As filed with the Securities and Exchange Commission Feb. 27, 1995.
File Nos. 33-28183
811-1600
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. 24 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 28 |X|
KEYSTONE AMERICA OMEGA FUND
(Exact Name of Registrant as Specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(617) 338-3200
Rosemary D. Van Antwerp, Esq., 200 Berkeley Street,
Boston, MA 02116-5034
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|_| on (date) pursuant to paragraph (b) of Rule 485
|X| 60 days after filing pursuant to paragraph (a)(i) of Rule 485
|_| on (date) pursuant to paragraph (a)(i) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
|_| on (date) pursuant to paragraph (a)(ii) of Rule 485
The Registrant has elected to register an indefinite number of shares of
its common stock pursuant to Rule 24f-2 under the Investment Company Act of
1940. A Rule 24f-2 Notice for Registrant's most recent fiscal year was filed on
January 26, 1995.
By this Post-Effective Amendment Keystone America Omega Fund (the "Trust")
expressly adopts as its own the Registration Statement (as appropriately
modified) under the Securities Act of 1933 (the "1933 Act") of Keystone America
Omega Fund, Inc. (the "Company"), the Trust's predecessor registrant, for
purposes of the 1933 Act and the Securities Exchange Act of 1934, and the Trust
also adopts as its own the Company's notification and Registration Statement
under the Investment Company Act of 1940 (as appropriately modified).
<PAGE>
KEYSTONE AMERICA OMEGA FUND
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 24
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 24 to Registration Statement
No. 33-28183/811-1600 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 24(b)
Financial Statements
Independent Auditors' Report
Listing of Exhibits
PART C - OTHER INFORMATION - ITEMS 25-32 and SIGNATURE PAGES
Number of Holders of Securities
Indemnification
Business and Other Connections
Principal Underwriter
Location of Accounts and Records
Signatures
Exhibits (including Powers of Attorney)
<PAGE>
KEYSTONE AMERICA OMEGA FUND
Cross-Reference Sheet pursuant to Rules 404 and 495 under the Securities Act of
1933.
Items in
Part A of
Form N-1A Prospectus Caption
- --------- ------------------
1 Cover Page
2 Fee Table
3 Financial Highlights
Performance Data
4 Cover Page
The Fund
Investment Objective and Policies
Investment Restrictions
Risk Factors
5 Fund Management and Expenses
Additional Information
5A Not Applicable
6 The Fund
Dividends and Taxes
Fund Shares
Shareholder Services
Pricing Shares
7 How to Buy Shares
Distribution Plan
Shareholder Services
8 How to Redeem Shares
9 Not Applicable
Items in
Part B of
Form N-1A Statement of Additional Information Caption
- --------- -------------------------------------------
10 Cover Page
11 Table of Contents
<PAGE>
Cross-Reference Sheet continued.
Items in
Part B of
Form N-1A Statement of Additional Information Caption
- --------- -------------------------------------------
12 Not Applicable
13 The Fund
Investment Restrictions
Brokerage
Appendix
14 Trustees and Officers
15 Additional Information
16 Investment Manager
Investment Adviser
Principal Underwriter
Distribution Plans
Sales Charges
Additional Information
17 Brokerage
18 Declaration of Trust
19 Valuation of Securities
Distribution Plan
Redemptions in Kind
20 Distributions and Taxes
21 Principal Underwriter
22 Standardized Total Return and Yield
Quotations
23 Financial Statements
<PAGE>
KEYSTONE AMERICA OMEGA FUND
Part A
PROSPECTUS
<PAGE>
KEYSTONE AMERICA OMEGA FUND
PROSPECTUS APRIL 28, 1995
Keystone America Omega Fund (the "Fund") is a diversified, open-end management
investment company that seeks maximum capital growth by investing in a varied
portfolio consisting primarily of common stocks and securities convertible into
common stocks.
The Fund offers three classes of shares. Information on share classes and
their fee and sales charge structures may be found in the Fund's fee table,
"Alternative Sales Options," "Contingent Deferred Sales Charge and Waiver of
Sales Charges," "Distribution Plans," and "Fund Shares."
This prospectus concisely states information about the Fund that you should
know before investing. Please read it and retain it for future reference.
Additional information about the Fund is con-
tained in a statement of additional information and accompanying appendix dated
April 28, 1995, 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.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
KEYSTONE AMERICA OMEGA FUND
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116-5034
CALL TOLL FREE 1-800-343-2898
TABLE OF CONTENTS
Page
Fee Table 2
Financial Highlights 3
The Fund 6
Investment Objective and Policies 6
Investment Restrictions 7
Risk Factors 7
Pricing Shares 9
Dividends and Taxes 9
Fund Management and Expenses 10
How to Buy Shares 13
Alternative Sales Options 13
Calculation of Contingent Deferred
Sales Charge and Waiver of Sales Charges 16
Distribution Plans 17
How to Redeem Shares 18
Shareholder Services 20
Performance Data 22
Fund Shares 22
Additional Information 23
Additional Investment Information (i)
Exhibit A A-1
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FEE TABLE
KEYSTONE AMERICA OMEGA FUND
The purpose of this fee table is to assist investors in understanding the
costs and expenses that an investor in each class will bear directly or
indirectly. For more complete descriptions of the various costs and expenses,
see the following sections of this prospectus: "Fund Management and Expenses";
"How to Buy Shares"; "Distribution Plans"; and "Shareholder Services."
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FRONT END BACK END LEVEL LOAD
SHAREHOLDER TRANSACTION EXPENSES LOAD OPTION LOAD OPTION<F1> OPTION<F2>
--------- --------- ---------
<S> <C> <C> <C>
Sales Charge ...................................... 5.75%<F3> None None
(as a percentage of offering price)
Contingent Deferred Sales Charge .................. 0.00%<F4> 3.00% in the first year 1.00% in the first
(as a percentage of the lesser of cost or market declining to 1.00% in year and 0.00%
value of shares redeemed) the fourth year and thereafter
0.00% thereafter
Exchange Fee (per exchange)<F5> .................... $10.00 $10.00 $10.00
ANNUAL FUND OPERATING EXPENSES<F6>
(as a percentage of average net assets)
Management Fees ................................... 0.75% 0.75% 0.75%
12b-1 Fees ........................................ 0.11% 1.00%<F7> 1.00%<F7>
Other Expenses .................................... 0.55% 0.55% 0.55%
---- ---- ----
Total Fund Operating Expenses ..................... 1.41% 2.30% 2.30%
---- ---- ----
---- ---- ----
<CAPTION>
EXAMPLES<F8> 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 ............................................................. $ 71.00 $100.00 $130.00 $217.00
Class B ............................................................. $ 53.00 $ 92.00 $123.00 N/A
Class C ............................................................. $ 33.00 $ 72.00 $123.00 $264.00
You would pay the following expenses on a $1,000 investment,
assuming no redemption at the end of each period:
Class A ............................................................. $ 71.00 $100.00 $130.00 $217.00
Class B ............................................................. $ 23.00 $ 72.00 $123.00 N/A
Class C ............................................................. $ 23.00 $ 72.00 $123.00 $264.00
AMOUNTS SHOWN IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- ---------
<FN>
<F1>Class B Shares convert tax free to Class A shares after seven calendar
years.
<F2>Class C shares are available only through dealers who have entered into
special distribution agreements with Keystone Distributors, Inc., the Fund's
principal underwriter.
<F3>The sales charge applied to purchases of Class A shares declines as the
amount invested increases. See "Sales Charges."
<F4>Purchases of Class A shares in the amount of $1,000,000 or more are not
subject to a sales charge, but may be subject to a contingent deferred sales
charge of 0.25%. See the "Calculation of Contingent Deferred Sales Charge
and Waiver of Sales Charges" section of this prospectus for an explanation
of the charge.
<F5>There is no fee for exchange orders received by the Fund directly from a
shareholder over the Keystone Automated Response Line ("KARL"). (For a
description of KARL, see "Shareholder Services.")
<F6>Expense ratios are for the Fund's fiscal year ended December 31, 1994.
<F7>Long term shareholders may pay more than the equivalent of the maximum
front end sales charges permitted by the National Association of
Securities Dealers, Inc. ("NASD").
<F8>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>
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
The following table contains significant financial information with respect
to the Fund and the information in years 1989 to 1994 has been audited by KPMG
Peat Marwick LLP, the Fund's independent auditors. The financial highlights for
the years ended December 31, 1985 to 1988 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 auditors' report, in the Fund's Annual Report. The Fund's financial
statements, related notes, and auditors' report are included in the statement of
additional information. Additional information about the Fund's performance is
contained in its Annual Report, which will be made available upon request and
without charge.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------
1994 1993 1992(C) 1991 1990 1989 1988 1987 1986 1985
---- ---- ------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $17.11 $15.84 $17.68 $13.37 $16.03 $13.66 $12.08 $13.44 $14.12 $10.78
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from
investment
operations
Investment income
(loss)--net .... 0.04 (0.07) 0.00 (0.04) 0.11 0.17 0.30<F4> 0.02 0.23 0.28
Net gains (losses)
on investments . (1.00) 3.07 0.39 6.92 (0.39) 4.30 1.40 1.11 1.49 3.18
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from
investment
operations ... (0.96) 3.00 0.39 6.88 (0.28) 4.47 1.70 1.13 1.72 3.46
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions
Dividends from
investment
income--net .... 0.00 0.00 0.00 (0.02) (0.25) (0.20) (0.12) (0.24) (0.28) (0.12)
Distribution in
excess of
investment
income--net<F1> 0.00 0.00 0.00 (0.05) (0.04) 0.00 0.00 0.00 0.00 0.00
Distribution from
capital gains .. (0.61) (1.73) (2.23) (2.50) (2.09) (1.90) 0.00 (2.25) (2.12) 0.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
distributions .... (0.61) (1.73) (2.23) (2.57) (2.38) (2.10) (0.12) (2.49) (2.40) (0.12)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF YEAR ...... $15.54 $17.11 $15.84 $17.68 $13.37 $16.03 $13.66 $12.08 $13.44 $14.12
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN<F2> (5.66%) 19.33% 4.00% 54.49% (2.38%) 33.05% 14.05% 8.27% 12.07% 33.29%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Operating and
management
expenses ..... 1.41% 1.51% 1.52% 1.57% 1.73% 1.84% 1.78% 1.99% 1.47% 1.65%
Investment
income (loss)
-- net ....... 0.27% (0.48%) (0.01%) (0.31%) 0.70% 1.03% 2.22% 0.13% 1.60% 2.26%
Portfolio turnover
rate ......... 137% 162% 176% 115% 108% 77% 84% 106% 178% 188%
Net assets, end of
year (thousands) $99,569 $90,404 $73,144 $58,671 $38,531 $39,682 $33,951<F3> $30,246<F3> $31,812<F3> $31,036<F3>
- ---------
<FN>
<F1>Effective January 1, 1993, the Fund adopted Statement of Position 93-2:
"Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions by Investment Companies".
As a result, distribution amounts exceeding book basis net investment income
(or tax basis net income on a temporary basis) are presented as
distributions in excess of investment income -- net. Similarly, capital gain
distributions in excess of book basis capital gains (or tax basis capital
gains on a temporary basis) are presented as "Distributions in excess of
capital gains". For the fiscal years ended December 31, 1992, 1991, and
1990, distributions, if any, in excess of book basis net income were charged
to paid-in capital.
<F2>Excluding applicable sales charges.
<F3>Calculated on average shares outstanding.
<F4>Includes $0.17 per share relating to a special non-recurring distribution
from INCO Limited.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
The following table contains significant financial information with respect
to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. The table appears in the Fund's Annual Report and should
be read in conjunction with the Fund's financial statements and related notes,
which also appear, together with the auditors' report, in the Fund's Annual
Report. The Fund's financial statements, related notes and auditors' report are
included in the statement of additional information. Additional information
about the Fund's performance is contained in its Annual Report which will be
made available upon request and without charge.
<TABLE>
<CAPTION>
AUGUST 2, 1993
YEAR (DATE OF INITIAL
ENDED PUBLIC OFFERING) TO
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ....... $17.06 $17.29
----- ------
Income from investment operations
Investment income (loss)--net .............. (0.06) (0.05)
Net gains (losses) on investments .......... (1.05) 1.55
----- ------
Total from investment operations ......... (1.11) 1.50
----- ------
Less distributions
Distributions from capital gains ........... (0.61) (1.73)
----- ------
Total distributions ...................... (0.61) (1.73)
----- ------
NET ASSET VALUE, END OF PERIOD ............. $15.34 $17.06
----- ------
----- ------
TOTAL RETURN<F2> ........................... (6.57%) 9.02%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Operating and management expenses ........ 2.30% 2.57%<F1>
Investment income (loss)--net ............ (0.58%) (1.73%)<F1>
Portfolio turnover rate .................... 137% 162%
Net assets, end of period (thousands) ...... $32,266 $7,423
<FN>
<F1>Annualized.
<F2>Excluding applicable sales charges.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
The following table contains significant financial information with respect
to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. The table appears in the Fund's Annual Report and should
be read in conjunction with the Fund's financial statements and related notes,
which also appear, together with the auditors' report, in the Fund's Annual
Report. The Fund's financial statements, related notes and auditors' report are
included in the statement of additional information. Additional information
about the Fund's performance is contained in its Annual Report which will be
made available upon request and without charge.
<TABLE>
<CAPTION>
AUGUST 2, 1993
YEAR (DATE OF INITIAL
ENDED PUBLIC OFFERING) TO
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........ $17.09 $17.29
------ ------
Income from investment operations
Investment income (loss)--net ............... (0.07) (0.06)
Net gains (losses) on investments ........... (1.04) 1.59
------ ------
Total from investment operations .......... (1.11) 1.53
------ ------
Less distributions
Distributions from capital gains ............ (0.61) (1.73)
------ ------
Total distributions ....................... (0.61) (1.73)
------ ------
NET ASSET VALUE, END OF PERIOD .............. $15.37 $17.09
------ ------
------ ------
TOTAL RETURN<F2> ............................ (6.56%) 9.20%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Operating and management expenses ......... 2.30% 2.48%<F1>
Investment income (loss)--net ............. (0.63%) (1.64%)<F1>
Portfolio turnover rate ..................... 137% 162%
Net assets, end of period (thousands) ....... $9,900 $3,620
<FN>
<F1>Annualized.
<F2>Excluding applicable sales charges.
</FN>
</TABLE>
<PAGE>
THE FUND
The Fund is an open-end, diversified management investment company commonly
known as a mutual fund. The Fund was reorganized as a Massachusetts business
trust on April , 1995. Originally, the Fund had been incorporated in
Massachusetts on February 8, 1968. The Fund is [one of twenty funds managed by
Keystone Management, Inc. ("Keystone Management"), the Fund's investment
manager, and] one of thirty funds advised by Keystone Custodian Funds, Inc.
("Keystone"), the Fund's investment adviser. [Keystone and Keystone Management
are, from time to time, collectively referred to as "Keystone."]
INVESTMENT OBJECTIVE AND POLICIES
PRINCIPAL INVESTMENTS
The Fund's investment objective is to seek maximum capital growth by investing
in a varied portfolio consisting primarily of common stocks and securities
convertible into common stocks.
The Fund pursues its objective by employing the techniques of the fully-
managed investment concept, meaning that Keystone will continuously review both
individual securities and relevant general conditions. Whenever, in the opinion
of Keystone, a security no longer seems to have the required characteristics, an
anticipated level of performance has been achieved, or other securities present
relatively greater opportunities for realizing the Fund's objective, appropriate
changes will be made in the Fund's portfolio. The Fund's equity position will be
changed as Keystone changes its evaluation of trends in general securities price
levels. Portfolio turnover rate will not be considered a limiting factor in the
execution of investment decisions.
In pursuing its objective, the Fund may also invest in foreign securities
issued by issuers located in developed countries as well as emerging markets
countries, including certain formerly communist 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 by the International Bank for
Reconstruction and Development ("World Bank").
OTHER ELIGIBLE SECURITIES
When Keystone deems it advisable, the Fund may, for temporary defensive
purposes, invest without limit in investment grade bonds or debentures rated by
Moody's Investors Service, Inc. ("Moody's") as BAA or better or by Standard &
Poor's Corporation ("S&P") as BBB or better or those having at least similar
quality in Keystone's judgment. Bonds that are rated BAA by Moody's are
considered to be medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and have speculative characteristics as
well. Debt rated BBB by S&P is regarded as having an adequate capacity to pay
interest and repay principal. While it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories. Under circumstances where
the Fund is investing for defensive purposes, it will not be pursuing its
investment objective.
The Fund may enter into repurchase and reverse repurchase agreements, invest
in master demand notes, lend portfolio securities, purchase and sell securities
and currencies on a when issued and delayed delivery basis and purchase or sell
securities on a forward commitment basis, write covered call and put options and
purchase call and put options to close out existing positions and may employ new
investment techniques with respect to such options. The Fund may also enter into
currency and other financial futures contracts and related options transactions
for hedging purposes and not for speculation, and may employ new investment
techniques with respect to such futures contracts and related options.
The Fund also may invest in non-convertible preferred stocks of companies
considered creditworthy and able to sustain dividend payments; and short-term
money market instruments maturing in one year or less. Such money market
instruments may be United States ("U.S.") government securities; certificates of
deposit in banks considered credit-worthy; or commercial paper of companies, the
bonds or debentures of which are investment grade. While these securities are
not without risk of price fluctuation or default, they are generally less
volatile than common stock.
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 net assets.
The Fund may invest in restricted securities, including securities eligible
for resale pursuant to Rule 144A under 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. Keystone determines the liquidity of the Fund's Rule 144A securities
in accordance with guidelines adopted by the Board of Trustees.
At the present time, the Fund cannot accurately predict exactly how the market
for Rule 144A securities will develop. A Rule 144A security that was readily
marketable upon purchase may subsequently become illiquid. In such an event, the
Board of Trustees will consider what action, if any, is appropriate.
For further information about the types of investments and investment
techniques available to the Fund, including the risks associated therewith see
the section of this prospectus entitled "Additional Investment Information" and
the statement of additional information.
There can, of course, be no assurance that the Fund will achieve its
investment objective.
NONFUNDAMENTAL NATURE OF INVESTMENT OBJECTIVE
The Fund's investment objective is nonfundamental and may be changed without
the vote of a majority of the shareholders. If the investment objective is
changed and a shareholder determines that the Fund is no longer an appropriate
investment, the shareholder may redeem his or her shares, but may be subject
to a contingent deferred sales charge upon redemption.
INVESTMENT RESTRICTIONS
The Fund has adopted the fundamental investment restrictions set forth below,
which may not be changed without the vote of a majority of the Fund's
outstanding shares, meaning 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. Unless otherwise stated, all references
to the Fund's assets are in terms of current market value.
The Fund may not do the following: (1) invest more than 5% of its total assets
in the securities of any one issuer, (2) borrow, unless, immediately after any
such borrowing, such borrowing and all other such borrowings and other
liabilities do not exceed one-third of the value of the Fund's total assets; and
(3) concentrate its investments in any particular industry.
RISK FACTORS
Investing in the Fund involves the risk common to investing in any security,
i.e., net asset value will fluctuate in response to changes in economic
conditions, interest rates and the market's perception of the underlying
portfolio securities of the Fund.
Investment in common stocks, particularly those having growth characteristics,
frequently involves greater risks (and possibly greater rewards) than investment
in other types of securities. Common stock prices tend to be more volatile and
companies having growth characteristics may sometimes be unproven.
By itself, the Fund does not constitute a balanced investment plan. The Fund
stresses providing growth of capital by investing in common stocks, debt
securities and rights and warrants. The yield of the Fund's portfolio securities
will fluctuate with changing market conditions. The Fund makes most sense for
those investors who can afford to ride out changes in the stock market because
it invests a substantial portion of its assets in common stocks.
Investments in foreign securities may involve more risk than investments 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; (9) interest and dividends on foreign securities may be subject to
withholding taxes in a foreign country that could result in a reduction of net
investment income available for distribution; and (10) to the extent the Fund
invests in securities of issuers located in the formerly communist countries of
Eastern Europe and the People's Republic of China, there is the risk that those
countries could convert back to a single economic structure.
Investing in securities of issuers in emerging market 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 market countries may also involve
exposure to national policies that may restrict investment by foreigners and
undeveloped legal systems governing private and foreign investments and private
property. The typically small size of the markets for securities issued by
companies in emerging markets countries and the possibility of a low or
nonexistent volume of trading in those securities may also result in a lack of
liquidity and in price volatility of those securities. Furthermore, investing in
securities of companies in the formerly communist countries of Eastern Europe
and the People's Republic of China involve additional risks to those associated
with investments in companies in non-formerly communist emerging markets
countries. Specifically, those countries could convert back to a single economic
system, and the claims of property owners prior to the expropriation by the
communist regime could be settled in favor of the former property owners, in
which case the Portfolio could lose its entire investment in those countries.
If and when the Fund invests in zero coupon bonds, the Fund does not expect to
have enough zero coupon bonds to have a material effect on dividends. The Fund
has undertaken to a state securities authority to disclose that zero coupon
securities pay no interest to holders prior to maturity, and the interest on
these securities is reported as income to the Fund and distributed to its
shareholders. These distributions must be made from the Fund's cash assets or,
if necessary, from the proceeds of sales of portfolio securities. The Fund will
not be able to purchase additional income producing securities with cash used to
make such distributions, and its current income ultimately may be reduced as a
result.
Past performance should not be considered representative of results for any
future period of time. Moreover, should many shareholders change from this Fund
to some other investment at about the same time, the Fund might have to sell
portfolio securities at a time when it would be disadvantageous to do so and at
a lower price than if such securities were held to maturity.
For additional information regarding the Fund's investments in securities of
newer and smaller companies and Rule 144A securities, see "Investment Objective
and Policies". For further information about the types of investments and
investment techniques available to the Fund, including the associated risks, see
"Additional Investment Information" and the statement of additional information.
PRICING SHARES
The net asset value of a Fund share is computed each day on which the New York
Stock Exchange (the "Exchange") is open as of the close of trading on the
Exchange (currently 4:00 p.m. Eastern time for the purpose of pricing fund
shares) except on days when changes in the value of the Fund's portfolio
securities do not affect the current net asset value of its shares. The Exchange
currently is closed on weekends, New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share of the Fund is arrived at by determining the value
of the Fund's assets, subtracting its liabilities and dividing the result by the
number of its shares outstanding.
For the purposes of calculating the net asset value of a Fund share on any
given day, securities traded on national securities exchanges or reported on the
National Association of Securities Dealers' Automated Quotation System
("NASDAQ") National Market are valued at the last sale price. If there were no
transactions on that day, securities will be valued at the mean of the closing
bid and asked prices or at such other value as shall be determined in good
faith, by or under the direction of the Fund's Board of Trustees, to be the fair
market value of such securities. Commercial paper is valued at cost, which
approximates market.
Other securities, including unlisted securities, are valued at the last
reported bid price if such prices are available. Prices for such securities are
considered to be unavailable if, for example, the securities are restricted
securities, or if there exists a "thin market" in the securities. In such
situations, the value is determined in good faith by or under the direction of
the Fund's Board of Trustees.
DIVIDENDS AND TAXES
The Fund has qualified and intends to qualify in the future as a regulated
investment company under the Internal Revenue Code (the "Code"). The Fund
qualifies if, among other things, it distributes to its shareholders at least
90% of its net investment income for its fiscal year. The Fund also intends to
make timely distributions, if necessary, sufficient in amount to avoid the
nondeductible 4% excise tax imposed on a regulated investment company to the
extent that it fails to distribute, with respect to each calendar year, at least
98% of its ordinary income for such calendar year and 98% of its net capital
gains for the one-year period ending October 31 of such calendar year. Any
taxable distributions would be (1) declared in October, November, or December to
shareholders of record in such a month, (2) paid by the following January 31,
and (3) includable in the taxable income of the shareholder for the year in
which the distributions were declared. If the Fund qualifies and if it
distributes all of its net investment income and net capital gains, if any, to
shareholders, it will be relieved of any federal income tax liability. The Fund
distributes all of its net investment income and net capital gains at least
annually. Because Class A shares bear most of the costs of distribution of such
shares through payment of a front end sales charge, while Class B and Class C
shares bear such expenses through a higher annual distribution fee, expenses
attributable to Class B shares and Class C shares will generally be higher, and
income distributions paid by the Fund with respect to Class A shares will
generally be greater than those paid with respect to Class B and Class C shares.
Shareholders receive Fund distributions in the form of Fund shares or, at the
shareholder's option, in cash. Such distributions may be reinvested at net asset
value without any sales charge. Dividends and distributions are taxable whether
or not they are reimbursed. Income dividends, and net short-term gains dividends
are taxable as ordinary income and net long-term gains are taxable as capital
gains regardless of how long the Fund's shares are held. If Fund shares held for
less than six months are sold at a loss, however, such loss will be treated for
tax purposes as a long-term capital loss to the extent of any long-term capital
gains dividends received. The Fund advises its shareholders annually as to the
federal tax status of all distributions made during the year.
FUND MANAGEMENT AND EXPENSES
BOARD OF TRUSTEES
Under Massachusetts law, the Fund's Board of Trustees has absolute and
exclusive control over the management and disposition of all assets of the Fund.
Subject to the authority of the Fund's Board of Trustees, Keystone, the Fund's
investment adviser, provides investment advice, management and administrative
services to the Fund.
INVESTMENT MANAGER
Subject to the authority of the Fund's Board of Directors, Keystone
Management, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034,
serves as investment manager to the Fund and is responsible for the overall
management of the Fund's business and affairs.
Keystone Management, the Fund's investment manager, organized in 1989, is a
wholly-owned subsidiary of Keystone. Its directors and principal executive
officers have been affiliated with Keystone, a seasoned investment adviser, for
a number of years. Keystone Management also serves as investment manager to most
of the other Keystone America Funds and to certain other funds in the Keystone
Group of Mutual Funds.
Pursuant to its Investment Management Agreement with the Fund (the "Management
Agreement"), Keystone Management has delegated its investment management
functions, except for certain administrative and management services to
Keystone. Keystone Management has entered into an Investment Advisory Agreement
with Keystone (the "Advisory Agreement") under which Keystone provides
investment advisory and management services to the Fund. Services performed by
Keystone Management include (1) performing research and planning with respect to
(a) the Fund's qualification as a regulated investment company under Subchapter
M of the Internal Revenue Code, (b) tax treatment of the Fund's portfolio
investments, (c) tax treatment of special corporate actions (such as
reorganizations), (d) state tax matters affecting the Fund, and (e) the Fund's
distributions of income and capital gains; (2) preparing the Fund's federal and
state tax returns; (3) providing services to the Fund's shareholders in
connection with federal and state taxation and distributions of income and
capital gains; and (4) storing documents relating to the Fund's activities.
The Fund pays Keystone Management a fee for its services at the annual rate
set forth below:
Aggregate Net Asset
Management Value of the Shares
Fee of the Fund
- ------------------------------------------------------------------------------
0.75% of the first $ 250,000,000, plus
0.675% of the next $ 250,000,000, plus
0.60% of the next $ 500,000,000, plus
0.50% of amounts over $1,000,000,000
computed as of the close of business on eachbusiness day and payable daily.
During the fiscal year ended December 31,1994, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$924,625, which amount represented 0.75% of the Fund's average net assets. Of
the amount paid to Keystone Management, $785,931 was paid to Keystone for
investment advisory services rendered pursuant to the Advisory Agreement.
To the extent the Fund's management fee equals 0.75%, the fee would be higher
than that paid by most mutual funds, but would not necessarily be higher than
that paid by funds with similar objectives.
INVESTMENT ADVISER
Keystone, the Fund's investment adviser, has provided investment advisory and
management services to investment companies and private accounts since it was
organized in 1932. Keystone is a wholly-owned subsidiary of Keystone Group, Inc.
("Keystone Group"), both located at 200 Berkeley Street, Boston, Massachusetts
02116-5034.
Keystone Group is a corporation privately owned by current and former members
of management of Keystone and its affiliates. The shares of Keystone Group
common stock beneficially owned by management are held in a number of voting
trusts, the trustees of which are George S. Bissell, Albert H. Elfner, III,
Roger T. Wickers, Edward F. Godfrey, and Ralph J. Spuehler, Jr. Keystone
provides accounting, bookkeeping, legal, personnel and general corporate
services to Keystone Management, Keystone, their affiliates and the Keystone
Group of Mutual Funds.
Pursuant to the Advisory Agreement, Keystone receives for its services an
annual fee representing 85% of the management fee received by Keystone
Management under the Management Agreement.
The Management Agreement and Advisory Agreement continue in effect from year
to year only so long as such continuance is specifically approved at least
annually by the Fund's Board of Directors or by vote of a majority of the
outstanding shares of the Fund. In either case, the terms of the Management
Agreement and the Advisory 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 Management Agreement and the
Advisory Agreement may be terminated, without penalty, on 60 days' written
notice by the Fund, Keystone Management or Keystone or terminated by a vote of
the Fund's shareholders. The Management Agreement and the Advisory Agreement
will terminate automatically upon assignment.
The Fund has adopted a Code of Ethics incorporating policies on personal
securities trading as recommended by the Investment Company Institute.
PORTFOLIO MANAGER
Maureen E. Cullinane has been the Fund's portfolio manager since 1989. She is
a Keystone Vice President and Senior Portfolio Manager, and has more than 18
years of investment experience.
FUND EXPENSES
The Fund will pay all of its expenses. In addition to the investment advisory
and management fees discussed above, the principal expenses that the Fund is
expected to pay include expenses of certain of its Trustees; transfer, dividend
disbursing and shareholder servicing agent expenses; custodian expenses; fees of
its accountants and legal counsel to its Trustees; fees payable to government
agencies, including registration and qualification fees of the Fund and its
shares under federal and state securities laws; and certain extraordinary
expenses. In addition, each class will pay all of the expenses attributable to
it. Such expenses are currently limited to Distribution Plan expenses. The Fund
also pays its brokerage commissions, interest charges and taxes. For the fiscal
year ended December 31, 1994, the Fund's Class A shares paid 1.41% of Class A
average net assets in expenses. For the fiscal period ended December 31, 1994,
the Fund's Class B and C shares paid, on an annualized basis, 2.30% and 2.30%,
respectively, of their average net assets in expenses.
During the fiscal year ended December 31, 1994, the Fund paid or accrued to
Keystone Group $16,827 for certain accounting and printing services. During the
year ended December 31, 1994, $480,953 was paid or accrued to Keystone Investor
Resource Center, Inc. ("KIRC"), the Fund's transfer and dividend disbursing
agent for shareholder services is a wholly-owned subsidiary of Keystone.
SECURITIES TRANSACTIONS
Under policies established by the Fund's Board of Trustees, Keystone selects
broker-dealers to execute transactions subject to the receipt of best execution.
When selecting broker-dealers to execute portfolio transactions for the Fund,
Keystone may consider as a factor the number of shares of the Fund sold by such
broker-dealer. In addition, broker-dealers executing portfolio transactions may,
from time to time, be affiliated with the Fund, Keystone Management, Keystone,
the Fund's principal underwriter or their affiliates.
The Fund may pay higher commissions to broker-dealers that provide research
services. Keystone may use these services in advising the Fund as well as in
advising its other clients.
PORTFOLIO TURNOVER
For the fiscal year ended December 31, 1994, the portfolio turnover rates for
each of the Fund's Class A, B, and C shares was 137%. For the fiscal year ended
December 31, 1993, the Fund's portfolio turnover rate was 162%. High portfolio
turnover may involve correspondingly greater brokerage commissions and other
transaction costs, which will 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 KDI, the Fund's principal underwriter. KDI, a wholly-owned
subsidiary of Keystone, is located at 200 Berkeley Street, Boston, Massachusetts
02116-5034.
In addition, you may open an account for the purchase of shares of the Fund by
mailing to the Fund c/o Keystone Investor Resource Center, Inc., P.O. Box 2121,
Boston, Massachusetts 02106-2121, a completed account application and a check,
payable to the Fund or you may telephone 1-800-343-2898 to obtain the number of
an account to which you can wire or electronically transfer funds and then send
in a completed account application. Subsequent investments in any amount may be
made by check, by wiring Federal funds or by an electronic funds transfer
("EFT").
Orders for the purchase of shares of the Fund will be confirmed at an offering
price equal to the net asset value per share next determined after receipt of
the order in proper form by Keystone Distributors, Inc. ("KDI"), the Fund's
principal underwriter, (generally as of the close of the Exchange on that day)
plus, in the case of Class A shares, the front end sales charge. Orders received
by dealers or other firms prior to the close of the Exchange and received by KDI
prior to the close of its business day will be confirmed at the offering price
effective as of the close of the Exchange on that day. The Fund reserves the
right to determine the net asset value more frequently than once a day if deemed
desirable. Dealers and other financial services firms are obligated to transmit
orders promptly.
