<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION DECEMBER 9, 1996.
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. 46
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25
KEYSTONE AMERICA HARTWELL EMERGING 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)
[X] on December 10, 1996 pursuant to paragraph (b)
[ ] 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
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has elected to register an indefinite number of its securities under the
Securities Act of 1933. A Rule 24f-2 Notice for Registrant's fiscal year ended
September 30, 1996 was filed November 27, 1996.
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 2,028,832 $25.12 $329,976 $100
Value
- --------------------------------------------------------------------------------
*Computed under Rule 457(d) on the basis of the offering price per share at the
close of business on November 26, 1996.
**The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. 2,015,696 shares of
the Fund were redeemed during its fiscal year ended September 30, 1996. Of
such shares, none were used for a reduction pursuant to Rule 24f-2 during the
current year.
<PAGE>
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 46
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 46 to Registration Statement No.
2-28719/811-1633 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 of Investment Advisers
Principal Underwriter
Location of Accounts and Records
Undertakings
Signatures
Exhibits (including Powers of Attorney)
<PAGE>
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
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
Additional Investment Information
5 Fund Management and Expenses
Additional Information
5A Not applicable
6 The Fund
Dividends and Taxes
Alternative Sales Options
Fund Shares
7 How to Buy Shares
Distribution Plans
Contingent Deferred Sales Charge and
Waiver of Sales Charge
Shareholder Services
Pricing Shares
8 How to Redeem Shares
9 Not Applicable
Items in
Part B of
Form N-1A Statement of Additional Information Caption
- --------- -------------------------------------------
10 Cover Page
11 Table of Contents
12 Not applicable
13 Investment Methods
Investment Restrictions
Brokerage
Appendix
14 Directors and Officers
Investment Management
15 Additional Information
16 Investment Management
Principal Underwriter
Distribution Plans
Sales Charges
Additional Information
17 Brokerage
18 Capital Stock
19 Valuation of Securities
Distribution Plans
20 Distributions and Taxes
21 Principal Underwriter
22 Standardized Total Return and Yield Quotations
23 Financial Statements
<PAGE>
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
PART A
PROSPECTUS
<PAGE>
KEYSTONE AMERICA HARTWELL
EMERGING GROWTH FUND, INC.
PROSPECTUS DECEMBER 10, 1996
Keystone America Hartwell Emerging Growth Fund, Inc. (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 primarily in small and medium-sized companies in a
relatively early stage of development that are principally traded in the
over-the-counter market.
The Fund offers Class A, B and C shares. Information on share classes and
their fee and sales charge structures may be found in the "Fee Table,"
"Alternative Sales Options," "Contingent Deferred Sales Charge and Waiver of
Sales Charges," "Distribution Plans" and "Fund Shares" sections of this
prospectus.
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 is contained in a statement of
additional information dated December 10, 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 provided on this page.
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
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 9
Fund Management and Expenses 9
How to Buy Shares 12
Alternative Sales Options 13
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 23
Additional Investment Information (i)
Exhibit A A-1
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
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(1) OPTION(2)
--------- --------- ---------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases ........... 5.75%(3) None None
(as a percentage of offering price)
Deferred Sales Load ............................... 0.00%(4) 5.00% in the first year 1.00% in the first
(as a percentage of the lesser of original declining to 1.00% in year and 0.00%
purchase price or redemption proceeds, as the sixth year and thereafter
applicable) 0.00% thereafter
Exchange Fee (per exchange)(5) .................... $10.00 $10.00 $10.00
ANNUAL FUND OPERATING EXPENSES(6)
(as a percentage of average net assets)
Management Fees ................................... 0.99%(7) 0.99%(7) 0.99%(7)
12b-1 Fees ........................................ 0.20% 1.00%(8) 1.00%(8)
Other Expenses .................................... 0.47% 0.47% 0.47%
---- ---- ----
Total Fund Operating Expenses ..................... 1.66% 2.46% 2.46%
==== ==== ====
<CAPTION>
EXAMPLES(9) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
Class A ................................................................... $73 $107 $143 $243
Class B ................................................................... $75 $107 $151 $260
Class C ................................................................... $35 $ 77 $131 $280
You would pay the following expenses on the same investment, assuming no
redemption at the end of each period:
Class A ................................................................... $73 $107 $143 $243
Class B ................................................................... $25 $ 77 $131 $260
Class C ................................................................... $25 $ 77 $131 $280
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>
- ----------
(1) 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.
(2) Class C shares are available only through broker-dealers who have entered into special distribution agreements with Keystone
Investment Distributors Company, the Fund's principal underwriter.
(3) The sales charge applied to purchases of Class A shares declines as the amount invested increases. See "Class A Shares."
(4) 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. See the "Class A
Shares" and "Contingent Deferred Sales Charge and Waiver of Sales Charges" sections of this prospectus for an explanation of
the charge.
(5) 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.")
(6) Expense ratios are for the year ended September 30, 1996. Total Fund Operating Expenses include indirectly paid expenses.
(7) 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."
(8) 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").
(9) 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%.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
The following table contains important financial information with respect to
the Fund. The financial information for the fiscal years ended September 30,
1991 through September 30, 1996 have been audited by KPMG Peat Marwick LLP, the
Fund's independent auditors. The financial information for the fiscal years
ended September 30, 1987 through September 30, 1990 were 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 incorporated by reference into 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>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR .... $ 26.28 $ 21.41 $ 28.56 $ 20.80 $ 22.91 $ 14.13 $ 15.96 $ 11.56 $ 24.37 $ 14.94
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss .... (0.30) (0.38) (0.37) (0.34) (0.26) (0.22) (0.29) (0.21) (0.20) (0.23)
Net gain (loss) on
investments .......... 2.89 8.14 (4.43) 8.10 0.05 9.13 (1.45) 4.61 (6.03) 9.66
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations ......... 2.59 7.76 (4.80) 7.76 (0.21) 8.91 (1.74) 4.40 (6.23) 9.43
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS FROM
Net realized gain on
investments .......... (0.25) (2.89) (2.35) 0 (1.90) (0.13) (0.09) 0 (6.58) 0
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions .. (0.25) (2.89) (2.35) 0 (1.90) (0.13) (0.09) 0 (6.58) 0
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE END OF
YEAR ................. $ 28.62 $ 26.28 $ 21.41 $ 28.56 $ 20.80 $ 22.91 $ 14.13 $ 15.96 $ 11.56 $ 24.37
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(A) ........ 9.96% 37.20% (17.86%) 37.31% (1.12%) 63.51% (10.95%) 38.06% (16.40%) 63.12%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses ....... 1.66%(b) 1.81%(b) 1.80% 1.60% 1.63% 1.70% 2.50% 2.40% 2.40% 1.90%
Net investment loss .. (1.10%) (1.58%) (1.62%) (1.34%) (1.18%) (1.18%) (1.80%) (1.60%) (1.70%) (1.20%)
Portfolio turnover rate 134% 164% 156% 155% 152% 137% 96% 136% 110% 224%
Average commission rate
paid ................. $0.0453 N/A N/A N/A N/A N/A N/A N/A N/A N/A
NET ASSETS END OF YEAR
(THOUSANDS) .......... $89,726 $111,791 $120,689 $195,708 $152,714 $72,602 $21,855 $25,131 $23,596 $41,440
<FN>
Per share calculations based on weighted average shares outstanding.
(a) Excluding applicable sales charges.
(b) The ratio of total expenses to average net assets includes indirectly paid expenses. Excluding indirectly paid expenses, the
expense ratio would have been 1.64% and 1.78% for the years ended September 30, 1996 and 1995, respectively.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
The following table contains important 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 incorporated by reference into 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>
AUGUST 2, 1993
YEAR ENDED SEPTEMBER 30, (DATE OF INITIAL
--------------------------------------- PUBLIC OFFERING)
1996 1995 1994 TO SEPTEMBER 30, 1993
---- ---- ---- ---------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF YEAR $25.69 $21.22 $28.56 $26.69
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss ............ (0.49) (0.56) (0.49) (0.05)
Net gain (loss) on investments . 2.78 7.92 (4.50) 1.92
------ ------ ------ ------
Total from investment
operations ................. 2.29 7.36 (4.99) 1.87
------ ------ ------ ------
LESS DISTRIBUTIONS FROM
Net realized gain on investments (0.25) (2.89) (2.35) 0
------ ------ ------ ------
Total distributions .......... (0.25) (2.89) (2.35) 0
------ ------ ------ ------
NET ASSET VALUE END OF YEAR .... $27.73 $25.69 $21.22 $28.56
====== ====== ====== ======
TOTAL RETURN(A) ................ 9.01% 35.61% (18.58%) 7.01%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses ............... 2.46%(c) 2.58%(c) 2.49% 3.70%(b)
Net investment loss .......... (1.89%) (2.34%) (2.27%) (3.42%)(b)
Portfolio turnover rate ........ 134% 164% 156% 155%
Average commission rate paid ... $0.0453 N/A N/A N/A
NET ASSETS END OF YEAR
(THOUSANDS) .................. $6,953 $6,970 $3,801 $ 823
<FN>
Per share calculations based on weighted average shares outstanding.
(a) Excluding applicable sales charges.
(b) Annualized.
(c) The ratio of total expenses to average net assets includes indirectly paid expenses. Excluding indirectly
paid expenses, the expense ratio would have been 2.43% and 2.55% for the years ended September 30, 1996
and 1995, respectively.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH 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 incorporated by reference into 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>
AUGUST 2, 1993
YEAR ENDED SEPTEMBER 30, (DATE OF INITIAL
--------------------------------------- PUBLIC OFFERING)
1996 1995 1994 TO SEPTEMBER 30, 1993
---- ---- ---- ---------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF YEAR $25.80 $21.26 $28.56 $26.69
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss ............ (0.50) (0.56) (0.47) (0.08)
Net gain (loss) on investments . 2.84 7.99 (4.48) 1.95
------ ------ ------ ------
Total from investment
operations ................. 2.34 7.43 (4.95) 1.87
------ ------ ------ ------
LESS DISTRIBUTIONS FROM
Net realized gain on investments (0.25) (2.89) (2.35) 0
------ ------ ------ ------
Total distributions .......... (0.25) (2.89) (2.35) 0
------ ------ ------ ------
NET ASSET VALUE END OF YEAR .... $27.89 $25.80 $21.26 $28.56
====== ====== ====== ======
TOTAL RETURN(A) ................ 9.17% 35.89% (18.42%) 7.01%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses ............... 2.46%(c) 2.58%(c) 2.47% 3.09%(b)
Net investment loss .......... (1.90%) (2.37%) (2.25%) (2.80%)(b)
Portfolio turnover rate ........ 134% 164% 156% 155%
Average commission rate paid ... $0.0453 N/A N/A N/A
NET ASSETS END OF YEAR
(THOUSANDS) .................. $2,368 $2,400 $1,679 $ 297
<FN>
Per share calculations based on weighted average shares outstanding.
(a) Excluding applicable sales charges.
(b) Annualized.
(c) The ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 2.43% and 2.55% for the years ended September 30, 1996 and 1995,
respectively.
</FN>
</TABLE>
<PAGE>
THE FUND
The Fund is a non-diversified, open-end management investment company,
commonly known as a mutual fund. The Fund was incorporated in New York on April
8, 1968 and began operations on September 10, 1968. The Fund is one of more than
30 funds managed or advised by Keystone Investment Management Company
("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
Directors and Keystone.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation.
The Fund's investment objective is not fundamental and may be changed without
the vote of a majority of the Fund's outstanding shares (as defined in the
Investment Company Act of 1940 ("1940 Act") 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). 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.
Any investment involves risk, and there is no assurance that the Fund will
achieve its investment objective.
PRINCIPAL INVESTMENTS
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 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.
The Fund seeks to achieve its objective through a program based on
substantially full investment in equity securities of companies in a relatively
early stage of development that are principally traded in the over-the-counter
("OTC") market (emerging growth companies). Such emerging growth companies are
small to medium-sized companies (generally under $500 million in market
capitalization) that the Fund's advisers believe have strong potential for (1)
earnings growth over time that is well above the growth rate of the economy and
(2) becoming more widely recognized as growth companies.
Under normal conditions, at least 65% of the value of the Fund's assets will
be invested in common stocks and other securities convertible into or
exchangeable for common stocks of emerging growth companies. The percentage of
assets invested in such issues may exceed 90% under favorable conditions.
OTHER ELIGIBLE INVESTMENTS
While it is anticipated that equity securities will constitute all or most of
the Fund's investment portfolio, the Fund may also invest in convertible
preferred stocks and debt securities when it appears desirable in light of the
Fund's objective.
