SUPPLEMENT TO THE PROSPECTUSES AND
STATEMENTS OF ADDITIONAL INFORMATION OF
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC., 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 GOVERNMENT SECURITIES FUND, KEYSTONE INTERMEDIATE
TERM BOND FUND, KEYSTONE OMEGA FUND, KEYSTONE SMALL COMPANY GROWTH FUND II,
KEYSTONE STRATEGIC DEVELOPMENT FUND, KEYSTONE STRATEGIC INCOME FUND, KEYSTONE
STATE TAX FREE FUND, KEYSTONE STATE TAX FREE FUND - SERIES II, KEYSTONE TAX FREE
INCOME FUND, AND KEYSTONE WORLD BOND FUND (EACH A "FUND"; COLLECTIVELY, THE
"FUNDS")
First Union Corporation has entered into an Agreement and Plan of
Acquisition and Merger with Keystone Investments, Inc. ("Keystone"), pursuant to
which Keystone will be merged with and into a subsidiary of First Union National
Bank of North Carolina (the "Merger"). The surviving corporation will be known
as Keystone Investments, Inc. Keystone Investment Management Company (the
"Adviser"), a wholly-owned subsidiary of Keystone Investments, Inc., is
investment adviser to each of the Funds. Keystone Management, Inc. (the
"Manager"), a wholly-owned subsidiary of the Adviser, is investment manager to
some of the Funds.
The proposed transaction may be deemed to cause an assignment, within
the meaning of the Investment Company Act of 1940 (the "1940 Act"), of the
following agreements: (i) with respect to Keystone Fund for Total Return,
Keystone Intermediate Term Bond Fund, Keystone Omega Fund, Keystone Strategic
Income Fund and Keystone Tax Free Income Fund, the Investment Advisory Agreement
between the Adviser and the Manager and the Investment Management Agreement
between the Manager and the Funds; (ii) with respect to Keystone America
Hartwell Emerging Growth Fund, Inc., Keystone Global Opportunities Fund and
Keystone Strategic Development Fund, the Investment Advisory and Management
Agreement between the Adviser and the Funds and Subinvestment Advisory
Agreements between the Adviser and certain subadvisors; and (iii) with respect
to each of the other Funds, the Investment Advisory and Management Agreement
between the Adviser and the Funds. Accordingly, the completion of the
transaction is contingent upon, among other things, the approval of the Funds'
shareholders of (i) a new investment advisory agreement between the Funds and
the Adviser; (ii) a new subadvisory agreement between the Adviser and Credit
Lyonnais International Asset Management, North America with respect to Keystone
Global Opportunities Fund; (iii) a new subadvisory agreement between the Adviser
and J.M. Hartwell Limited Partnership with respect to Keystone America Hartwell
Emerging Growth Fund, Inc.; and (iv) a new subadvisory agreement between the
Adviser and EquitiLink International Management Limited with respect to Keystone
Strategic Development Fund. The Funds' Trustees/Directors have approved the
terms of such 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 such agreements. The meeting is expected to be held in
December 1996. The proposed new investment advisory agreements and the proposed
new subadvisory agreements have terms, including investment advisory fees
payable thereunder, that are substantially 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
Funds and Keystone Investment Distributors, Inc. ("KID"), a wholly-owned
subsidiary of the Adviser. As a result, the Funds' Trustees/Directors have
approved the following agreements, subject to the completion of the Merger: (i)
a principal underwriting agreement with Evergreen Funds Distributor, Inc.
("EFD") and each of the Funds; (ii) a marketing support agreement between KID
and EFD with respect to each Fund; and (iii) a subadministration agreement
between the Adviser and EFD with respect to each Fund. EFD is a wholly-owned
subsidiary of Furman Selz LLC. It is expected that on or about January 2, 1997,
Furman Selz LLC will transfer EFD, and its related services, to BISYS Group,
Inc. ("BISYS") (the "Transfer"). The Funds' Trustees/Directors have also
approved, subject to completion of the Transfer: (i) a principal underwriting
agreement with EFD and each of the Funds; (ii) a marketing support agreement
between KID and EFD with respect to each Fund; and (iii) a subadministration
agreement between the Adviser and BISYS with respect to each Fund. The terms of
such agreements are substantially identical to the terms of the agreements to be
executed upon completion of the Merger.
First Union National Bank of North Carolina is a wholly-owned
subsidiary of First Union Corporation. Subject to a number of conditions being
met, it is currently anticipated that the Merger will take place on or around
December 23, 1996. Thereafter, Keystone Investments, Inc. is expected to be a
subsidiary of First Union National Bank of North Carolina.
September 13, 1996