Orders for shares received by broker-dealers prior to that day's close of
trading on the Exchange and transmitted to the Fund prior to its close of
business that day will receive the offering price equal to the net asset value
per share computed at the close of trading on the Exchange on the same day plus,
in the case of Class A shares, the front end sales charge. Orders received by
broker-dealers after that day's close of trading on the Exchange and transmitted
to the Fund prior to the close of business on the next business day will receive
the next business day's offering price.
Orders for shares received directly by the Fund from you will receive the
offering price equal to the net asset value per share next computed after the
Fund receives the purchase order plus, in the case of Class A shares, the front
end sales charge.
The initial purchase must be at least $1,000. There is no minimum amount for
subsequent purchases.
The Fund reserves the right to withdraw all or any part of the offering made
by this prospectus and to reject purchase orders.
Shareholder inquiries should be directed to KIRC by calling toll free 1-800-
343-2898 or writing to KIRC or to the firm from which this prospectus was
received.
ALTERNATIVE SALES OPTIONS
The Fund offers three classes of shares:
CLASS A SHARES -- FRONT END LOAD OPTION
Class A shares are sold with a sales charge at the time of purchase. Class A
shares are not subject to a sales charge when they are redeemed (except that
shares sold in a single purchase in excess of $1,000,000 without a front end
sales charge will be subject to a contingent deferred sales charge for one
year).
CLASS B SHARES -- BACK END LOAD OPTION
Class B shares are sold without a sales charge at the time of purchase, but
are subject to a deferred sales charge if they are redeemed during the year of
purchase or within three calendar years after the calendar year of purchase.
Class B shares will automatically convert to Class A shares at the end of seven
calendar years after the year of purchase.
CLASS C SHARES -- LEVEL LOAD OPTION
Class C shares are sold without a sales charge at the time of purchase, but
are subject to a deferred sales charge if they are redeemed within one year
after the date of purchase. Class C shares are available only through dealers
who have entered into special distribution agreements with KDI.
Each class of shares, pursuant to its Distribution Plan, pays an annual
service fee of 0.25% of the Fund's average daily net assets attributable to that
class. In addition to the 0.25% service fee, the Class B and C Distribution
Plans provide for the payment of an annual distribution fee of up to 0.75% of
the average net assets attributable to their respective classes. As a result,
income distributions paid by the Fund with respect to Class B and Class C shares
will generally be less than those paid with respect to Class A shares.
Investors who would rather pay the entire cost of distribution at the time of
investment, rather than spreading such cost over time, might consider Class A
shares. Other investors might consider Class B or Class C shares, in which case
100% of the purchase price is invested immediately, depending on the amount of
the purchase and the intended length of investment. The Fund will not normally
accept any purchase of Class B shares in the amount of $250,000 or more and will
not normally accept any purchase of Class C shares in the amount of $1,000,000
or more.
CLASS A SHARES
Class A shares are offered at net asset valueplus an initial sales charge as
follows:
<TABLE>
<CAPTION>
AS A % OF CONCESSION TO
AS A % OF NET AMOUNT DEALERS AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED<F1> AMOUNT INVESTED
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000....................... 5.75% 6.10% 5.25%
$50,000 but less than $100,000.......... 4.75% 4.99% 4.25%
$100,000 but less than $250,000......... 3.75% 3.90% 3.25%
$250,000 but less than $500,000......... 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000....... 1.50% 1.52% 1.50%
$1,000,000 and over<F2> ................ 0% 0% 0.25%
<FN>
- ---------
<F1>Rounded to the nearest one-hundredth percent.
<F2>Purchases of $1,000,000 or more may be subject to acontingent deferred sales
charge of 0.25%. See the "Calculation of Contingent Deferred Sales Charge and
Waiver of Sales Charges" section of this prospectus.
<FN>
</TABLE>
---------------------------------------
The sales charge is paid to KDI, which in turn normally reallows a portion to
your broker-dealer. In addition, your broker-dealer currently will be paid
periodic service fees at an annual rate of up to 0.25% of the average daily net
asset value of outstanding shares of Class A sold by your dealer.
Upon written notice to dealers with whom it has dealer agreements, KDI may
reallow up to the full applicable sales charge.
Initial sales charges may be eliminated for persons purchasing Class A shares
to be included in a broker-dealer managed fee based program (a "wrap account")
with broker dealers who have entered into special agreements with KDI. Initial
sales charges may be reduced or eliminated for persons or organizations
purchasing Class A shares of the Fund alone or in combination with Class A
shares of other Keystone America Funds. See Exhibit A to this prospectus.
Upon prior notification to KDI, Class A shares may be purchased at net asset
value by clients of registered representatives within six months after a change
in the registered representative's employment, where the amount invested
represents redemption proceeds from a registered open-end management investment
company not distributed or managed by Keystone or its affiliates; and the
shareholder either (i) paid a front end sales charge, or (ii) was at some time
subject to, but did not actually pay, a contingent deferred sales charge with
respect to the redemption proceeds.
In addition, since January 1, 1995 and through June 30, 1995 ("offering
period") and upon prior notification to KDI, Class A shares may be purchased at
net asset value by clients of registered representatives within six months after
the redemption of shares of any registered open-end investment company not
distributed or managed by Keystone or its affiliates, where the amount invested
represents redemption proceeds from such unrelated registered open-end
investment company, and the shareholder either (i) paid a front end sales
charge, or (ii) was at some time subject to, but did not actually pay, a
contingent deferred sales charge with respect to the redemption proceeds.
With certain exceptions, purchases of Class A shares in the amount of
$1,000,000 or more on which no sales charge has been paid will be subject to a
contingent deferred sales charge of 0.25% upon redemption during the one year
period commencing on the date the shares were originally purchased. The
contingent deferred sales charge is retained by KDI. See "Calculation of
Contingent Deferred Sales Charges and Waiver of Sales Charges" below.
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. Payment
under the Class A Distribution Plan are currently made to KDI (which may reallow
all or part to others, such as dealers), as service fees at an annual rate of up
to 0.25% of the average daily net asset value of Class A shares maintained by
the recipients 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 certain exceptions, the Fund may impose a deferred sales charge of
3.00% on shares redeemed during the calendar year of purchase and the first
calendar year after the year of purchase; 2.00% on shares redeemed during the
second calendar year after the year of purchase; and 1.00% on shares redeemed
during the third calendar year after the year of purchase. No deferred sales
charge is imposed on amounts redeemed thereafter. If imposed, the deferred sales
charge is deducted from the redemption proceeds otherwise payable to you. The
deferred sales charge is retained by KDI. Amounts received by KDI under the
Class B Distribution Plan are reduced by deferred sales charges retained by KDI.
See "Calculation of Contingent Deferred Sales Charges and Waiver of Sales
Charges" below.
Class B shares which have been outstanding during seven calendar years will
automatically convert to Class A shares, which are subject to a lower
Distribution Plan charge, without imposition of a front end sales charge or
exchange fee. (Conversion of Class B shares represented by stock certificates
will require the return of the stock certificates to KIRC.) The Class B shares
so converted will no longer be subject to the higher expenses borne by Class B
shares. Because the net asset value per share of the Class A shares may be
higher or lower than that of the Class B shares at the time of conversion,
although the dollar value will be the same, a shareholder may receive more or
less Class A shares than the number of Class B shares converted. Under current
law, it is the Fund's opinion that such a conversion will not constitute a
taxable event under federal income tax law. In the event that this ceases to be
the case, the Board of Trustees will consider what action, if any, is
appropriate and in the best interests of the Class B shareholders.
CLASS B DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class B shares
("Class B Distribution Plan") 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 B
shares to pay expenses of the distribution of Class B shares. Payments under the
Class B Distribution Plan are currently made to KDI (which may reallow all or
part to others, such as dealers) (1) as commissions for Class B shares sold and
(2) as shareholder service fees. Amounts paid or accrued to KDI under (1) and
(2) in the aggregate may not exceed the annual limitation referred to above. KDI
generally reallows to brokers or others a commission equal to 3% of the price
paid for each Class B share sold and the shareholder service fee, which is paid
at the rate of 0.25% per annum of the net asset value of shares maintained by
the recipients outstanding on the books of the Portfolio for specified periods.
See "Distribution Plans" below.
CLASS C SHARES
Class C shares are offered only through dealers who have special distribution
agreements with KDI. Class C shares are offered at net asset value, without an
initial sales charge. With certain exceptions, the Fund may impose a deferred
sales charge of 1.00% on shares redeemed within one year after the date of
purchase. No deferred sales charge is imposed on amounts redeemed thereafter. If
imposed, the deferred sales charge is deducted from the redemption proceeds
otherwise payable to you. The deferred sales charge is retained by KDI. See
"Calculation of Contingent Deferred Sales Charges and Waiver of Sales Charges"
below.
CLASS C DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class C shares
("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 KDI (which may reallow all or
part to others, such as dealers) (1) as commissions for Class C shares sold and
(2) as shareholder service fees. Amounts paid or accrued to KDI under (1) and
(2) in the aggregate may not exceed the annual limitation referred to above. KDI
generally reallows to brokers or others a commission in the amount of 0.75% of
the price paid for each Class C share sold, plus the first year's service fee in
advance in the amount of 0.25% of the price paid for each Class C share sold,
and, beginning approximately fifteen months after purchase, a commission at an
annual rate of 0.75% (subject to the NASD rule -- see "Distribution Plans") plus
service fees which are paid at the annual rate of 0.25%, respectively, of the
average daily net asset value of each share maintained by the recipients
outstanding on the books of the Portfolio for specified periods. See
"Distribution Plans" below.
CALCULATION OF CONTINGENT DEFERRED SALES CHARGE AND WAIVER OF SALES CHARGES
Any contingent deferred sales charge imposed upon the redemption of Class A,
Class B or Class C shares is a percentage of the lesser of (1) the net asset
value of the shares redeemed or (2) the net cost of such shares. No contingent
deferred sales charge is imposed when you redeem amounts derived from (1)
increases in the value of your account above the net cost of such shares due to
increases in the net asset value per share of such shares; (2) certain shares
with respect to which the Fund did not pay a commission on issuance, including
shares acquired through reinvestment of dividend income and capital gains
distributions; (3) Class C shares and certain Class A shares held for more than
one year from the date of purchase; or (4) Class B shares held during more than
four consecutive calendar years. Upon request for redemption, shares not subject
to the contingent deferred sales charge will be redeemed first. Thereafter,
shares held the longest will be the first to be redeemed.
The Fund may also sell Class A, Class B or Class C shares at net asset value
without any initial sales charge or a contingent deferred sales charge to
certain Trustees, Trustees, officers and employees of the Fund and Keystone and
certain of their affiliates, to registered representatives of firms with dealer
agreements with KDI and to a bank or trust company acting as a trustee for a
single account.
In addition, no contingent deferred sales charge is imposed on a redemption of
shares of the Fund in the event of (1) death or disability of the shareholder;
(2) a lump-sum distribution from a 401(k) plan or other benefit plan qualified
under the Employee Retirement Income Security Act of 1974 ("ERISA"); (3)
automatic withdrawals from ERISA plans if the shareholder is at least 59 1/2
years old; (4) involuntary redemptions of accounts having an aggregate net asset
value of less than $1,000; or (5) automatic withdrawals under an automatic
withdrawal plan of up to 1 1/2% per month of the shareholder's initial account
balance.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS
KDI may, from time to time, provide promotional incentives, including
reallowance of up to the entire sales charge, to certain dealers whose
representatives have sold or are expected to sell significant amounts of Fund
shares. In addition, dealers may, from time to time, receive additional cash
payments. KDI may also provide written information to dealers with whom it has
dealer agreements that relates to sales incentive campaigns conducted by such
dealers for their representatives as well as financial assistance in connection
with pre-approved seminars, conferences and advertising. No such programs or
additional compensation will be offered to the extent they are prohibited by the
laws of any state or any self-regulatory agency such as the NASD. Dealers to
whom substantially the entire sales charge on Class A shares is reallowed may be
deemed to be underwriters as that term is defined under the 1933 Act.
KDI may, at its own expense, pay concessions in addition to those described
above to dealers which satisfy certain criteria established from time to time by
KDI. These conditions relate to increasing sales of shares of the Keystone funds
over specified periods and certain other factors. Such payments may, depending
on the dealer's satisfaction of the required conditions, be up to .25% of the
value of shares sold by such dealer.
KDI may also pay a transaction fee (up to the level of payments allowed to
dealers for the sale of shares, as described above) to banks and other financial
services firms that facilitate transactions in shares of the Fund for their
clients.
The Glass-Steagall Act currently limits the ability of a depository
institution (such as a commercial bank or a savings and loan association) to
become an underwriter or distributor of securities. In the event the Glass-
Steagall Act is deemed to prohibit depository institutions from accepting
payments under the arrangement described above, or should Congress relax current
restrictions on depository institutions, the Board of Trustees will consider
what action, if any, is appropriate.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
DISTRIBUTION PLANS
The Fund bears some of the costs of selling its shares under Distribution
Plans adopted with respect to its Class A, Class B and Class C shares pursuant
to Rule 12b-1 under the 1940 Act. Payments under the Class A Distribution Plan
are currently limited to up to 0.25% annually of the average daily net asset
value of Class A shares. The Class B Distribution Plan and the Class C
Distribution Plan provide for the payment at an annual rate of up to 1.00% of
the average daily net asset valueof Class B shares and Class C shares,
respectively.
The NASD rule limits the amount that a Fund may pay annually in distribution
costs for the sale of its shares and shareholder service fees. The rule limits
annual expenditures to 1% of the aggregate average daily net asset value of its
shares, of which 0.75% may be used to pay such distribution costs and 0.25% may
be used to pay shareholder service fees. The NASD rule also limits the aggregate
amount 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 contingent deferred sales charges
paid by shareholders to KDI ), remaining unpaid from time to time.
KDI intends, but is not obligated, to continue to pay or accrue distribution
charges incurred in connection with the Class B Distribution Plan that exceed
current annual payments permitted to be received by KDI from the Fund. KDI
intends to seek full payment of such charges from the Fund (together with annual
interest thereon at the prime rate plus one percent) at such time in the future
as, and to the extent that, payment thereof by the Fund would be within the
permitted limits.
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class. After the termination of the Class B Distribution Plan,
however, KDI would be entitled to receive payment, at the annual rate of 1.00%
of the average daily net asset value of Class B shares as compensation for its
services which had been earned at any time during which the Class B Distribution
Plan was in effect. Unpaid distribution costs at fiscal year end for Class B and
Class C shares were $2,015,349 (6.25% of Class B's net assets) and $637,742
(6.44% of Class C's net assets).
For the year ended December 31, 1994, the Fund paid KDI $103,680, $204,876,
and $73,554 pursuant to the Class A, Class B and Class C Distribution Plans,
respectively. The Fund makes no payments in connection with the sale of its
shares other than the fee paid to its Principal Underwriter.
Dealers or others may receive different levels of compensation depending on
which class of shares they sell. Payments pursuant to a Distribution Plan are
included in the operating expenses of the class.
HOW TO REDEEM SHARES
You may redeem Fund shares for cash at their net asset value upon written
order to the Fund c/o KIRC, and presentation to the Fund of a properly endorsed
share certificate (if certificates have been issued). Your signature (s) on the
written order and certificates must be guaranteed as described below. In order
to redeem by telephone or to engage in telephone transactions generally, you
must complete the authorization in your account application. Proceeds for shares
redeemed on telephonic order will be deposited by wire or EFT only to the bank
account designated in your account application.
The redemption value equals the net asset value per share then determined and
may be more or less than your cost depending upon changes in the value of the
Fund's portfolio securities between purchase and redemption.
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 may delay the mailing of
a redemption check or the wiring or EFT of redemption proceeds until good
payment has been collected for the purchase of such shares. This may take 15
days. Any delay may be avoided by purchasing shares either with a certified
check or by Federal Reserve or bank wire of funds or 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 deferred sales charge, will
be made within seven days thereafter except as discussed herein.
You may also redeem your shares through broker-dealers. KDI, acting as agent
for the Fund, stands ready to repurchase Fund shares upon orders from dealers
and will calculate the net asset value on the same terms as those orders for the
purchase of shares received from broker-dealers and described under "How to Buy
Shares." If KDI has received proper documentation, it will pay the redemption
proceeds, less any applicable deferred sales charge, to the broker-dealer
placing the order within seven days thereafter. KDI charges no fee for this
service. Your broker-dealer, however, may charge a service fee.
For your protection, SIGNATURES ON CERTIFICATES, STOCK POWERS AND ALL WRITTEN
ORDERS OR AUTHORIZATIONS MUST BE GUARANTEED BY A U.S. STOCK EXCHANGE MEMBER, A
BANK OR OTHER PERSONS ELIGIBLE TO GUARANTEE SIGNATURES UNDER THE SECURITIES
EXCHANGE ACT OF 1934 AND KIRC'S POLICIES. The Fund or KIRC may waive this
requirement, but also may require additional documents in certain cases.
Currently, the requirement for a signature guarantee has been waived on
redemptions of $50,000 or less when the account address of record has been the
same for a minimum period of 30 days. The Fund and KIRC reserve the right to
withdraw this waiver at any time.
If the Fund receives a redemption order, but you have not clearly indicated
the amount of money or number of shares involved, the Fund cannot execute the
order. In such cases, the Fund will request the missing information from you and
process the order on the day such information is received.
TELEPHONE
Under ordinary circumstances, you may redeem up to $50,000 from your account
by telephone by calling toll free 1-800-343-2898. You must complete the
Telephone Redemptions section of the application to enjoy telephone redemption
privileges.
In order to insure that instructions received by KIRC are genuine when you
initiate a telephone transaction, you will be asked to verify certain criteria
specific to your account. At the conclusion of the transaction, you will be
given a transaction number confirming your request, and written confirmation of
your transaction will be mailed the next business day. Your telephone
instructions will be recorded. Redemptions by telephone are allowed only if the
address and bank account of record have been the same for a minimum period of 30
days.
If the redemption proceeds are less than $2,500, they will be mailed by check.
If they are $2,500 or more, they will be mailed, wired or sent by EFT to your
previously designated bank account as you direct. If you do not specify how you
wish your redemption proceeds to be sent, they will be mailed by check.
If you cannot reach the Fund by telephone, you should follow the procedures
for redeeming by mail or through a broker as set forth herein.
SMALL ACCOUNTS
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem your account if its value has fallen below $1,000, the current
minimum investment level, as a result of your redemptions (but not as a result
of market action). You will be notified in writing and allowed 60 days to
increase the value of your account to the minimum investment level. No deferred
sales charges are applied to such redemptions.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Fund to pay for all
redemptions in cash, the Fund may authorize payment to be made in portfolio
securities or other property. The Fund has obligated itself, however, under the
1940 Act to redeem for cash all shares presented for redemption by any one
shareholder up to the lesser of $250,000 or 1% of the Fund's net assets in any
90-day period. Securities delivered in payment of redemptions would be valued at
the same value assigned to them in computing the net asset value per share and
would, to the extent permitted by law, be readily marketable. Shareholders
receiving such securities would incur brokerage costs upon the securities' sale.
REDEMPTIONS OF CERTAIN CLASS A SHARES
Certain purchases of Class A shares in the amount of $1,000,000 or more, on
which no initial sales charge has been paid, are subject to a contingent
deferred sales charge of 0.25%. See "Class A Shares."
GENERAL
The Fund reserves the right at any time to terminate, suspend or change the
terms of any redemption method described in this prospectus, except redemption
by mail, and to impose fees.
Except as otherwise noted, neither the Fund, KIRC nor KDI assumes
responsibility for the authenticity of any instructions received by any of them
from a shareholder in writing, over the Keystone Automated Response Line
("KARL") or by telephone. KIRC will employ reasonable procedures to confirm that
instructions received over KARL or by telephone are genuine. Neither the Fund,
KIRC nor KDI will be liable when following instructions received over KARL or by
telephone that KIRC reasonably believes to be genuine.
The Fund may temporarily suspend the right to redeem its shares when (1) the
Exchange is closed, other than customary weekend and holiday closings; (2)
trading on the Exchange is restricted; (3) an emergency exists and the Fund
cannot dispose of its investments or fairly determine their value; or (4) the
Securities and Exchange Commission so orders.
SHAREHOLDER SERVICES
Details on all shareholder services may be obtained from KIRC by writing or by
calling toll free 1-800-343-2898.
KEYSTONE AUTOMATED RESPONSE LINE
KARL offers you specific fund account information and price and yield
quotations as well as the ability to do account transactions, including
investments, exchanges and redemptions. You may access KARL by dialing toll free
1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a week.
EXCHANGES
A shareholder who has obtained the appropriate prospectus, you may exchange
shares of the Fund for shares of certain other Keystone America Funds and
Keystone Liquid Trust ("KLT") as follows:
Class A shares may be exchanged for Class A shares of other Keystone America
Funds and Class A shares of KLT;
Class B shares may be exchanged for Class B shares of other Keystone America
Funds and Class B shares of KLT; and
Class C shares may be exchanged for Class C shares of other Keystone America
Funds and Class C shares of KLT.
The exchange of Class B shares and Class C shares will not be subject to a
contingent deferred sales charge. However, if the shares being tendered for
exchange are
(i) Class A shares where the original purchase was for $1,000,000 or more and
no sales charge was paid,
(ii) Class B shares which have been held for less than four years, or (iii)
Class C shares which have been held for less than one year,
and are still subject to a deferred sales charge, such charge will carry over to
the shares being acquired in the exchange transaction.
You may exchange shares for another Keystone fund for a $10 fee by calling or
writing to Keystone. The exchange fee is waived for individual investors who
make an exchange using KARL. Shares purchased by check are eligible for exchange
after 15 days. If the shares being tendered for exchange are still subject to a
deferred sales charge, such charge will carry over to the shares being acquired
in the exchange transaction. The Fund reserves the right, after providing the
required notice toshareholders, to terminate this exchange offer or to change
its terms, including the right to change the fee for any exchange.
Orders to exchange shares of the Fund for shares of KLT will be executed by
redeeming the shares of the Fund and purchasing shares of KLT at the net asset
value of such shares next determined after the proceeds from such redemption
become available, which may be up to seven days after such redemption. In all
other cases, orders for exchanges received by the Fund prior to 4:00 p.m. on any
day the Fund is open for business will be executed at the respective net asset
values determined as of the close of business that day. Orders for exchanges
received after 4:00 p.m. on any business day will be executed at the respective
net asset values determined at the close of the next business day.
An excessive number of exchanges may be disadvantageous to the Fund.
Therefore, the Fund, in addition to its right to reject any exchange, reserves
the right to terminate the exchange privilege of any shareholder who makes more
than five exchanges of shares of the funds in a year or three in a calendar
quarter.
An exchange order must comply with the requirements for a redemption or
repurchase order and must specify the dollar value or number of shares to be
exchanged. Exchanges are subject to the minimum initial purchase requirements of
the fund being acquired. An exchange constitutes a sale for federal income tax
purposes.
The exchange privilege is available only in states where shares of the fund
being acquired may legally be sold.
RETIREMENT PLANS
The Fund has various pension and profit-sharing plans available to you,
including Individual Retirement Accounts ("IRAs"); Rollover IRAs; Simplified
Employee Pension Plans ("SEPs"), Tax Sheltered Annuity Plans ("TSAs"), 401(k)
Plans; Keogh Plans; Corporate Profit-Sharing Plans, Pension and Target Benefit
Plans; Money Purchase Plans and Salary-Reduction Plans. For details, including
fees and application forms, call toll free 1-800-247-4075 or write to KIRC.
AUTOMATIC WITHDRAWAL PLAN
Under an Automatic Withdrawal Plan, if your account has a value of at least
$10,000, you may arrange for regular monthly or quarterly fixed withdrawal
payments. Each payment must be at least $100 and may be as much as 1.5% per
month or 4.5% per quarter of the total net asset value of the Fund shares in
your account when the Automatic Withdrawal Plan is opened. Fixed withdrawal
payments are not subject to a deferred sales charge. Excessive withdrawals may
decrease or deplete the value of your account. Moreover, because of the effect
of the applicable sales charge, a Class A investor should not make continuous
purchases of the Fund's shares while participating in the Automatic Withdrawal
Plan.
DOLLAR COST AVERAGING
Through dollar cost averaging you can invest a fixed dollar amount each month
or each quarter in any Keystone America Fund. This results in more shares being
purchased when the selected fund's net asset value is relatively low and fewer
shares being purchased when the fund's net asset value is relatively high and
may result in a lower average cost per share than a less systematic investment
approach.
Prior to participating in dollar cost averaging, you must establish an account
in a Keystone America Fund or a money market fund managed or advised by
Keystone. You should designate on the application (1) the dollar amount of each
monthly or quarterly investment (minimum $100) you wish to make and (2) the fund
in which the investment is to be made. Thereafter, on the first day of the
designated month, an amount equal to the specified monthly or quarterly
investment will automatically be redeemed from your initial account and invested
in shares of the designated fund. If you are a Class A investor and paid a sales
charge on your initial purchase, the shares purchased will be eligible for
Rights of Accumulation and the sales charge applicable to the purchase will be
determined accordingly. In addition, the value of shares purchased will be
included in the total amount required to fulfill a Letter of Intent. If a sales
charge was not paid on the initial purchase, a sales charge will be imposed at
the time of subsequent purchases, and the value of shares purchased will become
eligible for Rights of Accumulation and Letters of Intent.
TWO DIMENSIONAL INVESTING
You may elect to have income and capital gains distributions from any of your
Keystone America Funds automatically invested to purchase Class A shares of any
other Keystone America Fund. You may select this service on your application and
indicate the Keystone America Fund(s) into which distributions are to be
invested. The value of shares purchased will be ineligible for Rights of
Accumulation and Letters of Intent.
OTHER SERVICES
Under certain circumstances, you may, within 30 days after a redemption,
reinstate your account at current net asset value.
PERFORMANCE DATA
From time to time the Fund may advertise "total return" and "current yield."
ALL DATA IS BASED ON HISTORICAL EARNINGS AND IS NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. Total return and yield are computed separately for each class of
shares of the Fund. Total return refers to average annual compounded rates of
return over specified periods determined by comparing the initial amount
invested in a particular class to the ending redeemable value of that amount.
The resulting equation assumes reinvestment of all dividends and distributions
and deduction of the maximum sales charge or applicable contingent deferred
sales charge and all recurring charges, if any, applicable to all shareholder
accounts. The exchange fee is not included in the calculation.
Current yield quotations represent the yield on an investment for a stated
30-day period computed by dividing net investment income earned per share during
the base period by the maximum offering price per share on the last day of the
base period.
The Fund may also include comparative performance data for each class of
shares 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 three classes of shares which participate
proportionately based on their relative net asset values in dividends and
distributions and have equal voting, liquidation and other rights except that
(1) expenses related to the distribution of each class of shares or other
expenses that the Board of Trustees may designate as class expenses from time to
time, are borne solely by each class; (2) each class of shares has exclusive
voting rights with respect to its Distribution Plan, (3) each class has
different exchange privileges and (4) each class has a different designation.
When issued and paid for, the shares will be fully paid and nonassessable by the
Fund. Shares may be exchanged as explained under "Shareholder Services" but will
have no other preference, conversion, exchange or preemptive rights. Shares are
redeemable, transferable and freely assignable as collateral. The Fund is
authorized to issue three additional classes of shares.
Shareholders are entitled to one vote for each full share owned and fractional
votes for fractional shares. Shares of the Fund vote together except when
required by law to vote separately by class. The Fund does not have annual
meetings. The Fund will have special meetings, from time to time, as required
under its Declaration of Trust and under the 1940 Act. As provided in the Fund's
Declaration of Trust, shareholders have the right to remove Trustees by an
affirmative vote of two-thirds of the outstanding shares. A special meeting of
the shareholders will be held when 10% of the outstanding shares request a
meeting for the purpose of removing a Trustee. The Fund is prepared to assist
shareholders in communications with one another for the purpose of convening
such a meeting as prescribed by Section 16(c) of the 1940 Act.
Under Massachusetts law, it is possible that a Fund shareholder may be held
personally liable for the Fund's obligations. The Fund's Declaration of Trust
provides, however, that shareholders shall not be subject to any personal
liability for the Fund's obligations and provides indemnification from Fund
assets for any shareholder held personally liable for the Fund's obligations.
Disclaimers of such liability are included in each Fund agreement.
ADDITIONAL INFORMATION
KIRC, located at 101 Main Street, Cambridge, Massachusetts 02142-1519, is a
wholly-owned subsidiary of Keystone and serves as the Fund's transfer agent and
dividend disbursing agent.
When the Fund determines from its records that more than one account in the
Fund is registered in the name of a shareholder or shareholders having the same
address, upon notice to those shareholders, the Fund intends, when an annual
report or a 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.
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.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. These securities, which include
bonds, debentures, corporate notes, preferred stocks and other securities, are
securities that the holder can convert into common stock. Convertible securities
rank senior to common stock in a corporation's capital structure and, therefore,
entail less risk than a corporation's common stock. The value of a convertible
security is a function of its investment value (its market worth without a
conversion privilege) and its conversion value (its market worth if exchanged).
If a convertible security's investment value is greater than its conversion
value, its price primarily will reflect its investment value and will tend to
vary inversely with interest rates (the issuer's creditworthiness and other
factors also may affect its value). If a convertible security's conversion value
is greater than its investment value, its price will tend to be higher than its
conversion value and it will tend to fluctuate directly with the price of the
underlying equity security.
OBLIGATIONS OF FOREIGN BRANCHES OF UNITED STATES BANKS
The obligations of foreign branches of U.S. banks may be general obligations
of the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by government regulation. Payment of interest
and principal upon these obligations may also be affected by governmental action
in the country of domicile of the branch (generally referred to as sovereign
risk). In addition, evidences of ownership of such securities may be held
outside the U.S. and the Fund may be subject to the risks associated with the
holding of such property overseas. Various provisions of federal law governing
domestic branches do not apply to foreign branches of domestic banks.
OBLIGATIONS OF UNITED STATES BRANCHES OF FOREIGN BANKS
Obligations of U.S. branches of foreign banks may be general obligations of
the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by federal and state regulation as well as by
governmental action in the country in which the foreign bank has its head
office. In addition, there may be less publicly available information about a
U.S. branch of a foreign bank than about a domestic bank.
MASTER DEMAND NOTES
Master demand notes are unsecured obligations that permit the investment of
fluctuating amounts by the Fund at varying rates of interest pursuant to direct
arrangements between the Fund, as lender, and the issuer as borrower. The Fund
has the right to increase the amount under the note at any time up to the full
amount provided by the note agreement, or to decrease the amount. The borrower
may repay up to the full amount of the note without penalty. Notes acquired by
the Fund permit the Fund to demand payment of principal and accrued interest at
any time (on not more than seven days' notice). Notes acquired by the Fund may
have maturities of more than one year, provided that (1) the Fund is entitled to
payment of principal and accrued interest upon not more than seven days notice,
and (2) the rate of interest on such notes is adjusted automatically at periodic
intervals which normally will not exceed 31 days but may extend up to one year.
The notes will be deemed to have a maturity equal to the longer of the period
remaining to the next interest rate adjustment or the demand notice period.
Because these types of notes are direct lending arrangements between the lender
and borrower, such instruments are not normally traded and there is no secondary
market for these notes, although they are redeemable and thus repayable by the
borrower at face value plus accrued interest at any time. Accordingly, the
Fund's right to redeem is dependent on the ability of the borrower to
payprincipal and interest on demand. In connection with master demand note
arrangements, Keystone considers, under standards established by the Board of
Trustees, earning power, cash flow and other liquidity ratios of the borrower
and will monitor the ability of the borrower to pay principal and interest on
demand. These notes are not typically rated by credit rating agencies. Unless
rated, the Fund may invest in them only if at the time of an investment the
issuer meets the criteria established for commercial paper.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements; i.e., the Fund purchases a
security subject to its 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 market rate of interest that is
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. The Fund may enter into
such agreements only with respect to U.S. government securities. 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 a decline in the market value
of the underlying securities, as well as delay and costs to the Fund in
connection with 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 Keystone.
REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, the Fund would sell securities and agree
to repurchase them at a mutually agreed upon date and price. The Fund intends to
enter into reverse repurchase agreements to avoid otherwise having to sell
securities during unfavorable market conditions in order to meet redemptions. At
the time the Fund enters into a reverse repurchase agreement, it will establish
a segregated account with the Fund's custodian containing liquid assets such as
U.S. government securities or other high grade debt securities having a value
not less than the repurchase price (including accrued interest) and will
subsequently monitor the account to ensure such value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
that the Fund is obligated to repurchase may decline below the repurchase price.
Borrowing and reverse repurchase agreements magnify the potential for gain or
loss on the portfolio securities of the Fund and, therefore, increase the
possibility of fluctuation in the Fund's net asset value. Such practices may
constitute leveraging. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's obligation to repurchase the securities and the Fund's use of
the proceeds of the reverse repurchase agreement may effectively be restricted
pending such determination. The staff of the SEC has taken the position that the
Investment Company Act of 1940 treats reverse repurchase agreements as being
included in the percentage limit on borrowings imposed on a Fund.