Although it is not the policy of the Fund to invest in securities of companies
with no operating history, as much as 10% of the value of the Fund's net assets
may be invested in securities of companies with an operating history of less
than three years (unseasoned companies). Furthermore, investments in the
securities of unseasoned companies may involve an even greater degree of risk
than investments in securities of companies with longer operating histories.
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 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 that 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 Directors 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 Directors 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 Directors 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 associated risks, see the "Risk
Factors" and "Additional Investment Information" sections of this prospectus and
the statement of additional information.
INVESTMENT RESTRICTIONS
The Fund has adopted the fundamental restriction summarized below, which may
not be changed without the approval of a 1940 majority of the Fund's outstanding
shares. This restriction and certain other fundamental and nonfundamental
restrictions are set forth in the statement of additional information.
The Fund may not borrow, except from banks for temporary, extraordinary
emergency purposes not in excess of 33 1/3% of its total assets.
RISK FACTORS
Like any investment, your investment in the Fund involves an element 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.
Certain risks related to the Fund are discussed below. In addition to the
risks discussed in this section, specific risks attendant to individual
securities or investment practices are discussed in "Additional Investment
Information" and the statement of additional information.
FUND RISKS
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 aggressive and has the potential for high returns. The Fund involves a
high degree of risk and is not an appropriate investment for conservative
investors who are seeking preservation of capital and/or income.
The Fund, which is non-diversified, 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 non-diversified fund.
Investing in a non-diversified 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.
Investing in small to medium sized emerging growth companies involves greater
risk than investing in larger established companies. The stock prices of
emerging growth companies can rise very quickly and drop dramatically in a short
period of time. This volatility results from a number of factors, including
reliance by these companies on limited product lines, markets, and financial and
management resources.
These and other factors may make small to medium sized companies more
susceptible to setbacks or downturns. These companies may experience higher
rates of bankruptcy or other failures than larger companies. They may be more
likely to be negatively affected by changes in management. In addition, the
stock of small to medium sized companies may be thinly traded.
A need for cash due to large liquidations from the Fund when the prices of
emerging growth company stocks are declining could result in losses to the Fund.
PRICING SHARES
The Fund computes its net asset value as of the close of trading (currently
4:00 p.m. eastern time) on each day that the New York Stock Exchange (the
"Exchange") is open. However, the Fund does not compute its net asset value 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.
Current values for the Fund's portfolio securities are determined as follows:
1. securities traded on a national securities exchange or reported on the
National Association of Securities Dealers Automated Quotation System (NASDAQ)
National Market are valued at the last sales price, if a sale has occurred and
if such price reflects fair value in the opinion of the Fund;
2. securities traded on a national securities exchange or reported on the
NASDAQ National Market for which no sale has occurred are valued at the mean
of the closing bid and asked prices or at fair value, as determined in good
faith by, or under the direction of, the Fund's Board of Directors;
3. short-term instruments with mixed or remaining 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 approximates market
value;
4. short-term instruments with greater than sixty days to maturity are
valued at current market value, or if quotations are not readily available,
a fair value;
5. other securities, including unlisted securities, for which prices are
available are valued at the last reported bid price; and
6. securities for which prices are unavailable, are valued at fair value,
as determined in good faith by, or under the direction of, the Fund's Board
of Directors.
DIVIDENDS AND TAXES
The Fund has qualified and intends to continue to qualify 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.
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 and net
capital gains, if any, annually. Shareholders receive Fund distributions in the
form of additional shares of that class of shares upon which the 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.
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 than
those expenses attributable to Class A shares 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.
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. 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. 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. Dividends
and distributions may also be subject to state and local taxes.
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 DIRECTORS
Subject to the authority of the Fund's Board of Directors, Keystone provides
investment advice, management and administrative services to the Fund.
INVESTMENT ADVISER
Keystone has provided investment advisory and management services to
investment companies and private accounts since 1932. Keystone is a wholly-
owned subsidiary of Keystone Investments, Inc. ("Keystone Investments"). Both
Keystone and Keystone Investments are located at 200 Berkeley Street, Boston,
Massachusetts 02116-5034.
Keystone Investments is a private corporation predominantly 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, Ralph J. Spuehler, Jr. and Rosemary D. Van
Antwerp. 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 with the Fund
(the "Advisory Agreement"), 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.
For services rendered under the Advisory Agreement, 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: 1% of such net assets up to and
including $100,000,000; 0.90% of such net assets over $100,000,000 up to and
including $200,000,000; 0.80% of such net assets over $200,000,000 up to and
including $300,000,000; 0.70% of such net assets over $300,000,000 up to and
including $400,000,000; and 0.65% of such net assets over $400,000,000.
Under the Advisory Agreement, the basic management fee may be increased or
decreased by an incentive adjustment of up to 1/2 of 1% of the average daily net
asset value of the Fund during the latest 12 months. The incentive adjustment is
based on the Fund's performance 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.
The Advisory Agreement permits Keystone to enter into an agreement with
Hartwell, under which Hartwell, as subadviser, may provide substantially all the
advisory services to be provided by Keystone under the Advisory Agreement.
Keystone may also delegate to Hartwell substantially all of its 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 continues only if approved at least annually (i) by the
Fund's Board of Directors or by a vote of a majority of the outstanding shares,
and (ii) by the vote of a majority of the Fund's Independent Directors
(Directors who are not interested persons, as defined in the 1940 Act, and who
have no direct or indirect financial interest in the Fund's Distribution Plans
or any agreement related thereto) 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 Directors 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 its SubInvestment Advisory Agreement with Keystone ("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 and 60% of Keystone's incentive adjustment, 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 continues in effect from year to year only so long
as such continuance is specifically approved at least annually by the Board of
Directors or by vote of a majority of the outstanding shares of the Fund. In
either case, the terms of the Subadvisory Agreement and continuance thereof must
be approved by the vote of a majority of Independent Directors in person at a
meeting called for the purpose of voting on such approval. The Subadvisory
Agreement may be terminated at any time, without penalty, by the Fund's Board of
Directors 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.
For the fiscal year ended September 30, 1996, the Fund paid or accrued
$1,066,413 in management fees, which represented 0.99% of the Fund's average
daily net assets. Of such amount, $411,286 was paid or accrued to Hartwell.
Keystone Investments has recently entered into an Agreement and Plan of
Acquisition and Merger with First Union Corporation ("First Union"), pursuant to
which Keystone Investments will be merged with and into a subsidiary of First
Union National Bank of North Carolina ("FUNB-NC") (the "Merger"). The surviving
corporation will assume the name "Keystone Investments, Inc." Subject to a
number of conditions being met, it is currently anticipated that the Merger will
take place on or around December 11, 1996. Thereafter, Keystone Investments,
Inc. would be a subsidiary of FUNB-NC.
If consummated, the proposed merger may be deemed to cause an assignment,
within the meaning of the 1940 Act, of the Advisory Agreement and the
Subadvisory Agreement. Consequently, the completion of the Merger is contingent
upon, among other things, the approval of the Fund's shareholders of (i) a new
investment advisory and management agreement between the Fund and Keystone and
(ii) a new subinvestment advisory agreement between Keystone and Hartwell
(together, the "New Advisory Agreements"). The Fund's Directors have approved
the terms of the New Advisory Agreements, subject to the approval of
shareholders and the completion of the Merger, and have called a special meeting
of shareholders to obtain their approval of, among other things, the New
Advisory Agreements. The meeting is expected to be held in December 1996. The
proposed New Advisory Agreements have terms, including investment advisory fees
payable thereunder, that are substantively identical to those in the current
agreements.
The proposed transaction may also be deemed to cause an assignment, as defined
by the 1940 Act, of the Principal Underwriting Agreements between the Fund and
the Fund's principal underwriter, Keystone Investment Distributors Company (the
"Principal Underwriter"). As a result, the Fund's Directors have approved the
following agreements, subject to the completion of the Merger: (i) a principal
underwriting agreement between Evergreen Funds Distributor, Inc. ("EFD") and the
Fund; (ii) a marketing services agreement between the Principal Underwriter and
EFD with respect to the Fund; and (iii) a sub-administration agreement between
Keystone and Furman Selz LLC ("Furman Selz") with respect to the Fund. EFD is a
wholly-owned subsidiary of Furman Selz. It is expected that on or about January
2, 1997, Furman Selz will transfer EFD, and Furman Selz's related services, to
BISYS Group, Inc. ("BISYS") (the "Transfer"). The Fund's Directors have also
approved, subject to completion of the Transfer: (i) a new principal
underwriting agreement between EFD and the Fund; (ii) a new marketing services
agreement between the Principal Underwriter and EFD with respect to the Fund;
and (iii) a subadministration agreement between the Keystone and BISYS with
respect to the Fund. The terms of such agreements are substantively identical to
the terms of the agreements to be executed upon completion of the Merger.
The Fund has adopted a Code of Ethics incorporating policies on personal
securities trading as recommended by the Investment Company Institute.
PORTFOLIO MANAGER
Adrian S. Dawes has been the Fund's portfolio manager since April 1996. Mr.
Dawes is a Hartwell Vice President and Portfolio Manager and has 11 years of
experience in growth stock investing.
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, fees of its Independent
Directors; transfer, dividend disbursing and shareholder servicing agent
expenses; custodian expenses; fees of its independent auditors and legal counsel
to its Independent Directors; 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, 1996, the Fund's Class A, Class B and
Class C shares paid 1.66%, 2.46% and 2.46%, respectively, of their average net
assets in expenses, including indirectly paid expenses.
During the fiscal year ended September 30, 1996, the Fund paid or accrued
$20,900 to Keystone Investments for certain accounting services. During the same
period, the Fund paid or accrued $291,584 to Keystone Investor Resource Center,
Inc. ("KIRC") for services rendered as the Fund's transfer agent and dividend
disbursing agent. KIRC, a wholly-owned subsidiary of Keystone, is located at 200
Berkeley Street, Boston, Massachusetts 02116-5034.
SECURITIES TRANSACTIONS
Under policies established by the Board of Directors, 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 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 that 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,
1995 and 1996 were 164% and 134%, respectively. High portfolio turnover may
involve correspondingly greater brokerage commissions and other transactions
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 the 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. You may also 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, by direct deposit or by an
electronic funds transfer ("EFT").
Orders for the purchase of shares of the Fund will be confirmed at the public
offering price, which is 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 applicable sales charge. Orders received by broker-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.
Orders for shares received other than as stated above will receive the public
offering price, which is equal to the net asset value per share next determined
(generally, the next business day's offering price) plus, in the case of Class A
shares, the applicable sales charge.
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.
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
The Fund offers Class A, B and C 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 (1) in an amount equal to or exceeding
$1,000,000 or (2) by a corporate or certain other qualified retirement plan or a
non-qualified deferred compensation plan or a Title I tax sheltered annuity or
TSA plan sponsored by an organization 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 (a "CDSC") for the 24-month 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 CDSC if they are redeemed. Class B
shares purchased on or after June 1, 1995 are subject to a CDSC upon redemption
during the 72-month period from and including the month of purchase. Class B
shares purchased prior to June 1, 1995 are subject to a CDSC 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 CDSC if they are redeemed within one year after the date of
purchase. Class C shares are available only through broker-dealers who have
entered into special distribution agreements with the Principal Underwriter.
Each class of shares, pursuant to its Distribution Plan or other 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.
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 (an "Educational 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 an Educational TSA Plan in an
NAV Purchase, as described above, Class A shares acquired in an NAV Purchase are
subject to a CDSC of 1.00% upon redemption during the 24-month period commencing
on the date the shares were originally purchased. Class A shares acquired by an
Educational TSA Plan in an NAV Purchase are not subject to a CDSC.
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
and outstanding on the books of the Fund for specified periods.
Upon written notice to broker-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
that are offered in connection with certain fee based programs, such as wrap
accounts sponsored or managed by broker-dealers, investment advisers or others
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, when 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 CDSC with respect to
the redemption proceeds.
In addition, 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, when 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 CDSC with respect to the redemption proceeds. This
special net asset value purchase is currently being offered on a calendar
month-by-month basis and may be modified or terminated in the future.
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 broker-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 and outstanding on the
books of the Fund for specified periods.
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 CDSC 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 CDSC 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 CDSC 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 CDSC is imposed on amounts redeemed thereafter.
When imposed, the CDSC is deducted from the redemption proceeds otherwise
payable to you. The CDSC is retained by the Principal Underwriter. Amounts
received by the Principal Underwriter under the Class B Distribution Plan are
reduced by CDSCs retained by the Principal Underwriter. See "Contingent Deferred
Sales Charge 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. Class B
shares purchased prior to June 1, 1995 will similarly convert to Class A shares
at the end of seven calendar years after the year of purchase. Conversion of
Class B shares represented by stock certificates will require the return of the
stock certificates to KIRC. The Class B shares so converted will no longer be
subject to the higher distribution expenses and other expenses, if any, borne by
Class B shares. 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 Directors will consider
what action, if any, is appropriate and in the best interests of such Class B
shareholders.
