<PAGE>
SUPPLEMENT TO THE PROSPECTUSES
OF
KEYSTONE BALANCED FUND II, KEYSTONE CAPITAL PRESERVATION AND INCOME FUND,
KEYSTONE FUND OF THE AMERICAS, KEYSTONE FUND FOR TOTAL RETURN, KEYSTONE GLOBAL
OPPORTUNITIES FUND, KEYSTONE GOVERNMENT SECURITIES FUND, KEYSTONE AMERICA
HARTWELL EMERGING GROWTH FUND, INC., KEYSTONE INTERMEDIATE TERM BOND FUND,
KEYSTONE LIQUID TRUST, KEYSTONE OMEGA FUND, 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, AND KEYSTONE
WORLD BOND FUND (EACH A "FUND," COLLECTIVELY, THE "FUNDS")
The prospectus of each of the above-referenced Funds is hereby supplemented
as follows:
On December 11, 1996, Keystone Investments, Inc. ("Keystone Investments"),
and indirectly each of its subsidiaries, including Keystone Investment
Management Company ("Keystone"), each Fund's investment adviser, were acquired
(the "Acquisition") by First Union National Bank of North Carolina ("FUNB"), a
wholly-owned subsidiary of First Union Corporation ("First Union"). Keystone
Investments was acquired by FUNB by merger into a wholly-owned subsidiary of
FUNB, which entity then assumed the name "Keystone Investments, Inc." and
succeeded to the business of Keystone Investments. Contemporaneously with the
Acquisition, each Fund entered into a new investment advisory agreement with
Keystone and into a principal underwriting agreement with Evergreen Keystone
Distributor, Inc. (formerly Evergreen Funds Distributor, Inc.) ("EKD"), a
wholly-owned subsidiary of Furman Selz LLC ("Furman Selz"). In addition,
Keystone America Hartwell Emerging Growth Fund, Inc. and Keystone Global
Opportunities Fund, each entered into a new sub-investment advisory agreement
with its respective sub-adviser. The new investment advisory agreements and
the new sub-investment advisory agreements were approved by the shareholders
of each Fund on December 9, 1996, and became effective on December 11, 1996.
As a result of the above transactions, Keystone Management, Inc. ("Keystone
Management"), which, prior to the Acquisition, acted as investment manager to
certain of the Funds, no longer acts as such to any of the Funds. Keystone
currently provides each Fund with all the services that may previously have
been provided by Keystone Management. The fee rate paid by each Fund for the
services provided by Keystone and its affiliates has not changed as a result
of the Acquisition.
Keystone Investments and each of its subsidiaries, including Keystone, are
now indirectly owned by First Union. First Union is headquartered in
Charlotte, North Carolina, and had $133.9 billion in consolidated assets as of
September 30, 1996. First Union and its subsidiaries provide a broad range of
financial services to individuals and businesses throughout the United States.
The Capital Management Group of FUNB ("CMG"), together with Lieber & Company
and Evergreen Asset Management Corp. ("Evergreen Asset"), wholly-owned
subsidiaries of FUNB, manage or otherwise oversee the investment of over $50
billion in assets belonging to a wide range of clients, including the
Evergreen Family of Funds.
EKD, which is not affiliated with First Union, is now each Fund's principal
underwriter (the "Principal Underwriter"). EKD replaces Evergreen Keystone
Investment Services, Inc. (formerly Keystone Investment Distributors Company)
("EKIS") as the Funds' principal underwriter. EKIS may no longer act as
principal underwriter of the Funds due to regulatory restrictions imposed by
the Glass-Steagall Act upon national banks such as FUNB and their affiliates,
that prohibit such entities from acting as the underwriters of mutual fund
shares. While EKIS may no longer act as principal underwriter of the Funds as
discussed above, EKIS may continue to receive compensation from such Funds or
the Principal Underwriter in respect of underwriting and distribution services
performed prior to the termination of EKIS as principal underwriter. In
addition, EKIS may also be compensated by the Principal Underwriter for the
provision of certain marketing support services to the Principal Underwriter
at an annual rate of up to .75% of the average daily net assets of each Fund,
subject to certain restrictions.
Furman Selz will provide personnel to serve as officers of the Funds, and
certain administrative services to the Funds pursuant to a sub-administration
agreement under which it will receive from Keystone an annual fee at the
maximum annual rate of .01% of the average daily net assets of each Fund. Both
EKD and Furman Selz are located at 230 Park Avenue, New York, New York 10169.
It is expected that on or about January 2, 1997, Furman Selz will transfer
EKD, and its related mutual fund distribution and administration business, to
BISYS Group, Inc. ("BISYS"). At that time, BISYS will succeed as sub-
administrator to each of the Funds. It is not expected that the acquisition of
the mutual fund distribution and administration business by BISYS will affect
the services currently provided by EKD or Furman Selz.