FOREIGN SECURITIES
The Fund may invest 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 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). These risks
are carefully considered by Keystone prior to the purchase of these securities.
"WHEN ISSUED" SECURITIES
The Fund may also purchase and sell securities and currencies on a when issued
and delayed delivery basis. When issued or delayed delivery transactions arise
when securities or currencies are purchased or sold by the Fund with payment and
delivery taking place in the future in order to secure what is considered to be
an advantageous price and yield to the Fund at the time of entering into the
transaction. When the Fund engages in when issued and delayed delivery
transactions, the Fund relies on the buyer or seller, as the case may be, to
consummate the sale. Failure to do so may result in the Fund missing the
opportunity to obtain a price or yield considered to be advantageous. When
issued and delayed delivery transactions may be expected to occur a month or
more before delivery is due. However, no payment or delivery is made by the Fund
until it receives payment or delivery from the other party to the transaction. A
separate account of liquid assets equal to the value of such purchase
commitments will be maintained until payment is made. When issued and delayed
delivery agreements are subject to risks from changes in value based upon
changes in the level of interest rates, currency rates and other market factors,
both before and after delivery. The Fund does not accrue any income on such
securities or currencies prior to their delivery. To the extent the Fund engages
in when issued and delayed delivery transactions, it will do so consistent with
its investment objective and policies and not for the purpose of investment
leverage.
SHORT SALES
The Fund may make short sales of securities "against the box." A short sale
involves the borrowing of a security, which must eventually be returned to the
lender. A short sale is "against the box" if, at all times when the short
position is open, the Fund owns the securities sold short or owns an equal
amount of securities convertible into, or exchangeable without further
consideration for, securities identical to the securities sold short. Short
sales against the box are used to defer recognition of gains or losses or in
order to receive a portion of the interest earned by the executing broker from
the proceeds of such sale. The proceeds of a short sale are held by the broker
until the settlement date when the Fund delivers the security or convertible
security to close out its short position. Although prior to such delivery the
Fund will have to pay an amount equal to any dividends paid on the securities
sold short, the Fund will receive the dividends from the securities convertible
into the securities sold short plus a portion of the interest earned from the
proceeds of the short sale. The Fund will not make short sales of securities
subject to outstanding call options written by it. The Fund will segregate the
securities sold short or appropriate convertible securities in a special account
with the Fund's custodian in connection with its short sales "against the box."
LOANS OF SECURITIES
The Fund may lend its securities to broker-dealers or other institutional
borrowers for use in connection with their short sales, arbitrages or other
securities transactions. Such loan transactions afford the Fund an opportunity
to continue to earn income on the securities loaned and at the same time to earn
income on the collateral held by it to secure the loan. Loans of portfolio
securities will be made (if at all) in strict conformity with applicable federal
and state rules and regulations. There may be delays in recovery of loaned
securities or even a loss of rights in collateral should the borrower fail
financially. Therefore, loans will be made only to firms deemed by Keystone to
be of good standing and will not be made unless, in the judgment of Keystone,
the consideration to be earned from such loans justifies the risk.
The Fund understands that it is the current view of the staff of the
Securities and Exchange Commission that it is permitted to engage in loan
transactions only if it meets the following conditions: (1) the Fund must
receive 100% collateral in the form of cash or cash equivalents, e.g., U.S.
Treasury bills or notes, from the borrower; (2) the borrower must increase the
collateral whenever the market value of the securities (determined on a daily
basis) exceeds the value of the collateral; (3) the Fund must be able to
terminate the loan, after notice, at any time; (4) the Fund must receive
reasonable interest on the loan or a flat fee from the borrower, as well as
amounts equivalent to any dividends, interest or other distributions on the
securities loaned and any increase in the securities' market values; (5) the
Fund may pay only reasonable custodian fees in connection with the loan; and (6)
voting rights on the securities loaned may pass to the borrower; however, if a
material event affecting the securities occurs, the Fund must be able to
terminate the loan and vote proxies or enter into an alternative arrangement
with the borrower to enable the Fund to vote proxies. Excluding Items (1) and
(2), these procedures may be amended from time to time, as regulatory policies
may permit, by the Fund's Board of Trustees without shareholder approval. Such
loans may not exceed 25% of the Fund's total assets.
DERIVATIVES
The Fund may use derivatives in furtherance of its investment objective.
Derivatives are financial contracts whose value depends on, or is derived from,
the value of an underlying asset, reference rate or index. These assets, rates,
and indices may include bonds, stocks, mortgages, commodities, interest rates,
currency exchange rates, bond indices and stock indices. Derivatives can be used
to earn income or protect against risk, or both. For example, one party with
unwanted risk may agree to pass that risk to another party who is willing to
accept the risk, the second party being motivated, for example, by the desire
either to earn income in the form of a fee or premium from the first party, or
to reduce its own unwanted risk by attempting to pass all or part of that risk
to the first party.
Derivatives can be used by investors such as the Fund to earn income and
enhance returns, to hedge or adjust the risk profile of the portfolio, and
either in place of more traditional direct investments or to obtain exposure to
otherwise inaccessible markets. The Fund is permitted to use derivatives for one
or more of these purposes, although the Fund generally uses derivatives
primarily as direct investments in order to enhance yields and broaden portfolio
diversification. Each of these uses entails greater risk than if derivatives
were used solely for hedging purposes. The Fund uses futures contracts and
related options for hedging purposes. Derivatives are a valuable tool which,
when used properly, can provide significant benefit to Fund shareholders.
Keystone is not an aggressive user of derivatives with respect to the Fund.
However, the Fund may take positions in those derivatives that are within its
investment policies if, in Keystone's judgement, this represents an effective
response to current or anticipated market conditions. Keystone's use of
derivatives is subject to continuous risk assessment and control from the
standpoint of the Fund's investment objectives and policies.
Derivatives may be (1) standardized, exchange-traded contracts or (2)
customized, privately negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated.
There are four principal types of derivative instruments -- options, futures,
forwards and swaps -- from which virtually any type of derivative transaction
can be created. Further information regarding options and futures, is provided
later in this section and is provided in the Fund's statement of additional
information. The Fund does not presently engage in the use of swaps.
While the judicious use of derivatives by experienced investment managers such
as Keystone can be beneficial, derivatives also involve risks different from,
and, in certain cases, greater than, the risks presented by more traditional
investments. Following is a general discussion of important risk factors and
issues concerning the use of derivatives that investors should understand before
investing in the Fund.
* Market Risk -- This is the general risk attendant to all investments that the
value of a particular investment will decline or otherwise change in a way
detrimental to the Fund's interest.
* Management Risk -- Derivative products are highly specialized instruments that
require investment techniques and risk analyses different from those
associated with stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument, but also of the
derivative itself, without the benefit of observing the performance of the
derivative under all possible market conditions. In particular, the use and
complexity of derivatives require the maintenance of adequate controls to
monitor the transactions entered into, the ability to assess the risk that a
derivative adds to the Fund's portfolio and the ability to forecast price,
interest rate or currency exchange rate movements correctly.
* Credit Risk -- This is the risk that a loss may be sustained by the Fund as a
result of the failure of a another party to a derivative (usually referred to
as a "counterparty") to comply with the terms of the derivative contract. The
credit risk for exchange traded derivatives is generally less than for
privately negotiated derivatives, since the clearing house, which is the
issuer or counterparty to each exchange-traded derivative, provides a
guarantee of performance. This guarantee is supported by a daily payment
system (i.e., margin requirements) operated by the clearing house in order to
reduce overall credit risk. For privately negotiated derivatives, there is no
similar clearing agency guarantee. Therefore, the Fund considers the
creditworthiness of each counterparty to a privately negotiated derivative in
evaluating potential credit risk.
* Liquidity Risk -- Liquidity risk existswhen a particular instrument is
difficult to purchase or sell. If a derivative transaction is particularly
large or if the relevant market is illiquid (as is the case with many
privately negotiated derivatives), it may not be possible to initiate a
transaction or liquidate a position at an advantageous price.
OPTIONS TRANSACTIONS
WRITING COVERED OPTIONS. The Fund may write (i.e., sell) covered call and put
options. No more than 25% of its net assets will be subject to covered options.
By writing a call option, the Fund becomes obligated during the term of the
option to deliver the securities underlying the option upon payment of the
exercise price. By writing a put option, the Fund becomes obligated during the
term of the option to purchase the securities underlying the option at the
exercise price if the option is exercised.
The Fund may only write "covered" options. This means that so long as the Fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, the Fund might own substantially similar U.S. Treasury bills. If
the Fund has written options against all of its securities eligible for writing
options, the Fund may be unable to write additional options unless it sells a
portion of its portfolio holdings to obtain new securities against which it can
write options. If this were to occur, higher portfolio turnover and,
correspondingly, greater brokerage commissions and other transaction costs may
result. The Fund does not expect, however, that this will occur.
The Fund will be considered "covered" with respect to a put option it writes
if, so long as it is obligated as the writer of the put option, it deposits and
maintains liquid assets having a value equal to or greater than the exercise
price of the option with its custodian in a segregated account.
The principal reason for writing call or put options is to obtain, through a
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. The Fund receives a premium from writing a call or
put option, which it retains whether or not the option is exercised. By writing
a call option, the Fund might lose the potential for gain on the underlying
security while the option is open. By writing a put option, the Fund might
become obligated to purchase the underlying security for more than its current
market price upon exercise.
PURCHASING OPTIONS. The Fund may purchase call and put options.
The Fund would normally purchase call options to hedge against an increase
in the market value of its securities. The Fund will not engage in such
transactions for speculation. The purchase of a call option would entitle the
Fund, in return for the premium paid, to purchase specified securities at a
specified price upon exercise of the option during the option period. The Fund
would ordinarily realize a gain if, during the option period, the value of such
securities exceeds the sum of the exercise price, the premium paid and
transaction costs. Otherwise, the Fund would realize a loss on the purchase of
the call option.
The Fund may purchase put or call options, including purchasing put or call
options for the purpose of offsetting previously written put or call options of
the same series. If the Fund is unable to effect a closing purchase transaction
with respect to covered options it has written, the Fund will not be able to
sell the underlying securities until the options expire or are exercised.
The Fund would normally purchase put options to hedge against a decline in the
market value of securities in its portfolio (protective puts) or securities of
the type in which it is permitted to invest. The purchase of a put option would
entitle the Fund, in exchange for the premium paid, to sell specified securities
at a specified price during the option period. The purchase of protective puts
is designed to offset or hedge against a decline in the market value of the
Fund's securities. Gains and losses on the purchase of protective put options
would tend to be offset by countervailing changes in the value of underlying
portfolio securities. Put options may also be purchased by the Fund for the
purpose of affirmatively benefitting from a decline in the price of securities
that the Fund does not own. The Fund would ordinarily realize a gain if, during
the option period, the value of the underlying securities declined below the
exercise price sufficiently to cover the premium and transaction costs.
Otherwise, the Fund would realize a loss on the purchase of the put option.
The Fund may purchase put and call options on securities indices for the same
purposes as the purchase of options on securities. Options on securities indices
are similar to options on securities, except that the exercise of securities
index options requires cash payments and does not involve the actual purchase or
sale of securities. In addition, securities index options are designed to
reflect price fluctuations in a group of securities or segment of the securities
market rather than price fluctuations in a single security.
Options on some securities are relatively new, and it is impossible to predict
the amount of trading interest that will exist in such options. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair the Fund's ability to
use such options to achieve its investment objective.
OPTIONS TRADING MARKETS. Options which the Fund will trade are generally
listed on national securities exchanges. Exchanges on which such options
currently are traded are the Chicago Board Options Exchange and the New York,
American, Pacific and Philadelphia Stock Exchanges.
FUTURES TRANSACTIONS
The Fund may enter into futures contracts for the purchase or sale of
securities or currency or futures contracts based on stock indices and write
options on such contracts. The Fund intends to enter into such contracts and
related options for hedging purposes. The Fund may enter into other types of
futures contracts that may become available and relate to the securities held by
the Fund. The Fund will enter into futures contracts in order to hedge against
changes in securities prices. A futures contract is an agreement to buy or sell
securities or currencies at a specified price during a designated month. The
Fund does not make payment or deliver securities upon entering into a futures
contract. Instead, it puts down a margin deposit, which is adjusted to reflect
changes in the value of the contract and continues until the contract is
terminated.
The Fund may sell or purchase futures contracts. When a futures contract is
sold by the Fund, the value of the contract will tend to rise when the value of
the underlying securities or currencies declines and to fall when the value of
such securities or currencies increases. Thus, the Fund would sell futures
contracts in order to offset a possible decline in the value of its securities
or currencies. If a futures contract were purchased by the Fund, the value of
the contract would tend to rise when the value of the underlying securities
increased and to fall when the value of such securities declined. The Fund
intends to purchase futures contracts in order to fix what is believed by
Keystone to be a favorable price and rate of return for securities or favorable
exchange rate for currencies the Fund intends to purchase.
The Fund may also purchase put and call options on securities and currency
futures contracts for hedging purposes. A put option purchased by the Fund would
give it the right to assume a position as the seller of a futures contract. A
call option purchased by the Fund would give it the right to assume a position
as the purchaser of a futures contract. The purchase of an option on a futures
contract requires the Fund to pay a premium. In exchange for the premium, the
Fund becomes entitled to exercise the benefits, if any, provided by the futures
contract, but is not required to take any action under the contract. If the
option cannot be exercised profitably before it expires, the Fund's loss will be
limited to the amount of the premium and any transaction costs.
The Fund may write (sell) put and call options on futures contracts for
hedging purposes. The writing of a put option on a futures contract generates a
premium, which may partially offset an increase in the price of securities that
the Fund intends to purchase. However, the Fund becomes obligated to purchase a
futures contract, which may have a value lower than the exercise price.
Conversely, the writing of a call option on a futures contract generates a
premium which may partially offset a decline in the value of the Fund's assets.
By writing a call option, the Fund becomes obligated, in exchange for the
premium, to sell a futures contract, which may have a value higher than the
exercise price.
The Fund may enter into closing purchase and sale transactions in order to
terminate a futures contract and may sell put and call options for the purpose
of closing out its options positions. The Fund's ability to enter into closing
transactions depends on the development and maintenance of a liquid secondary
market. There is no assurance that a liquid secondary market will exist for any
particular contract or at any particular time. As a result, there can be no
assurance that the Fund will be able to enter into an offsetting transaction
with respect to a particular contract at a particular time. If the Fund is not
able to enter into an offsetting transaction, the Fund will continue to be
required to maintain the margin deposits on the contract and to complete the
contract according to its terms, in which case it would continue to bear market
risk on the transaction.
Although futures and options transactions are intended to enable the Fund to
manage market risk, unanticipated changes in market prices could result in
poorer performance than if it had not entered into these transactions. Even if
Keystone correctly predicts market price movements, a hedge could be
unsuccessful if changes in the value of the Fund's futures position did not
correspond to changes in the value of its investments. This lack of correlation
between the Fund's futures and securities positions may be caused by differences
between the futures and securities markets or by differences between the
securities underlying the Fund's futures position and the securities held by or
to be purchased for the Fund. Keystone will attempt to minimize these risks
through careful selection and monitoring of the Fund's futures and options
positions.
The Fund does not intend to use futures transactions for speculation. The Fund
may not purchase or sell futures contracts or options on futures, except for
closing purchase or sale transactions, if immediately thereafter the sum of
margin deposits on the Fund's outstanding futures and options positions and
premiums paid for outstanding options on futures would exceed 5% of the market
value of the Fund's total assets. These transactions involve brokerage costs,
require margin deposits and, in the case of contracts and options obligating the
Fund to purchase securities, require the Fund to segregate assets to cover such
contracts and options. In addition, the Fund's activities in futures contracts
may be limited by the requirements of the Internal Revenue Code for
qualification as a regulated investment company.
FOREIGN CURRENCY TRANSACTIONS
As discussed above, the Fund may invest in securities of foreign issuers. When
the Fund invests in foreign securities they usually will be denominated in
foreign currencies, and the Fund temporarily may hold funds in foreign
currencies. Thus, the value of Fund shares will be affected by changes in
exchange rates.
As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the Fund may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency the Fund
will deliver or receive when the contract is completed) is fixed when the Fund
enters into the contract. The Fund usually will enter into these contracts to
stabilize the U.S. dollar value of a security it has agreed to buy or sell. The
Fund intends to use these contracts to hedge the U.S. dollar value of a security
it already owns, particularly if the Fund expects a decrease in the value of the
currency in which the foreign security is denominated. Although the Fund will
attempt to benefit from using forward contracts, the success of its hedging
strategy will depend on Keystone's ability to predict accurately the future
exchange rates between foreign currencies and the U.S. dollar. The value of the
Fund's investments denominated in foreign currencies will depend on the relative
strength of those currencies and the U.S. dollar, and the Fund may be affected
favorably or unfavorably by changes in the exchange rates or exchange control
regulations between foreign currencies and the dollar. Changes in foreign
currency exchange rates also may affect the value of dividends and interest
earned, gains and losses realized on the sale of securities and net investment
income and gains, if any, to be distributed to shareholders by the Fund. The
Fund may also purchase and sell options related to foreign currencies in
connection with hedging strategies.
<PAGE>
EXHIBIT A
REDUCED SALES CHARGES
Initial sales charges may be reduced or eliminated for persons or
organizations purchasing Class A shares of the Fund alone or in combination with
Class A shares of other Keystone America Funds.
For purposes of qualifying for reduced sales charges on purchases made
pursuant to Rights of Accumulation or Letters of Intent, the term "Purchaser"
includes the following persons: an individual; an individual, his or her spouse
and children under the age of 21; a trustee or other fiduciary of a single trust
estate or single fiduciary account established for their benefit; an
organization exempt from federal income tax under Section 501 (c)(3) or (13) of
the Internal Revenue Code; a pension, profit-sharing or other employee benefit
plan whether or not qualified under Section 401 of the Internal Revenue Code; or
other organized groups of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some purpose
other than the purchase of redeemable securities of a registered investment
company at a discount. In order to qualify for a lower sales charge, all orders
from an organized group will have to be placed through a single investment
dealer or other firm and identified as originating from a qualifying purchaser.
CONCURRENT PURCHASES
For purposes of qualifying for a reduced sales charge, a Purchaser may combine
concurrent direct purchases of Class A shares of two or more of the "Eligible
Funds," as defined below. For example, if a Purchaser concurrently invested
$75,000 in one of the other "Eligible Funds" and $75,000 in the Fund, the sales
charge would be that applicable to a $150,000 purchase, i.e., 3.75% of the
offering price, as indicated in the Sales Charge Schedule in the Prospectus.
RIGHT OF ACCUMULATION
In calculating the sales charge applicable to current purchases of the Fund's
Class A shares, a Purchaser is entitled to accumulate current purchases with the
current value of previously purchased Class A shares of the Fund and Class A
shares of certain other eligible funds that are still held in (or exchanged for
shares of and are still held in) the same or another eligible fund ("Eligible
Fund(s)"). The Eligible Funds are the Keystone America Funds and Keystone Liquid
Trust.
For example, if a Purchaser held shares valued at $99,999 and purchased an
additional $5,000, the sales charge for the $5,000 purchase would be at the next
lower sales charge of 3.75% of the offering price as indicated in the Sales
Charge schedule. KIRC must be notified at the time of purchase that the
Purchaser is entitled to a reduced sales charge, which reduction will be granted
subject to confirmation of the Purchaser's holdings. The Right of Accumulation
may be modified or discontinued at any time.
LETTER OF INTENT
A Purchaser may qualify for a reduced sales charge on a purchase of Class A
shares of the Fund alone or in combination with purchases of Class A shares of
any of the other Eligible Funds by completing the Letter of Intent section of
the application. By so doing, the Purchaser agrees to invest within a
thirteen-month period a specified amount which, if invested at one time, would
qualify for a reduced sales charge. Each purchase will be made at a public
offering price applicable to a single transaction of the dollar amount specified
on the application, as described in this prospectus. The Letter of Intent does
not obligate the Purchaser to purchase, nor the Fund to sell, the amount
indicated.
After the Letter of Intent is received by KIRC, each investment made will be
entitled to the sales charge applicable to the level of investment indicated on
the application. The Letter of Intent may be back-dated up to ninety days so
that any investments made in any of the Eligible Funds during the preceding
ninety-day period, valued at the Purchaser's cost, can be applied toward
fulfillment of the Letter of Intent. However, there will be no refund of sales
charges already paid during the ninety-day period. No retroactive adjustment
will be made if purchases exceed the amount specified in the Letter of Intent.
Income and capital gains distributions taken in additional shares will not apply
toward completion of the Letter of Intent.
If total purchases made pursuant to the Letter of Intent are less than the
amount specified, the Purchaser will be required to remit an amount equal to the
difference between the sales charge paid and the sales charge applicable to
purchases actually made. Out of the initial purchase (or subsequent purchases,
if necessary) 5% of the dollar amount specified on the application will be held
in escrow by KIRC in the form of shares registered in the Purchaser's name. The
escrowed shares will not be available for redemption, transfer or encumbrance by
the Purchaser until the Letter of Intent is completed or the higher sales charge
paid. All income and capital gains distributions on escrowed shares will be paid
to the Purchaser or his order.
When the minimum investment specified in the Letter of Intent is completed
(either prior to or by the end of the thirteen-month period), the Purchaser will
be notified and the escrowed shares will be released. If the intended investment
is not completed, the Purchaser will be asked to remit to KDI any difference
between the sales charge on the amount specified and on the amount actually
attained. If the Purchaser does not within 20 days after written request by KDI
or his dealer pay such difference in sales charge, KIRC will redeem an
appropriate number of the escrowed shares in order to realize such difference.
Shares remaining after any such redemption will be released by KIRC. Any
redemptions made by the Purchaser during the thirteen-month period will be
subtracted from the amount of the purchases for purposes of determining whether
the Letter of Intent has been completed. In the event of a total redemption of
the account prior to completion of the Letter of Intent, the additional sales
charge due will be deducted from the proceeds of the redemption and the balance
will be forwarded to the Purchaser.
By signing the application, the Purchaser irrevocably constitutes and appoints
KIRC his attorney to surrender for redemption any or all escrowed shares with
full power of substitution.
The Purchaser or his dealer must inform KDI or KIRC that a Letter of Intent is
in effect each time a purchase is made.
<PAGE>
<TABLE>
KEYSTONE AMERICA FUNDS
APPLICATION
- ------------------------------------------------------------------------------ -----------------------------------------
Make check payable to the fund selected and mail with the application to Keystone, P.O. Box 2121, Boston, MA 02106-2121
- ------------------------------------------------------------------------------ -----------------------------------------
A. FUND SELECTION Indicate investment amount and share class below. There is
a $1,000 minimum initial investment. If a class is not
indicated, your investment will be made in Class A shares.
<S> <C> <C> <S> <S> <S>
CLASS AMOUNT CLASS AMOUNT
INCOME TAX FREE INCOME
Capital Preservation and Income Fund -------- $ -------- Tax Free Income Fund -------- $ --------
Government Securities Fund -------- $ -------- Florida Tax Free Fund -------- $ --------
Intermediate Term Bond Fund -------- $ -------- Pennsylvania Tax Free Fund -------- $ --------
World Bond Fund -------- $ -------- Massachusetts Tax Free Fund -------- $ --------
Strategic Income Fund -------- $ -------- New York Insured Tax Free Fund -------- $ --------
GROWTH & INCOME Texas Tax Free Fund -------- $ --------
Fund for Total Return -------- $ -------- California Insured Tax Free Fund -------- $ --------
Fund of the Americas -------- $ -------- Missouri Tax Free Fund -------- $ --------
MONEY MARKET GROWTH
Keystone Liquid Trust -------- $ -------- Global Opportunities Fund -------- $ --------
Hartwell Emerging Growth Fund -------- $ --------
Hartwell Growth Fund -------- $ --------
Omega Fund, Inc. -------- $ --------
Strategic Development Fund -------- $ --------
If you have an existing Keystone account, please enter the account number here >
- ------------------------------------------------------------------------------ -----------------------------------------
B. INVESTMENT DEALER
- ------------------------------------------------------------------------------ -----------------------------------------
Name of Broker/Dealer Firm Rep/AE No. Last Name First Initial
- ------------------------------------------------------------------------------ -----------------------------------------
Broker/Dealer Branch Office Telephone Number Investor's Account Number (if any) with your Firm
- ------------------------------------------------------------------------------ -----------------------------------------
C. SHAREHOLDER REGISTRATION (please print) For information about naming a beneficiary in your account registration, please
call Keystone.
Individual -------------------------------------------------------------------------------------------------------------
First Name Middle Initial Last Name Social Security #
Joint Tenant -----------------------------------------------------------------------------------------------------------
First Name Middle Initial Last Name Social Security #
Other ------------------------------------------------------------------------------------------------------------------
Name of Corporation, Organization, Fiduciary Taxpayer I.D. #
If trust give date of trust agreement: ------------------------------------------------------------------
Uniform Gifts to Minors Act --------------------------------------------------------------------------------------------
Custodian's Name
Uniform Transfers to Minors Act ----------------------------------------------------------------------------------------
Custodian's Name
As Custodian for ----------------------------------------------- Under ------------------------------------------------
Minor's Name Minor's Social Security # State
- ------------------------------------------------------------------------------------------------------------------------
Street Address City State 9-digit Zip Code
Daytime Telephone ( ) Evening Telephone ( )
-----------------------------------------------------------------------------------------------------
Area Code Area Code
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------
D. DISTRIBUTIONS. Choose One (If no choice is indicated, distributions will be reinvested)
[] Reinvest all income dividends and capital gains in additional shares [] Pay all dividends and capital gains distributions
in cash (if payment is to be made to other than
registered owner, identify in Section I).
[] Invest my dividends in another Keystone America Fund* ---------------- [] Pay all dividends in cash and reinvest
Designate Fund capital gains.
[] Invest my capital gains in another Keystone America Fund* -------------
Designate Fund
*See "Two Dimensional Investing" under the "Shareholder Services" section of the Prospectus.
- ------------------------------------------------------------------------------------------------------------------------
E. OPTIONAL SERVICES (please select by checking appropriate box)
1. Telephone Exchanges (1-800-343-2898) [] Subject to Prospectus provisions, I authorize Keystone
to accept my telephone instructions to exchange my shares
in any Keystone America Fund for shares in any other
Keystone America Fund. There is a $10.00 fee for each
exchange; however, if the exchange is made through KARL by
an individual investor, there is no fee.
[] Subject to Prospectus provisions, I authorize Keystone
to accept telephone instructions from my financial adviser
of record to exchange my shares in any Keystone America
Fund for shares of any other Keystone America Fund. There
is a $10.00 fee for each exchange.
Please refer to the Prospectus for a more complete
description of telephone privileges.
- ------------------------------------------------------------------------------------------------------------------------
2. Telephone Redemptions (1-800-343-2898) [] Subject to Prospectus provisions, I authorize Keystone to
accept my telephone instructions to redeem up to $50,000
from my account in any Keystone America Fund and to
deposit the proceeds to my bank by electronic funds
transfer. Redemptions of less than $2,500 will be mailed
by check. Only shares on deposit with Keystone can be
redeemed by telephone. Redemptions by telephone are
allowed only if the address and bank account of record
have been the same for a minimum period of 30 days.
(Please provide information on your bank in Section I.)
Please refer to the Prospectus for a more complete
description of telephone privileges.
- ------------------------------------------------------------------------------------------------------------------------
3. Automatic Investments by [] I wish to make automatic investments of $ ------------ in
Electronic Funds Transfer my Keystone America Fund
($100 minimum) ----------------------------------------------------------------------------
Name of Fund
[] Monthly. On [] the 5th or [] 20th day of each month, commencing ---------- 19 ---- or
[] Quarterly. Every three months on the [] 5th or [] 20th day, commencing ---------- 19 ----
Please provide information on your bank in Section I. You must receive
notification from Keystone that your electronic transfer feature is active
before you make electronic transactions. This is normally 30 business days
after we receive your application.
- ------------------------------------------------------------------------------ -----------------------------------------
4. Automatic Withdrawals by Electronic Funds Transfer or Check. ($100 minimum
per withdrawal; withdrawals may be as much as 1.5% per month or 4.5% per
quarter of account asset value at time withdrawals commence.)
[] Beginning ---------- 19 ---- please electronically transfer to my bank the
amount of $ --------- on the first day of each
[] month or [] quarter Please allow 30 days for payments to begin. Please
provide information on your bank under Section I.
[] I prefer to have checks sent to the registered
owner's address. [] Payment by check made to payee other than
registered shareholders. Please identify in
Section I.
- ------------------------------------------------------------------------------ -----------------------------------------
5. Dollar Cost Averaging [] Monthly [] Quarterly
[] I authorize Keystone to withdraw $ ---------- ($100 minimum) from my Keystone America -----------------------------
Designate Fund
account to purchase shares of Keystone America --------------------,
beginning ---------- 1st, 19 -----------------. Designate Fund
Month
- ------------------------------------------------------------------------------ -----------------------------------------
F. CHECKWRITING (Capital Preservation & Income Fund and Keystone Liquid Trust ONLY)
[] Yes, I want free checkwriting ($500 minimum per check). Please be sure to
fill out the attached signature card.
<PAGE>
- ------------------------------------------------------------------------------ -----------------------------------------
G. LETTER OF INTENT (Letter of Intent applies only to Class A shares)
[] I agree to the terms of the Letter of Intent set forth in the Prospectus (including the escrowing of
shares). Although I am not obligated to do so, it is my intention to invest over a thirteen-month
period in shares of one or more Keystone America Funds in an aggregate amount at least equal to:
[] $50,000 [] $100,000 [] $250,000 [] $500,000 [] $1,000,000
- ------------------------------------------------------------------------------ -----------------------------------------
H. RIGHTS OF ACCUMULATION (Rights of Accumulation applies only to Class A shares)
I qualify for Rights of Accumulation as described in the Prospectus. Listed below are accounts in the
Keystone America Family of Funds which may entitle me to a reduced sales charge:
- ------------------------------------------------------------------------------------------------------------------------
Fund Account Number
- ------------------------------------------------------------------------------------------------------------------------
Fund Account Number
- ------------------------------------------------------------------------------------------------------------------------
I. BANK AND PAYEE INFORMATION IMPORTANT -- YOUR BANK MUST BE A MEMBER OF THE AUTOMATED
CLEARING HOUSE IN ORDER FOR YOU TO USE ELECTRONIC
FUNDS TRANSFER SERVICES.
If you have elected to have funds deposited to or withdrawn from your bank account, please attach here a
voided check or pre-printed deposit slip for your bank account. Your Keystone America account and your
bank account must have one name in common.
- ------------------------------------------------------------------------------------------------------------------------
Name on Bank Account Bank Account Number
Type of Bank Account: [] Savings [] Checking [] NOW
I am identifying below the: [] Payee for distributions [] Payee for telephone redemptions [] Payee for automatic
withdrawals
- ------------------------------------------------------------------------------------------------------------------------
Name of Payee (other than bank) Street Address City State Zip
- ------------------------------------------------------------------------------------------------------------------------
Keystone Use Only Bank Routing/Transit
- ----------------------------------------------------------------------------------------------------------------------
J. SIGNATURES
[] Check if any owner is a citizen or resident of the U.S.
[] Check if any owner is a foreign Indicate Country -----------------------------------
person not subject to U.S. tax
reporting requirement.
NOTE: See reverse side for important tax information.
I (we) am (are) of legal age and have received the prospectus(es) and agree to its (their) terms.
IF I (WE) HAVE ELECTED ANY OF THE OPTIONAL EXCHANGE, REDEMPTION, AUTOMATIC INVESTMENT OR AUTOMATIC
WITHDRAWAL SERVICES DESCRIBED ABOVE: (I) I (WE) HEREBY RATIFY ANY INSTRUCTIONS RECEIVED BY KEYSTONE IN
WRITING AND I (WE) AGREE THAT NEITHER THE FUND, KIRC NOR KDI WILL BE HELD RESPONSIBLE FOR THE
AUTHENTICITY OF SUCH INSTRUCTIONS; (II) I (WE) AGREE THAT NEITHER THE FUND, KIRC NOR KDI WILL BE HELD
LIABLE WHEN FOLLOWING INSTRUCTIONS RECEIVED OVER KARL OR BY TELEPHONE WHICH ARE REASONABLY BELIEVED TO
BE GENUINE; AND (III) I (WE) UNDERSTAND, THAT IF SUCH REASONABLE PROCEDURES ARE NOT FOLLOWED, THE FUND,
KIRC OR KDI MAY BE LIABLE FOR ANY LOSSES DUE TO UNAUTHORIZED OR FRAUDULENT INSTRUCTIONS.