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, 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.
CLASS B DISTRIBUTION PLANS
The Fund has adopted Distribution Plans and other plans with respect to its
Class B shares (all such plans collectively, the "Class B Distribution Plans")
that provide, in the aggregate, 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 broker-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 broker-dealers 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-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
share maintained by the recipient and outstanding on the books of the Fund for
specified periods. See "Distribution Plans" below.
CLASS C SHARES
Class C shares are offered only through broker-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 CDSC of 1.00% on shares redeemed within one year
after the date of purchase. No CDSC is imposed on amounts redeemed thereafter.
If imposed, the CDSC is deducted from the redemption proceeds otherwise payable
to you. The CDSC is retained by the Principal Underwriter. See "Contingent
Deferred Sales Charge and Waiver of Sales Charges" below.
CLASS C DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class C shares,
(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 broker-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 broker-dealers 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, the broker-dealer or other party will receive 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
and outstanding on the books of the Fund for specified periods. See
"Distribution Plans" below.
CONTINGENT DEFERRED SALES CHARGE
AND WAIVER OF SALES CHARGES
Any CDSC 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 CDSC 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 24 months; (4) Class B shares held
more than four consecutive calendar years or more than 72 months, 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 CDSC 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 CDSC 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 CDSC 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 a Systematic Income Plan of up to 1.5% 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 CDSC to certain Directors, 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
From time to time, the Principal Underwriter may provide promotional
incentives, including reallowance of up to the entire sales charge, to certain
broker-dealers whose representatives have sold or are expected to sell
significant amounts of Fund shares. In addition, broker-dealers may receive
additional cash payments. The Principal Underwriter may also provide written
information to broker-dealers with whom it has dealer agreements that relates to
sales incentive campaigns conducted by such broker-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. Broker-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 broker-dealers that 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, depending on the
broker-dealer's satisfaction of the required conditions, may be periodic and may
be up to 0.25% of the value of shares sold by such broker-dealer.
During the period commencing November 1, 1996 through December 31, 1996 (the
"Offering Period"), the Principal Underwriter, or any successor entity to the
Principal Underwriter, will pay to First Union Brokerage Services, Inc. ("First
Union Brokerage"), a wholly-owned subsidiary of FUNB-NC, an additional
concession equal to 0.50% of the public offering price of any class of Fund
shares sold by First Union Brokerage during the Offering Period.
The Principal Underwriter may also pay a transaction fee (up to the level of
payments allowed to broker-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 Directors will consider
what action, if any, is appropriate.
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 the 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 the
Fund's 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 CDSCs 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 Fund's 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 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 Directors 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.
In connection with financing its distribution costs, including commission
advances to broker-dealers and others, the Principal Underwriter has sold to a
financial institution substantially all of its 12b-1 fee collection rights and
CDSC collection rights in respect of Class B shares sold during the period
commencing approximately June 1, 1995 and ending November 30, 1996. 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 adverse
distribution consequences.
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Directors or by vote of a majority of the outstanding voting shares
of the respective class. If a Distribution Plan is terminated, the Principal
Underwriter will ask the Independent Directors to take whatever action they deem
appropriate under the circumstances with respect to payment of advances.
Unpaid distribution costs at fiscal year end September 30, 1996 were $259,257
for Class B shares purchased prior to June 1, 1995 (3.74% of net class assets of
such Class B shares); $173,625 for Class B shares purchased on or after June 1,
1995 (2.50% of net class assets of such Class B shares); and $202,256 for Class
C shares (8.75% of Class C net class assets).
Broker-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 redemption value by writing
to the Fund, c/o KIRC, and presenting a properly endorsed share certificate (if
certificates have been issued) to the Fund. 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.
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 broker-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 CDSC, to the broker-dealer placing the order
within seven days thereafter. The Principal Underwriter charges no fees for this
service. Your broker-dealer, however, may charge a service fee.
The redemption value equals the net asset value per share adjusted for
fractions of a cent 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. A CDSC sales charge may be imposed by the Fund at the time of
redemption of certain shares as explained in "Alternative Sales Options." If
imposed, the CDSC 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 with a certified check, by
Federal Reserve or bank wire of funds, by direct deposit 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 CDSC (as described above),
will be made within seven days thereafter except as discussed herein.
For your protection, SIGNATURES ON CERTIFICATES, STOCK POWERS AND ALL WRITTEN
ORDERS OR AUTHORIZATIONS MUST BE GUARANTEED BY A U.S. STOCK EXCHANGE MEMBER, A
BANK OR OTHER PERSON ELIGIBLE TO GUARANTEE SIGNATURES UNDER THE SECURITIES
EXCHANGE ACT OF 1934 AND KIRC'S POLICIES. The Fund or KIRC may waive this
requirement, or 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 your
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 REDEMPTIONS
Under ordinary circumstances, you may redeem up to $50,000 from your account
by telephone by calling toll free 1-800-343-2898. As mentioned above, to engage
in telephone transactions generally, you must complete the appropriate sections
of the Fund's application.
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 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
Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem your account if its value has fallen below $1,000, the current
minimum investment level, as a result of your redemptions (but not as a result
of market action). You will be notified in writing and allowed 60 days to
increase the value of your account to the minimum investment level. No CDSC, are
applied to such redemptions.
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 by writing to KIRC 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 & 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
CDSC. 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 CDSC, 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 writing or
calling KIRC. The exchange fee is waived for individual investors who make an
exchange using KARL. As noted above, if the shares being tendered for exchange
are still subject to a CDSC, such charge will carry over to the shares being
acquired in the exchange transaction. The Fund reserves the right 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 funds are 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. 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.
AUTOMATIC INVESTMENT PLAN
With a Keystone Automatic Investment Plan, you can automatically transfer as
little as $100 per month or quarter from your bank account or KLT to the
Keystone fund of your choice. Your bank account will be debited for each
transfer. You will receive confirmtion with your next account statement.
To establish or terminate an Automatic Investment Plan or to change the amount
or schedule of your automatic investments, you may write to or call KIRC. Please
include your account numbers. Termination of an Automatic Investment Plan may
take up to 30 days.
RETIREMENT PLANS
The Fund has various retirement plans available to investors, including
Individual Retirement Accounts (IRAs); Rollover IRAs; Simplified Employee
Pension Plans (SEPs); Salary Reduction Plans (SARSEPs); Tax Sheltered Annuity
Plans (TSAs); 403(b)(7) Plans; 401(k) Plans; Keogh Plans; Corporate
Profit-Sharing Plans; and Money Purchase Pension Plans. For details, including
fees and application forms, call toll free 1-800-247-4075 or write to KIRC.
SYSTEMATIC INCOME PLAN
Under a Systematic Income 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 Systematic Income Plan was opened. Fixed withdrawal
payments are not subject to a CDSC 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 a Systematic Income 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 have established an
account in a Keystone America Fund or a money market fund managed or advised by
Keystone. You should designate on the application (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 of
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 the application and indicate the Keystone America Fund(s) into which
distributions are to be invested. The value of shares purchased will be
ineligible for Rights of Accumulation and Letters of Intent.
OTHER SERVICES
Under certain circumstances you may, within 30
days after a redemption, reinstate your account 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. PAST PERFORMANCE SHOULD NOT BE
CONSIDERED REPRESENTATIVE OF RESULTS FOR ANY FUTURE PERIODS OF TIME. 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
The Fund currently issues Class A, B and C shares that participate in
dividends and distributions and have equal voting, liquidation and other rights
except that (1) expenses related to the distribution of each class of shares or
other expenses that the Board of Trustees may designate as class expenses from
time to time are borne solely by each class; (2) each class of shares has
exclusive voting rights with respect to its Distribution Plan; (3) each class
has different exchange privileges; and (4) each class 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 transferable, redeemable and freely assignable
as collateral. The Fund is authorized to issue additional classes of shares.
Shareholders are entitled to one vote for each full share owned and fractional
votes for fractional shares. Shares of the Fund vote together except when
required by law to vote separately by 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 Declaration of Trust of the Fund, 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 holders of 10% of the
outstanding shares request a meeting. Shareholders may be eligible for
shareholder communication assistance in connection with the special meeting.
ADDITIONAL INFORMATION
When the Fund determines from its records that more than one account in the
Fund is registered in the name of a shareholder or shareholders having the same
address, upon written notice to those shareholders, the Fund intends, when an
annual report or semi-annual report of the Fund is required to be furnished, to
mail one copy of such report to that address.
Except as otherwise stated in this prospectus or required by law, the Fund
reserves the right to change the terms of the offer stated in this prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
The Fund may engage in the following investment practices to the extent
described in the prospectus and the statement of additional information.
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, particularily 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 on 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 or
coupon zero coupon bond (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 coupon bonds and coupon zero 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 value 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 Directors. 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
*
Balanced Fund II
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
Fund for Total Return
Global Opportunities Fund
Hartwell Emerging Growth Fund, Inc.
Omega Fund
Fund of the Americas
Global Resources and Development Fund
Small Company Growth Fund II
- --------------------------------------
[Logo] KEYSTONE
INVESTMENTS
Keystone Investment Distributors Company
200 Berkeley Street
Boston, Massachusetts 02116-5034
HEGF-P 12/96 [Recycle symbol]
.5M
- --------------------------------------
KEYSTONE
AMERICA
[graphic omitted]
HARTWELL EMERGING
GROWTH FUND
- --------------------------------------
[Logo]
PROSPECTUS AND
APPLICATION
<PAGE>
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
December 10, 1996
This statement of additional information is not a prospectus, but
relates to, and should be read in conjunction with, the prospectus of Keystone
America Hartwell Emerging Growth Fund, Inc. (the "Fund") dated December 10,
1996. A copy of the prospectus may be obtained from the Fund's principal
underwriter, Keystone Investment Distributors Company (the "Principal
Underwriter"), or your broker-dealer. The Principal Underwriter is located at
200 Berkeley Street, Boston, Massachusetts 02116-5034.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
The Fund 2
Investment Methods 2
Investment Restrictions 3
Distributions and Taxes 4
Valuation of Securities 5
Brokerage 5
Sales Charges 7
Distribution Plans 9
Investment Management 12
Directors and Officers 15
Principal Underwriter 18
Capital Stock 19
Standardized Total Return
and Yield Quotations 20
Additional Information 20
Financial Statements 23
Appendix A-1
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<PAGE>
- -------------------------------------------------------------------------------
THE FUND
- -------------------------------------------------------------------------------
The Fund is a non-diversified open-end investment company, commonly
known as a mutual fund. The Fund's investment objective is capital appreciation.
The Fund was incorporated in New York on April 8, 1968 and began operations on
September 10, 1968. The Fund is one of over 30 funds advised by Keystone
Investment Management Company. 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 Directors and
Keystone.
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.
- -------------------------------------------------------------------------------
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
Hartwell. 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,
17534
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<PAGE>
dividends, growth outlook, operating gains or losses, general market conditions,
or economic and political conditions.
The Fund will normally invest in common stocks of the emerging growth
category and other securities convertible into or exchangeable for such common
stocks having, in the opinion of its advisers, a potential for appreciation.
Emerging growth stocks are stocks of newer, smaller companies primarily traded
in the over-the-counter market. The emphasis of the Fund on investment in
emerging growth stocks inherently involves greater risk than is associated with
investment in stocks of larger, more established companies traded on national
exchanges.
OTHER METHODS
Although the Fund is permitted to employ the other investment methods
enumerated below, it does not currently engage in such practices and does not
intend to do so.
The Fund's policies permit it to borrow from banks and to engage in
margin transactions for the purpose of making leveraged investments, subject to
regulatory restrictions, and provided that the Fund maintains an asset coverage,
including the amount of borrowings, of at least 300% of such borrowings. The
Fund may also engage in short sale transactions in securities listed on one or
more national securities exchanges and in unlisted securities registered under
Section 12(g) of the Securities Exchange Act of 1934 or securities that are
subject to other restrictions against sale or transfer ("restricted
securities"), but does not currently do so. The Fund is also permitted to make
short sales, "sales against the box," to purchase and sell warrants and puts and
calls written by others (option contracts), to engage in margin transactions
with brokers, to invest up to 15% of its net assets in illiquid securities and
to make short-term investments for trading purposes, but does not currently do
so.
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
Directors, 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 voting
shares (as defined in the Investment Company Act of 1940 (the "1940 Act"), which
means the lesser of (1) 67% of the shares represented at a meeting at which more
than 50% of the outstanding shares are represented or (2) more than 50% of the
outstanding shares).