CERTAIN OTHER CHANGES
In connection with the Acquisition described above, the following changes
have also occurred or will occur with respect to each Fund:
o The name of Keystone Investor Resource Center, Inc., each Fund's transfer
and dividend disbursing agent, has been changed to Evergreen Keystone
Service Company. It is not expected that the Acquisition or the change of
name will have any effect on the services provided.
o It is expected that, effective January 1, 1997, the sales loads and
contingent deferred sales charges on each Fund's Class A and Class B
shares will be adjusted. Please see your broker for further information.
KEYSTONE FUND FOR TOTAL RETURN, KEYSTONE GLOBAL OPPORTUNITIES FUND, KEYSTONE
OMEGA FUND, KEYSTONE SMALL COMPANY GROWTH FUND II, AND KEYSTONE STRATEGIC
INCOME FUND ONLY
Effective January 1, 1997, each of these Funds will offer Class Y shares.
Class Y shares bear no distribution or shareholder servicing expenses. Class Y
shares are only available to (i) persons who at or prior to December 31, 1994,
owned shares in a mutual fund managed by Evergreen Asset, (ii) certain
institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates.
KEYSTONE STATE TAX FREE FUND AND KEYSTONE STATE TAX FREE FUND - SERIES II, ONLY
The names of Keystone California Insured Tax Free Fund and Keystone New York
Insured Tax Free Fund have been changed to Keystone California Tax Free Fund
and Keystone New York Tax Free Fund, respectively.
KEYSTONE SMALL COMPANY GROWTH FUND II, ONLY
J. Gary Craven is now the Fund's Portfolio Manager. Mr. Craven is currently
a Keystone Senior Vice President and Group Leader for the small cap equity
area. Mr. Craven has been an investment professional since 1987.
EFFECTS OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase
of shares of such an investment company upon the order of its customer.
Keystone and its affiliates, since they are direct or indirect subsidiaries of
FUNB, are subject to and in compliance with the aforementioned laws and
regulations. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from accepting certain payments from the Fund, or
should Congress relax current restrictions on depository institutions, the
Boards of Trustees* will consider what action, if any, is appropriate.
- ----------
*The term "Trustees" includes the Directors of Keystone American Hartwell
Emerging Growth Fund, Inc.
December 11, 1996
AMER-SK3
<PAGE>
SUPPLEMENT TO THE STATEMENTS OF ADDITIONAL INFORMATION
OF
KEYSTONE BALANCED FUND II, KEYSTONE CAPITAL PRESERVATION AND INCOME
FUND, KEYSTONE FUND OF THE AMERICAS, KEYSTONE FUND FOR TOTAL RETURN,
KEYSTONE GLOBAL OPPORTUNITIES FUND, KEYSTONE GOVERNMENT SECURITIES
FUND, KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC., KEYSTONE
INTERMEDIATE TERM BOND FUND, KEYSTONE LIQUID TRUST, KEYSTONE OMEGA
FUND, 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, AND KEYSTONE WORLD BOND
FUND (EACH A "FUND," COLLECTIVELY, THE "FUNDS")
The statement of additional information of each of the above-referenced
Funds is hereby supplemented as follows:
On December 11, 1996, Keystone Investments, Inc. ("Keystone
Investments"), and indirectly each of its subsidiaries, including Keystone
Investment Management Company ("Keystone"), each Fund's investment adviser, were
acquired (the "Acquisition") by First Union National Bank of North Carolina
("FUNB"), a wholly-owned subsidiary of First Union Corporation ("First Union").
Keystone Investments was acquired by FUNB by merger into a wholly-owned
subsidiary of FUNB, which entity then assumed the name "Keystone Investments,
Inc." and succeeded to the business of Keystone Investments. Contemporaneously
with the Acquisition, each Fund entered into a new investment advisory agreement
with Keystone and into a principal underwriting agreement with Evergreen
Keystone Distributor, Inc. (formerly Evergreen Funds Distributor, Inc.) ("EKD"),
a wholly-owned subsidiary of Furman Selz LLC ("Furman Selz"). In addition,
Keystone America Hartwell Emerging Growth Fund, Inc. and Keystone Global
Opportunities Fund each entered into a new sub-investment advisory agreement
with its respective sub-adviser. The new investment advisory agreements and the
new sub-investment advisory agreements were approved by the shareholders of each
Fund on December 9, 1996, and became effective on December 11, 1996. As a result
of the above transactions, Keystone Management, Inc. ("Keystone Management"),
which prior to the Acquisition acted as investment manager to certain of the
Funds, no longer acts as such to any of the Funds. Keystone currently provides
each Fund with all the services that may previously have been provided by
Keystone Management. The fee rate paid by each Fund for the services provided by
Keystone and its affiliates has not changed as a result of the Acquisition.