UNDER PENALTIES OF PERJURY, EACH OF THE UNDERSIGNED CERTIFIES THAT THE NUMBER SHOWN ABOVE IS THE
UNDERSIGNED'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND THAT THE UNDERSIGNED IS NOT SUBJECT TO BACKUP
WITHHOLDING UNLESS INDICATED BY CHECKING THE BOX BELOW.
[] THE UNDERSIGNED IS SUBJECT TO BACKUP WITHHOLDING UNDER THE PROVISIONS OF THE INTERNAL REVENUE CODE
SECTION 3406(A)(1)(C).
[] CHECK HERE IF YOU DO NOT HAVE A NUMBER BUT HAVE APPLIED OR INTEND TO APPLY FOR ONE. THE SIGNATURE OF
EACH PERSON ON THIS APPLICATION SERVES TO CERTIFY THIS, AND THAT EACH UNDERSIGNED UNDERSTANDS THAT IF
THE UNDERSIGNED DOES NOT PROVIDE A NUMBER WITHIN 60 DAYS WE ARE REQUIRED BY LAW TO WITHHOLD 31% OF ALL
DIVIDENDS, CAPITAL GAINS, REDEMPTIONS, EXCHANGES, AND CERTAIN OTHER PAYMENTS.
> >
Signature Date
- ------------------------------------------------------------------------------ -----------------------------------------
> >
Signature Date
- ------------------------------------------------------------------------------ -----------------------------------------
</TABLE>
<PAGE>
IMPORTANT TAX NOTICE
BACKUP WITHHOLDING INFORMATION
- ------------------------------------------------------------------------------
Federal tax law requires us to obtain your certification that:
1. The taxpayer identification number you provide is correct, and
2. That you are not subject to backup withholding. (For most individuals, the
taxpayer identification number is the Social Security Number.)
Nonresident aliens must certify that they qualify as foreign persons, exempt
from U.S. tax reporting requirements. On joint accounts where an owner is a U.S.
citizen or resident, that owner must certify that the taxpayer identification
number provided is correct and is not subject to backup withholding.
Certification of foreign status must be filed every three years.
If you do not provide us with the above information on the application, we are
required by law to withhold 31% of all your dividends, capital gains,
redemptions, exchanges and certain other payments.
The following are the other conditions under which you will be subject to backup
withholding:
1. If you have received a notice from the Internal Revenue Service that you
provided an incorrect taxpayer identification number.
2. If you have received a notice from the Internal Revenue Service that you
underreported interest or dividend payments or did not file a return
reporting such payments.
DO NOT CHECK THE BOX INDICATING THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING
UNLESS YOU HAVE RECEIVED A NOTICE FROM THE INTERNAL REVENUE SERVICE.
If you fall within one of the following categories, you are exempt from backup
withholding on ALL payments and should NOT check the box:
* CORPORATION * FINANCIAL INSTITUTION * REGISTERED SECURITIES DEALER * COMMON
TRUST FUND * COLLEGE, CHURCH OR CHARITABLE ORGANIZATION * RETIREMENT PLAN *
OTHER ENTITY LISTED IN INTERNAL REVENUE CODE SEC. 3452.
FOR FURTHER DETAILS, REFER TO INTERNAL REVENUE SERVICE FORM W-9.
<PAGE>
KEYSTONE AMERICA
FAMILY OF FUNDS
Capital Preservation and Income Fund
Government Securities Fund
Intermediate Term Bond Fund
Strategic Income Fund
World Bond Fund
Tax Free Income Fund
California Insured Tax Free Fund
Florida Tax Free Fund
Massachusetts Tax Free Fund
Missouri Tax Free Fund
New York Insured Tax Free Fund
Pennsylvania Tax Free Fund
Texas Tax Free Fund
Fund for Total Return
Global Opportunities Fund
Hartwell Emerging Growth Fund Inc.
Hartwell Growth Fund Inc.
Omega Fund Inc.
Fund of the Americas
Strategic Development Fund
KEYSTONE
Distributors, Inc.
200 Berkeley Street
Boston, Massachusetts 02116-5034
KEYSTONE
AMERICA
OMEGA
FUND INC.
PROSPECTUS AND
APPLICATION
<PAGE>
KEYSTONE AMERICA OMEGA FUND
Part B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
KEYSTONE AMERICA OMEGA FUND
STATEMENT OF ADDITIONAL INFORMATION
April 28, 1995
This statement of additional information is not a prospectus but relates
to, and should be read in conjunction with the prospectus of Keystone America
Omega Fund (the "Fund") dated April 28, 1995. A copy of the prospectus may be
obtained from Keystone Distributors, Inc. ("KDI"), the Fund's principal
underwriter ("Principal Underwriter"), 200 Berkeley Street, Boston,
Massachusetts 02116-5034.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
The Fund 2
Investment Restrictions 2
Distributions and Taxes 5
Valuation of Securities 6
Brokerage 8
Sales Charges 9
Distribution Plans 12
Trustees and Officers 15
Investment Manager 19
Investment Adviser 21
Principal Underwriter 23
Declaration of Trust 24
Standardized Total Return and Yield Quotations 26
Additional Information 27
Appendix A-1
Financial Statements F-1
Independent Auditors' Report F-13
<PAGE>
2
- --------------------------------------------------------------------------------
THE FUND
- --------------------------------------------------------------------------------
The Fund is an open-end, diversified management investment company commonly
known as a mutual fund. The Fund's investment objective is maximum capital
growth by investing in a varied portfolio consisting primarily of common stocks
and securities convertible into common stocks. The Fund was incorporated in
Massachusetts on February 8, 1968, as Omega Fund, Inc. Omega Fund, Inc. joined
the Keystone America Funds on April 19, 1989 and was renamed Keystone America
Omega Fund, Inc. The Fund is managed by Keystone Management, Inc. ("Keystone
Management") and advised by Keystone Custodian Funds, Inc. ("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 RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions set forth below, are fundamental and may not be
changed without the vote of a majority of the Fund's outstanding voting shares.
The Fund may not do the following:
(1) purchase securities on margin, provided that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
(2) make short sales of securities or maintain a short position, unless, at
all times when a short position is open, it owns an equal amount of such
securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 15% of the Fund's net assets
(taken at market or fair value as determined by the Fund's Board of Trustees) is
held as collateral for such sales at any one time (a reason for making such a
sale would be to defer realization of gain or loss for federal income tax
purposes);
(3) make loans, except by the purchase of a portion of an issue of bonds,
notes, debentures or other obligations publicly distributed or of a type
customarily purchased by financial institutions, or by entering into loan
transactions with respect to portfolio securities not in excess of 25% of the
Fund's total assets (taken at current value) immediately after such transaction;
<PAGE>
3
the Fund will not lend any of its assets to any investment adviser or principal
underwriter for the Fund or to any officer, trustee or employee of either of
them or of the Fund;
(4) borrow, unless, immediately after any such borrowing, such borrowing
and all other such borrowings and other liabilities do not exceed one-third of
the value of the Fund's total assets (including all such borrowings), taken at
market or other fair value;
(5) invest more than 10% of the Fund's total assets (taken at market or
fair value as determined by the Fund's Board of Trustees) in the securities of
any one issuer (except United States ("U.S.") government securities);
(6) purchase securities of any company with a record of less than three
years' continuous operation (including that of predecessors) if such purchase
would cause the Fund's investments in such companies taken at cost to exceed 5%
of the Fund's total assets taken at market value;
(7) purchase or sell real estate or interests in real estate;
(8) purchase or sell commodities or commodity contracts, except that the
Fund may engage in transactions in commodity futures contracts and options on
commodity futures contracts, other than physical commodity futures contracts;
(9) purchase or acquire the securities of any other investment company;
except that it may make such a purchase or acquisition in the open market
involving no commission or profit to a sponsor or dealer (other than the
customary broker's commission); provided that, immediately after such purchase
or acquisition, the Fund and any company or companies controlled by the Fund do
not own in the aggregate:
(a) more than 3% of the total outstanding voting stock of the acquired
company;
(b) securities issued by the acquired company having an aggregate value in
excess of 5% of the value of the total assets of the Fund; or
(c) securities issued by the acquired company and all other investment
companies having an aggregate value in excess of 10% of the value of
the total assets of the Fund; and
provided that, immediately after such purchase or acquisition, the
Fund, other investment companies having the same investment adviser,
and companies controlled by the Fund and/or such investment companies
<PAGE>
4
do not own more than 10% of the total outstanding voting stock of any
closed-end investment company so purchased or acquired;
(10) purchase or retain the securities of any issuer if those officers and
trustees of the Fund or its investment adviser owning individually more than
one-half of 1% of the securities of such issuer together own more than 5% of the
securities of such issuer;
(11) act as a securities underwriter, or act as a distributor of securities
of which it is the issuer, except that the Fund may issue, sell and distribute
securities of which it is the issuer, including additional shares of its capital
stock, and may act as its own distributor of such securities to the extent that
such action is not in contravention of such rules and regulations as the
Securities and Exchange Commission may prescribe in respect thereof, and except
that the Fund might be deemed an underwriter within the meaning of Section 2(11)
of the Securities Act of 1933 ("1933 Act") in making sales of restricted
securities;
(12) concentrate its investments in any particular industry.
A borrowing limitation in excess of 5% is generally associated with a
leveraged fund. The Fund anticipates borrowing only for temporary purposes. To
the extent the Fund's total borrowings exceed 5%, no additional investments will
be made until such borrowings are reduced to 5%.
A purchase by the Fund of securities of other investment companies would
result in a layering of expenses such that the Fund's shareholders would
indirectly bear a proportionate share of the expenses of those investment
companies, including operating costs, investment advisory fees and
administrative fees. The Fund does not anticipate purchasing the securities of
other investment companies.
The Fund has adopted the non-fundamental policies set forth below, which
may be changed without shareholder approval or notification in order to permit
the sale of shares in certain states.
The Fund will not do the following:
(1) pledge more than 10% of the Fund's average net assets (taken at market
or fair value as determined by the Board of Trustees) for the preceding fiscal
year at the time of such pledging;
(2) invest in warrants, valued at the lower of cost or market, exceeding
5%, or, in the case of warrants not listed on the New York or American Stock
Exchanges, 2% of the value (taken at market or fair value as determined by the
Board of Trustees) of the Fund's net assets immediately after the making of any
<PAGE>
5
such investment; warrants acquired in units or attached to securities may be
deemed to be without value;
(3) invest in oil, gas or other mineral leases or exploration programs;
(4) invest in the securities of any issuer if, immediately after the making
of such investment, the Fund would own more than 10% of the voting stock of, or
have more than 5% of the Fund's total assets invested in the securities of, such
issuer;
(5) use leverage except for temporary and emergency purposes, and leverage
will not be used generally for making additional investments; and
(6) purchase or sell real property (including limited partnership
interests, but excluding readily marketable interests in real estate investment
trusts or readily marketable securities of companies which invest in real
estate).
Whenever an investment policy or restriction states a maximum percentage of
the Fund's assets that may be invested in any security or other asset, it is
intended that such minimum or maximum percentage limitation be determined
immediately after and as a result of the acquisition of such security or other
asset. Accordingly, any later increase or decrease resulting from a change in
values, net assets or other circumstances will not be considered when
determining whether the investment complies with the Fund's investment policies
and restrictions.
- --------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
The Fund annually distributes to its shareholders dividends from net
investment income and net realized long-term and short-term capital gains
annually in shares or, at the option of the shareholder, in cash. Shareholders
who have not opted, prior to the record date for any distribution, to receive
cash will have the number of distributed shares determined on the basis of the
Fund's net asset value per share computed at the end of the day on the record
date after adjustment for the distribution. Net asset value is used in computing
the number of shares in both gains and income distribution reinvestments.
Account statements and/or checks as appropriate will be mailed to shareholders
within seven days after the Fund pays the distribution. Unless the Fund receives
instructions to the contrary from a shareholder before the record date, it will
assume that the shareholder wishes to receive that distribution and future gains
and income distributions in shares. Instructions continue in effect until
changed in writing.
<PAGE>
6
Distributed long term capital gains are taxable as such to the shareholder
whether received in cash or in additional Fund shares and regardless of the
period of time Fund shares have been held by the shareholder. However, if such
shares are held less than six months and redeemed at a loss, the shareholder
will recognize a long term capital loss on such shares to the extent of the long
term capital gain distribution received in connection with such shares. If the
net asset value of the Fund's shares is reduced below a shareholder's cost by a
capital gains distribution, such distribution, to the extent of the reduction,
would be a return of investment though taxable as stated above. Since
distributions of capital gains depend upon profits actually realized from the
sale of securities by the Fund, they may or may not occur. The foregoing
comments relating to the taxation of dividends and distributions paid on the
Fund's shares relate solely to federal income taxation. Such dividends and
distributions may also be subject to state and local taxes.
When the Fund makes a distribution, it intends to distribute only the
Fund's 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) Common stock, preferred stock and other equity securities listed on the
New York Stock Exchange (the "Exchange") are valued on the basis of the last
sale price on the Exchange. In the absence of any sales, such securities are
valued at the last bid price.
(2) Common stock, preferred stock and other equity securities listed on
other U.S. or foreign exchanges will be valued as described in (1) above using
quotations on the exchange on which the security is most extensively traded.
(3) Common stock, preferred stock and other equity securities unlisted and
quoted on the National Market System ("NMS") are valued at the last sale price,
provided a sale has occurred. In the absence of any sales, such securities are
valued at the high or "inside" bid, which is the bid supplied by the National
Association of Securities Dealers Automated Quotation system ("NASDAQ") for
securities traded in the over-the-counter market.
<PAGE>
7
(4) Common stock, preferred stock and other equity securities quoted on the
NASDAQ system but not listed on NMS are valued at the high or "inside" bid.
(5) Common stock, preferred stock and other equity securities not listed
and not quoted on the NASDAQ system and for which over-the-counter market
quotations are readily available are valued at the mean between the current bid
and asked prices for such securities.
(6) Non-U.S. common stock, preferred stock and other equity securities not
listed or listed and subject to restrictions on sale are valued at prices
supplied by a dealer selected by Keystone.
(7) Bonds, debentures and other debt securities, whether or not listed on
any national securities exchange, are valued at a price supplied by a pricing
service or a bond dealer selected by Keystone.
(8) Short-term debt securities maturing in sixty days or less are valued at
amortized cost if their original term to maturity from the date of purchase was
sixty days or less, or by amortizing their value on the sixty-first day prior to
maturity if their term to maturity from the date of purchase exceeds sixty days,
unless the Trustees determine that such valuation does not represent fair market
value.
(9) Options, futures contracts and options on futures listed or traded on a
national exchange are valued at the last sale price on such exchange prior to
the time of determining net asset value, or, if no sale is reported, are valued
at the mean between the most recent bid and asked prices.
(10) Forward currency contracts are valued at their last sale as reported
by a pricing service and, in the absence of a report, at a value determined on
the basis of the underlying currency at prevailing exchange rates.
(11) Securities subject to restrictions on resale are valued at fair value
at least monthly by a pricing service under the direction of the Fund's Board of
Trustees.
(12) All other assets are valued at fair market value as determined by or
under the direction of the Fund's Board of Trustees.
<PAGE>
8
- --------------------------------------------------------------------------------
BROKERAGE
- --------------------------------------------------------------------------------
It is the policy of the Fund, in effecting transactions in portfolio
securities, to seek best execution of orders at the most favorable prices. The
determination of what may constitute best execution and price in the execution
of a securities transaction by a broker involves a number of considerations,
including, without limitation, the overall direct net economic result to the
Fund, involving both price paid or received and any commissions and other costs
paid, the efficiency with which the transaction is effected, the ability to
effect the transaction at all where a large block is involved, the availability
of the broker to stand ready to execute potentially difficult transactions in
the future and the financial strength and stability of the broker. Such
considerations are weighed by management in determining the overall
reasonableness of brokerage commissions paid.
Subject to the foregoing, a factor in the selection of brokers is the
receipt of research services, such as analyses and reports concerning issuers,
industries, securities, economic factors and trends and other statistical and
factual information. Any such research and other statistical and factual
information provided by brokers to the Fund or Keystone is considered to be in
addition to, and not in lieu of, services required to be performed by Keystone
under its Investment Advisory Agreement with the Fund. The cost, value and
specific application of such information are indeterminable and cannot be
practically allocated among the Fund and other clients of Keystone 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 Investment Advisory
Agreement, Keystone is 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 Keystone follows such a practice,
it 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. 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
direct purchase from an issuer of certain securities, thereby taking advantage
<PAGE>
9
of the lower purchase price available to members of such a group.
Neither Keystone nor the Fund intends to place securities transactions with
any particular broker-dealer or group thereof. The Fund's Board of Trustees has
determined, however, that the Fund may follow a policy of considering sales of
shares as a factor in the selection of broker-dealers to execute portfolio
transactions, subject to the requirements of best execution, including best
price, described above.
The policy of the Fund with respect to brokerage is and will be reviewed by
the Fund's Board of Trustees from time to time. Because of the possibility of
further regulatory developments affecting the securities exchanges and brokerage
practices generally, the foregoing practices may be changed, modified or
eliminated.
Investment decisions for the Fund are made independently by Keystone from
those of the other funds and investment accounts managed by Keystone. It may
frequently develop, however, 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 that is
equitable to each fund or account. It is recognized that, in some cases, this
system could have a detrimental effect on the price or volume of the security as
far as the Fund is concerned. In other cases, however, it is believed that the
ability of the Fund to participate in volume transactions will produce better
executions for the Fund.
For the fiscal years ended December 31, 1992, 1993 and 1994, the Fund paid
$258,337, $380,450 and $592,800, respectively, in brokerage commissions.
In no instance are portfolio securities purchased from or sold to Keystone,
KDI, or any of their affiliated persons, as said term is defined under the
Investment Company Act of 1940 (the "1940 Act") and rules and regulations issued
thereunder.
- --------------------------------------------------------------------------------
SALES CHARGES
- --------------------------------------------------------------------------------
General
The Fund offers three classes of shares. Class A shares are offered with a
sales charge of 5.75% payable at the time of purchase of Fund shares ("Front End
Load Option"). Class B shares are sold subject to a contingent deferred sales
<PAGE>
10
charge payable upon redemption within three calendar years after purchase.
("Back End Load Option"). Class B shares which have been outstanding during
seven calendar years will automatically convert to Class A shares, without
imposition of a front end sales charge. (Conversion of Class B shares
represented by stock certificates will require the return of the stock
certificates to Keystone Investor Resource Center, Inc. ("KIRC").) Class C
shares are sold subject to a contingent deferred sales charge payable upon
redemption within one year after purchase ("Level Load Option"). Class C shares
are available only through dealers who have entered into special distribution
agreements with KDI, the Fund's principal underwriter. The Prospectus contains a
general description of how investors may buy shares of the Fund, as well as a
table of applicable sales charges for Class A shares, a discussion of reduced
sales charges which may apply to subsequent purchases and a description of
applicable contingent deferred sales charges.
Contingent Deferred Sales Charges
In order to reimburse the Fund for certain expenses relating to the sale of
its shares (See "Distribution Plan"), a contingent deferred sales charge may be
imposed at the time of redemption of certain Fund shares, as follows:
Class A Shares
With certain exceptions, purchases of Class A shares in the amount of
$1,000,000 on which no sales charge has been paid will be subject to a
contingent deferred sales charge of 0.25% upon redemption during the one year
period commencing on the date the shares were originally purchased. The
contingent deferred sales charge will be retained by KDI. See "Calculation of
Contingent Deferred Sales Charge" below.
Class B Shares
With certain exceptions, the Fund may impose a deferred sales charge of
3.00% on shares redeemed during the calendar year of purchase and during the
first calendar year after purchase; 2.00% on shares redeemed during the second
calendar year after purchase; and 1.00% on shares redeemed during the third
calendar year after purchase. No deferred sales charge is imposed on amounts
redeemed thereafter. If imposed, the deferred sales charge is deducted from the
redemption proceeds otherwise payable to you. The deferred sales charge is
retained by KDI. See "Calculation of Contingent Deferred Sales Charge" below.
Class C Shares
With certain exceptions, the Fund may impose a deferred sales charge of 1%
on shares redeemed within one year after the date of purchase. No deferred sales
<PAGE>
11
charge is imposed on amounts redeemed thereafter. If imposed, the deferred sales
charge is deducted from the redemption proceeds otherwise payable to you. The
deferred sales charge is retained by KDI. See "Calculation of Contingent
Deferred Sales Charge" below.
Calculation of Contingent Deferred Sales Charge
Any contingent deferred sales charge imposed upon the redemption of Class
A, Class B or Class C shares is a percentage of the lesser of (1) the net asset
value of the shares redeemed or (2) the net cost of such shares. No contingent
deferred sales charge is imposed when you redeem amounts derived from (1)
increases in the value of your account above the net cost of such shares due to
increases in the net asset value per share of the Fund; (2) certain shares with
respect to which the Fund did not pay a commission on issuance, including shares
acquired through reinvestment of dividend income and capital gains
distributions; (3) Class C shares and certain Class A shares held during more
than one year; or (4) Class B shares held during more than four consecutive
calendar years. Upon request for redemption, shares not subject to the
contingent deferred sales charge will be redeemed first. Thereafter, shares held
the longest will be the first to be redeemed. There is no contingent deferred
sales charge when the shares of a class are exchanged for the shares of the same
class of another Keystone America Fund. Moreover, when shares of one such class
of a fund have been exchanged for shares of another such class of a fund, the
calendar year of the purchase of the shares of the fund exchanged into is
assumed to be the year shares tendered for exchange were originally purchased.
Waiver of Sales Charges
Shares of the Fund 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 to (1) certain Directors, Trustees,
officers, full-time employees or sales representatives of the Fund, Keystone
Management, Keystone, Keystone Group, Inc. ("Keystone Group"), one of their
subsidiaries or KDI who have been such for not less than ninety days; (2) a
pension and profit-sharing plan established by such companies, their
subsidiaries and affiliates for the benefit of their Directors, Trustees,
officers, full-time employees and sales representatives; or (3) a registered
representative of a firm with a dealer agreement with KDI; 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 is charged on purchases of shares of the Fund by a
bank or trust company in a single account in the name of such bank or trust
company as trustee if the initial investment in shares of the Fund or any
<PAGE>
12
Keystone Group Fund purchased 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.
If you were an Omega Fund, Inc. shareholder of record as of May 1, 1987,
you have the perpetual right, so long as you remain a Fund shareholder, to
invest and reinvest in additional shares of the Fund without imposition of a
sales charge or a deferred sales charge. In addition, certain shares held of
record as of April 19, 1989 are not subject to a deferred sales charge.
In addition, no contingent deferred sales charge is imposed on a redemption
of shares of the Fund in the event of (1) death or disability of the
shareholder; (2) a lump-sum distribution from a benefit plan qualified under the
Employee Retirement Income Security Act of 1974 ("ERISA"); (3) automatic
withdrawals from ERISA plans if the shareholder is at least 59 1/2 years old;
(4) involuntary redemptions of an account having an aggregate net asset value of
less than $1,000; or (5) automatic withdrawals under an Automatic Withdrawal
Plan of up to 1 1/2% per month of the shareholder's initial account balance.
Redemption of Shares
The Fund has obligated itself under the 1940 Act to redeem for cash all
shares presented for redemption by any one shareholder up to the lesser of
$250,000 or 1% of the Fund's assets in any 90 day period.
- --------------------------------------------------------------------------------
DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
Rule 12b-1 under the 1940 Act permits investment companies, such as the
Fund, to use their assets to bear expenses of distributing their shares if they
comply with various conditions, including adoption of a distribution plan
containing certain provisions set forth in Rule 12b-1.
Distribution Plans in General
A rule adopted by the NASD limits the amount that the Fund may pay annually
in distribution costs for sale of its shares and shareholder service fees. The
rule limits annual expenditures to 1% of the aggregate average daily net asset
value of its shares, of which 0.75% may be used to pay such distribution costs
and 0.25% may be used to pay shareholder service fees. The NASD rule also limits
the aggregate amount which the Fund may pay for such distribution costs to 6.25%
of gross share sales since the inception of the 12b-1 Plan, plus interest at the
<PAGE>
13
prime rate plus 1% on such amounts (less any contingent deferred sales charges
paid by shareholders to KDI).
Class A Distribution Plan. The Class A Distribution Plan provides that the Fund
may expend daily amounts at an annual rate which is currently limited to up to
0.25% of the Fund's average daily net asset value attributable to Class A shares
to finance any activity which is primarily intended to result in the sale of its
shares, including without limitation, expenditures consisting of payments to the
Principal Underwriter of the Fund (currently KDI) to enable the Principal
Underwriter to pay or to have paid to others who sell Class A shares a service
or other fee, at such intervals as the Principal Underwriter may determine, in
respect of Class A shares maintained by any such recipients outstanding on the
books of the Fund for specified periods.
Amounts paid by the Fund under the Class A Distribution Plan are currently
used to pay others, such as dealers, service fees at an annual rate of up to
0.25% of the average net asset value of Class A shares sold by such others and
remaining outstanding on the books of the Fund for specified periods.
Class B Distribution Plan. The Class B Distribution Plan provides that the Fund
may expend daily amounts at an annual rate of up to 1.00% of the Fund's average
daily net asset value attibutable to Class B shares to finance any activity
which is primarily intended to result in the sale of its shares, including,
without limitation, expenditures consisting of payments to the Principal
Underwriter of the Fund (currently KDI) to enable the Principal Underwriter to
pay to others (dealers) commissions in respect of Class B shares 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 B shares maintained by any such
recipients outstanding on the books of the Fund for specified periods.
Amounts paid by the Fund under the Class B Distribution Plan are currently
used to pay others (dealers) (1) a commission normally equal to 3.00% for each
share sold; and/or (2) service fees at an annual rate of 0.25% of the average
net asset value of shares sold by such others and remaining outstanding on the
books of the Fund for specified periods.
KDI intends, but is not obligated, to continue to pay or accrue
distribution charges incurred in connection with the Class B Distribution Plan
that exceed current annual payments permitted to be received by KDI from the
Fund. KDI intends to seek full payment of such charges from the Fund (together
with annual interest thereon at the prime rate plus one percent) at such time in
the future as, and to the extent that, payment thereof by the Fund would be
within the permitted limits.
<PAGE>
14
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 attibutable to Class C shares to finance any activity
which is primarily intended to result in the sale of its shares, including,
without limitation, expenditures consisting of payments to the Principal
Underwriter of the Fund (currently KDI) to enable the Principal Underwriter to
pay to others (dealers) commissions in respect of Class C shares 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 outstanding on the books of the Fund for specified periods.
Amounts paid by the Fund under the Class C Distribution Plan are currently
used to pay others (dealers) (1) a commission normally equal to 1.00% for each
share sold; and (2) a commission at an annual rate of 0.75% (subject to
applicable NASD limitations) and service fees at an annual rate of 0.25%,
respectively, of the average net asset value of each share sold by such others
and remaining outstanding on the books of the Fund for specified periods.
Distribution Plans - General
Whether any expenditure under a Plan is subject to a state expense limit
will depend upon the nature of the expenditure and the terms of the state law,
regulation or order imposing the limit. A portion of the Fund's Distribution
Plan expenses may be includable in the Fund's total operating expenses for
purposes of determining compliance with state expense limits.
Each of the Distribution Plans may be terminated at any time by vote of the
Fund's Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
shares of the respective class of Fund shares. However, after the termination of
the Class B Distribution Plan, KDI would be entitled to receive payment, at the
annual rate of 1.00% of the average daily net asset value of Class B shares, as
compensation for its services which had been earned at any time during which the
Class B Distribution Plan was in effect.
Any change in a Distribution Plan that would materially increase the
distribution expenses of the Fund provided for in a Distribution Plan requires
shareholder approval. Otherwise, a Distribution Plan may be amended by the
Trustees, including the Rule 12b-1 Trustees. Unpaid distribution costs at
December 31, 1994 for Class B and Class C were $2,015,349 (6.25% of net class
assets and $637,742 (6.44% of net class assets), respectively.
While a Distribution Plan is in effect, the Fund will be required to commit
the selection and nomination of candidates for Independent Trustees to the
discretion of the Independent Trustees.
<PAGE>
15
The total amounts paid by the Fund under the foregoing arrangements may not
exceed the maximum Distribution Plan limit specified above. The amounts and
purposes of expenditures under a Distribution Plan must be reported to the Rule
12b-1 Trustees quarterly. The Rule 12b-1 Trustees may require or approve changes
in the implementation or operation of a Plan and may also require that total
expenditures by the Fund under a Distribution Plan be kept within limits lower
than the maximum amount permitted by a Distribution Plan as stated above.
The Independent Trustees of the Fund have determined that the sales of the
Fund's shares resulting from payments under the Distribution Plans are expected
to benefit the Fund.
For the fiscal year ended December 31, 1994, the Fund paid KDI $103,680,
$204,876 and 73,554 pursuant to the Class A, Class B and Class C Distribution
Plans, respectively. These amounts were used to pay commissions and fees.
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
Trustees and officers of the Fund, their principal occupations and some of
their affiliations over the last five years are as follows:
*ALBERT H. ELFNER, III: President, Trustee and Chief Executive Officer of the
Fund; Chairman of the Board, President, Director and Chief Executive
Officer of Keystone Group, Inc. ("Keystone Group"), President and Trustee
or Director of Keystone America Capital Preservation and Income Fund,
Keystone America Intermediate Term Bond Fund, Keystone America Strategic
Income Fund, Keystone America World Bond Fund, Keystone Tax Free Income
Fund, Keystone America State Tax Free Fund, Keystone America State Tax Free
Fund - Series II, Keystone America Fund for Total Return, Keystone America
Global Opportunities Fund, Keystone America Hartwell Emerging Growth Fund,
Inc., Keystone America Hartwell Growth Fund, Inc., Keystone America Omega
Fund, Inc., Keystone Fund of the Americas Luxembourg and Keystone Fund of
the Americas - U.S., Keystone Strategic Development Fund (collectively,
"Keystone America Funds"); Keystone Custodian Funds, Series B-1, B-2, B-4,
K-1, K-2, S-1, S-3, and S-4; Keystone International Fund, Keystone Precious
Metals Holdings, Inc., Keystone Tax Free Fund, Keystone Tax Exempt Trust,
Keystone Liquid Trust (collectively, "Keystone Custodian Funds"); Keystone
Institutional Adjustable Rate Fund and Master Reserves Trust (all such
funds, collectively, "Keystone Group Funds"); Director and Chairman of the
Board, Chief Executive Officer and Vice Chairman of Keystone Custodian
<PAGE>
16
Funds, Inc. ("Keystone"); Chairman of the Board and Director of Keystone
Investment Management Corporation ("KIMCO") and Keystone Fixed Income
Advisors ("KFIA"); Director, Chairman of the Board, Chief Executive Officer
and President of Keystone Management, Inc. ("Keystone Management"),
Keystone Software Inc. ("Keystone Software"); Director and President of
Hartwell Keystone Advisers, Inc. ("Hartwell Keystone"), Keystone Asset
Corporation, Keystone Capital Corporation, and Keystone Trust Company;
Director of Keystone Distributors, Inc. ("KDI"), Keystone Investor Resource
Center, Inc. ("KIRC"), and Fiduciary Investment Company, Inc. ("FICO");
Director and Vice President of Robert Van Partners, Inc.; Director of
Boston Children's Services Association; Trustee of Anatolia College,
Middlesex School, and Middlebury College; Member, Board of Governors, New
England Medical Center and former Trustee of Neworld Bank.
FREDERICK AMLING: Trustee of the Fund; Trustee or Director of all other Keystone
Group Funds; Professor, Finance Department, George Washington University;
President, Amling & Company (investment advice); Member, Board of Advisers,
Credito Emilano (banking); and former Economics and Financial Consultant,
Riggs National Bank.
CHARLES A. AUSTIN III: Trustee of the Fund; Trustee or Director ofall other
Keystone Group Funds; Investment Counselor to Appleton Partners, Inc.;
former Managing Director, Seaward Management Corporation (investment
advice) and former Director, Executive Vice President and Treasurer, State
Street Research & Management Company (investment advice).
*GEORGE S. BISSELL: Chairman of the Board and Trustee of the Fund; Director of
Keystone Group; Chairman of the Board and Trustee or Director of all other
Keystone Group Funds,; Director and Chairman of the Board of Hartwell
Keystone; Chairman of the Board and Trustee of Anatolia College; Trustee of
University Hospital (and Chairman of its Investment Committee); former
Chairman of the Board and Chief Executive Officer of Keystone Group; and
former Chief Executive Officer of the Fund.
EDWIN D. CAMPBELL: Trustee of the Fund; Trustee or Director of all other
Keystone Group Funds; Executive Director, Coalition of Essential Schools,
Brown University; Director and former Executive Vice President, National
Alliance of Business; former Vice President, Educational Testing Services;
and former Dean, School of Business, Adelphi University.