- -------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- -------------------------------------------------------------------------------
The Fund has adopted the fundamental investment restrictions set forth
below, which may not be changed without the vote of a 1940 Act majority 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:
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<PAGE>
(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 and the purchase of
convertible debt securities or debt securities with warrants, rights or options
attached or other such securities shall not be deemed to be the making of loans;
(3) invest in real estate (including interests in real estate
investment trusts whose securities are not readily marketable), commodities or
commodity contracts;
(4) borrow money, except that the Fund may borrow from a bank as a
temporary measure for extraordinary or emergency purposes not in excess of
331/3% of its total assets;
(5) concentrate its investments by investing 25% or more of the total
value of its assets in the securities of issuers in any particular industry or
group of industries; and
(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.
- --------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
The Fund will make distributions from net investment income and net
capital gains, if any, annually in shares or, at the option of the shareholder,
in cash. Distributions are taxable whether received in cash or additional
shares. (Distributions of ordinary income may be eligible in whole or in part
for the corporate 70% dividends received deduction.) Shareholders who have not
opted, prior to the ex-dividend 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 how long the shareholder has held the Fund shares.
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.
17534
4
<PAGE>
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.
- -------------------------------------------------------------------------------
VALUATION OF SECURITIES
- -------------------------------------------------------------------------------
Current values for the Fund's portfolio securities are determined as
follows:
(1) securities traded on a national securities exchange or reported on
the National Association of Securities Dealers Automated Quotation System
(NASDAQ) National Market are valued at the last sales price, if a sale has
occurred and if such price reflects fair value in the opinion of the Fund;
(2) securities traded on a national securities exchange or reported on
the NASDAQ National Market for which no sale has occurred are valued at the mean
of the closing bid and asked prices or at fair value, as determined in good
faith by, or under the direction of, the Fund's Board of Directors;
(3) short-term instruments with initial or remaining 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
approximates market value;
(4) short-term instruments with greater than sixty days to maturity are
valued at current market value, or if quotations are not readily available, at
fair value;
(5) other securities, including unlisted securities, for which prices
are available are values at the last reported bid price; and
(6) securities for which prices are unavailable, are valued at fair
value, as determined in good faith by, or under the direction of, the Fund's
Board of Directors.
- -------------------------------------------------------------------------------
BROKERAGE
- -------------------------------------------------------------------------------
It is the policy of Keystone, in effecting transactions in the Fund's
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
broker's 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 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
17534
5
<PAGE>
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 Keystone under the
Advisory Agreement or Hartwell under the 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 that 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 Directors, however, has determined that the Fund consider 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 Fund's Board of Directors periodically reviews the Fund's brokerage
policy. In the event of further regulatory developments affecting the securities
exchanges and brokerage practices generally, the Board of Directors may change,
modify, or eliminate any of the foregoing practices.
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. Although, in some cases,
this system could have a detrimental effect on the price or volume of the Fund's
securities, the Fund believes that, in other cases, its ability to participate
in volume transactions will produce better executions.
Portfolio securities are not 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, 1994, 1995, and 1996 the Fund
paid $257,916, $75,720, and $34,048, respectively, in brokerage commissions.
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<PAGE>
- -------------------------------------------------------------------------------
SALES CHARGES
- -------------------------------------------------------------------------------
GENERAL
The Fund offers Class A, B, and C 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 ("CDSC") 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 CDSC payable upon redemption within three
calendar years after the first year of 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. ("KIRC"), the
Fund's transfer and dividend disbursing agent. Class C shares are sold subject
to a CDSC payable upon redemption within one year after purchase ("Level Load
Option"). Class C shares are available only through broker-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 and a description of applicable 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 CDSC is imposed at the time of
redemption of certain Fund shares, as described below. If imposed, the CDSC is
deducted from the redemption proceeds otherwise payable to you and retained by
the Principal Underwriter. See "Calculation of Deferred Sales Charge" below.
CLASS A SHARES
With certain exceptions, purchases of Class A shares (1) in an amount
equal to or exceeding $1,000,000, and/or (2) by a corporate qualified retirement
plan or a non-qualified deferred compensation plan or a Title I tax sheltered
annuity or TSA plan sponsored by an organization having 100 or more eligible
employees (a "Qualifying Plan"), in either case, without a front-end sales
charge, will be subject to a CDSC during the 24-month period following the date
of purchase.
CLASS B SHARES
With respect to Class B shares purchased on or after June 1, 1995, the
Fund, with certain exceptions, will impose a CDSC on Class B shares redeemed
during succeeding twelve-month periods as follows: 5% during the first
twelve-month period; 4% during the second twelve-month period; 3% during the
third twelve-month period; 3% during the fourth twelve-month period; 2% during
the fifth twelve-month period; and 1% during the sixth twelve-month period. No
CDSC is imposed on amounts redeemed thereafter.
With respect to Class B shares purchased prior to June 1, 1995, the
Fund, with certain exceptions, will impose a CDSC 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
17534
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<PAGE>
after the year of purchase; and 1% on shares redeemed during the third calendar
year after the year of purchase. No CDSC is imposed on amounts redeemed
thereafter.
Amounts received by the Principal Underwriter under the Class B
Distribution Plans are reduced by CDSCs 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 CDSC of 1.00% on shares
redeemed within one year after the date of purchase. No CDSC is imposed on
amounts redeemed thereafter.
CALCULATION OF CONTINGENT DEFERRED SALES CHARGE
Any CDSC 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 CDSC is imposed when you redeem amounts derived from (1) increases
in the value of your account above the net cost 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 24 months;
(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 CDSC will be
redeemed first. Thereafter, shares held the longest will be the first to be
redeemed. There is no CDSC when the shares of a class are exchanged for the
shares of the same class of another Keystone America Fund. Moreover, for
purposes of computing any future CDSCs, when shares of one such class of a fund
have been exchanged for shares of another such class of a fund, the date of
purchase of the shares being acquired by exchange is deemed to be the date the
shares tendered for exchange were originally purchased.
WAIVER OF SALES CHARGES
Shares of the Fund may also 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 or a CDSC to (1) certain
Directors, Trustees, officers, full-time employees and sales representatives of
the Fund, Keystone, Keystone Investments, Inc. ("Keystone Investments"), or the
Principal Underwriter, and certain of their affiliates who have been such for
not less than ninety days; (2) a pension and profit-sharing plan established by
such companies and their 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, however, that 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 or CDSC is charged on purchases or redemptions
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.
17534
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<PAGE>
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 CDSC 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 CDSC 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 a Systematic Income Plan of up to 1.5% 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.
- -------------------------------------------------------------------------------
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 the adoption of a distribution plan
containing certain provisions set forth in Rule 12b-1 (a "Distribution Plan").
The Fund's Class A, B, and C Distribution Plans have been approved by
the Fund's Board of Directors, including a majority of the Independent Directors
(Directors 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 Distribution
Plans or any agreement related thereto).
The National Association of Securities Dealers, Inc. ("NASD") limits
the amount that the Fund may pay annually in distribution costs for sale of its
shares and shareholder service fees. The NASD currently 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 Distribution Plan, plus interest at the prime rate plus 1%
on such amounts (less any CDSC paid by shareholders to the Principal
Underwriter) remaining unpaid from time to time.
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 that is primarily intended to result in the sale of its shares,
including without limitation, expenditures consisting of payments to the
Principal Underwriter to enable the Principal Underwriter to pay or to have paid
to others (such as, broker-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.
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<PAGE>
Amounts paid by the Fund under the Class A Distribution Plan are
currently used to pay others, such as broker-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 and outstanding on the books of the Fund for specific periods.
CLASS B DISTRIBUTION PLANS
Each Class B Distribution Plan provides that the Fund may expend daily
amounts at an annual rate of up to 1% of the Fund's average daily net asset
value attributable to Class B shares to finance any activity that is primarily
intended to result in the sale of Class B shares, including, without limitation,
expenditures consisting of payments to the Principal Underwriter (1) to enable
the Principal Underwriter to pay to others (such as, broker-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 broker-dealers or
others a commission equal to 4% 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-dealer 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 and 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 ("Advances"). The Principal
Underwriter intends to seek full reimbursement of Advances 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 Directors authorize the
reimbursement of Advances, 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.
In connection with financing its distribution costs, including
commission advances to broker-dealers and others, the Principal Underwriter has
sold to a financial institution substantially all of its 12b-1 fee collection
rights and CDSC 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 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 that is primarily
intended to result in the sale of Class C shares, including, without limitation,
expenditures consisting of payments to the Principal Underwriter (1) to enable
the Principal Underwriter to pay to others (such as, broker-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.
17534
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<PAGE>
The Principal Underwriter generally reallows to broker-dealers 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 and outstanding on the books of the Fund for specified periods.
DISTRIBUTION PLANS - GENERAL
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
Independent Directors quarterly. The Independent Directors 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.
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
Directors, including the Independent Directors.
Listed below are the amounts paid by each class of shares under its
respective Distribution Plan to the Principal Underwriter for the fiscal year
ended August 31, 1996. For more information, see "Distribution Plans."
Class B Shares Sold Class B Shares Sold on
Class A Shares Prior to June 1, 1995 or after June 1, 1995 Class C Shares
- -------------- --------------------- ---------------------- --------------
$185,509 $47,939 $21,303 $23,074
While a Distribution Plan is in effect, the Fund will be required to
commit the selection and nomination of candidates for Independent Directors to
the discretion of the Independent Directors.
Each of the Distribution Plans may be terminated at any time by vote of
a majority of (i) the Independent Directors or (ii) the outstanding voting
shares of the respective class of Fund shares. If a Class B Distribution Plan is
terminated, the Principal Underwriter will ask the Independent Directors to take
whatever action they deem appropriate under the circumstances with respect to
payment of Advances.
The Independent Directors have determined that the sales of the Fund's
shares resulting from payments under the Distribution Plans have benefited the
Fund.
17534
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<PAGE>
- -------------------------------------------------------------------------------
INVESTMENT MANAGEMENT
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Subject to the general supervision of the Fund's Board of Directors,
Keystone 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. Both Keystone and Keystone Investments are located at 200 Berkeley
Street, Boston, Massachusetts 02116-5034.
Keystone Investments is a private corporation predominantly 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, Ralph J. Spuehler, Jr., and Rosemary
D. Van Antwerp. Keystone Investments provides accounting, bookkeeping, legal,
personnel, and general corporate services to Keystone, its 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"), 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 (i) provide office space and all necessary office facilities, equipment
and personnel in connection with its services; (ii) pay or reimburse the Fund
for the compensation of Fund officers and Directors who are affiliated with
Keystone; (iii) pay all of its expenses incurred in connection with the
provisions of its services. The Fund shall bear all other costs, charges and
expenses, including, but not limited to, (i) custodian charges and expenses;
(ii) bookkeeping and auditors' charges and expenses; (iii) transfer agent
charges and expenses; (iv) fees of Independent Directors; (v) brokerage
commissions, brokers' fees and expenses and issue and transfer taxes; (vi) costs
and expenses under the Distribution Plans; (vii) taxes and trust fees payable to
governmental agencies; (viii) the cost of share certificates; (ix) fees and
expenses of the registration and qualification of the Fund and its shares with
the Securities and Exchange Commission (the "Commission") or under state or
other securities laws; (x) expenses of preparing, printing and mailing
prospectuses, statements of additional information, notices, reports and proxy
materials to shareholders of the Fund; (xi) expenses of shareholders' and
Directors' meetings; (xii) charges and expenses of legal counsel for the Fund
and for the Directors of the Fund on matters relating to the Fund; (xiii)
charges and expenses of filing annual and other reports with the Commission and
other authorities; and (xiv) all extraordinary charges and expenses of the Fund.
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, 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%). 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'
17534
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<PAGE>
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 Commission guidelines, the value of
cash distributions on securities that 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, 1994, the Fund paid or
accrued to Hartwell Keystone Advisers, Inc. ("Hartwell Keystone"), which served
as the Fund's investment adviser prior to January 30, 1995, $1,452,834, which
represented 0.97% 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 $223,747, and during the period from
January 31, 1995 through September 30, 1995, the Fund paid or accrued to
Keystone $419,530, which in the aggregate represented 0.84% of the Fund's
average daily net assets.
During the fiscal year ended September 30, 1996, the Fund paid or
accrued to Keystone $1,066,413, which represented 0.99% of the Fund's average
daily net assets.
The Advisory Agreement continues in effect from year to year only if
approved at least annually (i) by the Fund's Board of Directors or by a vote of
a majority of the Fund's outstanding shares, and (ii) by the vote of a majority
of the Independent Directors 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 Directors 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.
The Advisory Agreement permits Keystone to enter into an agreement with
J.M. Hartwell Limited Partnership ("Hartwell"), or another investment adviser,
pursuant to which Hartwell or such other investment adviser will furnish an
investment program for the Fund and will furnish to the Fund
17534
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<PAGE>
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.
SUBADVISER
Pursuant to the terms of the Advisory Agreement, Keystone has entered
into a Subinvestment Advisory Agreement (the "Subadvisory Agreement") with
Hartwell under which Keystone has delegated certain of its investment advisory
functions, except for certain administrative and management services, to
Hartwell. Under the Subadvisory Agreement, 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 Directors 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 Directors 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.