Keystone Investments and each of its subsidiaries, including Keystone,
are now indirectly owned by First Union. First Union is headquartered in
Charlotte, North Carolina, and had $133.9 billion in consolidated assets as of
September 30, 1996. First Union and its subsidiaries provide a broad range of
financial services to individuals and businesses throughout the United States.
The Capital Management Group of FUNB, together with Lieber & Company and
Evergreen Asset Management Corp., wholly-owned subsidiaries of FUNB, manage or
otherwise oversee the investment of over $50 billion in assets belonging to a
wide range of clients, including the Evergreen Family of Funds.
EKD, which is not affiliated with First Union, is now each Fund's
principal underwriter (the "Principal Underwriter"). EKD replaces Evergreen
Keystone Investment Services, Inc. (formerly Keystone Investment Distributors
Company) ("EKIS") as the Funds' principal underwriter. EKIS may no longer act as
principal underwriter of the Funds due to regulatory restrictions imposed by the
Glass-Steagall Act upon national banks such as FUNB and their affiliates, that
prohibit such entities from acting as the underwriters of mutual fund shares.
While EKIS may no longer act as principal underwriter of the Funds as discussed
above, EKIS may continue to receive compensation from such Funds or the
Principal Underwriter in respect of underwriting and distribution services
performed prior to the termination of EKIS as principal underwriter. In
addition, EKIS may also be compensated by the Principal Underwriter for the
provision of certain marketing support services to the Principal Underwriter at
an annual rate of up to .75% of the average daily net assets of each Fund,
subject to certain restrictions.
Furman Selz will provide personnel to serve as officers of the Funds,
and certain administrative services to the Funds pursuant to a
sub-administration agreement under which it will receive from Keystone an annual
fee at the maximum annual rate of .01% of the average daily net assets of each
Fund. Both EKD and Furman Selz are located at 230 Park Avenue, New York, New
York 10169.
It is expected that on or about January 2, 1997, Furman Selz will
transfer EKD, and its related mutual fund distribution and administration
business, to BISYS Group, Inc. ("BISYS"). At that time, BISYS will succeed as
sub-administrator to each of the Funds. It is not expected that the acquisition
of the mutual fund distribution and administration business by BISYS will affect
the services currently provided by EKD or Furman Selz.
TRUSTEES(1) AND OFFICERS
The current Trustees and officers of each Fund, their addresses, their
principal occupations and some of their affiliations over the last five years
are as follows:
FREDERICK AMLING: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Professor, Finance Department, George
Washington University; President, Amling & Company
(investment advice); and former Member, Board of
Advisers, Credito Emilano (banking).
LAURENCE B. ASHKIN: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Trustee of all the Evergreen funds other than
Evergreen Investment Trust; real estate developer
and construction consultant; and President of
Centrum Equities and Centrum Properties, Inc.
CHARLES A. AUSTIN III: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Investment Counselor to Appleton Partners,
Inc.; and former Managing Director, Seaward
Management Corporation (invest ment advice).
FOSTER BAM: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Trustee of all the Evergreen funds other than
Evergreen Investment Trust; Partner in the law firm
of Cummings & Lockwood; Director, Symmetrix, Inc.
(sulphur company) and Pet Practice, Inc. (veterinary
services); and former Director, Chartwell Group Ltd.
(manufacturer of office furnishings and
accessories), Waste Disposal Equipment Acquisition
Corporation and Rehabilitation Corporation of
America (rehabilitation hospitals).
*GEORGE S. BISSELL: Chairman of the Board and Trustee of the Funds;
Chairman of the Board and Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; 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, Director
and Chief Executive Officer of Keystone Investments.
EDWIN D. CAMPBELL: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Principal, Padanaram Associates, Inc.; and
former Executive Director, Coalition of Essential
Schools, Brown University.
CHARLES F. CHAPIN: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; and former Director, Peoples Bank (Charlotte,
NC).
- --------
(1) The term Trustees includes the Directors of Keystone America Hartwell
Emerging Growth Fund, Inc.
K. DUN GIFFORD: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families 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 consulting); and former
Director, Keystone Investments and Keystone.
JAMES S. HOWELL: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Chairman and Trustee of the Evergreen funds;
former Chairman of the Distribution Foundation for
the Carolinas; and former Vice President of Lance
Inc. (food manufacturing).