CHARLES F. CHAPIN: Trustee of the Fund; Trustee or Director of all other
Keystone Group Funds; former Group Vice President, Textron Corp.; and
former Director, Peoples Bank (Charlotte, N.C).
<PAGE>
17
LEROY KEITH, JR.: Trustee of the Fund; Trustee or Director of all other Keystone
Group Funds; Director of Phoenix Total Return Fund and Equifax, Inc.;
Trustee of Phoenix Series Fund, Phoenix Multi-Portfolio Fund and The
Phoenix Big Edge Series Fund; and former President, Morehouse College.
K. DUN GIFFORD: Trustee of the Fund; Trustee or Director of all other Keystone
Group Funds; Chairman of the Board, Director and Executive Vice President,
The London Harness Company; Managing Partner, Roscommon Capital Corp.;
Trustee, Cambridge College; Chairman Emeritus and Director, American
Institute of Food and Wine; Chief Executive Officer, Gifford Gifts of Fine
Foods; Chairman, Gifford, Drescher & Associates (environmental consulting);
President, Oldways Preservation and Exchange Trust (education); and former
Director, Keystone Group and Keystone.
F. RAY KEYSER, JR.: Trustee of the Fund; Trustee or Director of all other
Keystone Group Funds; Of Counsel, Keyser, Crowley & Meub, P.C.; Member,
Governor's (VT) Council of Economic Advisers; Chairman of the Board and
Director, Central Vermont Public Service Corporation and Hitchcock Clinic;
Director, Vermont Yankee Nuclear Power Corporation, Vermont Electric Power
Company, Inc., Grand Trunk Corporation, Central Vermont Railway, Inc.,
S.K.I. Ltd., Sherburne Corporation, Union Mutual Fire Insurance Company,
New England Guaranty Insurance Company, Inc. and the Investment Company
Institute; former Governor of Vermont; former Director and President,
Associated Industries of Vermont; former Chairman and President, Vermont
Marble Company; former Director of Keystone; and former Director and
Chairman of the Board, Green Mountain Bank.
DAVID M. RICHARDSON: Trustee of the Fund; Trustee or Director of all other
Keystone Group Funds; Executive Vice President, DHR International, Inc.
(executive recruitment); former Senior Vice President, Boyden International
Inc. (executive recruit- ment); and Director, Commerce and Industry
Association of New Jersey, 411 International, Inc. and J & M Cumming Paper
Co.
RICHARD J. SHIMA: Trustee of the Fund; Trustee or Director of all other Keystone
Group Funds; Chairman, Environmental Warranty, Inc., and Consultant, Drake
Beam Morin, Inc. (executive outplacement); Director of Connecticut Natural
Gas Corporation, Trust Company of Connecticut, Hartford Hospital, Old State
House Association and Enhanced Financial Services, Inc.; Member, Georgetown
College Board of Advisors; Chairman, Board of Trustees, Hartford Graduate
Center; Trustee, Kingswood-Oxford School and Greater Hartford YMCA; former
Director, Executive Vice President and Vice Chairman of The Travelers
Corporation; and former Managing Director of Russell Miller, Inc.
<PAGE>
18
ANDREW J. SIMONS: Trustee of the Fund; Trustee or Director of all other Keystone
Group Funds; Partner, Farrell, Fritz, Caemmerer, Cleary, Barnosky &
Armentano, P.C.; President, Nassau County Bar Association; former Associate
Dean and Professor of Law, St. John's University School of Law.
EDWARD F. GODFREY: Senior Vice President of the Fund; Senior Vice President of
all other Keystone Group Funds; Director, Senior Vice President, Chief
Financial Officer and Treasurer of Keystone Group, KDI, Keystone Asset
Corporation, Keystone Capital Corporation, Keystone Trust Company;
Treasurer of KIMCO, Robert Van Partners, Inc., and FICO; Treasurer and
Director of Keystone Management, Keystone Software, Inc., and Hartwell
Keystone; Vice President and Treasurer of KFIA; and Director of KIRC.
JAMES R. McCALL: Senior Vice President of the Fund; Senior Vice President of all
other Keystone Group Funds; and President of Keystone.
KEVIN J. MORRISSEY: Treasurer of the Fund; Treasurer of all other Keystone Group
Funds; Vice President of Keystone Group; Assistant Treasurer of FICO and
Keystone; and former Vice President and Treasurer of KIRC.
ROSEMARY D. VAN ANTWERP: Senior Vice President and Secretary of the Fund; Senior
Vice President and Secretary of all other Keystone Group Funds; Senior Vice
President, General Counsel and Secretary of Keystone; Senior Vice
President, General Counsel, Secretary and Director of KDI, Keystone
Management and Keystone Software, Senior Vice President and General Counsel
of KIMCO; Senior Vice President, General Counsel and Director of FICO and
KIRC: Senior Vice President and Secretary of Hartwell Keystone and Robert
Van Partners, Inc. Vice President and Secretary of KFIA; Senior Vice
President, General Counsel and Secretary of Keystone Group, Keystone Asset
Corporation, Keystone Capital Corporation and Keystone Trust Company.
* This Trustee may be considered an "interested person" within the meaning of
the 1940 Act.
Mr. Elfner and Mr. Bissell are "interested persons" by virtue of their
positions as officers and/or Directors of Keystone Group and several of its
affiliates including Keystone, KDI and KIRC. Mr. Elfner and Mr. Bissell own
shares of Keystone Group. Mr. Elfner is Chairman of the Board, Chief Executive
Officer and Director of Keystone Group. Mr. Bissell is a Director of Keystone
Group.
During the fiscal year ended December 31, 1994, no Trustee affiliated with
Keystone or any officer received any direct remuneration from the Fund. During
<PAGE>
19
this same period, the nonaffiliated Trustees received no retainers and fees. As
of January 31, 1995, the Trustees and officers beneficially owned less than 1.0%
of the Fund's then outstanding Class A, Class B or Class C shares.
The address of all the Fund's trustees and officers and the address of the
Fund is 200 Berkeley Street, Boston, Massachusetts 02116-5034.
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
- --------------------------------------------------------------------------------
Subject to the general supervision of the Fund's Board of Trustees,
Keystone Management, located at 200 Berkeley Street, Boston, Massachusetts
02116-5034, serves as investment manager to the Fund and is responsible for the
overall management of the Fund's business and affairs. Keystone Management,
organized in 1989, is a wholly-owned subsidiary of Keystone and its directors
and principal executive officers have been affiliated with Keystone, a seasoned
investment adviser, for a number of years. Keystone Management also serves as
investment manager to each of the Keystone Custodian Funds and to certain other
Keystone funds.
Except as otherwise noted below, pursuant to an Investment Management
Agreement with the Fund (the "Management Agreement") and subject to the
supervision of the Fund's Board of Trustees, Keystone Management manages and
administers the operation of the Fund, and manages the investment and
reinvestment of the Fund's assets in conformity with the Fund's investment
objectives and restrictions. The Management Agreement stipulates that Keystone
Management shall provide office space, all necessary office facilities,
equipment and personnel in connection with its services under the Management
Agreement and pay or reimburse the Fund for the compensation of Fund officers
and trustees who are affiliated with the investment manager as well as pay all
expenses of Keystone Management incurred in connection with the provisions of
its services. All charges and expenses other than those specifically referred to
as being borne by Keystone Management will be paid by the Fund, including, but
not limited to, custodian charges and expenses; bookkeeping and auditors'
charges and expenses; transfer agent charges and expenses; fees of Independent
Trustees; brokerage commissions, brokers' fees and expenses; issue and transfer
taxes; costs and expenses under the Distribution Plan; taxes and trust fees
payable to governmental agencies; the cost of share certificates; fees and
expenses of the registration and qualification of the Fund and its shares with
the Securities and Exchange Commission (sometimes referred to herein as the
"SEC" or the "Commission") or under state or other securities laws; expenses of
preparing, printing and mailing prospectuses, statements of additional
<PAGE>
20
information, notices, reports and proxy materials to shareholders of the Fund;
expenses of shareholders' and trustees' meetings; charges and expenses of legal
counsel for the Fund and for the Trustees of the Fund on matters relating to the
Fund; charges and expenses of filing annual and other reports with the SEC and
other authorities; and all extraordinary charges and expenses of the Fund.
Keystone Management pays all charges and expenses relating to these items
subject to reimbursement by the Fund.
The Management Agreement permits Keystone Management to enter into an
agreement with Keystone or other investment adviser, under which Keystone or
such other investment adviser, as investment adviser, will provide substantially
all the services to be provided by Keystone Management under the Management
Agreement. The Management Agreement also permits Keystone Management to delegate
to Keystone or another investment adviser substantially all of the investment
manager's rights, duties and obligations under the Management Agreement.
Keystone Management provides the Fund with certain administrative and management
services, which services include (1) performing research and planning with
respect to (a) the Fund's qualification as a regulated investment company under
Subchapter M of the Internal Revenue Code, (b) tax treatment of the Fund's
portfolio investments, (c) tax treatment of special corporate actions (such as
reorganizations), (d) state tax matters affecting the Fund, and (e) the Fund's
distributions of income and capital gains; and (2) preparing the Fund's federal
and state tax returns; (3) providing services to the Fund's shareholders in
connection with federal and state taxation and distributions of income and
capital gains; and (4) storing documents relating to the Fund's activities.
The Fund pays Keystone Management a fee for its services at the annual rate
of:
Management Aggregate Net Asset Value
Fee of the Shares of the Fund
- ---------------------------------------------------------------------------
0.75% of the first $ 250,000,000 plus
0.675% of the next $ 250,000,000 plus
0.60% of the next $ 500,000,000 plus
0.50% of amounts over $1,000,000,000
computed as of the close of business on each business day and payable daily.
The Fund is subject to certain annual state expense limitations, the most
restrictive of which is as follows:
2.5% of the first $30 million of Fund average net assets; 2.0% of the next
$70 million of Fund average net assets; and 1.5% of Fund average net assets
over $100 million.
<PAGE>
21
Capital charges and certain expenses, including a portion of the Fund's
Distribution Plan fees, are not included in the calculation of the state expense
limitation. This limitation may be modified or eliminated in the future.
As a continuing condition of registration of shares in a state, Keystone
Management has agreed to reimburse the Fund annually for certain operating
expenses incurred by the Fund in excess of certain percentages of the Fund's
average daily net assets. However, Keystone Management is not required to
reimburse the Fund to the extent that such reimbursement would result in the
Fund's inability to qualify as a regulated investment company under the
provisions of the Internal Revenue Code. This condition may be modified or
eliminated in the future.
The Management Agreement continues in effect from year to year only if
approved at least annually by the Fund's Board of Trustees or by a vote of a
majority of the outstanding shares, and such renewal has been approved by the
vote of a majority of the Independent Trustees cast in person at a meeting
called for the purpose of voting on such approval. The Management Agreement may
be terminated, without penalty, on 60 days' written notice by the Fund's Board
of Trustees or by a vote of a majority of outstanding shares.
For further discussion of fees paid to Keystone Management, see "Investment
Adviser" below.
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INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Pursuant to its Investment Management Agreement, Keystone Management has
delegated its investment management functions, except for certain administrative
and management services to be performed in Nevada, to Keystone and has entered
into an Investment Advisory Agreement, with Keystone pursuant to which Keystone
provides investment advisory and management services to the Fund.
Keystone, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034,
has provided investment advisory and management services to investment companies
and private accounts since it was organized in 1932. Keystone is a wholly-owned
subsidiary of Keystone Group, Inc., which is located at 200 Berkeley Street,
Boston, Massachusetts 02116-5034. Keystone Group is a corporation privately
owned by current and former members of Keystone's management and its affiliates.
The shares of Keystone Group common stock beneficially owned by management are
held in a number of voting trusts, the trustees of which are George S. Bissell,
Albert H. Elfner, III, Roger T. Wickers, Edward F. Godfrey and Ralph J.
Spuehler, Jr. Keystone Group provides accounting, bookkeeping, legal, personnel
<PAGE>
22
and general corporate services to Keystone Management, Keystone, their
affiliates and the Keystone Group of Mutual Funds.
Pursuant to the Advisory Agreement, Keystone receives for its services an
annual fee representing 85% of the management fee received by Keystone
Management under its Management Agreement.
Under the terms of the Advisory Agreement and subject to the supervision of
the Fund's Board of Trustees, Keystone manages and administers the operation of
the Fund, and manages the investment and reinvestment of the Fund's assets in
conformity with the Fund's investment objectives and restrictions. The Advisory
Agreement stipulates that Keystone shall provide office space, all necessary
office facilities, equipment and personnel in connection with its services under
the Advisory Agreement and pay or reimburse the Fund for the compensation of
Fund officers and trustees who are affiliated with the investment manager and
will pay all expenses of Keystone incurred in connection with the provision of
its services. All charges and expenses other than those specifically referred to
as being borne by Keystone will be paid by the Fund, including, but not limited
to, custodian charges and expenses; bookkeeping and auditors' charges and
expenses; transfer agent charges and expenses; fees of Independent Trustees;
brokerage commissions, brokers' fees and expenses; issue and transfer taxes;
costs and expenses under the Distribution Plan; taxes and trust fees payable to
governmental agencies; the cost of share certificates, fees and expenses of the
registration and qualification of the Fund and its shares with the SEC or under
state or other securities laws; expenses of preparing, printing and mailing
prospectuses, statements of additional information, notices, reports and proxy
materials to shareholders of the Fund; expenses of shareholders' and Trustees'
meetings; charges and expenses of legal counsel for the Fund and for the
Trustees of the Fund on matters relating to the Fund; charges and expenses of
filing annual and other reports with the SEC and other authorities; and all
extraordinary charges and expenses of the Fund.
During the fiscal year ended December 31, 1992, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$464,861. Of such amount paid to Keystone Management, $395,132 was paid to
Keystone under an Investment Advisory Agreement between Keystone Management and
Keystone.
During the fiscal year ended December 31, 1993, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$627,879. Of such amount paid to Keystone Management, $533,697 was paid to
Keystone under an Investment Advisory Agreement between Keystone Management and
Keystone.
<PAGE>
23
During the fiscal year ended December 31, 1994, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$924,625. Of such amount paid to Keystone Management, $785,931 was paid to
Keystone for investment advisory services under the Investment Advisory
Agreement between Keystone Management and Keystone.
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PRINCIPAL UNDERWRITER
- --------------------------------------------------------------------------------
The Fund has entered into a Principal Underwriting Agreement (the
"Underwriting Agreement") with KDI, a wholly-owned subsidiary of Keystone.
KDI, located at 200 Berkeley Street, Boston, Massachusetts, 02116-5034, is
a Delaware corporation. KDI, as agent, currently has the right to obtain
subscriptions for and to sell shares of the Fund to the public. In so doing, KDI
may retain and employ representatives to promote distribution of the shares and
may obtain orders from brokers, dealers or others, acting as principals, for
sales of shares. No such representative, dealer or broker has any authority to
act as agent for the Fund. KDI has not undertaken to buy or to find purchasers
for any specific number of shares. KDI may receive payments from the Fund
pursuant to the Distribution Plans.
All subscriptions and sales of shares by KDI are at the offering price of
the shares, such price being in accordance with the provisions of the Fund's
Restated Articles of Incorporation, By-Laws, current prospectus and statement of
additional information. All orders are subject to acceptance by the Fund, and
the Fund reserves the right, in its sole discretion, to reject any order
received. Under the Underwriting Agreement, the Fund is not liable to anyone for
failure to accept any order.
The Fund has agreed under the Underwriting Agreement to pay all expenses in
connection with registration of its shares with the Commission as well as
auditing and filing fees in connection with registration of its shares under the
various state "blue-sky" laws.
From time to time, if in KDI's judgment it could benefit the sales of Fund
shares, KDI may use its discretion in providing to selected dealers promotional
materials and selling aids, including, but not limited to, personal computers,
related software and Fund data files.
KDI has agreed that it will in all respects duly conform with all state and
federal laws applicable to the sale of the shares and will indemnify and hold
harmless the Fund, and each person who has been, is or may be a Trustee or
officer of the Fund, against expenses reasonably incurred by any of them in
<PAGE>
24
connection with any claim or in connection with any action, suit or proceeding
to which any of them may be a party that arises out of or is alleged to arise
out of any misrepresentation or omission to state a material fact on the part of
KDI or any other person for whose acts KDI is responsible or is alleged to be
responsible, unless such misrepresentation or omission was made in reliance upon
written information furnished by the Fund.
The Underwriting Agreement provides that it will remain in effect as long
as its terms and continuance are approved by a majority of the Fund's
Independent Trustees at least annually at a meeting called for that purpose and
if its continuance is approved annually by vote of a majority of Trustees or by
vote of a majority of the outstanding shares.
The Underwriting Agreement may be terminated, without penalty, on 60 days'
written notice by the Fund's Board of Trustees or by a vote of a majority of
outstanding shares. The Underwriting Agreement will terminate automatically upon
its "assignment" as that term is defined in the 1940 Act.
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DECLARATION OF TRUST
- --------------------------------------------------------------------------------
Massachusetts Business Trust
The Fund is a Massachusetts business trust established under a Declaration
of Trust dated September 21, 1994. The Fund is similar in most respects to a
business corporation. The principal distinction between the Fund and a
corporation relates to the shareholder liability described below. A copy of the
Declaration of Trust (the "Declaration of Trust") is filed as an exhibit to the
Registration Statement of which this statement of additional information is a
part. This summary is qualified in its entirety by reference to the Declaration
of Trust.
Description of Shares
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest of classes of shares. Each share of the Fund
represents an equal proportionate interest with each other share of that class.
Upon liquidation, shares are entitled to a pro rata share of the Fund based on
the relative net assets of each class. Shareholders have no preemptive or
conversion rights. Shares are redeemable and transferable. The Fund is
authorized to issue additional classes or series of shares. The Fund currently
issues three classes of shares, but may issue additional classes or series of
shares.
<PAGE>
25
Pursuant to certain decisions of the Supreme Judicial Court of
Massachusetts, shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. If the Fund were held to be a partnership, the possibility of the
shareholders' incurring financial loss for that reason appears remote because
(1) the Fund's Declaration of Trust contains an express disclaimer of
shareholder liability for obligations of the Fund and requires that notice of
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Fund or the Trustees; and (2) because the Declaration of
Trust provides for indemnification out of the Fund's property for any
shareholder held personally liable for the obligations of the Fund.
Voting Rights
Under the Declaration of Trust, the Fund does not hold annual meetings. At
meetings called for the initial election of Trustees or to consider other
matters, shares are entitled to one vote per share. Shares generally vote
together as one class on all matters. Classes of shares of the Fund have equal
voting rights except that each class of shares has exclusive voting rights with
respect to its respective Distribution Plan. No amendment may be made to the
Declaration of Trust which adversely affects any class of shares without the
approval of a majority of the shares of that class. Shares have non-cumulative
voting rights, which means that the holders of more than 50% of the shares
voting for the election of Trustees can elect 100% of the Trustees to be elected
at a meeting and, in such event, the holders of the remaining 50% or less of the
shares voting will not be able to elect any Trustees.
After an initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, unless and until such time as less than a majority of the Trustees
holding office have been elected by Shareholders at which time the Trustees then
in office will call a shareholders meeting for election of Trustees.
Except as set forth above, the Trustees shall continue to hold office
indefinitely, unless otherwise required by law, and may appoint successor
Trustees. A Trustee may be removed from or cease to hold office (as the case may
be) (1) at any time by two-thirds vote of the remaining Trustees; (2) when such
Trustee becomes mentally or physically incapacitated; or (3) at a special
meeting of shareholders by a two-thirds vote of the outstanding shares. Any
Trustee may voluntarily resign from office.
<PAGE>
26
Limitation of Trustees' Liability
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
- --------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS
- --------------------------------------------------------------------------------
Total return quotations for a class of shares of the Fund as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one, five and ten year periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added and the maximum sales
charge deducted 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 Class A cumulative total return figures for the one, five and ten year
periods ended December 31, 1994 were (11.09)% (including applicable sales
charge), 66.42% and 305.32%, respectively. The Class A 5-year and 10-year
average annual returns were 10.72% and 15.02%, respectively. The total return
figures do not reflect expense subsidies by International Heritage Corp., the
Fund's previous adviser, or Keystone. Effective April 19, 1989, Keystone became
investment adviser to the Fund. Total return figures are included for historical
purposes.
The Class B cumulative total return figure for the one year ended December
31, 1994 was (9.27)% (including contingent deferred sales charge). The Class B
total return figure since August 2, 1993 (date of initial public offering) until
December 31, 1994 was (0.81)% (including contingent deferred sales charge).
The Class C cumulative total return (annualized) for the one year ended
December 31, 1994 was (6.56)% (including contingent deferred sales charge). The
Class C total return figure since August 2, 1993 (date of initial public
offering) until December 31, 1994 was 1.44% including contingent deferred sales
charge).
Current yield quotations as they may appear from time to time in
advertisements will consist of a quotation based on a 30-day period ended on the
date of the most recent balance sheet of the Fund computed by dividing the net
<PAGE>
27
investment income per share earned during the period by the maximum offering
price per share on the last day of the base period.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
To the best of the Fund's knowledge, as of January 31, 1995 there were no
shareholders of record who owned 5% or more of the Fund's outstanding Class A
shares.
As of January 31, 1995, the following shareholders of record owned 5% or
more of the Fund's outstanding shares: Merrill Lynch Pierce Fenner & Smith, 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, Florida 32246-6484
As of January 31, 1995, the following shareholders of record owned 5% or
more of the fund's outstanding Class c shares: Merrill Lynch Pierce fenner &
Smith, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville, Florida 32246-6484,
5.23% of Class A shares, 10.46% of Class B shares and 32.81% of Class C shares.
The equity securities of the Fund owned by all officers and Trustees of the
Fund, as a group, is less than one percent of Class A, Class B and Class C
shares.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the custodian ("Custodian") of all securities and cash
of the Fund. The Custodian performs no investment management functions for the
Fund, but, in addition to its custodial services, is responsible for accounting
and related recordkeeping on behalf of the Fund.
KPMG Peat Marwick LLP, One Boston Place, Boston, Massachusetts 02108,
Certified Public Accountants, serve as independent auditors for the Fund.
KIRC, located at 101 Main Street, Cambridge, Massachusetts 02142, is a
wholly-owned subsidiary of Keystone, and acts as transfer agent and dividend
disbursing agent for the Fund.
Except as otherwise stated in its prospectus or required by law, the Fund
reserves the right to change the terms of the offer stated in its prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
No dealer, salesman or other person is authorized to give any information
or to make any representation not contained in the Fund's prospectus, statement
of additional information or in supplemental sales literature issued by the Fund
<PAGE>
28
or KDI, and no person is entitled to rely on any information or representation
not contained therein.
The Fund's prospectus and statement of additional information omit certain
information contained in the registration statement filed with the Commission,
which may be obtained from the Commission's principal office in Washington, D.C.
upon payment of the fee prescribed by the rules and regulations promulgated by
the Commission.
The Fund is one of 15 different investment companies in the family of
Keystone America Funds. The Keystone America Funds offer a range of choices to
serve shareholder needs. The Keystone America Funds consist of the funds having
the various investment objectives described below:
Keystone America Hartwell Emerging Growth Fund - Seeks capital appreciation by
investment primarily in small and medium-sized companies in a relatively early
stage of development that are principally traded in the over-the-counter market.
Keystone America Hartwell Growth Fund - Seeks capital appreciation by investment
in securities selected for their long-term growth prospects.
Keystone America Capital Preservation and Income Fund - Seeks high current
income, consistent with low volatility of principal, by investing in adjustable
rate securities issued by the U.S. government, its agencies or
instrumentalities.
Keystone America Fund for Total Return - Seeks above-average income, dividend
growth and capital appreciation potential from quality common stocks, preferred
stocks, convertible bonds, other fixed-income securities and foreign securities
(up to 50%).
Keystone America Global Opportunities Fund - Seeks long-term capital growth from
foreign and domestic securities.
Keystone America Government Securities Fund - Seeks income and capital
preservation from U.S. government securities.
Keystone America Intermediate Term Bond Fund - Seeks income, capital
preservation and price appreciation potential from investment grade corporate
bonds.
Keystone America Omega Fund - Seeks maximum capital growth from common stocks
and securities convertible into common stocks.
Keystone America State Tax Free Fund - A mutual fund consisting of five separate
series of shares investing in different portfolio securities which seeks the
highest possible current income, exempt from federal income taxes and applicable
state taxes.
<PAGE>
29
Keystone America State Tax Free Fund - Series II - A mutual fund consisting of
two separate series of shares investing in different portfolio securities which
seeks the highest possible current income, exempt from federal income taxes and
applicable state taxes.
Keystone America Strategic Income Fund - Seeks high yield and capital
appreciation potential from corporate bonds, discount bonds, convertible bonds,
preferred stock and foreign bonds (up to 25%).
Keystone America Tax Free Income Fund - Seeks income exempt from federal income
taxes and capital preservation from the four highest grades of municipal bonds.
Keystone America World Bond Fund - Seeks total return from interest income,
capital gains and losses and currency exchange gains and losses from investment
in debt securities denominated in U.S. and foreign currencies.
Keystone Fund of the Americas - Seeks long-term growth of capital through
investments in equity and debt securities in North America (the United States
and Canada) and Latin America (Mexico and countries in South and Central
America).
Keystone Strategic Development Fund - Seeks long-term capital growth by
investing primarily in equity securities.
<PAGE>
A-1
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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.
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A-2
B. Moody's Common Stock Rankings
Moody's presents a concise statement of the important characteristics of a
company and an evaluation of the grade (quality) of its common stock. Data
presented includes: (a) capsule stock information which reveals short and long
term growth and yield afforded by the indicated dividend, based on a recent
price; (b) a long term price chart which shows patterns of monthly stock price
movements and monthly trading volumes; (c) a breakdown of a company's capital
account which aids in determining the degree of conservatism or financial
leverage in a company's balance sheet; (d) interim earnings for the current year
to date, plus three previous years; (e) dividend information; (f) company
background; (g) recent corporate developments; (h) prospects for a company in
the immediate future and the next few years; and (i) a ten year comparative
statistical analysis.
This information provides investors with information on what a company
does, how it has performed in the past, how it is performing currently and what
its future performance prospects appear to be.
These characteristics are then evaluated and result in a grading, or
indication of quality. The grade is based on an analysis of each company's
financial strength, stability of earnings and record of dividend payments. Other
considerations include conservativeness of capitalization, depth and caliber of
management, accounting practices, technological capabilities and industry
position. Evaluation is represented by the following grades:
(1) High Grade
(2) Investment Grade
(3) Medium Grade
(4) Speculative Grade
C. Moody's Preferred Stock Ratings
Preferred stock ratings and their definitions are as follows:
1. aaa: An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
2. aa: An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
3. a: An issue which is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be
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A-3
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 which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
5. ba: An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
6. b: An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
7. caa: An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate the
future status of payments.
8. ca: An issue which is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
payments.
9. c: This is the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
CORPORATE BOND RATINGS
S&P Corporate Bond Ratings
An S&P corporate bond rating is a current assessment of the
creditworthiness of an obligor, including obligors outside the United States,
with respect to a specific obligation. This assessment may take into
consideration obligors such as guarantors, insurers or lessees. Ratings of
foreign obligors do not take into account currency exchange and related
uncertainties. The ratings are based on current information furnished by the
issuer or obtained by S&P from other sources it considers reliable.
<PAGE>
A-4
The ratings are based, in varying degrees, on the following considerations:
a. Likelihood of default - capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
b. Nature of and provisions of the obligation; and
c. Protection afforded by and relative position of the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
PLUS (+) OR MINUS (-): To provide more detailed indications of credit
quality, ratings from "AA" to "A" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Bond ratings are as follows:
1. AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
2. AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
3. A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
4. BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
5. BB, B, CCC, CC and C - Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
<PAGE>
A-5
Moody's Corporate Bond Ratings
Moody's ratings are as follows:
1. Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
2. Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
3. A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
4. Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
5. Ba - Bonds which are rated Ba are judged to have speculative elements.
Their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
6. B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security
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A-6
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.
ZERO COUPON BONDS
A zero coupon "stripped" bond represents ownership in serially maturing
interest payments 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. Coupon zero coupon bonds of any
series mature periodically from the date of issue of such series through the
maturity date of the securities related to such series. Principal zero coupon
bonds mature on the date specified therein, which is the final maturity date of
the related securities. 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
individually 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 bonds (either initially or in the secondary market) is
treated as if the buyer had purchased a corporate obligation issued on the
purchase date with an original issue discount equal to the excess of the amount
payable at maturity over the purchase price. The purchaser is required to take
into income each year as ordinary income an allocable 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 both principal zero coupon bonds and coupon zero
coupon bonds representing interest in the same underlying issue of securities, a
special basis allocation rule (requiring the aggregate basis to be allocated
among the items sold and retained based on their relative fair market values at
the time of sale) may apply to determine the gain or loss on a sale of any such
zero coupon bonds items.
PAYMENT-IN-KIND SECURITIES
Payment-in-kind (PIK) securities pay interest in either cash or additional
securities, at the issuer's option, for a specified
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A-7
period. The issuer's option to pay in additional securities typically ranges
from one to six years, compared to an average maturity for all PIK securities of
eleven years. Call protection and sinking fund features are comparable to those
offered on traditional debt issues.
PIKs, like zero coupon bonds, are designated to give an issuer flexibility
in managing cash flow. Several PIKs are senior debt. In other cases, where PIKs
are subordinated, most senior lenders view them as equity equivalents.
An advantage of PIKs for the issuer - as with zero coupon securities - is
that interest payments are automatically compounded (reinvested) at the stated
coupon rate, which is not the case with cash-paying securities. However, PIKs
are gaining popularity over zeros since interest payments in additional
securities can be monetized and are more tangible than accretion of a discount.
As a group, PIK bonds trade flat (i.e., without accrued interest). Their
price is expected to reflect an amount representing accreted interest since the
last payment. PIKs generally trade at higher yields than comparable cash-paying
securities of the same issuer. Their premium yield is the result of the lesser
desirability of non-cash interest, the more limited audience for non-cash paying
securities, and the fact that many PIKs have been issued to equity investors who
do not normally own or hold such securities.
Calculating the true yield on a PIK security requires a discounted cash
flow analysis if the security (ex interest) is trading at a premium or a
discount, because the realizable value of additional payments is equal to the
current market value of the underlying security, not par.
Regardless of whether PIK securities are senior or deeply subordinated,
issuers are highly motivated to retire them because they are usually their most
costly form of capital. Sixty-eight percent of the PIK debentures issued prior
to 1987 have already been redeemed, and approximately 35% of the over $10
billion PIK debentures issued through year-end 1988 have been retired.
MONEY MARKET INSTRUMENTS
Money market securities are instruments with remaining maturities of one
year or less such as bank certificates of deposit, bankers' acceptances,
commercial paper and obligations issued or guaranteed by the United States
("U.S.") government, its agencies or instrumentalities, some of which may be
subject to repurchase agreements.
<PAGE>
A-8
Commercial Paper
Commercial paper will consist of issues rated at the time of purchase A-1,
A-2 or higher by Standard & Poor's Corporation ("S&P"), Prime-1 or Prime-2 by
Moody's Investors Service, Inc. ("Moody's"), or, if not rated, will be issued by
companies which have an outstanding debt issue rated at the time of purchase
Aaa, Aa or A by Moody's, or AAA, AA or A by S&P, or will be determined by
Keystone to be of comparable quality.
A. S&P Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. The top category is as follows:
1. A: Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.
2. A-1: This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
B. Moody's Ratings
The term "commercial paper" as used by Moody's means promissory obligations
not having an original maturity in excess of nine months. Moody's commercial
paper ratings are opinions of the ability of issuers to repay punctually
promissory obligations not having an original maturity in excess of nine months.
Moody's employs the following designation, judged to be investment grade, to
indicate the relative repayment capacity of rated issuers.
1. The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are deemed
to have a superior capacity for repayment of short term promissory obligations.
Repayment capacity of Prime-1 issuers is normally evidenced by the following
characteristics:
1) leading market positions in well-established industries;
2) high rates of return on funds employed;
3) conservative capitalization structures with moderate
reliance on debt and ample asset protection;
4) broad margins in earnings coverage of fixed financial
charges and high internal cash generation; and
5) well established access to a range of financial markets
and assured sources of alternate liquidity.
<PAGE>
A-9
In assigning ratings to issuers whose commercial paper obligations are
supported by the credit of another entity or entities, Moody's evaluates the
financial strength of the affiliated corporations, commercial banks, insurance
companies, foreign governments or other entities, but only as one factor in the
total rating assessment.
Certificates of Deposit
Certificates of deposit are receipts issued by a bank in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior to maturity.
Certificates of deposit will be limited to U.S. dollar-denominated
certificates of United States banks, including their branches abroad, and of
U.S. branches of foreign banks, which are members of the Federal Reserve System
or the Federal Deposit Insurance Corporation, and have at least $1 billion in
deposits as of the date of their most recently published financial statements.