For the fiscal years ended September 30, 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 $500,516 and $89,914 from Hartwell Keystone for its services
under its Subadvisory Agreement.
For the period from January 31, 1995 through September 30, 1995,
Hartwell, the Fund's subadviser since January 31, 1995, received $296,954 from
Keystone for its services under the Subadvisory Agreement.
For the fiscal year ended September 30, 1996, Hartwell received
$411,286 from Keystone for its services under the Subadvisory Agreement.
Keystone Investments has recently entered into an Agreement and Plan of
Acquisition and Merger with First Union Corporation ("First Union"), pursuant to
which Keystone Investments will be merged with and into a wholly-owned
subsidiary of First Union National Bank of North Carolina ("FUNB-NC")(the
"Merger"). The surviving corporation will assume the name "Keystone Investments,
Inc." Subject to a number of conditions being met, it is currently anticipated
that the Merger will take place on or around December 11, 1996. Thereafter,
Keystone Investments, Inc. would be a subsidiary of FUNB-NC.
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<PAGE>
If consummated, the proposed Merger will be deemed to cause an
assignment, within the meaning of the 1940 Act, of both the Advisory Agreement
and the Subadvisory Agreement. Consequently, the completion of the Merger is
contingent upon, among other things, the approval of the Fund's shareholders of
(i) a new investment advisory and management agreement between the Fund and
Keystone and (ii) a new subinvestment advisory agreement between Keystone and
Hartwell (together, the "New Advisory Agreements"). The Fund's Directors have
approved the terms of the New Advisory Agreements, subject to the approval of
shareholders and the completion of the Merger, and have called a special meeting
of shareholders to obtain their approval of, among other things, the New
Advisory Agreements. The meeting is expected to be held in December 1996. The
proposed New Advisory Agreements have terms, including fees payable thereunder,
that are substantively identical to those in the current agreements.
- -------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
- -------------------------------------------------------------------------------
Directors 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 Director of the
Fund; Chairman of the Board, President and Chief Executive Officer of
Keystone Investments, Keystone, Keystone Management and Keystone
Software, Inc. ("Keystone Software"); President, Chief Executive
Officer and Trustee or Director of all other funds in the Keystone
Investments Family of Funds; Chairman of the Board and Director of
Keystone Institutional Company, Inc. ("Keystone Institutional")and
Keystone Fixed Income Advisors ("KFIA"); Director and President of
Keystone Asset Corporation, Keystone Capital Corporation and Keystone
Trust Company; Director of 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 Director and
President of Hartwell Keystone Advisers, Inc. ("Hartwell Keystone");
former Director and Vice President, Robert Van Partners, Inc.; and
former Trustee of Neworld Bank.
FREDERICK AMLING: Director of the Fund; Trustee or Director of all other funds
in the Keystone Investments Family of Funds; Professor, Finance
Department, George Washington University; President, Amling & Company
(investment advice); and former Member, Board of Advisers, Cre dito
Emilano (banking).
CHARLES A. AUSTIN III: Director of the Fund; Trustee or Director of all other
funds in the Keystone Investments Family of Funds; Investment Counselor
to Appleton Partners, Inc.; and former Managing Director, Seaward
Management Corporation (investment advice).
*GEORGE S. BISSELL: Chairman of the Board and Director of the Fund; Chairman of
the Board and Trustee or Director of all other funds in the Keystone
Investments Family of Funds; Director of Keystone Investments; Chairman
of the Board and Trustee of Anatolia College; Trustee of University
Hospital (and Chairman of its Investment Committee); former Director
and Chairman of the Board of Hartwell Keystone; and former Chairman of
the Board and Chief Executive Officer of Keystone Investments.
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<PAGE>
EDWIN D. CAMPBELL: Director of the Fund; Trustee or Director of all other funds
in the Keystone Investments Family of Funds; Principal, Padanaram
Associates, Inc.; and former Executive Di rector, Coalition of
Essential Schools, Brown University.
CHARLES F. CHAPIN: Director of the Fund; Trustee or Director of all other funds
in the Keystone Investments Family of Funds; and former Director,
Peoples Bank (Charlotte, NC).
K. DUN GIFFORD: Director of the Fund; Trustee or Director of all other
funds in the Keystone Investments Family of Funds; Trustee, Treasurer,
and Chairman of the Finance Committee, Cambridge College; Chairman
Emeritus and Director, American Institute of Food and Wine; Chairman
and President, Oldways Preservation and Exchange Trust (education);
Former Chairman of the Board, Director, and Executive Vice President,
The London Harness Company; former Managing Partner, Roscommon Capital
Corp.; former Chief Executive Officer, Gifford Gifts of Fine Foods;
former Chairman, Gifford, Drescher & Associates (environmental consult
ing); and former Director, Keystone Investments and Keystone.
LEROY KEITH, JR.: Director of the Fund; Trustee or Director of all other
funds in the Keystone Investments Family of Funds; Chairman of the
Board and Chief Executive Officer, Carson Products Company; 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.
F. RAY KEYSER, JR.: Director of the Fund; Trustee or Director of all other
funds in the Keystone Investments Family of Funds; Chairman and Of
Counsel, Keyser, Crowley, Meub, Layden, Kulig & Sullivan P.C.; Member,
Governor's (VT) Council of Economic Advisers; Chairman of the Board and
Director, Central Vermont Public Service Corporation and Lahey
Hitchcock Clinic; Director, Vermont Yankee Nuclear Power Corporation,
Grand Trunk Corporation, Grand Trunk Western Railroad, Union Mutual
Fire Insurance Company, New England Guaranty Insurance Company, Inc.,
and the Investment Company Institute; former Director and President,
Associated Industries of Vermont; former Director of Keystone, Central
Vermont Railway, Inc., S.K.I. Ltd., and Arrow Financial Corp.; and
former Director and Chairman of the Board, Hitchcock Clinic, Proctor
Bank, and Green Mountain Bank.
DAVID M. RICHARDSON: Director of the Fund; Trustee or Director of all other
funds in the Keystone Investments Family of Funds; Vice Chair and
former Executive Vice President, DHR Interna tional, 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: Director of the Fund; Trustee or Director of all other funds
in the Keystone Investments Family of Funds; Chairman, Environmental
Warranty, Inc. (insurance agency); Executive Consultant, Drake Beam
Morin, Inc. (executive outplacement); Director of Connecticut Natural
Gas Corporation, Hartford Hospital, Old State House Association,
Middlesex Mutual Assurance Company, and Enhance Financial Services,
Inc.; Chairman, Board of Trustees, Hartford Graduate Center; Trustee,
Greater Hartford YMCA; former Director, Vice Chairman and Chief
Investment Officer, The Travelers Corporation; former Trustee,
Kingswood-Oxford School; and former Managing Director and Consultant,
Russell Miller, Inc.
ANDREW J. SIMONS: Director of the Fund; Trustee or Director of all other funds
in the Keystone Investments Family of Funds; Partner, Farrell, Fritz,
Caemmerer, Cleary, Barnosky & Armentano, P.C.; Adjunct Professor of Law
and former Associate Dean, St. John's University
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<PAGE>
School of Law; Adjunct Professor of Law, Touro College School of Law;
and former President, Nassau County Bar Association.
EDWARD F. GODFREY: Senior Vice President of the Fund; Senior Vice President of
all other funds in the Keystone Investments Family of Funds; Director,
Senior Vice President, Chief Financial Officer, and Treasurer of
Keystone Investments, the Principal Underwriter, Keystone Asset
Corporation, Keystone Capital Corporation, and 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 and Director of Hartwell
Keystone; and former Treasurer of Robert Van Partners, Inc.
JAMES R. McCALL: Senior Vice President of the Fund; Senior Vice President of
all other funds in the Keystone Investments Family of Funds; and
President of Keystone.
J. KEVIN KENELY: Treasurer of the Fund; Treasurer of all other funds in the
Keystone Investments Family of Funds; Vice President and former
Controller of Keystone Investments, Keystone, the Principal
Underwriter, FICO, and Keystone Software; and former Controller of
Keystone Asset Corporation and Keystone Capital Corporation.
ROSEMARY D. VAN ANTWERP: Senior Vice President and Secretary of the Fund; Senior
Vice President and Secretary of all other funds in the Keystone
Investments Family of 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.
DONALD C. DATES: Vice President of the Fund; Vice President of certain other
funds in the Keystone Investments Family of Funds; and Senior Vice
President of Keystone.
* This Director may be considered an "interested person" of the Fund within
the meaning of the 1940 Act.
Mr. Elfner and Mr. Bissell are "interested persons" of the Fund 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, President, Chief Executive Officer and Director of
Keystone Investments. Mr. Bissell is a Director of Keystone Investments.
During the fiscal year ended September 30, 1996, no Director nor any
officer received any direct remuneration from the Fund. For the calendar year
ended December 31, 1995, aggregate compensation received by the Independent
Directors on a complex wide basis (which includes over 30 mutual funds) was
approximately $450,716. As of November 21, 1996, the Fund's Directors and
officers beneficially owned less than 1% of the Fund's then outstanding Class A
shares, Class B and Class C shares.
The address of all of the Fund's Directors and officers and the address
of the Fund is 200 Berkeley Street, Boston, Massachusetts 02116-5034.
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<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER
- --------------------------------------------------------------------------------
The Fund has entered into Principal Underwriting Agreements with the
Principal Underwriter (the "Underwriting Agreements"). The Principal Underwriter
is a Delaware corporation and a wholly-owned subsidiary of Keystone.
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 broker-dealers or others,
acting as principals, for sales of shares. No such representative or
broker-dealer 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 Restated Certificate of Incorporation, By-Laws, the
current prospectus and statement of additional information. All orders are
subject to acceptance by the Fund, and the Fund reserves the right, in its sole
discretion, to reject any order received. Under the Underwriting 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 Commission
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 provide to
selected broker-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.
The Principal Underwriter has also agreed that it will indemnify and hold
harmless the Fund, and each person who has been, is or may be a Director or
officer of the Fund, against expenses reasonably incurred by any of them in
connection with any claim, 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 (i) the Fund's Independent
Directors cast in person at a meeting called for that purpose and (ii) by vote
of a majority of Directors 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 Directors 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.
17534
18
<PAGE>
For each of the Fund's last three fiscal years, the table below lists
the aggregate dollar amounts of underwriting commissions (front-end sales
charges, plus distribution fees, plus CDSCs) paid with respect to the public
distribution of the Fund's shares. The table also indicates the aggregate dollar
amount of underwriting commissions retained by the Principal Underwriter. For
more information, see "Principal Underwriter" and "Sales Charges."
Aggregate Dollar Amount of
Underwriting Commissions
Fiscal Year Ended Aggregate Dollar Amount of Retained by the Principal
August 31, Underwriting Commissions Underwriter
- ----------------- -------------------------- --------------------------
1996 $232,935 $34,642
1995 $332,596 $8,902
1994 $505,370 $0
In addition to an assignment of the Fund's Advisory Agreements, the
Merger, if consummated, will also be deemed to cause an assignment, as defined
by the 1940 Act, of the Underwriting Agreements. As a result, the Fund's
Directors have approved the following agreements, subject to the Merger's
completion: (i) a principal underwriting agreement between Evergreen Funds
Distributor, Inc. ("EFD") and the Fund; (ii) a marketing services agreement
between the Principal Underwriter and EFD with respect to the Fund; and (iii) a
subadministration agreement between Keystone and Furman Selz LLC ("Furman Selz")
with respect to the Fund. EFD is a wholly-owned subsidiary of Furman Selz. It is
currently anticipated that on or about January 2, 1997, Furman Selz will
transfer EFD, and Furman Selz's related services, to BISYS Group, Inc. ("BISYS")
(the "Transfer"). The Fund's Directors have also approved, subject to completion
of the Transfer, (i) a new principal underwriting agreement between EFD and the
Fund; (ii) a new marketing services agreement between the Principal Underwriter
and EFD with respect to the Fund; and (iii) a subadministration agreement
between Keystone and BISYS with respect to the Fund. The terms of such
agreements will be substantively identical to the terms of the agreements to be
executed upon completion of the Merger.
- --------------------------------------------------------------------------------
CAPITAL STOCK
- --------------------------------------------------------------------------------
The Fund is authorized to issue 90,000,000 shares of common stock, par
value $1.00 per share, consisting of the following classes of shares:
Class A 30,000,000
Class B 30,000,000
Class C 30,000,000
Each share represents an equal proportionate interest in the Fund with
each other share of that class. Upon liquidation, shares are entitled to a pro
rata share in the net assets of the Fund based on the relative net asset value
of each class of shares. Each share of the Fund is entitled to one vote. Classes
of shares of the Fund have equal voting rights except that each class of shares
has exclusive voting rights with respect to its Distribution Plan.
