTMENT-INCOME> (16,368)
<REALIZED-GAINS-CURRENT> 137,616
<APPREC-INCREASE-CURRENT> 56,789
<NET-CHANGE-FROM-OPS> 178,037
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (59,908)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 35,697
<NUMBER-OF-SHARES-REDEEMED> (12,016)
<SHARES-REINVESTED> 3,194
<NET-CHANGE-IN-ASSETS> 652,160
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 43,948
<OVERDISTRIB-NII-PRIOR> (2,245)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (6,323)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (22,204)
<AVERAGE-NET-ASSETS> 793,146
<PER-SHARE-NAV-BEGIN> 20.80
<PER-SHARE-NII> (0.41)
<PER-SHARE-GAIN-APPREC> 4.44
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.20)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 22.63
<EXPENSE-RATIO> 2.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> KEYSTONE HARTWELL GROWTH FUND CLASS C
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 12,962,923
<INVESTMENTS-AT-VALUE> 22,457,140
<RECEIVABLES> 38,417
<ASSETS-OTHER> 3,168
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,498,725
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,286
<TOTAL-LIABILITIES> 39,286
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 621,324
<SHARES-COMMON-STOCK> 31,500
<SHARES-COMMON-PRIOR> 10,801
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 3,229
<ACCUMULATED-NET-GAINS> 72,172
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,309
<NET-ASSETS> 709,034
<DIVIDEND-INCOME> 2,451
<INTEREST-INCOME> 705
<OTHER-INCOME> 0
<EXPENSES-NET> (11,883)
<NET-INVESTMENT-INCOME> (8,727)
<REALIZED-GAINS-CURRENT> 90,166
<APPREC-INCREASE-CURRENT> 23,535
<NET-CHANGE-FROM-OPS> 104,974
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (25,743)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28,600
<NUMBER-OF-SHARES-REDEEMED> (9,229)
<SHARES-REINVESTED> 1,328
<NET-CHANGE-IN-ASSETS> 485,393
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 16,957
<OVERDISTRIB-NII-PRIOR> (631)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (3,494)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (12,037)
<AVERAGE-NET-ASSETS> 433,897
<PER-SHARE-NAV-BEGIN> 20.71
<PER-SHARE-NII> (0.41)
<PER-SHARE-GAIN-APPREC> 4.41
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.20)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 22.51
<EXPENSE-RATIO> 2.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