The Fund will not acquire time deposits or obligations issued by the
International Bank for Reconstruction and Development, the Asian Development
Bank or the Inter-American Development Bank. Additionally, the Fund does not
currently intend to purchase such foreign securities (except to the extent that
certificates of deposit of foreign branches of U.S. banks may be deemed foreign
securities) or purchase certificates of deposit, bankers' acceptances or other
similar obligations issued by non U.S. branches of foreign banks.
Bankers' Acceptances
Bankers' acceptances typically arise from short term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by the bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Bankers' acceptances acquired by the Fund must have been accepted by U.S.
commercial banks, including foreign branches of U.S. commercial banks, having
total deposits at the time of purchase in excess of $1 billion and must be
payable in U.S. dollars.
<PAGE>
A-10
United States Government Securities
Securities issued or guaranteed by the United States government include a
variety of Treasury securities that differ only in their interest rates,
maturities and dates of issuance and securities issued by the Government
National Mortgage Association ("GNMA"). Treasury bills have maturities of one
year or less. Treasury notes have maturities of one to ten years and Treasury
bonds generally have maturities of greater than ten years at the date of
issuance. GNMA securities include GNMA mortgage pass-through certificates. Such
securities are supported by the full faith and credit of the U.S. government
Securities issued or guaranteed by U.S. government agencies or
instrumentalities include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, General Services Administration, Central
Bank for Cooperatives, Federal Home Loan Banks, Federal Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Maritime
Administration, The Tennessee Valley Authority, District of Columbia Armory
Board and Federal National Mortgage Association.
Some obligations of U.S. government agencies and instrumentalities, such as
securities of Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the Treasury. Others, such as bonds issued by the Federal
National Mortgage Association, a private corporation, are supported only by the
credit of the instrumentality. Because the U.S. government is not obligated by
law to provide support to an instrumentality it sponsors, the Fund will invest
in the securities issued by such an instrumentality only when Keystone
determines under standards established by the Board of Directors that the credit
risk with respect to the instrumentality does not make its securities unsuitable
investments. U.S. government securities do not include international agencies or
instrumentalities in which the U.S. government, its agencies or
instrumentalities participate, such as the World Bank, Asian Development Bank or
the Inter-American Development Bank, or issues insured by the Federal Deposit
Insurance Corporation.
FOREIGN SECURITIES
The Fund may invest 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 than about a
U.S. company, and foreign
<PAGE>
A-11
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). These risks are carefully
considered by Keystone prior to the purchase of these securities.
OPTIONS TRANSACTIONS
Option Writing and Related Risks
The Fund may write covered call and put options with respect to up to 25%
of its net assets. A call option gives the purchaser of the option the right to
buy, and the writer the obligation to sell, the underlying security at the
exercise price during the option period. Conversely, a put option gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying security at the exercise price during the option period.
So long as the obligation of the writer continues, the writer may be
assigned an exercise notice by the broker/dealer through whom the option was
sold. The exercise notice would require the writer to deliver, in the case of a
call, or take delivery of, in the case of a put, the underlying security against
payment of the exercise price. This obligation terminates upon expiration of the
option, or at such earlier time that the writer effects a closing purchase
transaction by purchasing an option of the same series as the one previously
sold. Once an option has been exercised, the writer may not execute a closing
purchase transaction. For options traded on national securities exchanges
("Exchanges") to secure the obligation to deliver the underlying security in the
case of a call option, the writer of the option is required to deposit in escrow
the underlying security or other assets in accordance with the rules of the OCC,
an institution created to interpose itself between buyers and sellers of
options. Technically, the OCC assumes the order side of every purchase and sale
transaction on an Exchange and by doing so, gives its guarantee to the
transaction.
The principal reason for writing options on a securities portfolio is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the underlying securities alone. In return for the premium, the
covered call option writer has given up the opportunity for profit from a price
increase in the underlying security above the exercise price so long as the
option remains open, but retains the risk of loss
<PAGE>
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should the price of the security decline. Conversely, the put option writer
gains a profit, in the form of a premium, so long as the price of the underlying
security remains above the exercise price, but assumes an obligation to purchase
the underlying security from the buyer of the put option at the exercise price,
even though the price of the security may fall below the exercise price, at any
time during the option period. If an option expires, the writer realizes a gain
in the amount of the premium. Such a gain may, in the case of a covered call
option, be offset by a decline in the market value of the underlying security
during the option period. If a call option is exercised, the writer realizes a
gain or loss from the sale of the underlying security. If a put option is
exercised, the writer must fulfill his obligation to purchase the underlying
security at the exercise price, which will usually exceed the then market value
of the underlying security. In addition, the premium paid for the put
effectively increases the cost of the underlying security, thus reducing the
yield otherwise available from such securities.
Because the Fund can write only covered options, it may at times be unable
to write additional options unless it sells a portion of its portfolio holdings
to obtain new securities against which it can write options. This may result in
higher portfolio turnover and correspondingly greater brokerage commissions and
other transaction costs.
To the extent that a secondary market is available, the covered option
writer may close out options it has written prior to the assignment of an
exercise notice by purchasing, in a closing purchase transaction, an option of
the same series as the option previously written. If the cost of such a closing
purchase, plus transaction costs, is greater than the premium received upon
writing the original option, the writer will incur a loss in the transaction.
Writing Covered Options
The Fund writes only covered options. Call and put options written by the
Fund will normally have expiration dates of not more than nine months from the
date written. The exercise price of the options may be below, equal to, or above
the current market values of the underlying securities at the times the options
are written.
Unless the option has been exercised, the Fund may close out an option it
has written by effecting a closing purchase transaction, whereby it purchases an
option covering the same underlying security and having the same exercise price
and expiration date (of the same series) as the one it has written. If the Fund
desires to sell a particular security on which it has written a call option, it
will effect a closing purchase transaction prior to or concurrently with the
sale of the security. If the Fund is able to enter into a closing purchase
transaction,
<PAGE>
A-13
the Fund will realize a profit (or loss) from such transaction if the cost of
such transaction is less (or more) than the premium received from the writing of
the option.
An option position may be closed out only in a secondary market for an
option of the same series. Although the Fund will generally write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular option at
any particular time, and for some options no secondary market may exist. In such
event it might not be possible to effect a closing transaction in a particular
option. If the Fund as a covered call option writer is unable to effect a
closing purchase transaction, it will not be able to sell the underlying
securities until the option expires or it delivers the underlying securities
upon exercise.
Because the Fund intends to qualify as a regulated investment company under
the Internal Revenue Code, the extent to which the Fund may write covered call
options and enter into so-called "straddle" transactions involving put and call
options may be limited.
Many options are traded on registered securities exchanges. Options traded
on such exchanges are issued by the Options Clearing Corporation ("OCC"), a
clearing corporation which assumes responsibility for the completion of options
transactions.
Purchasing Put and Call Options
The Fund can close out a put option it has purchased by effecting a closing
sale transaction; for example, the Fund may close out a put option it has
purchased by selling a put option. If, however, a secondary market does not
exist at a time the Fund wishes to effect a closing sale transaction, the Fund
will have to exercise the option to realize any profit.
The Fund may also purchase call options for the purpose of offsetting
previously written call options of the same series.
The Fund's ability to purchase put and call options may be limited by the
Internal Revenue Code's requirements for qualification as a regulated investment
company.
Options Trading Markets
Options which the Fund will trade are generally listed on Exchanges.
Exchanges on which such options currently are traded include the Chicago Board
Options Exchange and the New York, American, Pacific and Philadelphia Stock
Exchanges.
<PAGE>
A-14
The staff of the Commission currently is of the view that the premiums
which the Fund pays for the purchase of unlisted options, and the value of
securities used to cover unlisted options written by the Fund, are considered to
be invested in illiquid securities or assets for the purpose of calculating
whether the Fund is in compliance with its fundamental investment restriction
prohibiting it from investing more than 10% of its total assets (taken at
current value) in any combination of illiquid assets and securities. The Fund
intends to request that the Commission staff reconsider its current view. It is
the intention of the Fund to comply with the staff's current position and the
outcome of such reconsideration.
Special Considerations Applicable to Options
On Treasury Bonds and Notes. Because trading interest in U.S. Treasury
bonds and notes tends to center on the most recently auctioned issues, new
series of options with expirations to replace expiring options on particular
issues will not be introduced indefinitely. Instead, the expirations introduced
at the commencement of options trading on a particular issue will be allowed to
run their course, with the possible addition of a limited number of new
expirations as the original ones expire. Options trading on each series of bonds
or notes will thus be phased out as new options are listed on the more recent
issues, and a full range of expiration dates will not ordinarily be available
for every series on which options are traded.
On Treasury Bills. Because the deliverable U.S. Treasury bill changes from
week to week, writers of U.S. Treasury bill call options cannot provide in
advance for their potential exercise settlement obligations by acquiring and
holding the underlying security. However, if the Fund holds a long position in
U.S. Treasury bills with a principal amount corresponding to the option contract
size, the Fund may be hedged from a risk standpoint. In addition, the Fund will
maintain in a segregated account with its Custodian liquid assets maturing no
later than those which would be deliverable in the event of an assignment of an
exercise notice to ensure that it can meet its open option obligations.
On GNMA Certificates. Options on GNMA certificates are not currently traded on
any Exchange. However, the Fund may purchase and write such options should they
commence trading on any Exchange.
Since the remaining principal balance of GNMA certificates declines each
month as a result of mortgage payments, the Fund, as a writer of a covered GNMA
call holding GNMA certificates as "cover" to satisfy its delivery obligation in
the event of assignment of an exercise notice, may find that its GNMA
certificates no longer have a sufficient remaining principal balance for this
purpose. Should this occur, the Fund will enter
<PAGE>
A-15
into a closing purchase transaction or will purchase additional GNMA
certificates from the same pool (if obtainable) or replacement GNMA certificates
in the cash market in order to remain covered.
A GNMA certificate held by the Fund to cover an option position in any but
the nearest expiration month may cease to present cover for the option in the
event of a decline in the GNMA coupon rate at which new pools are originated
under the FHA/VA loan ceiling in effect at any given time. Should this occur,
the Fund will no longer be covered, and the Fund will either enter into a
closing purchase transaction or replace the GNMA certificate with a certificate
which represents cover. When the Fund closes its position or replaces the GNMA
certificate, it may realize an unanticipated loss and incur transaction costs.
Risks Pertaining to the Secondary Market. An option position may be closed
out only in a secondary market for an option of the same series. Although the
Fund will generally purchase or write only those options for which there appears
to be an active secondary market, there is no assurance that a liquid secondary
market will exist for any particular option at any particular time, and for some
options no secondary market may exist. In such event, it might not be possible
to effect closing transactions in particular options, with the result that the
Fund would have to exercise its options in order to realize any profit and might
incur transaction costs in connection therewith. If the Fund as a covered call
option writer is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market include the following:
(i) insufficient trading interest in certain options; (ii) restrictions imposed
on transactions; (iii) trading halts, suspensions or other restrictions imposed
with respect to particular classes or series of options or underlying
securities; (iv) interruption of the normal operations on an Exchange or by a
broker; (v) inadequacy of the facilities of an Exchange, the OCC or a broker to
handle current trading volume; or (vi) a decision by one or more Exchanges or
brokers to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market in that class or series of
options would cease to exist, although outstanding options issued as a result of
trades would generally continue to be exercisable in accordance with their
terms.
The hours of trading for options on U.S. government securities may not
conform to the hours during which the underlying securities are traded. To the
extent that the option markets close before the markets for the underlying
securities, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
<PAGE>
A-16
FUTURES CONTRACTS AND RELATED OPTIONS TRANSACTIONS
The Fund intends to enter into futures contracts as a hedge against changes
in prevailing levels of interest or currency exchange rates to seek relative
stability of principal and to establish more definitely the effective return on
securities held or intended to be acquired by the Fund or as a hedge against
changes in the prices of securities or currencies held by the Fund or to be
acquired by the Fund. The Fund's hedging may include sales of futures as an
offset against the effect of expected increases in interest or currency exchange
rates or securities prices and purchases of futures as an offset against the
effect of expected declines in interest or currency exchange rates.
For example, when the Fund anticipates a significant market or market
sector advance, it will purchase a stock index futures contract as a hedge
against not participating in such advance at a time when the Fund is not fully
invested. The purchase of a futures contract serves as a temporary substitute
for the purchase of individual securities which may then be purchased in an
orderly fashion. As such purchases are made, an equivalent amount of index based
futures contracts would be terminated by offsetting sales. In contrast, the Fund
would sell stock index futures contracts in anticipation of or in a general
market or market sector decline that may adversely affect the market value of
the Fund's portfolio. To the extent that the Fund's portfolio changes in value
in correlation with a given index, the sale of futures contracts on that index
would substantially reduce the risk to the portfolio of a market decline or
change in interest rates, and, by doing so, provide an alternative to the
liquidation of the Fund's securities positions and the resulting transaction
costs.
The Fund intends to engage in options transactions which are related to
currency and other financial futures contracts for hedging purposes and in
connection with the hedging strategies described above.
Although techniques other than sales and purchases of futures contracts and
related options transactions could be used to reduce the Fund's exposure to
interest rate and/or market fluctuations, the Fund may be able to hedge its
exposure more effectively and perhaps at a lower cost through using futures
contracts and related options transactions. While the Fund does not intend to
take delivery of the instruments underlying futures contracts it holds, the Fund
does not intend to engage in such futures contracts for speculation.
Futures Contracts
Futures contracts are transactions in the commodities markets rather than
in the securities markets. A futures contract creates an obligation by the
seller to deliver to the buyer the commodity
<PAGE>
A-17
specified in the contract at a specified future time for a specified price. The
futures contract creates an obligation by the buyer to accept delivery from the
seller of the commodity specified at the specified future time for the specified
price. In contrast, a spot transaction creates an immediate obligation for the
seller to deliver and the buyer to accept delivery of and pay for an identified
commodity. In general, futures contracts involve transactions in fungible goods
such as wheat, coffee and soybeans. However, in the last decade an increasing
number of futures contracts have been developed which specify currencies,
financial instruments or financially based indexes as the underlying commodity.
The Fund has represented to the Commodity Futures Trading Commission (CFTC) that
the Fund will not enter into any futures contract or related option if, as a
result, the sum of initial margin deposits on futures contracts and options and
premiums paid for options the Fund purchased, after taking in account unrealized
profits and losses on such contracts, would exceed 5% of the Fund's total
assets.
U.S. futures contracts are traded only on national futures exchanges and
are standardized as to maturity date and underlying financial instrument. The
principal financial futures exchanges in the United States are: The Board of
Trade of the City of Chicago; the Chicago Mercantile Exchange; the International
Monetary Market (a division of the Chicago Mercantile Exchange); the New York
Futures Exchange; and the Kansas City Board of Trade. Each exchange guarantees
performance under contract provisions through a clearing corporation, a
nonprofit organization managed by the exchange membership, which is also
responsible for handling daily accounting of deposits or withdrawals of margin.
A futures commission merchant (Broker) effects each transaction in connection
with futures contracts for a commission. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC") and National Futures Association ("NFA").
Index Based Futures Contracts
Stock Index Futures Contracts
A stock index assigns relative values to the common stocks included in the
index. The index fluctuates with changes in the market values of the common
stocks so included. A stock index futures contract is a bilateral agreement by
which two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the closing value of the
stock index on the expiration date of the contract and the price at which the
futures contract is originally made. No physical delivery of the underlying
stocks in the index is made.
Currently stock index futures contracts can be purchased or sold on the
Standard and Poor's Corporation (S&P) Index of 500
<PAGE>
A-18
Stocks, the S&P Index of 100 Stocks, the New York Stock Exchange Composite
Index, the Value Line Index and the Major Market Index. It is expected that
futures contracts trading in additional stock indices will be authorized. The
standard contract size is $500 times the value of the index.
The Fund does not believe that differences between existing stock indices
will create any differences in the price movements of the stock index futures
contracts in relation to the movements in such indices. However, such
differences in the indices may result in differences in correlation of the
futures with movements in the value of the securities being hedged.
Other Index Based Futures Contracts
It is expected that bond index and other financially based index futures
contracts will be developed in the future. It is anticipated that such index
based futures contracts will be structured in the same way as stock index
futures contracts but will be measured by changes in interest rates, related
indexes or other measures, such as the consumer price index. In the event that
such futures contracts are developed the Fund will sell interest rate index and
other index based futures contracts to hedge against changes which are expected
to affect the Fund's portfolio.
The purchase or sale of a futures contract differs from the purchase or
sale of a security, in that no price or premium is paid or received. Instead, to
initiate trading an amount of cash, cash equivalents, money market instruments,
or U.S. Treasury bills equal to approximately 1 1/2% (up to 5%) of the contract
amount must be deposited by the Fund with the Broker. This amount is known as
initial margin. The nature of initial margin in futures transactions is
different from that of margin in security transactions. Futures contract margin
does not involve the borrowing of funds by the customer to finance the
transactions. Rather, the initial margin is in the nature of a performance bond
or good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract assuming all contractual obligations have
been satisfied. The margin required for a particular futures contract is set by
the exchange on which the contract is traded, and may be significantly modified
from time to time by the exchange during the term of the contract.
Subsequent payments, called variation margin, to the Broker and from the
Broker, are made on a daily basis as the value of the underlying instrument or
index fluctuates making the long and short positions in the futures contract
more or less valuable, a process known as mark-to-market. For example, when the
Fund has purchased a futures contract and the price of the underlying financial
instrument or index has risen, that position will have increased in value and
the Fund will receive from the Broker a variation margin
<PAGE>
A-19
payment equal to that increase in value. Conversely, where the Fund has
purchased a futures contract and the price of the underlying financial
instrument or index has declined, the position would be less valuable and the
Fund would be required to make a variation margin payment to the Broker. At any
time prior to expiration of the futures contract, the Fund may elect to close
the position. A final determination of variation margin is then made, additional
cash is required to be paid to or released by the Broker, and the Fund realizes
a loss or gain.
The Fund intends to enter into arrangements with its custodian and with
Brokers to enable its initial margin and any variation margin to be held in a
segregated account by its custodian on behalf of the Broker.
There can be no assurance, however, that the Fund will be able to enter
into an offsetting transaction with respect to a particular contract at a
particular time. If the Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the contract and to complete the contract according to its terms.
Purchase of Put Options on Futures Contracts
The purchase of protective put options on currency or other financial
futures contracts is analogous to the purchase of protective puts on individual
stocks, where an absolute level of protection is sought below which no
additional economic loss would be incurred by the Fund. Put options may be
purchased to hedge a portfolio of stocks or debt instruments or a position in
the futures contract upon which the put option is based.
Purchase of Call Options on Futures Contracts
The purchase of a call option on a currency and other financial futures
contract represents a means of obtaining temporary exposure to market
appreciation at limited risk. It is analogous to the purchase of a call option
on an individual stock, which can be used as a substitute for a position in the
stock itself. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the underlying
financial instrument or index itself, purchase of a call option may be less
risky than the ownership of the interest rate or index based futures contract or
the underlying securities. Call options on financial futures contracts may be
purchased to hedge against an interest rate increase or a market advance when
the Fund is not fully invested.
<PAGE>
A-20
Use of New Investment Techniques Involving Currency and Other Financial Futures
Contracts or Related Options
The Fund may employ new investment techniques involving currency and other
financial futures contracts and related options. The Fund intends to take
advantage of new techniques in these areas which may be developed from time to
time and which are consistent with the Fund's investment objective. The Fund
believes that no additional techniques have been identified for employment by
the Fund in the foreseeable future other than those described above.
Limitations on Purchase and Sale of Futures Contracts and Related Options on
Such Futures Contracts
The Fund will not enter into a futures contract if, as a result thereof,
more than 5% of the Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to margin deposits on such
futures contracts and premiums on options on futures contracts.
The Fund intends that its futures contracts and related options
transactions will be entered into for traditional hedging purposes. That is,
futures contracts will be sold to protect against a decline in the price of
securities that the Fund owns, or futures contracts will be purchased to protect
the Fund against an increase in the price of securities it intends to purchase.
The Fund does not intend to enter into futures contracts for speculation.
In instances involving the purchase of futures contracts by the Fund, an
amount of cash and cash equivalents equal to the market value of the futures
contracts will be deposited in a segregated account with the Fund's custodian
and/or in a margin account with a Broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
Federal Income Tax Treatment
For federal income tax purposes, the Fund is required to recognize as
income for each taxable year its net unrealized gains and losses on futures
contracts as of the end of the year as well as those actually realized during
the year. Any gain or loss recognized with respect to a futures contract is
considered to be 60% long term and 40% short term, without regard to the holding
period of the contract. In the case of a futures transaction classified as a
"mixed straddle," the recognition of losses may be deferred to a later taxable
year. The federal income tax treatment of gains or losses from transactions in
options on futures is unclear.
In order for the Fund to continue to qualify for federal income tax
treatment as a regulated investment company, at least
<PAGE>
A-21
90% of its gross income for a taxable year must be derived from qualifying
income. Any net gain realized from the closing out of futures contracts, for
purposes of the 90% requirement, will be qualifying income. In addition, gains
realized on the sale or other disposition of securities held for less than three
months must be limited to less than 30% of the Fund's annual gross income. The
1986 Tax Act added a provision which effectively treats both positions in
certain hedging transactions as a single transaction for the purpose of the 30%
requirement. The provision provides that, in the case of any "designated hedge"
increases and decreases in the value of positions of the hedge are to be netted
for the purposes of the 30% requirement. However, in certain situations, in
order to avoid realizing a gain within a three month period, the Fund may be
required to defer the closing out of a contract beyond the time when it would
otherwise be advantageous to do so.
Risks of Futures Contracts
Currency and other financial futures contracts prices are volatile and are
influenced, among other things, by changes in stock prices, market conditions,
prevailing interest rates and anticipation of future stock prices, market
movements or interest rate changes, all of which in turn are affected by
economic conditions, such as government fiscal and monetary policies and
actions, and national and international political and economic events.
At best, the correlation between changes in prices of futures contracts and
of the securities being hedged can be only approximate. The degree of
imperfection of correlation depends upon circumstances, such as variations in
speculative market demand for futures contracts and for securities, including
technical influences in futures contracts trading; differences between the
securities being hedged and the financial instruments and indexes underlying the
standard futures contracts available for trading, in such respects as interest
rate levels, maturities and creditworthiness of issuers, or identities of
securities comprising the index and those in the Fund's portfolio. In addition
futures contract transactions involve the remote risk that a party will be
unable to fulfill its obligation and that the amount of the obligation will be
beyond the ability of the clearing broker to satisfy. A decision of whether,
when and how to hedge involves the exercise of skill and judgment, and even a
well conceived hedge may be unsuccessful to some degree because of market
behavior or unexpected interest rate trends.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a 10% decrease in the
<PAGE>
A-22
value of the futures contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out, and a 15% decrease would result in a loss equal to 150% of the
original margin deposit. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, the Fund would presumably have sustained comparable losses if, instead
of entering into the futures contract, it had invested in the underlying
financial instrument. Furthermore, in order to be certain that the Fund has
sufficient assets to satisfy its obligations under a futures contract, the Fund
will establish a segregated account in connection with its futures contracts
which will hold cash or cash equivalents equal in value to the current value of
the underlying instruments or indices less the margins on deposit.
Most U.S. futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
Risks of Options on Futures Contracts
In addition to the risks described above for currency and other financial
futures contracts, there are several special risks relating to options on
futures contracts. The ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid secondary
market. There is no assurance that a liquid secondary market will exist for any
particular option or at any particular time. The Fund will not purchase options
on any futures contract unless and until it believes that the market for such
options has developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with the futures contracts.
Compared to the use of futures contracts, the purchase of options on such
futures involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options (plus transaction costs). However,
there may be circumstances when the use of an option on a futures contract would
result in a loss to the Fund, even though the use of a futures contract would
not, such as when there is no movement in the level of the futures contract.
<PAGE>
A-23
FOREIGN CURRENCY TRANSACTIONS
The Fund may invest in foeign securities. When the Fund invests in foreign
securities they usually will be denominated in foreign currencies and the Fund
temporarily may hold funds in foreign currencies. Thus, the Fund's share value
will be affected by changes in exchange rates.
Forward Currency Contracts
As one way of managing exchange rate risk, the Fund may engage in forward
currency exchange contracts (agreements to purchase or sell currencies at a
specified price and date). Under the contract, the exchange rate for the
transaction (the amount of currency the Fund will deliver or receive when the
contract is completed) is fixed when the Fund enters into the contract. The Fund
usually will enter into these contracts to stabilize the U.S. dollar value of a
security it has agreed to buy or sell. The Fund also may use these contracts to
hedge the U.S. dollar value of a security it already owns, particularly if the
Fund expects a decrease in the value of the currency in which the foreign
security is denominated. Although the Fund will attempt to benefit from using
forward contracts, the success of its hedging strategy will depend on Keystone's
ability to predict accurately the future exchange rates between foreign
currencies and the U.S. dollar. The value of the Fund's investments denominated
in foreign currencies will depend on the relative strength of those currencies
and the U.S. dollar, and the Fund may be affected favorably or unfavorably by
changes in the exchange rates or exchange control regulations between foreign
currencies and the dollar. Changes in foreign currency exchangerates also may
affect the value of dividends and interest earned, gains and losses realized on
the sale of securities and net investment income and gains, if any, to be
distributed to shareholders by the Fund.
Currency Futures Contracts
Currency futures contracts are bilateral agreements under which two parties
agree to take or make delivery of a specified amount of a currency at a
specified future time for a specified price. Trading of currency futures
contracts in the United States is regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission (CFTC) and National Futures Association
(NFA). Currently the only national futures exchange on which currency futures
are traded is the International Monetary Market of the Chicago Mercantile
Exchange. Foreign currency futures trading is conducted in the same manner and
subject to the same regulations as trading in interest rate and index based
futures. The Fund intends to only engage in currency futures contracts for
hedging purposes, and not for speculation. The Fund may engage in currency
futures contracts for other purposes if authorized to do so by the Board. The
hedging strategies which will be used by the Fund in
<PAGE>
A-24
connection with foreign currency futures contracts are similar to those
described above for forward foreign currency exchange contracts.
Currently, currency futures contracts for the British Pound Sterling,
Canadian Dollar, Dutch Guilder, Deutsche Mark, Japanese Yen, Mexican Peso, Swiss
Franc and French Franc can be purchased or sold for U.S. dollars through the
International Monetary Market. It is expected that futures contracts trading in
additional currencies will be authorized. The standard contract sizes are
L125,000 for the Pound, 125,000 for the Guilder, Mark, Swiss and French Francs,
C$100,000 for the Canadian Dollar, Y12,500,000 for the Yen, and 1,000,000 for
the Peso. In contrast to Forward Currency Exchange Contracts which can be traded
at any time, only four value dates per year are available, the third Wednesday
of March, June, September and December.
Foreign Currency Options Transactions
Foreign currency options (as opposed to futures) are traded in a variety of
currencies in both the United States and Europe. On the Philadelphia Stock
Exchange, for example, contracts for half the size of the corresponding futures
contracts on the Chicago Board Options Exchange are traded with up to nine
months maturity in marks, sterling, yen, Swiss francs and Canadian dollars.
Options can be exercised at any time during the contract life and require a
deposit subject to normal margin requirements. Since a futures contract must be
exercised, the Fund must continually make up the margin balance. As a result, a
wrong price move could result in the Fund losing more than the original
investment as it cannot walk away from the futures contract as it can an option
contract.
The Fund will purchase call and put options and sell such options to
terminate an existing position. Options on foreign currency are similar to
options on stocks except that an option on an interest rate and/or index based
futures contract gives the purchaser the right, in return for the premium paid,
to purchase or sell foreign currency, rather than to purchase or sell stock, at
a specified exercise price at any time during the period of the option.
The Fund intends to use foreign currency option transactions in connection
with hedging strategies.
Purchase of Put Options on Foreign Currencies
The purchase of protective put options on a foreign currency is analagous
to the purchase of protective puts on individual stocks, where an absolute level
of protection is sought below which no additional economic loss would be
incurred by the Fund. Put options may be purchased to hedge a portfolio of
foreign stocks or
<PAGE>
A-25
foreign debt instruments or a position in the foreign currency upon which the
put option is based.
Purchase of Call Options on Foreign Currencies
The purchase of a call option on foreign currency represents a means of
obtaining temporary exposure to market appreciation at limited risk. It is
analogous to the purchase of a call option on an individual stock which can be
used as a substitute for a position in the stock itself. Depending on the
pricing of the option compared to either the foreign currency upon which it is
based, or upon the price of the foreign stock or foreign debt instruments, the
purchase of a call option may be less risky than the ownership of the foreign
currency or the foreign securities. The Fund would purchase a call option on a
foreign currency to hedge against an increase in the foreign currency or a
foreign market advance when the Fund is not fully invested.
The Fund may employ new investment techniques involving forward foreign
currency exchange contracts, foreign currency futures contracts and options on
foreign currencies in order to take advantage of new techniques in these areas
which may be developed from time to time and which are consistent with the
Fund's investment objective. The Fund believes that no additional techniques
have been identified for employment by the Fund in the foreseeable future other
than those described above.
Currency Trading Risks
Currency exchange trading may involve significant risks. The four major
types of risk the Fund faces are exchange rate risk, interest rate risk, credit
risk and country risk.
Exchange Rate Risk
Exchange rate risk results from the movement up and down of foreign
currency values in response to shifting market supply and demand. When the Fund
buys or sells a foreign currency, an exposure called an open position is
created. Until the time that position can be "covered" by selling or buying an
equivalent amount of the same currency, the Fund is exposed to the risk that the
exchange rate might move against it. Since exchange rate changes can readily
move in one direction, a position carried overnight or over a number of days
involves greater risk than one carried a few minutes or hours. Techniques such
as foreign currency forward and futures contracts and options on foreign
currency are intended to be used by the Fund to reduce exchange rate risk.
Maturity Gaps and Interest Rate Risk
Interest rate risk arises whenever there are mismatches or gaps in the
maturity structure of the Fund's foreign exchange
<PAGE>
A-26
currency holdings, which is the total of its outstanding spot and forward or
futures contracts.
Foreign currency transactions often involve borrowing short term and
lending longer term to benefit from the normal tendency of interest rates to be
higher for longer maturities. However in foreign exchange trading, while the
maturity pattern of interest rates for one currency is important, it is the
differential between interest rates for two currencies that is decisive.
Credit Risk
Whenever the Fund enters into a foreign exchange contract, it faces a risk,
however small, that the counterparty will not perform under the contract. As a
result there is a credit risk, although no extension of "credit" is intended. To
limit credit risk, the Fund intends to evaluate the creditworthiness of each
other party.
Credit risk exists because the Fund's counterparty may be unable or
unwilling to fulfill its contractual obligations as a result of bankruptcy or
insolvency or when foreign exchange controls prohibit payment. In any foreign
exchange transaction, each party agrees to deliver a certain amount of currency
to the other on a particular date. In establishing its hedges a Fund relies on
each contract being completed. If the contract is not performed, then the Fund's
hedge is eliminated, and the Fund is exposed to any changes in exchange rates
since the contract was originated. To put itself in the same position it would
have been in had the contract been performed, the Fund must arrange a new
transaction. However, the new transaction may have to be arranged at an adverse
exchange rate. The trustee for a bankrupt company may elect to perform those
contracts which are advantageous to the company but disclaim those contracts
which are disadvantageous, resulting in losses to the Fund.
Another form of credit risk stems from the time zone differences between
the U.S. and foreign nations. If the Fund sells sterling it generally must pay
pounds to a counterparty earlier in the day than it will be credited with
dollars in New York. In the intervening hours, the buyer can go into bankruptcy
or can be declared insolvent. Thus, the dollars may never be credited to the
Fund.
Country Risk
At one time or another, virtually every country has interfered with
international transactions in its currency. Interference has taken the form of
regulation of the local exchange market, restrictions on foreign investment by
residents or limits on inflows of investment funds from abroad. Governments take
such measures for example to improve control over the domestic banking system or
to influence the pattern of receipts and payments between
<PAGE>
A-27
residents and foreigners. In those cases, restrictions on the exchange market or
on international transactions are intended to affect the level or movement of
the exchange rate. Occasionally a serious foreign exchange shortage may lead to
payment interruptions or debt servicing delays, as well as interference in the
exchange market. It has become increasingly difficult to distinguish foreign
exchange or credit risk from country risk.
Changes in regulations or restrictions usually do have an important
exchange market impact. Most disruptive are changes in rules which interfere
with the normal payments mechanism. If government regulations change and a
counterparty is either forbidden to perform or is required to do something
extra, then the Fund might be left with an unintended open position or an
unintended maturity mismatch. Dealing with such unintended long or short
positions could result in unanticipated costs to the Fund.