17534
19
<PAGE>
Fund shares are fully paid and non-assessable when issued and have no
preemptive, conversion or exchange rights. Shareholders are entitled to redeem
their shares as set forth under "How to Redeem Shares" in the prospectus. The
shares are transferable without restriction. The Fund does not issue
certificates for fractional shares.
Fund shares have non-cumulative voting rights, which means that the
holders of more than 50% of shares voting for the election of Directors can
elect 100% of the Directors if they choose to do so. In such an event, the
holders of the remaining shares so voting are not able to elect any Directors.
- --------------------------------------------------------------------------------
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, 1996 were 58.65% and 334.96%,
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, 1996 were
3.64%, 9.67% and 15.84%, respectively.
The cumulative total return for Class B shares of the Fund for the
period August 2, 1993 (commencement of operations) through September 30, 1996
("Life of the Fund") was 25.81%. The compounded average annual rates of return
for Class B shares of the Fund for the one year period ended September 30, 1996
and the Life of the Fund were 5.01% and 7.53%, respectively.
The cumulative total return for Class C shares of the Fund for the
period August 2, 1993 (commencement of operations) through September 30, 1996
was 29.50%. The compounded average annual rates of return for Class C shares of
the Fund for the one year period ended September 30, 1996 and the Life of the
Fund were 9.17% and 8.51%, respectively.
- --------------------------------------------------------------------------------
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.
17534
20
<PAGE>
KIRC, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034,
is a wholly-owned subsidiary of Keystone and acts as transfer agent and dividend
disbursing agent for the Fund.
As of November 21, 1996, MLPF&S for the Sole Benefit of its Customers,
Attn: Fund Administration, 4800 Deer Lake Drive E 3rd Floor, Jacksonville, FL
32246-6484, owned 20.102% of the Fund's Class A outstanding shares.
As of November 21, 1996, MLPF&S for the Sole Benefit of its Customers,
Attn: Fund Administration, 4800 Deer Lake Drive E 3rd Floor, Jacksonville, FL
32246-6484, owned 11.909% of the Fund's Class B outstanding shares.
As of November 21, 1996, MLPF&S for the Sole Benefit of its Customers,
Attn: Fund Administration, 4800 Deer Lake Drive E 3rd Floor, Jacksonville, FL
32246-6484, owned 27.118% of the Fund's Class C outstanding shares; Lavedna
Ellingson, Douglas Ellinston JT WROS, 8510 McClintock, Tempe, AZ 85284-2527,
owned 10.234% of the Fund's Class C outstanding shares; and Painewebber FBO,
John T. Frankfurth, 13093 S.E. Green Turtle Way, Tequesta, FL 33469-1574, owned
6.181% 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.
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.
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 16 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 BALANCED FUND II - Seeks current income and capital appreciation
consistent with the preservation of capital.
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.
17534
21
<PAGE>
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 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 GLOBAL OPPORTUNITIES FUND - Seeks long-term capital growth from foreign
and domestic securities.
KEYSTONE GLOBAL RESOURCES AND DEVELOPMENT FUND (formerly, Keystone Strategic
Development Fund) - Seeks long-term capital growth by investing primarily in
equity 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 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 SMALL CAPITALIZATION GROWTH FUND II - Seeks long term growth of
capital.
KEYSTONE STATE TAX FREE FUND - A mutual fund consisting of four 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.
17534
22
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following financial statements of the Fund are incorporated by
reference herein from the Fund's Annual Report, as filed with the Commission:
Schedule of Investments as of September 30, 1996;
Financial Highlights for each of the years in the ten-year period ended
September 30, 1996 for Class A shares; and each of the years in the
three-year period then ended and the period from August 2, 1993 to
September 30, 1993 for Class B and Class C shares;
Statement of Assets and Liabilities as of September 30, 1996;
Statement of Operations for the year ended September 30, 1996;
Statements of Changes in Net Assets for each of the years in the
two-year period ended September 30, 1996;
Notes to Financial Statements; and
Independent Auditors' Report dated November 1, 1996.
A copy of the Fund's Annual report will be furnished upon request and
without charge. Requests may be made in writing to KIRC, P.O. Box 2121, Boston,
Massachusetts 02121-5034, or by calling KIRC toll free at 1-800-343-2898.
17534
23
<PAGE>
A-1
- --------------------------------------------------------------------------------
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
<PAGE>
A-2
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 that 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 that 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 that is rated "a" is considered to be an upper medium
grade preferred stock. While risks are judged to be somewhat greater then in the
"aaa" and "aa" classification, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
4. baa: An issue that 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 that 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 that 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 that 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 that 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
<PAGE>
A-3
attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the higher
end of its generic rating category, the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
<PAGE>
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). Financial Statements
The following financial statements are hereby incorporated by reference from
Registrant's Annual Report, as filed with the Securities and Exchange
Commission.
Schedule of Investments September 30, 1996
Financial Highlights
Class A Shares For each of the years in
the ten-year period ended
September 30, 1996.
Class B Shares For each of the years in
the three-year period ended
September 30, 1996, and the
period August 2, 1993 (date
of initial public offering)
to September 30, 1993.
Class C Shares For each of the years in
the three-year period ended
September 30, 1996, and the
period August 2, 1993 (date
of initial public offering)
to September 30, 1993.
Statement of Assets and Liabilities September 30, 1996
Statement of Operations Year ended
September 30, 1996
Statements of Changes in Net Assets Two years ended
September 30, 1996
Notes to Financial Statements
Independent Auditors' Report November 1, 1996
<PAGE>
(24)(b) Exhibits
(1)(A) Registrant's form of Certificate of Incorporation (the "Certificate of
Incorporation") (1).
(B) Certificates of Amendment to Certificate of Incorporation (2).
(2)(A) By-Laws (3).
(B) Amendment to the By-Laws (4).
(C) Amendment to the By-Laws (2).
(3) Not applicable.
(4)(A) Share certificate evidencing Registrant's Common Stock (1).
(B) Certificate of Incorporation, as amended (1, 2).
(C) By-Laws (3).
(5)(A) Investment Advisory and Management Agreement between the Registrant
and Keystone Investment Management Company (the "Advisory Agreement")
(5).
(B) SubInvestment Advisory Agreement between Keystone Investment Management
Company and J.M. Hartwell Limited Partnership (the "Subadvisory
Agreement) (5).
(6)(A) Principal Underwriting Agreements between the Registrant and Keystone
Investment Distributors Company, as amended (the "Underwriting
Agreements") (6).
(B) Form of Dealer Agreements used by Keystone Investment Distributors
Company (6).
(7) Not applicable.
(8) Registrant's Custodian, Fund Accounting and Recordkeeping Agreement
with State Street Bank and Trust Company (6).
(9) Not applicable.
(10) Opinion and a consent of counsel (2).
(11) Independent Auditors' Consent (2).
(12) Not applicable.
(13) Not applicable.
(14) Copies of model plans used in the establishment of retirement plans in
connection with which Registrant offers its securities (7).
(15) Registrant's Class A, B and C Distribution Plans (6).
(16) Schedules for computation of total return (2).
(17) Financial Data Schedules (2).
(18) Form of Registrant's Multiple Class Plan (8).
(19) Powers of Attorney (2).
- --------------------------------------------
(1) Filed with Post-Effective Amendment No. 27 to the Registration
Statement No. 2-28719/811-1633 (the "Registration Statement") and
incorporated by reference herein.
(2) Filed herewith.
(3) Filed with Post-Effective Amendment No. 28 to the Registration
Statement and incorporated by reference herein.
(4) Filed with Post-Effective Amendment No. 34 to the Registration
Statement and incorporated by reference herein.
(5) Filed with Post-Effective Amendment No. 41 to the Registration
Statement and incorporated by reference herein.
(6) Filed with Post-Effective Amendment No. 45 to the Registration
Statement and incorporated by reference herein.
(7) Filed with the Post-Effective Amendment No. 66 to Registration
Statement No. 2-10527/811-96 and incorporated by reference herein.
(8) Filed with Post Effective Amendment No. 43 to the Registration
Statement and incorporated by reference herein.
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
Number of Record
Title of Class Holders as of November 21, 1996
-------------- ------------------------------
Shares of $1.00
par value:
Class A 6,199
Class B 735
Class C 201
Item 27. Indemnification
Provisions for the indemnification of Registrant's Directors and officers
are contained in Article XI of the By-Laws, a copy of which was filed with
Post-Effective Amendment No. 28 to the Registration Statement and is
incorporated by reference herein.
Provisions for the indemnification of Keystone Investment Distributors
Company, Registrant's principal underwriter, are contained in Section 9 of the
Underwriting Agreements, copies of which were filed with Post-Effective
Amendment No. 45 to the Registration Statement and are incorporated by reference
herein.
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 Advisory
Agreement and Section 4 of the Subadvisory Agreement, forms of which were filed
with Post- Effective Amendment No. 41 to the Registration Statement 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 fiscal 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
<TABLE>
<CAPTION>
Position with
Keystone
Investment
Name Management Company Other Business Affiliations
- ---- ------------------ ---------------------------
<S> <C> <C>
Albert H. Chairman of Chairman of the Board,
Elfner, III 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. Senior Vice None
Bishop, Jr. President
Donald C. Dates Senior Vice None
President
Gilman Gunn Senior Vice None
President
Edward F. Director, Director, Senior Vice President
Godfrey Senior Vice President, President, Chief Financial Officer and Treasurer:
Treasurer and Keystone Investments, Inc.
Chief Financial Officer Keystone Investment Distributors Company
Treasurer and Director:
Keystone Management, Inc.
Treasurer:
Keystone Institutional Company, 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. Director President and Director:
Spuehler, Jr. 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:
Keystone Investments, Inc.
Keystone Investment Management Company
Keystone America Hartwell Growth Fund, Inc.
Rosemary D. Senior Vice General Counsel, Senior Vice President and Secretary:
Van Antwerp President, Keystone Investments, Inc.
General Counsel Senior Vice President and General Counsel:
and Secretary 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.
J. Kevin Kenely Vice President Vice President:
Keystone Investments, Inc.
Keystone Investment Distributors Company
Keystone Institutional Company, Inc.
Keystone Management, Inc.
Keystone Institutional Company, Inc.
Keystone Software, Inc.
Fiduciary Investment Company, Inc.
Former Controller:
Keystone Investments, Inc.
Keystone Investment Management Company
Keystone Investment Distributors Company
Keystone Institutional Company, Inc.
Keystone Management, Inc.
Keystone Software, Inc.
Fiduciary Investment Company, Inc.
John D. Rogol Vice President Vice President and
Controller:
Keystone Investments, Inc.
Keystone Investment Distributors Company
Keystone Institutional Company, Inc.
Keystone Management, Inc.
Keystone Software, Inc.
Fiduciary Investment Company, Inc.
Robert K. Vice President None
Baumback
Betsy A. Blacher Senior Vice None
President
Francis X. Claro Vice President None
Kristine R. Vice President None
Cloyes
Christopher P. Senior Vice None
Conkey President
J. Gary Craven Senior Vice None
President
Richard Cryan Senior Vice None
President
Maureen E. Senior Vice None
Cullinane President
Walter T. Senior Vice None
McCormick President
George F. Wilkins Senior Vice None
President
John F. Addeo Vice President None
Andrew G. Baldassare Vice President None
David S. Benhaim Vice President None
Donald M. Bisson Vice President None
George E. Dlugos Vice President None
Antonio T. Docal Vice President None
Dana E. Erikson Vice President None
Sami J. Karam Vice President None
George J. Kimball Vice President None
JoAnn L. Lyndon Vice President None
John C. Vice President None
Madden, Jr.
Eleanor H. Marsh Vice President None
James D. Medredeff Vice President None
Stanley M. Niksa Vice President None
Jonathan A. Noonan Vice President None
Robert E. O'Brien Vice President None
Margery C. Parker Vice President None
William H. Vice President None
Parsons
Joyce W. Petkovich Vice President None
Daniel A. Rabasco Vice President None
Harlen R. Sanderling Vice President None
Kathy K. Wang Vice President None
Judith A. Warners Vice President None
Mary J. Willis Vice President None
Peter Willis Vice President None
Richard A. Wisentaner Vice President None
Cheryle E. Wanble Vice President None
Walter Zagrobski Vice President None
Joseph J. Asst. Vice President None
Decristofaro
</TABLE>
<PAGE>
LIST OF OFFICERS AND DIRECTORS OF
JMH MANAGEMENT CORPORATION -
GENERAL PARTNERS OF 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.
Director:
Hartwell Distributors,
Inc.