LEROY KEITH, JR.: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families 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.: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Chairman and Of Counsel, Keyser, Crowley &
Meub, P.C.; Member, Governor's (VT) Council of
Economic Advisers; Chair man 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, Proctor Bank and Green Mountain Bank.
GERALD M. MCDONELL: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Trustee of the Evergreen funds; and Sales
Representative with Nucor-Yamoto, Inc. (steel
producer).
THOMAS L. MCVERRY: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Trustee of the Evergreen funds; former Vice
President and Director of Rexham Corporation; and
former Director of Carolina Cooperative Federal
Credit Union.
*WILLIAM WALT PETTIT: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Trustee of the Evergreen funds; and Partner
in the law firm of Holcomb and Pettit, P.A.
DAVID M. RICHARDSON: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Vice Chair and former Executive Vice
President, DHR International, Inc. (executive
recruitment); former Senior Vice President, Boyden
International Inc. (executive recruitment); and
Director, Commerce and Industry Association of New
Jersey, 411 International, Inc., and J&M Cumming
Paper Co.
RUSSELL A. SALTON, III MD: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Trustee of the Evergreen funds; Medical
Director, U.S. Health Care/Aetna Health Services;
former Managed Health Care Consultant; and former
President, Primary Physician Care.
MICHAEL S. SCOFIELD: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Trustee of the Evergreen funds; and Attorney,
Law Offices of Michael S. Scofield.
RICHARD J. SHIMA: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families 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: Trustee of the Funds; Trustee or Director of all
other funds in the Keystone Investments Families of
Funds; Partner, Farrell, Fritz, Caemmerer, Cleary,
Barnosky & Armentano, P.C.; Adjunct Professor of Law
and former Associate Dean, St. John's University
School of Law; Adjunct Professor of Law, Touro
College School of Law; and former President, Nassau
County Bar Association.
JOHN J. PILEGGI: President and Treasurer of the Funds; President and
Treasurer of all other funds in the Keystone
Investments Families of Funds; President and
Treasurer of the Evergreen funds; Senior Managing
Director, Furman Selz LLC since 1992; and Managing
Director, 1984 to 1992; 230 Park Avenue, Suite 910,
New York, NY.
GEORGE O. MARTINEZ: Secretary of the Funds; Secretary of all other funds
in the Keystone Investments Families of Funds; and
Senior Vice President and Director of Administration
and Regulatory Services, BISYS Fund Services; 3435
Stelzer Road, Columbus, Ohio.
* This person may be considered an "interested person" of each Fund within the
meaning of the 1940 Act.
After the transfer of EKD and its related mutual fund distribution and
administration business to BISYS, it is expected that all of the officers of the
Funds will be officers and/or employees of BISYS.
CERTAIN OTHER CHANGES
In connection with the Acquisition described above, the following
changes have also occurred or will occur with respect to each Fund:
o The name of Keystone Investor Resource Center, Inc., each Fund's transfer
and dividend disbursing agent, has been changed to Evergreen Keystone
Service Company. It is not expected that the Acquisition or the change of
name will have any effect on the services provided.
o It is expected that, effective January 1, 1997, the sales loads and
contingent deferred sales charges on each Fund's Class A and Class B shares
will be adjusted. Please see your broker for further information.
KEYSTONE STATE TAX FREE FUND AND KEYSTONE STATE TAX FREE FUND - SERIES II, ONLY
The names of Keystone California Insured Tax Free Fund and Keystone New
York Insured Tax Free Fund have been changed to Keystone California Tax Free
Fund and Keystone New York Tax Free Fund, respectively.
EFFECTS OF BANKING LAWS
The Glass-Steagall Act currently limits the ability of depository
institutions (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 Boards of Trustees will consider
what action, if any, is appropriate.
The Glass-Steagall Act and other banking laws and regulations also
presently prohibit member banks of the Federal Reserve System ("Member Banks")
or their non-bank affiliates from sponsoring, organizing, controlling, or
distributing the shares of registered open-end investment companies such as the
Funds. Such laws and regulations also prohibit banks from issuing, underwriting
or distributing securities in general. However, under the Glass-Steagall Act
and such other laws and regulations, a Member Bank or an affiliate thereof may
act as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Keystone
and its affiliates, since they are direct or indirect subsidiaries of FUNB, are
subject to and in compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in Keystone Investments or its affiliates
being prevented from continuing to perform the services required under the
investment advisory contract or from acting as agent in connection with the
purchase of shares of a fund by its customers. In such event, it is expected
that the Trustees would identify, and call upon each Fund's shareholders to
approve, a new investment adviser. If this were to occur, it is not anticipated
that the shareholders of any Fund would suffer any adverse financial
consequences.
December 11, 1996