Other changes in official regulations influence international investment
transactions. If one of the factors affecting the buying or selling of a
currency changes, the exchange rate is likely to respond. Changes in such
controls often are unpredictable and can create a significant exchange rate
response.
Many major countries have moved toward liberalization of exchange and
payments restrictions in recent years or accepted the principle that
restrictions should be relaxed. A few industrial countries have moved in the
other direction. Important liberalizations were carried out by Switzerland, the
United Kingdom and Japan. They dismantled mechanisms for restricting either
foreign exchange inflows (Switzerland), outflows (Britain) or elements of both
(Japan). By contrast, France and Mexico have recently tightened foreign exchange
controls.
Overall, many exchange markets are still heavily restricted. Several
countries limit access to the forward market to companies financing documented
export or import transactions in an effort to insulate the market from purely
speculative activities. Some of these countries permit local traders to enter
into forward contracts with residents but prohibit certain forward transactions
with nonresidents. By comparison, other countries have strict controls on
exchange transactions by residents, but permit free exchange transactions
between local traders and non-residents. A few countries have established tiered
markets, funneling commercial transactions through one market and financial
transactions through another. Outside the major industrial countries, relatively
free foreign exchange markets are rare and controls on foreign currency
transactions are extensive.
Another aspect of country risk has to do with the possibility that the Fund
may be dealing with a foreign trader whose home country is facing a payments
problem. Even though the foreign trader intends to perform on its foreign
exchange contracts, the
<PAGE>
A-28
contracts are tied to other external liabilities the country has incurred. As a
result performance may be delayed, and can result in unanticipated cost to the
Fund. This aspect of country risk is a major element in the Fund's credit
judgment as to with whom it will deal and in what amounts.
<PAGE>
A-29
EXHIBIT A
GLOSSARY OF TERMS
Class of Options. Options covering the same underlying security.
Clearing Corporation. The Options Clearing Corporation, Trans Canada
Options, Inc., The European Options Clearing Corporation B.V., or the London
Options Clearing House.
Closing Purchase Transaction. A transaction in which an investor who is
obligated as a writer of an option or seller of a futures contract terminates
his obligation by purchasing on an Exchange an option of the same series as the
option previously written or futures contract identical to the futures contract
previously sold, as the case may be. (Such a purchase does not result in the
ownership of an option or futures contract.)
Closing Sale Transaction. A transaction in which an investor who is the
holder or buyer of an outstanding option or futures contract liquidates his
position as a holder or seller by selling an option of the same series as the
option previously purchased or futures contract identical to the futures
contract previously purchased. (Such sale does not result in the investor
assuming the obligations of a writer or seller).
Covered Call Option Writer. A writer of a call option who, so long as he
remains obligated as a writer, owns the shares of the underlying security or
holds on a share for share basis a call on the same security where the exercise
price of the call held is equal to or less than the exercise price of the call
written, or, if greater than the exercise price of the call written, the
difference is maintained by the writer in cash, U.S. Treasury bills, or other
high grade, short term obligations in a segregated account with the writer's
broker or custodian.
Covered Put Option Writer. A writer of a put option who, so long as he
remains obligated as a writer, has deposited Treasury bills with a value equal
to or greater than the exercise price with a securities depository and has
pledged them to the Options Clearing Corporation for the account of the
brokerdealer carrying the writer's position or holds on a share for share basis
a put on the same security as the put written where the exercise price of the
put held is equal to or greater than the exercise price of the put written, or,
if less than the exercise price of the put written, the difference is maintained
by the writer in cash, U.S. Treasury bills, or other high grade, short term
obligations in a segregated account with the writer's broker or custodian.
<PAGE>
A-30
Securities Exchange. A securities exchange on which call and put options
are traded. The U.S. Exchanges are as follows: The Chicago Board Options
Exchange; American Stock Exchange; New York Stock Exchange; Philadelphia Stock
Exchange; and Pacific Stock Exchange. The foreign securities exchanges in Canada
are the Toronto Stock Exchange and the Montreal Stock Exchange, in the
Netherlands, the European Options Exchange, and in the United Kingdom, the Stock
Exchange (London).
Those issuers whose common stocks have been approved by the Exchanges as
underlying securities for option transactions are published in various financial
publications.
Commodities Exchange. A commodities exchange on which futures contracts are
traded which is regulated by exchange rules that have been approved by the
Commodity Futures Trading Commission. The U.S. exchanges are as follows: The
Chicago Board of Trade of the City of Chicago; Chicago Mercantile Exchange,
International Monetary Market; (a division of the Chicago Mercantile Exchange);
the Kansas City Board of Trade; and the New York Futures Exchange.
Exercise Price. The price per unit at which the holder of a call option may
purchase the underlying security upon exercise or the holder of a put option may
sell the underlying security upon exercise.
Expiration Date. The latest date when an option may be exercised or a
futures contract must be completed according to its terms.
Hedging. An action taken by an investor to neutralize an investment risk by
taking an investment position which will move in the opposite direction as the
risk being hedged so that a loss (or gain) on one will tend to be offset by a
gain (or loss) on the other.
Option. Unless the context otherwise requires, the term "option" means
either a call or put option issued by a Clearing Corporation, as defined above.
A call option gives a holder the right to buy from such Clearing Corporation the
number of shares of the underlying security covered by the option at the stated
exercise price by the filing of an exercise notice prior to the expiration time
of the option. A put option gives a holder the right to sell to a Clearing
Corporation the number of shares of the underlying security covered by the put
at the stated exercise price by the filing of an exercise notice prior to the
expiration time of the option. The Fund will sell ("write") and purchase puts
only on U.S. Exchanges.
Option Period. The time during which an option may be exercised, generally
from the date the option is written through its expiration date.
<PAGE>
A-31
Premium. The price of an option agreed upon between the buyer and writer or
their agents in a transaction on the floor of an Exchange.
Series of Options. Options covering the same underlying security and having
the same exercise price and expiration date.
Stock Index. A stock index assigns relative values to the common stocks
included in the index, and the index fluctuates with changes in the market
values of the common stocks so included.
Underlying Security. The security subject to being purchased upon the
exercise of a call option or subject to being sold upon the exercise of a put
option.
SCHEDULE OF INVESTMENTS--December 31, 1994
Market
Shares Value
COMMON STOCKS (80.7%)
ADVERTISING & PUBLISHING (3.4%)
Comcast Corp., Class A 125,000 $ 1,960,938
Viacom, Inc., Class B (a) 70,000 2,843,750
4,804,688
AIR TRANSPORTATION (1.3%)
AMR Corp. (a) 35,000 1,863,750
AMUSEMENTS (2.8%)
Hospitality Franchise Systems, Inc.
(a) 50,000 1,325,000
Mattel, Inc. 55,000 1,381,875
Mirage Resorts, Inc. (a) 65,000 1,332,500
4,039,375
AUTOMOTIVE (1.6%)
Exide Securities Corp. 40,500 2,278,125
CAPITAL GOODS (8.5%)
AGCO Corp. 142,500 4,328,437
Caterpillar, Inc. 70,000 3,858,750
General Electric Co. 75,000 3,825,000
12,012,187
CHEMICALS (3.3%)
duPont (E.I.) de Nemours & Co. 30,000 1,687,500
Union Carbide Corp. 100,000 2,937,500
4,625,000
CONSUMER GOODS (5.2%)
Blyth Industries, Inc. (a) 53,900 1,542,887
Department 56, Inc. (a) 80,000 3,180,000
Gillette Co., The 35,000 2,616,250
7,339,137
DRUGS (8.1%)
Abbey Healthcare Group, Inc. (a) 43,700 1,007,831
Forest Laboratories, Inc. (a) 50,000 2,331,250
Mariner Health Group, Inc. (a) 100,000 2,175,000
Merck & Co., Inc. 75,000 2,859,375
Pharmacia Aktiebolag (a) 120,000 1,942,500
Physician Reliance Network,
Inc. (a) 60,300 1,138,163
11,454,119
ELECTRONICS PRODUCTS (8.6%)
Analog Devices, Inc.,
Common Rts. (a) 85,000 $ 2,985,625
KLA Instruments Corp. (a) 63,000 3,094,875
Lam Research Corp. (a) 65,000 2,413,125
Solectron Corp. (a) 50,000 1,375,000
Teradyne, Inc. (a) 70,000 2,371,250
12,239,875
FINANCE (2.1%)
BankAmerica Corp. 50,000 1,975,000
Chase Manhattan Corp., The 30,000 1,031,250
3,006,250
NATURAL GAS (2.4%)
Anadarko Petroleum Corp. 45,000 1,732,500
Barrett Resources Corp. (a) 80,000 1,640,000
3,372,500
OFFICE & BUSINESS EQUIPMENT (4.6%)
EMC Corp. (a) 201,000 4,346,625
Sun Microsystems (a) 60,000 2,126,250
6,472,875
OIL (5.0%)
Amoco Corp. 40,000 2,365,000
Mobil Corp. 30,000 2,527,500
Unocal Corp. 80,000 2,180,000
7,072,500
OIL SERVICES (2.6%)
Baker Hughes, Inc. 100,000 1,825,000
Energy Service Co., Inc. (a) 150,000 1,837,500
3,662,500
RETAIL (7.7%)
Baby Superstore, Inc. (a) 33,600 1,541,400
Best Buy Co., Inc. (a) 50,000 1,562,500
Corporate Express, Inc. (a) 49,100 951,312
Michaels Stores, Inc. (a) 50,000 1,731,250
OfficeMax, Inc. (a) 100,000 2,650,000
Staples, Inc. (a) 102,000 2,511,750
10,948,212
See Notes to Schedule of Investments.
<PAGE>
Market
Shares Value
SOFTWARE SERVICES (8.0%)
Adobe Systems, Inc. 65,000 $ 1,941,875
Computer Sciences Corp. (a) 40,000 2,040,000
Epic Design Technology, Inc. (a) 42,300 941,175
LEGENT Corp. (a) 40,000 1,160,000
Oracle Systems Corp. (a) 70,000 3,097,500
Parametric Technology Corp. (a) 62,000 2,131,250
11,311,800
TELECOMMUNICATIONS (5.6%)
Cabletron Systems, Inc. (a) 40,000 1,860,000
Cisco Systems, Inc. (a) 50,000 1,753,125
DSC Communications Corp. (a) 85,000 3,065,313
NetManage, Inc. (a) 30,000 1,230,000
7,908,438
TOTAL COMMON STOCKS
(COST--$106,214,748) $114,411,331
PREFERRED STOCKS (1.6%)
DRUGS (1.6%)
United States Surgical Corp., conv. 101,600 2,336,800
TOTAL PREFERRED STOCKS
(COST--$2,285,900) $ 2,336,800
Maturity Market
Value Value
SHORT-TERM INVESTMENTS (17.1%)
REPURCHASE AGREEMENTS (17.1%)
PaineWebber, Inc. purchased
12/30/94, (Collateralized by
$11,705,000 U.S. Treasury
Note, 8.875%, due 7/15/95),
5.850% maturing 01/03/95
(Cost $12,180,000) $12,187,917 $ 12,180,000
Sanwa Bank purchased 12/30/94,
(Collateralized by $12,055,000
GNMA, 6.5%, due 6/20/24),
6.000% maturing 01/06/95
(Cost $12,000,000) 12,014,000 12,000,000
TOTAL SHORT-TERM INVESTMENTS
(COST--$24,180,000) $ 24,180,000
TOTAL INVESTMENTS
(COST--$132,680,648) (B) 140,928,131
OTHER ASSETS AND LIABILITIES--
NET (0.6%) 807,065
NET ASSETS (100%) $141,735,196
NOTES TO SCHEDULE OF INVESTMENTS
(a) Non-income producing security.
(b) The cost of investments for Federal income tax purposes is $132,882,513.
Gross unrealized appreciation and depreciation of investments, on identified
tax cost, at December 31, 1994 are as follows:
Gross unrealized appreciation $11,444,255
Gross unrealized depreciation (3,398,637)
Net unrealized appreciation $ 8,045,618
See Notes to Financial Statements.
<PAGE>
Keystone America Omega Fund, Inc.
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992(c) 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of year $ 17.11 $ 15.84 $ 17.68 $ 13.37 $ 16.03 $ 13.66 $ 12.08 $ 13.44 $ 14.12 $ 10.78
Income from investment
operations
Investment income
(loss)--net 0.04 (0.07) 0.00 (0.04) 0.11 0.17 0.30(a) 0.02 0.23 0.28
Net gains (losses) on
investments (1.00) 3.07 0.39 6.92 (0.39) 4.30 1.40 1.11 1.49 3.18
Total from investment
operations (0.96) 3.00 0.39 6.88 (0.28) 4.47 1.70 1.13 1.72 3.46
Less distributions
Dividends from
investment income--net 0.00 0.00 0.00 (0.02) (0.25) (0.20) (0.12) (0.24) (0.28) (0.12)
Distributions in excess
of investment
income--net (a) 0.00 0.00 0.00 (0.05) (0.04) 0.00 0.00 0.00 0.00 0.00
Distributions from
capital gains (0.61) (1.73) (2.23) (2.50) (2.09) (1.90) 0.00 (2.25) (2.12) 0.00
Total distributions (0.61) (1.73) (2.23) (2.57) (2.38) (2.10) (0.12) (2.49) (2.40) (0.12)
Net asset value: End of
year $ 15.54 $ 17.11 $ 15.84 $ 17.68 $ 13.37 $ 16.03 $ 13.66 $ 12.08 $ 13.44 $ 14.12
Total return (b) (5.66%) 19.33% 4.00% 54.49% (2.38%) 33.05% 14.05% 8.27% 12.07% 33.29%
Ratios/supplemental data
Ratios to average net
assets:
Operating and management
expenses 1.41% 1.51% 1.52% 1.57% 1.73% 1.84% 1.78% 1.99% 1.47% 1.65%
Investment income
(loss)--net 0.27% (0.48%) (0.01%) (0.31%) 0.70% 1.03% 2.22% 0.13% 1.60% 2.26%
Portfolio turnover rate 137% 162% 176% 115% 108% 77% 84% 106% 178% 188%
Net assets, end of year
(thousands) $99,569 $90,404 $73,144 $58,671 $38,531 $39,682 $33,951(c) $30,246(c) $31,812(c) $31,036(c)
<FN>
(a) Effective January 1, 1993, the Fund adopted Statement of Position 93-2:
"Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions by Investment Companies". As
a result, distribution amounts exceeding book basis net investment income (or
tax basis net income on a temporary basis) are presented as distributions in
excess of investment income--net. Similarly, capital gain distributions in
excess of book basis capital gains (or tax basis capital gains on a temporary
basis) are presented as "Distributions in excess of capital gains". For the
fiscal years ended December 31, 1992, 1991, and 1990, distributions, if any,
in excess of book basis net income were charged to paid-in capital.
(b) Excluding applicable sales charges.
(c) Calculated on average shares outstanding.
</FN>
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
August 2, 1993
Year (Date of Initial
Ended Public Offering) to
December 31, 1994 December 31, 1993
<S> <C> <C>
Net asset value:
Beginning of period $ 17.06 $17.29
Income from investment operations
Investment income (loss)--net (0.06) (0.05)
Net gains (losses) on investments (1.05) 1.55
Total from investment operations (1.11) 1.50
Less distributions
Distributions from capital gains (0.61) (1.73)
Total distributions (0.61) (1.73)
Net asset value: End of period $ 15.34 $17.06
Total return (b) (6.57%) 9.02%
Ratios/supplemental data
Ratios to average net assets:
Operating and management expenses 2.30% 2.57%(a)
Investment income (loss)--net (0.58%) (1.73%)(a)
Portfolio turnover rate 137% 162%
Net assets, end of period (thousands) $32,266 $7,423
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
See Notes to Financial Statements.
<PAGE>
Keystone America Omega Fund, Inc.
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(For a share outstanding throughout the period)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
August 2, 1993
Year (Date of Initial
Ended Public Offering) to
December 31, 1994 December 31, 1993
<S> <C> <C>
Net asset value:
Beginning of period $17.09 $17.29
Income from investment operations
Investment income (loss)--net (0.07) (0.06)
Net gains (losses) on investments (1.04) 1.59
Total from investment operations (1.11) 1.53
Less distributions
Distributions from capital gains (0.61) (1.73)
Total distributions (0.61) (1.73)
Net asset value: End of period $15.37 $17.09
Total return (b) (6.56%) 9.20%
Ratios/supplemental data
Ratios to average net assets:
Operating and management expenses 2.30% 2.48%(a)
Investment income (loss)--net (0.63%) (1.64%)(a)
Portfolio turnover rate 137% 162%
Net assets, end of period (thousands) $9,900 $3,620
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
See Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
Assets:
Investments at market value (identified cost--
$108,500,648) $116,748,131
Repurchase Agreements (identified cost--
$24,180,000) 24,180,000
Total investments at market value
(identified cost--$132,680,648) (Note 1) 140,928,131
Cash 761
Receivable for:
Investments sold 2,788,451
Fund shares sold 300,881
Interest and dividends 120,389
Other assets 5,367
Prepaid Expenses 2,461
Total assets 144,146,441
Liabilities:
Payable for:
Investments purchased 2,284,010
Fund shares redeemed 87,425
Capital Gain Distribution 1,241
Accrued reimbursable expenses (Note 4) 16,827
Other accrued expenses 21,742
Total liabilities 2,411,245
Net assets $141,735,196
Net assets represented by:
Paid-in capital $135,501,360
Accumulated realized gains (losses) on investment
transactions--net (2,013,647)
Net unrealized appreciation on investments 8,247,483
Total net assets $141,735,196
Net asset value per share and redemption price per
share (Notes 1 and 2):
Class A Shares ($15.54 on 6,408,219 shares
outstanding) $ 99,569,026
Class B Shares ($15.34 on 2,103,471 shares
outstanding) 32,265,775
Class C Shares ($15.37 on 644,331 shares
outstanding) 9,900,395
$141,735,196
Offering price per share:
Class A Shares (including sales charge of 5.75%) $ 16.49
Class B Shares $ 15.34
Class C Shares $ 15.37
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
Investment income (Note 1):
Dividends (net of foreign withholding
taxes of $2,692) $ 1,282,870
Interest 758,166
Other income 8,264
Total income 2,049,300
Expenses (Notes 2 and 4):
Management fee $ 924,625
Shareholder services 480,953
Accounting, auditing and legal 33,419
Custodian fee expense 80,666
Printing 15,198
Distribution Plan expenses 382,110
Registration expense 50,141
Miscellaneous expenses 2,480
Total expenses 1,969,592
Investment income--net 79,708
Realized and unrealized gain (loss)
on investments--net
(Notes 1 and 3):
Realized loss on investment
transactions:
Proceeds from sales 169,485,265
Cost of investments sold 171,498,912
Realized loss on investment
transactions--net (2,013,647)
Realized loss on foreign currency
related transactions--net (204,825)
Realized loss on investment and
foreign currency related
transactions--net (2,218,472)
Net unrealized appreciation
(depreciation) on investments
Beginning of year 12,896,631
End of year 8,247,483
Net change in unrealized appreciation
or depreciation
on investments (4,649,148)
Net loss on investment transactions (6,867,620)
Net decrease in net assets resulting
from operations ($6,787,912)
<PAGE>
Keystone America Omega Fund, Inc.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
<S> <C> <C>
Operations:
Investment income (loss)--net $ 79,708 ($ 422,468)
Realized gain (loss) on investment and foreign currency related
transactions--net (2,218,472) 12,241,623
Net change in unrealized appreciation or depreciation on investments (4,649,148) 2,660,034
Net increase (decrease) in net assets resulting from operations (6,787,912) 14,479,189
Distributions to shareholders from (Notes 1 and 5):
Realized gain from investment transactions--net--Class A Shares (3,782,055) (8,401,302)
Realized gain from investment transactions--net--Class B Shares (984,992) (350,891)
Realized gain from investment transactions--net--Class C Shares (322,709) (241,521)
Total distributions to shareholders (5,089,756) (8,993,714)
Capital share transactions (Note 2):
Proceeds from shares sold--Class A Shares 25,532,191 15,471,805
Proceeds from shares sold--Class B Shares 30,415,780 7,399,377
Proceeds from shares sold--Class C Shares 8,044,614 3,875,434
Payment for shares redeemed--Class A Shares (10,802,653) (11,739,365)
Payment for shares redeemed--Class B Shares (4,383,078) (32,917)
Payment for shares redeemed--Class C Shares (1,273,016) (307,969)
Net asset value of shares issued in reinvestment of distributions from:
Capital Gain Distributions--Class A Shares 3,419,022 7,629,294
Capital Gain Distributions--Class B Shares 909,009 308,602
Capital Gain Distributions--Class C Shares 303,801 213,797
Net increase in net assets resulting from capital share transactions 52,165,670 22,818,058
Total increase in net assets 40,288,002 28,303,533
Net assets:
Beginning of year 101,447,194 73,143,661
End of year $141,735,196 $101,447,194
</TABLE>
See Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1.) Significant Accounting Principles
Keystone America Omega Fund, Inc. (the "Fund") is an open-end diversified
management investment company incorporated in Massachusetts on February 8,
1968. Keystone Management, Inc. ("KMI") is the Investment Manager and
Keystone Custodian Funds, Inc. ("Keystone") is the Investment Adviser. It is
registered under the Investment Company Act of 1940 as a diversified open-end
management investment company.
The Fund currently issues three classes of shares. Class A shares are sold
subject to a maximum sales charge of 5.75% payable at the time of purchase.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption within three calendar years after the calendar year of
purchase. Class C shares are sold subject to a contingent deferred sales
charge payable upon redemption within one year after purchase. Class C shares
are available only through dealers who have entered into special distribution
agreements with Keystone Distributors, Inc. ("KDI"), the Fund's principal
underwriter.
Keystone is a wholly-owned subsidiary of Keystone Group, Inc. ("KGI"), a
Delaware corporation. KGI is privately owned by an investor group consisting
of members of current and former management of Keystone. Keystone Management,
Inc. ("KMI") is a wholly-owned subsidiary of Keystone. Keystone Investor
Resource Center, Inc. ("KIRC"), a wholly-owned subsidiary of Keystone, is the
Fund's transfer agent.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. Investments are usually valued at the closing price, or in the absence of
sales and for over-the- counter securities, the mean of the bid and asked
quotations. Management values of the following securities at prices it deems
in good faith to be fair: (a) securities (including restricted securities)
for which complete quotations are not readily available and (b) listed
securities if, in the opinion of management, the last sales price does not
reflect a current value, or if no sales occurred. Short-term investments
which are purchased with maturities of sixty days or less are valued at
amortized cost (original purchase cost as adjusted for amortization of
premium or accretion of discount) which when combined with accrued interest
approximates market. Short-term investments maturing in more than sixty days
for which market quotations are readily available are valued at current
market value. Short-term investments maturing in more than sixty days when
purchased which are held on the sixtieth day prior to maturity are valued at
amortized cost (market value on the sixtieth day adjusted for amortization of
premium or accretion of discount) which when combined with accrued interest
approximates market.
B. Securities transactions are accounted for on the trade date. Realized
gains and losses are computed on the identified cost basis. Interest income
is recorded on the accrual basis and dividend income is recorded on the
ex-dividend date. Distributions to the shareholders are recorded by the Fund
on the record date.
C. The Fund has qualified and intends to qualify in the future as a regulated
investment company under the Internal Revenue Code of 1986, as amended
("Internal Revenue Code"). Thus, the Fund is relieved of any federal income
tax liability by distributing all of its net taxable investment income and
net taxable capital gains, if any, to its shareholders. The Fund intends to
avoid excise tax liability by making the required distributions under the
Internal Revenue Code.
<PAGE>
Keystone America Omega Fund, Inc.
D. When the Fund enters into a repurchase agreement (a purchase of securities
whereby the seller agrees to repurchase the securities at a mutually agreed
upon date and price) the repurchase price of the securities will generally
equal the amount paid by the Fund plus a negotiated interest amount. The
seller under the repurchase agreement will be required to provide securities
("collateral") to the Fund whose value will be maintained at an amount not
less than the repurchase price, and which generally will be maintained at
101% of the repurchase price. The Fund monitors the value of collateral on a
daily basis, and if the value of the collateral falls below required levels,
the Fund intends to seek additional collateral from the seller or terminate
the repurchase agreement. If the seller defaults, the Fund would suffer a
loss to the extent that the proceeds from the sale of the underlying
securities were less than the repurchase price. Any loss would be increased
by any cost incurred on disposing of such securities. If bankruptcy
proceedings are commenced against the seller under the repurchase agreement,
the realization on the collateral may be delayed or limited. Repurchase
agreements entered into by the Fund will be limited to transactions with
dealers or domestic banks believed to present minimal credit risks, and the
Fund will take constructive receipt of all securities underlying repurchase
agreements until such agreements expire.
E. From time to time the Fund may enter into forward foreign currency
exchange contracts to hedge certain foreign currency assets. Contracts are
recorded at market value. Realized gains and losses arising from such trans-
actions are included in net realized gain (loss) on foreign currency related
transactions. The Fund is subject to the credit risk that the other party
will not complete the obligations of the contract.
F. The Fund distributes net income and net capital gains, if any, annually.
Distributions from investment income--net are based on tax basis net income.
From time to time, the Fund may distribute dividends which exceed book basis
net income. Effective January 1, 1993 the Fund adopted Statement of Position
93-2: Determination, Disclosure, and Financial Statement Presentation of
Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. As a result, the Fund changed the financial statement
classification of distributions to shareholders to more clearly reflect the
differences between financial statement amounts available for distribution
and amounts distributed to comply with income tax regulations.
The significant differences between financial statement amounts available for
distribution and distributions
made in accordance with income tax regulations are due to the deferral of
losses for income tax purposes that have been recognized for financial
statement purposes and the treatment of certain realized gains on foreign
currency transactions.
(2.) Capital Share Transactions
Two hundred million shares of the Fund with a par value of $1.00 are
authorized for issuance. Transactions in shares of the Fund were as follows:
<PAGE>
Class A Shares
Year Ended December 31,
1994 1993
Shares sold 1,577,169 914,263
Shares redeemed (668,733) (701,038)
Shares issued in
reinvestment of
distributions from
realized
gains--net 216,943 453,335
Net increase 1,125,379 666,560
Class B Shares
August 2, 1993
(Date of Initial
Year Ended Public Offering) to
December 31, 1994 December 31, 1993
Shares sold 1,881,751 418,519
Shares redeemed (271,676) (1,958)
Shares issued in
reinvestment of
distributions from
realized
gains--net 58,195 18,640
Net increase 1,668,270 435,201
Class C Shares
August 2, 1993
(Date of Initial
Year Ended Public Offering) to
December 31, 1994 December 31, 1993
Shares sold 493,899 217,151
Shares redeemed (80,825) (18,207)
Shares issued in
reinvestment of
distributions from
realized
gains--net 19,425 12,888
Net increase 432,499 211,832
The Fund bears some of the costs of selling its shares under a Distribution
Plan adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The Class A Distribution Plan provides for payments which are currently
limited to 0.25% annually of the average daily net asset value of Class A
shares to pay expenses of the distribution of Class A shares. Amounts paid by
the Fund to KDI under the Class A Distribution Plan are currently used to pay
others such as brokers or dealers, service fees at an annual rate of up to
0.25% of the average net asset value of the shares sold by such others and
remaining outstanding on the books of the Fund for specified periods.
The Class B Distribution Plan provides payment at an annual rate of 1.00% of
the average daily net asset value of Class B shares. Amounts paid by the Fund
under the Class B Distribution Plan are currently used to pay others
(dealers) (i) a commission at the time of purchase normally equal to 3.00% of
the value of each share sold; and/or (ii) service fees currently at an annual
rate of 0.25% of the average net asset value of shares sold by such others
and remaining outstanding on the books of the Fund for specified periods.
The Class C Distribution Plan provides for payments at an annual rate of
1.00% of the average daily net asset value of Class C shares to pay expenses
of the distribution of Class C shares. Amounts paid by the Fund under the
Class C Distribution Plan are currently used to pay others (dealers) (i)
payment at time of purchase of 1.00% of the value of each share sold, such
payment to consist of a commission in the amount of 0.75% and the first
year's service fee in advance in the amount of 0.25%; and (ii) beginning
approximately 15 months after purchase, a commission at an annual rate of
0.75% (subject to applicable limi
<PAGE>
Keystone America Omega Fund, Inc.
tations imposed by the rules of the National Association of Securities
Dealers, Inc.) and service fees at an annual rate of 0.25%, respectively, of
the average net asset value of each share sold by such others and remaining
outstanding on the books of the Fund for specified periods.
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. However, after the termination of the Class B
Distribution Plan, payments to KDI will continue at the annual rate of 1.00%
of the average daily net asset value of Class B shares, as compensation for
its services which had been earned while the Class B Distribution Plan was in
effect. Under the National Association of Securities Dealers, Inc. Rule, the
maximum uncollected amounts for which KDI may seek payment from the Fund
under its Distribution Plans are $2,015,349, and $637,742, respectively, for
Class B and Class C as of December 31, 1994.
During the year ended December 31, 1994, the Fund paid KDI $103,680,
$204,876, and $73,554 under its Class A, Class B, and Class C Distribution
Plans, respectively.
(3.) Securities Transactions
As of December 31, 1994, the Fund had a capital loss carryover for Federal
income tax purposes of approximately $452,000 which expires in the year 2002.
Additionally, the Fund has incurred capital losses of approximately
$1,300,000 in the current fiscal year which, under the Tax Reform Act of 1986
are treated for tax purposes as occurring on the first day of the Fund's next
fiscal year and are available as an offset to capital gains that may be
recognized in the next fiscal year.
Cost of purchases and proceeds from sales of investment securities (including
proceeds received at maturity) for the year ended December 31, 1994, were as
follows:
Cost of Proceeds
Purchases From Sales
Portfolio
Securities $ 203,664,645 $ 169,485,265
Short-term
investments 3,288,711,268 3,275,958,532
$3,492,375,913 $3,445,443,797
(4.) Investment Management and Transactions with Affiliates
Under the terms of the Investment Management Agreement between KMI and the
Fund, dated December 29, 1989, KMI provided investment management and
administrative services to the Fund during the year ended December 31, 1994.
The management fee was computed and charged to the Fund daily. The management
fee is determined by applying percentage rates, starting at 0.75% and
declining as net assets increase, to 0.50% per annum, to the net asset value
of the Fund. During the year ended December 31, 1994, the Fund paid or
accrued to KMI investment management and administrative services fees of
$924,625, which represented 0.75% of the Fund's average net assets. Of such
amounts paid to KMI, $785,931 was paid to Keystone under an Investment
Advisory Agreement between KMI and Keystone dated December 30, 1989, pursuant
to which Keystone provides investment advisory services to the Fund and
receives 85% of the amount paid to KMI.
During the year ended December 31, 1994, the Fund paid or accrued to KGI
$16,827 as reimbursement for the cost of accounting and printing expense
provided to the Fund. During the year ended December 31, 1994, $480,953 was
paid or accrued to KIRC for shareholder services.
<PAGE>
Certain officers and/or Directors of Keystone are also officers and/or
Directors of the Fund. Officers of Keystone and affiliated Directors receive
no compensation directly from the Fund. Currently, the independent Directors
of the Fund receive no compensation for their services.
(5.) Distributions to Shareholders
The Fund intends to distribute to its shareholders dividends from net
investment income and all net taxable realized long-term capital gains, if
any, annually. Any distribution which is declared in December and paid before
the next February 1 will be taxable to shareholders in the year declared.
Federal Tax Status--Fiscal 1994 Distributions (Unaudited)
The per-share distributions paid to you for fiscal 1994, whether taken in
shares or cash, are as follows:
Capital Gain
Payment Date Long-term Short-term Total
September 7, 1994 $0.10 $0.51 $0.61
<PAGE>
Keystone America Omega Fund, Inc.
INDEPENDENT AUDITORS' REPORT
The Directors and Shareholders
Keystone America Omega Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Keystone America Omega Fund, Inc., including the schedule of investments, as
of December 31, 1994, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
years in the six-year period then ended for Class A Shares and for the year
then ended and the period from August 2, 1993 (Date of Initial Public
Offering) to December 31, 1993 for Class B and Class C Shares. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
financial highlights for Class A Shares for each of the years in the
four-year period ended December 31, 1988 were audited by other auditors whose
report, dated February 3, 1989, expressed an unqualified opinion thereon.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1994 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Keystone America Omega Fund, Inc. as of December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the six-year period then ended for Class A Shares and
for the year then ended and the period from August 2, 1993 to December 31,
1993 for Class B and Class C Shares, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 3, 1995
<PAGE>
KEYSTONE AMERICA OMEGA FUND
Part C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). Financial Statements
All financial statements listed below are included in Registrant's Statement of
Additional Information.