Former Vice President:
Hartwell Growth Fund
Harrison Augur Director General Partner:
CA Partners
Director:
ILC Technology
William S. 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 Quality Bond 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 Balanced Fund II
Keystone Capital Preservation and Income Fund
Keystone Emerging Markets Fund
Keystone Fund for Total Return
Keystone Fund of the Americas
Keystone Global Opportunities Fund
Keystone Global Resources and Development Fund
Keystone Government Securities Fund
Keystone Intermediate Term Bond Fund
Keystone International Fund Inc.
Keystone Liquid Trust
Keystone Omega Fund
Keystone Precious Metals Holdings, Inc.
Keystone Small Company Growth Fund II
Keystone State Tax Free Fund
Keystone State Tax Free Fund - Series II
Keystone Strategic Income Fund
Keystone Tax Free Income Fund
Keystone Tax Free Fund
Keystone World Bond Fund
(b) The following table lists additional information regarding each
director and officer of Registrant's acting principal underwriter:
Positions with
Keystone Investment Positions with
Name Distributors Company Registrant
- ---- -------------------- --------------
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 President
Counsel and Secretary 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 None
John D. Rogol* Vice President and None
Controller
C. Kenneth Molander Divisional Vice None
8 King Edward Drive President
Londenderry, NH 03053
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 Manager and None
309 West 90th Street Vice President
New York, NY 10024
Michael E. Gathings Regional Vice None
245 Wicklawn Way President
Roswell, GA 30076
Paul D. Graffy Regional Manager and None
15509 Janas Drive Vice President
Lockport, IL 60441
Robert G. Holz, Jr. Regional Manager and None
313 Meadowcrest Drive 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
118 Main Center #203 Vice President
Northville, MI 48167
Robert P. Muligan* Regional Manager and None
Vice President
Alan V. Niemi Regional Manager and None
3511 Grant Street Vice President
Lee's Summit, MO 64064
Matthew D. Twomey Regional Vice None
9627 Sparrow Court President
Ellicott City, MD 21042
Raymond P. Ajemian* Manager and None
Vice President
Jonathan I. Cohen* Vice President None
Michael S. Festa* Vice President None
Russell A. Haskell* Vice President None
Jeffrey M. Landes Vice President None
Joan M. Balchunas* Assistant Vice None
President
Julie A. Robinson Vice President None
John M. McAllister* Vice President None
Thomas J. Gainey* Assistant Vice None
President
Lyman Jackson* Assistant Vice None
President
Eric S. Jeppson* Assistant Vice None
President
Mark Minnucci* Assistant Vice None
President
Ashley M. Norwood* Assistant Vice None
President
* Located at 200 Berkeley Street, Boston, Massachusetts 02116-5034
Item 29(c). - Not applicable
<PAGE>
Item 30. Location of Accounts and Records
Keystone Investments, Inc.
200 Berkeley Street
Boston, Massachusetts 02116-5034
J.M. Hartwell Limited Partnership
515 Madison Avenue
New York, New York 10022
Iron Mountain
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 Registrant's prospectus is delivered.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this amendment to its registration statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this amendment to its registration statement to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Boston, and The Commonwealth
of Massachusetts, on the ____ day of ____________, 1996.
KEYSTONE AMERICA HARTWELL EMERGING
GROWTH FUND, INC.
By: /s/ Rosemary D. Van Antwerp
------------------------------
Rosemary D. Van Antwerp
Senior Vice President and
Secretary
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 ____ day of ____________, 1996.
SIGNATURES TITLE
- ---------- -----
/s/ George S. Bissell Chairman of the Board and Director
- -------------------------------
George S. Bissell*
/s/ Albert H. Elfner, III President, Chief Executive Officer
- ------------------------------- and Director
Albert H. Elfner, III*
/s/ J. Kevin Kenely Treasurer (Principal Financial
- ------------------------------- and Accounting Officer)
J. Kevin Kenely*
*By: /s/ James M. Wall
------------------------------
James M. Wall**
Attorney-in-Fact
<PAGE>
SIGNATURES TITLE
- ---------- -----
/s/ Frederick Amling Director
- -------------------------------
Frederick Amling*
/s/ Charles A. Austin, III Director
- -------------------------------
Charles A. Austin, III*
/s/ Edwin D. Campbell Director
- -------------------------------
Edwin D. Campbell*
/s/ Charles F. Chapin Director
- -------------------------------
Charles F. Chapin*
/s/ K. Dun Gifford Director
- -------------------------------
K. Dun Gifford*
/s/ Leroy Keith, Jr. Director
- -------------------------------
Leroy Keith, Jr.*
/s/ F. Ray Keyser, Jr. Director
- -------------------------------
F. Ray Keyser, Jr.*
/s/ David M. Richardson Director
- -------------------------------
David M. Richardson*
/s/ Richard J. Shima Director
- -------------------------------
Richard J. Shima*
/s/ Andrew J. Simons Director
- -------------------------------
Andrew J. Simons*
*By: /s/ James M. Wall
------------------------------
James M. Wall**
Attorney-in-Fact
** James M. Wall, by signing his 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 (A) Certificate of Incorporation (1)
(B) Certificates of Amendment to
Certificate of Incorporation (2)
2 (A) By-Laws (3)
(B) Amendment to By-Laws (4)
(C) Amendment to By-Laws (2)
4 (A) Share Certificate (1)
(B) Certificate of Incorporation, as amended (1, 2)
(C) By-Laws (3)
5 (A) Advisory Agreement (5)
(B) Subadvisory Agreement (5)
6 (A) Underwriting Agreement (6)
(B) Dealer Agreements (6)
8 Custodian, Fund Accounting
and Recordkeeping Agreement (6)
10 Opinion and Consent of Counsel (2)
11 Independent Auditors' Consent (2)
14 Model Retirement Plans (7)
15 Distribution Plans (6)
16 Performance Data Schedules (2)
17 Financial Data Schedules (filed as Exhibit 27) (2)
18 Multiple Class Plan (8)
19 Powers of Attorney (2)
- --------------
(1) Incorporated by reference herein to Registrant's Post-Effective Amendment
No. 27 to the Registration Statement.
(2) Filed herewith.
(3) Incorporated by reference herein to Registrant's Post-Effective Amendment
No. 28 to the Registration Statement.
(4) Incorporated by reference herein to Registrant's Post-Effective Amendment
No. 34 to the Registration Statement.
(5) Incorporated by reference herein to Registrant's Post-Effective Amendment
No. 41 to the Registration Statement.
(6) Incorporated by reference herein to Registrant's Post-Effective Amendment
No. 45 to the Registration Statement.
(7) Incorporated by reference herein to Post-Effective Amendment No. 66 to
Registration Statement No. 2-10527/811-96.
(8) Incorporated by reference herein to Registrant's Post-Effective Amendment
No. 43 to the Registration Statement.
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
Under Section 805 of the Business Corporation Law
The undersigned, being the Senior Vice President and the Assistant
Secretary of KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC., do hereby
certify and set forth:
1. The name of the corporation is Keystone America Hartwell Emerging
Growth Fund, Inc. The name under which the corporation was formed was HARTWELL
AND CAMPBELL LEVERAGE FUND, INC.
2. The Certificate of Incorporation was filed by the Department of
State on the 8th day of April, 1968.
3. The Certificate of Incorporation of the corporation is hereby
amended to authorize an additional class of shares pursuant to section
801(b)(12) of the Business Corporation Law.
4. Paragraph Fourth of the Certificate of Incorporation which refers
to the authorized shares is hereby amended as follows:
FOURTH: (A) The aggregate number of shares which the Corporation shall
have the authority to issue is 120,000,000 shares of Common Stock consisting of:
30,000,000 shares of Class A, par value One Dollar ($1.00) per share;
30,000,000 shares of Class B, par value One Dollar ($1.00) per share;
30,000,000 shares of Class C, par value One Dollar ($1.00) per share;
and
30,000,000 shares of Class E, par value One Dollar ($1.00) per share.
(B) Each of the above classes of shares shall have all of the
same relative rights, preferences and limitations except the following:
(1) Each class of shares may bear its own distribution expenses
incurred under its distribution plan adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 or otherwise;
(2) Each class of shares may bear other class expenses
including, but not limited to, (a) transfer agent fees attributable to the
class; (b) printing and postage expenses attributable to the class related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; (c) SEC and Blue Sky registration fees
incurred by the class; (d) the expense of administrative personnel and services
as required to support the shareholders of the class; (e) litigation or other
legal expenses relating to the class; (f) accounting fees and expenses relating
to the class; and (g) trustees'/directors' fees as a result of issues relating
to the class;
(3) Each class of shares shall have exclusive voting rights but
only with respect to its distribution plan under said Rule 12b-1 as it affects
such class of shares; and
(4) Each class of shares may have certain varying exchange and
rights of conversion to other classes of shares.
5. The manner in which this amendment to the Certificate of
Incorporation was authorized was by vote of the Board of Directors on November
17, 1992 and December 16, 1992, followed by a vote of the holders of a majority
of all outstanding shares entitled to vote thereon at a meeting of shareholders
on July 27, 1993, all pursuant to Section 803(a) of the Business Corporation
Law.
IN WITNESS WHEREOF, KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND,
INC., the corporation hereinbefore mentioned and described, has caused this
certificate to be signed in its name by its Senior Vice President and Assistant
Secretary this fifth day of June, 1995 and the statements contained therein are
affirmed as true under the penalties of perjury.
/s/ Rosemary D. Van Antwerp
---------------------------
Rosemary D. Van Antwerp
Senior Vice President
/s/ Jean S. Loewenberg
---------------------------
Jean S. Loewenberg
Assistant Secretary
COMMONWEALTH OF MASSACHUSETTS )
)
)
COUNTY OF SUFFOLK )
Before me, the undersigned Notary Public in and for said County and
State, personally appeared the above-named Rosemary Van Antwerp and Jean S.
Loewenberg, known to me to be the Senior Vice President and Assistant Secretary
of Keystone America Hartwell Emerging Growth Fund, Inc., who, being duly sworn,
acknowledged that he/she did sign the above instrument and that the same is
his/her free act and deed.
Witness my hand and official seal this 5th day of June, 1995.
Maureen E. Towle
--------------------------
Notary Public
My commission expires: 01/04/02
<PAGE>
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
HARTWELL EMERGING GROWTH FUND, INC.
Under Section 805 of the Business Corporation Law
The undersigned, being the President and the Secretary of HARTWELL
EMERGING GROWTH FUND, INC., do hereby certify and set forth:
1. The name of the corporation prior to the effectiveness of this
amendment is HARTWELL EMERGING GROWTH FUND, INC. The name under which the
corporation was formed is HARTWELL AND CAMPBELL LEVERAGE FUND, INC.
2. The Certificate of Incorporation was filed by the Department of
State on the 8th day of April, 1968.
3. The Certificate of Incorporation is hereby amended to change the
name of the corporation: to authorize three classes of shares pursuant to
section 801(b)(12) of the Business Corporation Law; to change the Common Stock
presently authorized to 13 million Class A shares, 1 million Class B shares and
1 million Class C shares and to increase the aggregate number of shares for each
of the newly authorized classes which the corporation shall have the authority
to issue pursuant to section 801(b)(7) of the Business Corporation Law.
4. Paragraphs First and Fourth of the Certificate of Incorporation
which refer respectively to the corporate name and the authorized shares are
hereby amended as follows:
FIRST: The name of the corporation is KEYSTONE AMERICA HARTWELL
EMERGING GROWTH FUND, INC.
FOURTH: (A) The aggregate number of shares which the Corporation shall
have the authority to issue is 90 million shares of Common Stock consisting of:
30,000,000 shares of Class A, par value One Dollar ($1.00) per share;
30,000,000 shares of Class B, par value One Dollar ($1.00) per share;
and
30,000,000 shares of Class C, par value One Dollar ($1.00) per share.
(B) Each of the above classes of shares shall have all of the
same relative rights, preferences and limitations except the following:
(1) Each class of shares may bear its own distribution expenses
incurred under its distribution plan adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 or otherwise;
(2) Each class of shares may bear other class expenses
including, but not limited to, (a) transfer agent fees attributable to the
class; (b) printing and postage expenses attributable to the class related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; (c) SEC and Blue Sky registration fees
incurred by the class; (d) the expense of administrative personnel and services
as required to support the shareholders of the class; (e) litigation or other
legal expenses relating to the class; (f) accounting fees and expenses relating
to the class; and (g) trustees'/directors' fees as a result of issues relating
to the class;
(3) Each class of shares shall have exclusive voting rights but
only with respect to its distribution plan under said Rule 12b-1 as it affects
such class of shares.
5. The 7,077,509 issued shares of Common Stock, par value $1.00 per
share, have been changed to 7,077,509 Class A shares, par value $1.00 per share,
on a share for share basis. 5,922,491 of the unissued shares of Common Stock,
par value $1.00 per share, were changed to 5,922,491 Class A shares, par value
$1.00 per share, on a share for share basis. 1,000,000 of the unissued shares of
Common Stock, par value $1.00 per share, were changed to 1,000,000 Class B
shares, par value $1.00 per share, on a share for share basis. 1,000,000 of the
unissued shares of Common Stock, par value $1.00 per share, were changed to
1,000,000 Class C shares, par value $1.00 per share, on a share for share basis.
6. The manner in which this amendment to the Certificate of
Incorporation of the corporation was authorized was by vote of the Board of
Directors on November 17, 1992 and December 16, 1992, followed by a vote of the
holders of a majority of all outstanding shares entitled to vote thereon at a
meeting of shareholders on July 27, 1993, all pursuant to Section 803(a) of the
Business Corporation Law.
IN WITNESS WHEREOF, KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND,
INC., the corporation hereinbefore mentioned and described, has caused this
certificate to be signed in its name by its President and Secretary this
nineteenth day of July, 1994 and the statements contained therein are affirmed
as true under the penalties of perjury.
/s/ Albert H. Elfner, III
---------------------------
Albert H. Elfner, III
/s/ Rosemary D. Van Antwerp
---------------------------
Rosemary D. Van Antwerp
COMMONWEALTH OF MASSACHUSETTS )
)
) SS:
)
COUNTY OF SUFFOLK )
Before me, the undersigned Notary Public in and for said County and
State, personally appeared the above-named Albert H. Elfner, III and Rosemary D.
Van Antwerp, known to me to be the President and Secretary of Keystone America
Hartwell Emerging Growth Fund, Inc., who, being duly sworn, acknowledged that
he/she did sign the above instrument and that the same is his/her free act and
deed.
Witness my hand and official seal this 19th day of July, 1994.
Jean S. Loewenberg
-----------------------------
Notary Public
My commission expires: 09/25/98
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC.
Revised Article III, Section 4 of the By-Laws as adopted by the Board
of Directors on June 19, 1996:
SECTION 4. ELECTION AND TERM OF DIRECTORS. At each Annual Meeting of
Shareholders, the shareholders shall elect Directors to hold office until the
next annual meeting. Each Director shall hold office until the expiration of the
term for which he or she is elected, and until his or her successor has been
elected and qualified. A Director holding office shall automatically retire on
December 31 of the year in which he or she reaches the age of seventy-five.
Dated: September 13, 1996
December 9, 1996
Keystone America Hartwell Emerging Growth Fund, Inc.
200 Berkeley Street
Boston, Massachusetts 02116-5034
Ladies and Gentlemen:
I am a Senior Vice President of and General Counsel to Keystone Investment
Management Company, investment adviser to Keystone America Hartwell Emerging
Growth Fund, Inc. (the "Fund"). You have asked for my opinion with respect to
the proposed issuance of 2,028,832 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. 45 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 Certificate of Incorporation, as amended ("Certificate of
Incorporation") 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 Certificate of Incorporation and subject to the limitations set forth
therein.
My opinion is based upon my examination of the Fund's Certificate of
Incorporation and By-Laws, as amended; a review of the minutes of the Fund's
Board of Directors 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. 46 to the Fund's Registration Statement, which
covers the registration of such additional shares.
Very truly yours,
/s/ Rosemary D. Van Antwerp
Rosemary D. Van Antwerp
Senior Vice President and
General Counsel
CONSENT OF INDEPENDENT AUDITORS
The Directors and Shareholders
Keystone America Hartwell Emerging Growth Fund, Inc.
We consent to the use of our report dated November 1, 1996 incorporated
by reference herein and to the reference to our firm under the caption
"Financial Highlights" in the Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
December 9, 1996
<TABLE>
<CAPTION>
KAHEG CLASS A MTD YTD ONE YEAR THREE YEAR THREE YEAR
30-Sep-96 TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C>
5.75% LOAD 3.83% 3.64% 16.80% 5.31%
no load 5.45% 10.16% 9.96% 23.92% 7.41%
Beg dates 30-Aug-96 29-Dec-95 29-Sep-95 30-Sep-93 30-Sep-93
Beg Value (LOAD) 184,126 176,257 176,581 156,687 156,687
Beg Value (no load) 173,539 166,122 166,428 147,677 147,677
End Value 183,003 183,003 183,003 183,003 183,003
TIME 3
INCEPTION DATE 31-Dec-77
<CAPTION>
KAHEG CLASS A FIVE YEAR FIVE YEAR TEN YEAR TEN YEAR
30-Sep-96 TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C>
5.75% LOAD 58.65% 9.67% 334.96% 15.84%
no load 68.33% 10.98% 361.50% 16.52%
Beg dates 30-Sep-91 30-Sep-91 30-Sep-86 30-Sep-86
Beg Value (LOAD) 115,347 115,347 42,073 42,073
Beg Value (no load) 108,714 108,714 39,654 39,654
End Value 183,003 183,003 183,003 183,003
TIME 5 10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KAHEG-B MTD YTD ONE YEAR THREE YEAR THREE YEAR
30-Sep-96 TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C>
with cdsc N/A 4.47% 5.01% 17.46% 5.51%
W/O CDSC 5.36% 9.47% 9.01% 20.37% 6.38%
Beg dates 30-Aug-96 29-Dec-95 29-Sep-95 30-Sep-93 30-Sep-93
Beg Value (no load) 12,226 11,766 11,816 10,701 10,701
End Value (W/O CDSC) 12,881 12,881 12,881 12,881 12,881
End Value (with cdsc) 12,292 12,408 12,569 12,569
beg nav 26.32 25.33 25.69 28.56 28.56
end nav 27.73 27.73 27.73 27.73 27.73
shares originally purchased 464.51 464.51 459.94 374.67 374.67
5% cdsc thru date=> 31-Jul-94
TIME 4% cdsc thru date=> 31-Jul-95 3
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
<CAPTION>
KAHEG-B FIVE YEAR FIVE YEAR TEN YEAR TEN YEAR
30-Sep-96 TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C>
with cdsc 25.81% 7.53% NA NA
W/O CDSC 28.81% 8.33% NA NA
Beg dates 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93
Beg Value (no load) 10,000 10,000 10,000 10,000
End Value (W/O CDSC) 12,881 12,881 12,881 12,881
End Value (with cdsc) 12,581 12580.7515746 12,881 12880.7515746
beg nav 26.69 26.69 26.69 26.69
end nav 27.73 27.73 27.73 27.73
shares originally purchased 374.67 374.67 374.67 374.67
TIME 3.1638888889 3.1638888889
INCEPTION DATE 31-Dec-96
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KAHEG-C MTD YTD ONE YEAR THREE YEAR THREE YEAR
30-Sep-96 TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C>
with cdsc N/A 8.50% 9.17% 21.02% 6.57%
W/O CDSC 5.36% 9.50% 9.17% 21.02% 6.57%
Beg dates 30-Aug-96 29-Dec-95 29-Sep-95 30-Sep-93 30-Sep-93
Beg Value (no load) 12,290 11,826 11,862 10,701 10,701
End Value (W/O CDSC) 12,950 12,950 12,950 12,950 12,950
End Value (with cdsc) 12,832 12,950 12,950 12,950
beg nav 26.47 25.47 25.80 28.56 28.56
end nav 27.89 27.89 27.89 27.89 27.89
shares originally purchased 464.32 464.32 459.78 374.67 374.67
TIME 3
INCEPTION DATE 02-Aug-93 1% cdsc effect. 01-Jan-96
1% cdsc thru date^
Compound Return Time Period: BEGINNING Dec-95
Through Sep-96
<CAPTION>
KAHEG-C FIVE YEAR FIVE YEAR TEN YEAR TEN YEAR
30-Sep-96 TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C>
with cdsc 29.50% 8.51% NA NA
W/O CDSC 29.50% 8.51% NA NA
Beg dates 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93
Beg Value (no load) 10,000 10,000 10,000 10,000
End Value (W/O CDSC) 12,950 12,950 12,950 12,950
End Value (with cdsc) 12,950 12949.8023552 12,950 12949.8023552
beg nav 26.69 26.69 26.69 26.69
end nav 27.89 27.89 27.89 27.89
shares originally purchased 374.67 374.67 374.67 374.67
TIME 3.1638888889 3.1638888889
INCEPTION DATE 31-Dec-96
1% cdsc thru date^
</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 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/ J. Kevin Kenely
J. Kevin Kenely
Treasurer
Dated: December 15, 1995
<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 AMERICA HARTWELL EMERGING GROWTH FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 63,728,460
<INVESTMENTS-AT-VALUE> 99,729,500
<RECEIVABLES> 18,012
<ASSETS-OTHER> 2,595
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 99,750,107
<PAYABLE-FOR-SECURITIES> 561,249
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,978
<TOTAL-LIABILITIES> 702,227
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,147,443
<SHARES-COMMON-STOCK> 3,135,470
<SHARES-COMMON-PRIOR> 4,253,505
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,965,953
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 32,612,921
<NET-ASSETS> 89,726,317
<DIVIDEND-INCOME> 2,174
<INTEREST-INCOME> 526,998
<OTHER-INCOME> 0
<EXPENSES-NET> (1,615,462)
<NET-INVESTMENT-INCOME> (1,086,290)
<REALIZED-GAINS-CURRENT> 7,995,493
<APPREC-INCREASE-CURRENT> 911,905
<NET-CHANGE-FROM-OPS> 7,821,109
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,044,733)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 691,682
<NUMBER-OF-SHARES-REDEEMED> (1,845,621)
<SHARES-REINVESTED> 35,904
<NET-CHANGE-IN-ASSETS> (22,027,166)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,444,910
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (975,851)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,615,462)
<AVERAGE-NET-ASSETS> 99,801,798
<PER-SHARE-NAV-BEGIN> 26.28
<PER-SHARE-NII> (0.30)
<PER-SHARE-GAIN-APPREC> 2.89
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.25)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 28.62
<EXPENSE-RATIO> 1.66
<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 AMERICA HARTWELL EMERGING GROWTH FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 63,728,460
<INVESTMENTS-AT-VALUE> 99,729,500
<RECEIVABLES> 18,012
<ASSETS-OTHER> 2,595
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 99,750,107
<PAYABLE-FOR-SECURITIES> 561,249
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,978
<TOTAL-LIABILITIES> 702,227
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,963,748
<SHARES-COMMON-STOCK> 250,786
<SHARES-COMMON-PRIOR> 271,302
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 462,341
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,527,387
<NET-ASSETS> 6,953,476
<DIVIDEND-INCOME> 153
<INTEREST-INCOME> 37,294
<OTHER-INCOME> 0
<EXPENSES-NET> (168,723)
<NET-INVESTMENT-INCOME> (131,276)
<REALIZED-GAINS-CURRENT> 619,623
<APPREC-INCREASE-CURRENT> 70,669
<NET-CHANGE-FROM-OPS> 559,016
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (72,730)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 105,037
<NUMBER-OF-SHARES-REDEEMED> (128,181)
<SHARES-REINVESTED> 2,628
<NET-CHANGE-IN-ASSETS> (75,303)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (211,328)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (67,825)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (168,723)
<AVERAGE-NET-ASSETS> 7,003,885
<PER-SHARE-NAV-BEGIN> 25.69
<PER-SHARE-NII> (0.49)
<PER-SHARE-GAIN-APPREC> 2.78
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.25)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.73
<EXPENSE-RATIO> 2.46
<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 AMERICA HARTWELL EMERGING GROWTH FUND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 63,728,460
<INVESTMENTS-AT-VALUE> 99,729,500
<RECEIVABLES> 18,012
<ASSETS-OTHER> 2,595
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 99,750,107
<PAYABLE-FOR-SECURITIES> 561,249
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,978
<TOTAL-LIABILITIES> 702,227
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,349,900
<SHARES-COMMON-STOCK> 84,921
<SHARES-COMMON-PRIOR> 93,058
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 157,455
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 860,731
<NET-ASSETS> 2,368,087
<DIVIDEND-INCOME> 53
<INTEREST-INCOME> 12,310
<OTHER-INCOME> 0
<EXPENSES-NET> (56,302)
<NET-INVESTMENT-INCOME> (43,939)
<REALIZED-GAINS-CURRENT> 211,020
<APPREC-INCREASE-CURRENT> 24,067
<NET-CHANGE-FROM-OPS> 191,148
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (23,366)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,909
<NUMBER-OF-SHARES-REDEEMED> (41,894)
<SHARES-REINVESTED> 848
<NET-CHANGE-IN-ASSETS> (10,838)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (133,580)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (22,738)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (56,302)
<AVERAGE-NET-ASSETS> 2,345,643
<PER-SHARE-NAV-BEGIN> 25.8
<PER-SHARE-NII> (0.50)
<PER-SHARE-GAIN-APPREC> 2.84
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.25)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.89
<EXPENSE-RATIO> 2.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