ANNUAL FINANCIAL STATEMENTS
Schedule of Investments December 31, 1994
Financial Highlights For Fiscal Years ended December 31, 1985
through 1994 for Class A shares. For
period from August 2, 1993 (commencmenet
of operations) through December 31 1993
and fiscal year ended December 31,1994
for Class B and C shares.
Statement of Assets and Liabilities December 31, 1994
Statement of Operations Year ended December 31, 1994
Statement of Changes in Net Assets Two years ended December 31, 1994
Notes to Financial Statements
Independent Auditors' Report
dated February 3, 1995
All other schedules are omitted as the required information is inapplicable.
<PAGE>
Item 24(b) Exhibits
(1) A copy of Registrant's form of Declaration of Trust is
filed herewith.
(2) A copy of form of Registrant's By-Laws is filed
herewith.
(3) Not applicable.
(4) A copy of the form of share certificate will be filed
by amendment.
(A) A copy of the Investment Management Agreement between
Registrant and Keystone Management, Inc. is filed
herewith.
(B) A copy of the Investment Advisory Agreement, between
Keystone Management, Inc. and Keystone Custodian Funds,
Inc. is filed herewith.
(6) (A) A copy of the form of Principal Underwriting Agreement
between Registrant and Keystone Distributors, Inc. is filed
herewith
(B) A copy of the form of Dealer Agreement used by Keystone
Distributors, Inc. was filed with Post-Effective
Amendment No. 20 to the Registration Statement for
Keystone America Omega Fund, Inc. (File No.
33-28183/811-1600) as Exhibit 24(b)(6)(B) and is
incorporated by reference herein.
(7) Not applicable.
(8) A copy of the form of Custodian, Fund Accounting and
Recordkeeping Agreement between Registrant and State
Street Bank and Trust Company is filed herewith.
(9) Not applicable.
<PAGE>
Item 24(b) Exhibits (con't)
(10) An opinion and consent of counsel as to the legality of
the securities registered is filed herewith.
(11) A consent as to the use of the Independent Auditors'
Report is filed herewith.
(12) Not applicable.
(13) Not applicable.
(14) Copies of forms of model plans used in the
establishment of retirement plans, in connection with
which Registrant offers its securities, were filed with
Post-Effective Amendment No. 66 to the Registration
Statement for Keystone America Omega Fund, Inc.
(File No. 2-10527/811-96) as Exhibit 1(b)(14) and are
incorporated by reference herein.
(15) A copy of the forms of Registrant's respective Class A,
B, and C Rule 12b-1 Distribution Plans are filed
herewith.
(16) Schedules for the computation of total return are filed
herewith.
(17) A financial data schedule is filed herewith.
(18) Powers of Attorney are filed herewith.
<PAGE>
Item 25. Persons Controlled By or Under Common Control With
Registrant
Not applicable.
Item 26. Number of Holders of Securities
Number of Record
Title of Class Holders as of January 31, 1995
-------------- ------------------------------
Class A ......................................... 9,434
Class B ......................................... 3,420
Class C ......................................... 776
Item 27. Indemnification
Provisions for the indemnification of the Registrant's Trustees and
officers are contained in Article VIII of Registrant's form of Declaration of
Trust, a copy of which is filed herewith.
Provisions for the indemnification of Keystone Distributors, Inc., the
Registrant's Principal Underwriter, are contained in Section 9 of the Principal
Underwriting Agreement between Registrant and Keystone Distributors, Inc., a
copy of the form of which was filed with Registration Statement No.
33-28183/811-1600 as Exhibit 24(b)(6)(A) and is incorporated by reference
herein.
Provisions for the indemnification of Keystone Management, Inc. and
Keystone Custodian Funds, Inc., Registrant's investment manager and adviser,
respectively, are contained in Section 6 of the Investment Management Agreement
between Registrant and Keystone Custodian Funds, Inc., a copy of the form of
which is filed herewith.
<PAGE>
Item 28. Businesses and Other Connections of Investment Adviser
The following tables list the names of the various officers
and directors of Keystone Custodian Funds, Inc., Registrant's
investment adviser, and their respective positions. For each
named individual, the tables list, for at least the past two
fiscal years, (i) any other organizations (excluding
investment advisory clients) with which the officer and/or
director has had or has substantial involvement; and (ii)
positions held with such organizations.
<PAGE>
1/26/95
LIST OF OFFICERS AND DIRECTORS OF KEYSTONE CUSTODIAN FUNDS, INC.
Position with
Keystone Other
Custodian Business
Name Funds, Inc. Affiliations
- ---- ----------- ------------
Albert H. Chairman of Chairman of the Board,
Elfner, III the Board, Chief Chief Executive Officer,
Chief Executive President and Director:
Officer, Vice Keystone Group, Inc.
Chairman and Keystone Management,
Director Inc.
Keystone Software, Inc.
Keystone Asset
Corporation
Keystone Capital Corp.
Chairman of the Board and
Director:
Keystone Fixed Income
Advisers, Inc.
Keystone Investment
Management Corporation
President and Director:
Keystone Trust Company
Director or Trustee:
Fiduciary Investment
Company, Inc.
Keystone Distributors,
Inc.
Keystone Investor
Resource Center, Inc.
Robert Van Partners,
Inc.
Boston Children's
Services Associates
Middlesex School
Middlebury College
Formerly Trustee:
Neworld Bank
Philip M. Byrne Director President and Director:
Keystone Investment
Management Corporation
Senior Vice President:
Keystone Group, Inc.
<PAGE>
Position with
Keystone
Custodian
Name Funds, Inc. Other Business Affiliations
- ---- ----------- ---------------------------
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
Godfrey Senior Vice Chief Financial
President, Treasurer:
Treasurer and Keystone Group, Inc.
Chief Financial Keystone
Officer Distributors,Inc.
Treasurer:
Keystone Investment
Management Corporation
Keystone Management,
Inc.
Keystone Software, Inc.
Fiduciary Investment
Company, Inc.
Treasurer and Director:
Hartwell Keystone
Advisers, Inc.
James R. McCall Director and None
President
Ralph J. Director President and Director:
Spuehler, Jr. Keystone
Distributors,Inc.
Senior Vice President and
Director:
Keystone Group, Inc.
Treasurer:
Hartwell Emerging Growth
Fund, Inc.
Hartwell Growth
Fund,Inc.
Director:
Keystone Investor
Resource Center, Inc.
Keystone Management,
Inc.
<PAGE>
Position with
Keystone
Custodian
Name Funds, Inc. Other Business Affiliations
- ---- ----------- ---------------------------
Ralph J. Formerly President:
Spuehler, Jr. (con't) Keystone Management,
Inc.
Formerly Treasurer:
The Kent Funds
Keystone Group, Inc.
Keystone Custodian
Funds, Inc.
Rosemary D. Senior Vice General Counsel, Senior
Van Antwerp President, Vice President and
General Counsel Secretary:
and Secretary Keystone Group, Inc.
Senior Vice President and
General Counsel:
Keystone Investment
Management Corporation
Senior Vice President,
General Counsel and
Director:
Keystone Investor
Resource Center, Inc.
Fiduciary Investment
Company, Inc.
Keystone Distributors,
Inc.
Keystone Management,
Inc.
Keystone Software, Inc.
Senior Vice President and
Secretary:
Hartwell Keystone
Advisers, Inc.
Vice President and
Secretary:
Keystone Fixed Income
Advisers, Inc.
Formerly Assistant
Secretary:
The Kent Funds
Harry Barr Vice President None
Robert K. Vice President None
Baumback
<PAGE>
Position with
Keystone
Custodian
Name Funds, Inc. Other Business Affiliations
- ---- ----------- ---------------------------
Betsy A. Blacher Vice President None
Francis X. Claro Vice President None
Kristine R. Vice President None
Cloyes
Christopher P. Vice President None
Conkey
Richard Cryan Vice President None
Maureen E. Vice President None
Cullinane
George E. Dlugos Vice President None
Antonio T. Docal Vice President None
Christopher R. Vice President None
Ely
Roland Gillis Vice President None
Robert L. Hockett Vice President None
Sami J. Karam Vice President None
Donald M. Keller Vice President None
George J. Kimball Vice President None
JoAnn L. Lydon Vice President None
John C. Vice President None
Madden, Jr.
Stephen A. Marks Vice President None
Eleanor H. Marsh Vice President None
Walter T. Vice President None
McCormick
Barbara McCue Vice President None
<PAGE>
Position with
Keystone
Custodian
Name Funds, Inc. Other Business Affiliations
- ---- ----------- ---------------------------
Stanley M. Niksa Vice President None
Robert E. O'Brien Vice President None
Margery C. Parker Vice President None
William H. Vice President None
Parsons
Daniel A. Rabasco Vice President None
David L. Smith Vice President None
Kathy K. Wang Vice President None
Judith A. Warners Vice President None
Marcia Waterman Vice President None
J. Kevin Kenely Vice President None
Joseph J. Vice President None
Decristofaro
Jean Susan Assistant Vice President and
Loewenberg Secretary Counsel:
Keystone Group, Inc.
Vice President and
Secretary:
Keystone Trust Company
Secretary:
Keystone Investor
Resource Center, Inc.
Assistant Secretary:
Keystone Asset
Corporation
Keystone Capital
Corporation
Keystone Distributors,
Inc.
Keystone Fixed Income
Advisers, Inc.
Keystone Management,
Inc.
Keystone Software, Inc.
Hartwell Keystone
Advisers, Inc.
<PAGE>
Position with
Keystone
Custodian
Name Funds, Inc. Other Business Affiliations
- ---- ----------- ---------------------------
Jean Susan Clerk:
Loewenberg (con't) Keystone Investment
Management Corporation
Fiduciary Investment
Company, Inc.
Assistant Secretary:
Hartwell Keystone
Advisers, Inc.
Keystone Distributors,
Inc.
Colleen L. Assistant Assistant Secretary:
Mette Secretary Keystone Distributors,
Inc.
Keystone Group, Inc.
Kevin J. Assistant Vice President:
Morrissey Treasurer Keystone Group, Inc.
Assistant Treasurer:
Fiduciary Investment
Company, Inc.
Formerly Assistant
Treasurer:
The Kent Funds
<PAGE>
Item 29. Principal Underwriter
(a) Keystone Distributors, Inc., which acts as Registrant's
principal underwriter, also acts as principal underwriter or
distributor for the following entities:
Keystone America Hartwell Emerging Growth Fund
Keystone America Hartwell Growth Fund
Keystone Custodian Fund, Series B-1
Keystone Custodian Fund, Series B-2
Keystone Custodian Fund, Series B-4
Keystone Custodian Fund, Series K-1
Keystone Custodian Fund, Series K-2
Keystone Custodian Fund, Series S-1
Keystone Custodian Fund, Series S-3
Keystone Custodian Fund, Series S-4
Keystone America Capital Preservation and Income Fund
Keystone America Fund for Total Return
Keystone America Global Opportunities Fund
Keystone America Government Securities Fund
Keystone America Intermediate Term Bond Fund
Keystone America State Tax Free Fund
Keystone America State Tax Free Fund - Series II
Keystone America Strategic Income Fund
Keystone America Tax Free Income Fund
Keystone America World Bond Fund
Keystone Fund of the Americas
Keystone Tax Free Fund
Keystone Tax Exempt Trust
Keystone Liquid Trust
Keystone International Fund Inc.
Keystone Precious Metals Holdings, Inc.
Keystone Strategic Development Fund
Master Reserves Trust
(b) For information with respect to each officer and
director of Registrant's acting principal underwriter,
see the following pages.
<PAGE>
Item 29(b) (continued).
Position and
Name and Principal Position and Offices with Offices with
Business Address Keystone Distributors, Inc. the Fund
- ---------------- --------------------------- ------------
Ralph J. Spuehler* Director, President None
Edward F. Godfrey* Director, Senior Vice Senior Vice
President, Treasurer President
and Chief Financial
Officer
Rosemary D. Van Antwerp Director, Senior Vice Senior Vice
President, General Counsel President
and Secretary
Albert H. Elfner, III* Director President
Charles W. Carr* Senior Vice President None
Peter M. Delehanty* Senior Vice President None
J. Kevin Kenely* Vice President and None
Controller
Frank O. Gebhardt Divisional Vice None
2626 Hopeton President
San Antonio, TX 78230
C. Kenneth Molander Divisional Vice None
8 King Edward Drive President
Londenderry, NH 03053
David S. Ashe Regional Manager and None
32415 Beaconsfield Vice President
Birmingham, MI 48025
David E. Achzet Regional Vice President None
60 Lawn Avenue -
Greenway 27
Stamford, CT 06902
William L. Carey, Jr. Regional Manager and None
4 Treble Lane Vice President
Malvern, PA 19355
John W. Crites Regional Manager and None
2769 Oakland Circle W. Vice President
Aurora, CO 80014
<PAGE>
Item 29(b) continued
Position and
Name and Principal Position and Offices with Offices with
Business Address Keystone Distributors, Inc. the Fund
- ---------------- --------------------------- ------------
Richard J. Fish Regional Vice President None
309 West 90th Street
New York, NY 10024
Michael E. Gathings Regional Manager and None
245 Wicklawn Way Vice President
Roswell, GA 30076
Robert G. Holz, Jr. Regional Manager and None
313 Meadowcrest Drive Vice President
Richardson, Texas 75080
Todd L. Kobrin Regional Manager and None
20 Iron Gate Vice President
Metuchen, NJ 08840
Ralph H. Johnson Regional Manager and None
345 Masters Court, #2 Vice President
Walnut Creek, CA 94598
Paul J. McIntyre Regional Manager and None
Vice President
Dale M. Pelletier Regional Manager and None
464 Winnetka Ave. Vice President
Winnetka, IL 60093
Juliana Perkins Regional Manager and None
2348 West Adrian Street Vice President
Newbury Park, CA 91320
Matthew D. Twomey Regional Manager and None
9627 Sparrow Court Vice President
Ellicott City, MD 21042
Mitchell I. Weiser Regional Manager and None
7031 Ventura Court Vice President
Parkland, FL 33067
Welden L. Evans Regional Banking Officer None
490 Huntcliff Green and Vice President
Atlanta, GA 30350
Russell A. Haskell* Vice President None
Robert J. Matson* Vice President None
<PAGE>
Item 29(b) continued
Position and
Name and Principal Position and Offices with Offices with
Business Address Keystone Distributors, Inc. the Fund
- ---------------- --------------------------- ------------
John M. McAllister* Vice President None
Gregg A. Mahalich Vice President None
14952 Richards Drive W.
Minnetonka, MN 55345
Burton Robbins Vice President None
1586 Folkstone Terrace
Westlake Village, CA
91361
Thomas E. Ryan, III* Vice President None
Peter Willis* Vice President None
Raymond P. Ajemian* Manager and Vice President None
Joan M. Balchunas* Assistant Vice President None
Thomas J. Gainey* Assistant Vice President None
Eric S. Jeppson* Assistant Vice President None
Julie A. Robinson* Assistant Vice President None
Peter M. Sullivan Assistant Vice President None
21445 Southeast 35th Way
Issaquah, WA 98027
Jean S. Loewenberg* Assistant Secretary Assistant
Secretary
Colleen L. Mette* Assistant Secretary Assistant
Secretary
Dorothy E. Bourassa* Assistant Secretary Assistant
Secretary
* Located at 200 Berkeley Street, Boston, Massachusetts 02116-5034
Item 29(c). - Not applicable
<PAGE>
Item 30. Location of Accounts and Records
200 Berkeley Street
Boston, Massachusetts 02116-5034
Keystone Investor Resource Center, Inc.
101 Main Street
Cambridge, Massachusetts 02142-1519
Data Vault, Inc.
3431 Sharp Slot Road
Swansea, Massachusetts 02171
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 the 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 be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston, in The Commonwealth of Massachusetts, on
the 27th day of February, 1995.
KEYSTONE AMERICA OMEGA FUND, INC.
By: /s/ George S. Bissell
-------------------------
George S. Bissell*
Chairman of the Board
*By: /s/ Melina M.T. Murphy
-------------------------
Melina M.T. Murphy**
Attorney-in-Fact**
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registrant's Registration Statement has been signed below by the
following persons in the capacities indicated on the 27th day of February, 1995.
SIGNATURES TITLE
- ---------- -----
/s/ George S. Bissell Chairman of the Board and
- ---------------------------------- Trustee
George S. Bissell*
/s/ Albert H. Elfner, III President, Chief Executive Officer
- ---------------------------------- and Trustee
Albert H. Elfner, III*
/s/ Kevin J. Morrissey Treasurer (Principal Accounting
- ---------------------------------- and Financial Officer)
Kevin J. Morrissey*
*By: /s/ Melina M.T. Murphy
-------------------------
Melina M.T. Murphy**
Attorney-in-Fact
<PAGE>
SIGNATURES TITLE
- ---------- -----
/s/ Frederick Amling Trustee
- ----------------------------------
Frederick Amling*
/s/ Charles A. Austin, III Trustee
- ----------------------------------
Charles A. Austin, III*
/s/ George S. Bissell Trustee
- ----------------------------------
George S. Bissell*
/s/ Edwin D. Campbell Trustee
- ----------------------------------
Edwin D. Campbell*
/s/ Charles F. Chapin Trustee
- ----------------------------------
Charles F. Chapin*
/s/ Albert H. Elfner, III Trustee
- ----------------------------------
Albert H. Elfner, III*
/s/ K. Dun Gifford Trustee
- ----------------------------------
K. Dun Gifford*
/s/ Leroy Keith, Jr. Trustee
- ----------------------------------
Leroy Keith, Jr.*
/s/ F. Ray Keyser Trustee
- ----------------------------------
F. Ray Keyser*
/s/ David M. Richardson Trustee
- ----------------------------------
David M. Richardson*
/s/ Richard J. Shima Trustee
- ----------------------------------
Richard J. Shima*
/s/ Andrew J. Simons Trustee
- ----------------------------------
Andrew J. Simons*
*By: /s/ Melina M.T. Murphy
-------------------------
Melina M.T. Murphy**
Attorney-in-Fact
** Melina M.T. Murpby, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to
powers of attorney duly executed by such persons and attached hereto as
Exhibit 24(b)(18).
<PAGE>
INDEX TO EXHIBITS
Page Number
In Sequential
Exhibit Number Exhibit Numbering System
- -------------- ------- ----------------
1 Restatement of Trust
2 By-Laws
5 Form of Advisory Agreement Form of
Investment Management Agreement
6 Form of Principal Underwriting
Agreement Form of Dealers
Agreement(1)
8 Form of Custodian, Fund Accounting
and Recordkeeping Agreement Form of
Master Trust and Record Agreement
10 Form of Opinion and Consent of
Counsel
11 Independent Auditors' Consent
14 Form of Model Retirement Plans(2)
15 Form of Distribution Plans
16 Performance Data Schedules
17 Financial Data Schedule
18 Powers of Attorney
- ----------------------------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 90 to
Registration Statement No. 2-10660/811-97.
(2) Incorporated herein by reference to Post-Effective Amendment No. 66 to
Registration Statement No. 2-10527/811-96.
EXHIBIT 99.24.(b)(1)
KEYSTONE AMERICA OMEGA FUND
DECLARATION OF TRUST
Dated: September 21, 1994
This DECLARATION OF TRUST of Keystone America Omega Fund, made at Boston,
Massachusetts on September 21, 1994 by Frederick Amling, Charles A. Austin, III,
George S. Bissell, Edwin D. Campbell, Charles F. Chapin, Albert H. Elfner, III,
K. Dun Gifford, Leroy Keith, Jr., F. Ray Keyser, Jr., David M. Richardson,
Richard J. Shima, Andrew J. Simons (hereinafter with their successors referred
to as the "Trustees").
WITNESSETH:
WHEREAS, the Trustees have agreed to manage all property received by them
as Trustees in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the holders from time
to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust shall be known as Keystone America Omega Fund
and the Trustees shall conduct the business of this Trust under that name or any
other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided
(a) The terms "Affiliated Person," "Assignment," "Commission",
"Interested Person" and "Principal Underwriter" shall have the meanings
given them in the 1940 Act;
(b) The "Trust" refers to the Massachusetts business trust
established by and under this Declaration of Trust;
<PAGE>
- 2 -
(c) "Declaration of Trust" shall mean this Declaration of Trust as
amended or restated from time to time;
(d) "Net Asset Value Per Share" means the net asset value per share
of the Trust determined in the manner provided or authorized in Article
VI, Section 4;
(e) "Shareholder" means a record owner of Shares of the Trust;
(f) "Shares" means the equal proportionate units of interest into
which the beneficial interest in the Trust shall be divided from time to
time or, if more than one series ("Series") or more than one class
("Class") of Shares is authorized by the Trustees, the equal proportionate
units into which each such Series or Class of Shares shall be divided from
time to time, and includes where appropriate fractions of a Share as well
as a whole Share, unless the Trustees provide that there shall be no
fractions of any particular Shares;
(g) "Trustees" refers to the Trustee or Trustees of the Trust who
become such in accordance with Article IV and where appropriate means a
majority or other portion of them acting in accordance with this
Declaration of Trust or the By-laws of the Trust; and
(h) The "1940 Act" refers to the Investment Company Act of 1940 and
the Rules and Regulations thereunder, all as amended from time to time.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a continuous source of
managed investments.
ARTICLE III
Beneficial Interest
Section 1. Shares of Beneficial Interest. The beneficial interest in the
Trust shall at all times be divided into transferable Shares, without par value,
each of which shall represent an equal proportionate interest in the Trust with
each other Share outstanding, none having priority or preference over another,
except to the extent modified by the Trustees under the provisions of this
Section. The number of Shares which may be issued is unlimited. The Trustees may
from time to time divide or combine the outstanding Shares into a greater or
lesser number
<PAGE>
- 3 -
without thereby changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and/or fractions.
From time to time, as they deem appropriate, the Trustees may create
additional Series and/or Classes of Shares, in addition to the Shares initially
created under this instrument ("Original Series"). References in this
Declaration of Trust to Shares of the Trust shall apply, as appropriate, to each
such Series of Shares and to each such Class of Shares.
Any additional Series of Shares created hereunder shall represent the
beneficial interest in the assets (and related liabilities) allocated by the
Trustees to such Series of Shares and acquired by the Trust only after creation
of the respective Series of Shares and only on account of such Series. If the
Trustees create any additional Series of Shares hereunder, then the Original
Series shall be deemed a separate Series of Shares. Upon creation of each Series
of Shares, the Trustees may designate it appropriately and determine the
investment policies with respect to the assets allocated to such Series of
Shares, redemption rights, dividend policies, conversion rights, liquidation
rights, voting rights, and such other rights and restrictions as the Trustees
deem appropriate, to the extent not inconsistent with the provisions of this
Declaration of Trust.
The Trustees may divide any Series (including the Original Series) into
more than one Class of Shares. Upon creation of each additional Class of Shares,
the Trustees may designate it appropriately and determine its rights and
restrictions (including, without limitation, such redemption rights, dividend
rights, conversion rights, liquidation rights, voting rights and such other
rights and restrictions as the Trustees deem appropriate).
Section 2. Ownership of Shares. The ownership of Shares shall be recorded
on the books of the Trust or a transfer agent or a similar agent. The Trustees
may make such rules as they consider appropriate for the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer agent or similar agent, as the case may be, shall be conclusive as to
who are the holders of Shares of each Series or Class and as to the number of
Shares of each Series or Class held from time to time by each.
Section 3. Investments in the Trust. The Trustees shall accept investments
in the Trust from such persons and on such terms and, subject to any
requirements of law, for such consideration as the Trustees from time to time
authorize and may cease offering Shares to the public at any time. After such
acceptance, the number of Shares of the appropriate Series or Class to represent
the contribution may, in the Trustees' discretion, be considered as outstanding,
and the amount receivable by the Trustees on account
<PAGE>
- 4 -
of the contribution may be treated as an asset of the Series or Class.
Section 4. No Preemptive Rights. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
Section 5. Provisions Relating to Series or Classes of Shares. Whenever no
Shares of a Series or Class are outstanding, then the Trustees may abolish such
Series or Class. Whenever more than one Series or Class of Shares is
outstanding, then the following provisions shall apply:
(a) Assets Belonging to Each Series or Class. All consideration
received by the Trust for the issue or sale of Shares of a particular
Series or Class, together with all assets in which such consideration is
invested or reinvested, all income, earnings and proceeds thereof, and any
funds derived from any reinvestment of such proceeds, shall, except to the
extent specifically otherwise provided in the provisions adopted by the
Board of Trustees establishing the Series or Class, irrevocably belong to
that Series or Class for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of the Trust. In the
event there are assets, income, earnings and proceeds thereof which are
not readily identifiable as belonging to a particular Series or Class,
then the Trustees shall allocate such items to the various Series or
Classes then existing, in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. The amount of each such item
allocated to a particular Series or Class by the Trustees shall then
belong to that Series or Class, and each such allocation shall be
conclusive and binding upon the Shareholders of all Series or Classes for
all purposes.
(b) Liabilities Belonging to Each Series or Class. The assets
belonging to each particular Series or Class shall, except to the extent
specifically otherwise provided in the provisions adopted by the Board of
Trustees establishing the Series or Class, be charged with the
liabilities, expenses, costs and reserves of the Trust attributable to
that Series or Class; and any general liabilities, expenses, costs and
reserves of the Trust which are not readily identifiable as attributable
to a particular Series or Class shall be allocated by the Trustees to the
various Series or Classes then existing, in such manner and on such basis
as they, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes.
(c) Series or Classes of Shares, Dividends and Liquidation. Each
Share of each respective Series or Class
<PAGE>
- 5 -
shall, except to the extent specifically otherwise provided in the
provisions adopted by the Board of Trustees establishing the Series or
Class, have the same rights and pro rata beneficial interest in the assets
and liabilities of the Series or Class as any other such Share. Any
dividends paid on the Shares of any Series or Class shall, except to the
extent specifically otherwise provided in the provisions adopted by the
Board of Trustees establishing the Series or Class, only be payable from
and to the extent of the assets (net of liabilities) belonging to that
Series or Class. In the event of liquidation of a Series or Class, only
the assets (less provision for liabilities) of that Series or Class shall
be distributed to the holders of the Shares of that Series or Class.
(d) Voting by Series or Class. Except as provided in this Section or
as limited by the rights and restrictions of any Series or Class, each
Share of the Trust may vote with and in the same manner as any other Share
on matters submitted to a vote of the Shareholders entitled to vote
thereon, without differentiation among votes from the separate Series or
Classes; provided, however, that (i) as to any matter with respect to
which a separate vote of any Series or Class is required by the 1940 Act,
or otherwise by applicable law, such requirement as to a separate vote
shall apply in lieu of the voting described above; (ii) in the event that
the separate vote requirements referred to in (i) above apply with respect
to one or more Series or Classes, then, subject to (iii) below, the Shares
of all other Series or Classes shall vote without differentiation among
their votes; and (iii) as to any matter which does not affect the interest
of any particular Series or Class, only the holders of Shares of the one
or more affected Series or Classes shall be entitled to vote.
Section 6. Limitation of Personal Liability. The Trustees shall have no
power to bind any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription to
any Shares or otherwise. Every note, bond, contract or other undertaking issued
by or on behalf of the Trust or the Trustees relating to the Trust shall include
a recitation limiting the obligation represented thereby to the Trust and its
assets (but the omission of such a recitation shall not operate to bind any
Shareholder).
ARTICLE IV
The Trustees
Section 1. Number of Trustees. The number of Trustees shall initially be
such number as shall be elected as such by a vote of
<PAGE>
- 6 -
the shareholders of the Trust and thereafter shall be such number as shall be
fixed from time to time by action of a majority of the Trustees.
Section 2. Election or Appointment and Term. The initial Trustees shall be
the individuals signing this Declaration in that capacity, who shall have been
previously elected by a vote of the shareholders of the Trust. Thereafter,
subject to Section 16(a) of the 1940 Act, the Trustees may elect themselves or
their successors at such intervals, as they deem proper, and may appoint
Trustees to fill vacancies as provided in Section 4 hereof; provided, that
Trustees shall be elected by vote of a majority of Shares voting thereon at such
time or times as the Trustees shall determine that such action is advisable.
Subject to Section 3 hereof, the Trustees shall have the power to set and alter
the terms of office of the Trustees, and they may at any time lengthen or
shorten their own terms or make their terms of unlimited duration; provided,
that the term of office of any incumbent Trustee shall continue until
terminated, as provided in Section 4 hereof or, if not so terminated, until the
election of such Trustee's successor in office has become effective in
accordance with this Section 2.
Section 3. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees, and such resignation shall be
effective upon such delivery or at any later date according to the terms of the
instrument. Any Trustee may be removed by the action of two-thirds of the
remaining Trustees. Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver such documents
as the remaining Trustees shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust property held in his name. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence. However, the execution and delivery of such
documents by a former Trustee or his legal representative shall not be requisite
to the vesting of title to the Trust property in the remaining Trustees.
Section 4. Vacancies. The term of office of a Trustee shall terminate and
a vacancy shall occur in the event of such Trustee's death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of Trustee. No such vacancy shall operate to annul this
Declaration of Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. In the case of an existing vacancy,
including a vacancy existing by reason of an increase in the number of Trustees,
subject to applicable law, the remaining Trustees or, if only one Trustee shall
then remain in office, the sole remaining Trustee, shall appoint such individual
to fill such vacancy as they or he, in their or his discretion, shall see fit.
An appointment
<PAGE>
- 7 -
of a Trustee may be made in anticipation of a vacancy to occur at a later date
by reason of retirement or resignation of a Trustee or an increase in the number
of Trustees; provided, that such appointment shall not become effective prior to
such retirement or resignation or such increase in the number of Trustees.
Whenever a vacancy in the number of Trustees shall occur, until such vacancy is
filled as provided in this Section 4, the Trustees in office, regardless of
their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration of Trust
in the manner provided by this Declaration of Trust. A written instrument
certifying the existence of such vacancy signed by a majority of the Trustees
shall be conclusive evidence of the existence of such vacancy.
Section 5. Management of the Trust. Subject to the provisions of this
Declaration of Trust, the business and affairs of the Trust shall be managed by
the Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility. Action by the Trustees may be taken by majority vote of
the Trustees at a meeting at which a quorum (which shall be a majority of the
Trustees then in office) shall be present, or by a writing signed by a majority
of the Trustees in office.
Without limiting the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of the
business of the Trust and may amend and repeal them to the extent that they do
not reserve that right to any Shareholders; they may elect and remove such
officers and appoint and terminate such agents as they consider appropriate;
they may appoint from their own number and terminate any one or more committees;
they may employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities,
retain a transfer agent or a Shareholder servicing agent, or both, provide for
the distribution of Shares by the Trust, through one or more principal
underwriters or otherwise, set, or otherwise provide for the setting of, record
dates, and in general delegate such authority to do any or all things which the
Trustees may do in the operation of the business of the Trust as they consider
desirable to any officers of the Trust and committees of the Trustees and to any
agent or employee, custodian or underwriter. Any action relating to the
operation of the Trust provided for herein to be taken by the Trustees may be
taken by any other person under authority granted by the Trustees whether or not
specifically so stated, and unless specifically so stated to the contrary. A
specific statement indicating that the Trustees may delegate any authority shall
not give rise to any contrary implication with respect to any provision of this
Declaration of Trust.
Without limiting the foregoing, the Trustees in addition to all powers
granted by law shall have power and authority:
<PAGE>
- 8 -
(a) To invest and reinvest cash, and to hold cash uninvested,
without in anywise being bound or limited by any present or future law or
custom in regard to investments by trustees;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate or lease
any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property, and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustees
shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in the
Trust's own name or in the name of a custodian or subcustodian or a
nominee or nominees or otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust;
(g) To join with other security holders in acting through a
committee, depository, voting trustee or otherwise, and in that connection
to deposit any security with, or transfer any security to, any such
committee, depository or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and
to pay, such portion of the expenses and compensation of such committee,
depository or trustee as the Trustees shall deem proper;
(h) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust for any matter in controversy, including, but not
limited to, claims for taxes; and
(i) To borrow funds.
<PAGE>
- 9 -
The Trustees shall not be required to obtain any court order to deal with
any assets of the Trust or take any other action hereunder.
Section 6. Ownership of Assets of the Trust. The assets of the Trust shall
be held separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or by any successor Trustees.
All of the assets of the Trust shall at all times be considered as vested in the
Trustees. No Shareholder shall be deemed to have a severable ownership in any
individual asset of the Trust or any right of partition or possession thereof,
but each Shareholder shall have a proportionate undivided beneficial interest in
the assets of the Series or Class of Shares of which he is a holder, subject to
any rights or restrictions applicable to any Series or Class of Shares of which
he is a holder.
Section 7. Payment of Expenses. The Trustees shall pay or cause to be paid
out of the principal or income of the Trust, or partly out of principal and
partly out of income, as they deem fair, all expenses, charges, taxes and
liabilities incurred or arising in connection with the Trust, or in connection
with the management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
investment adviser or manager, administrator, auditor, counsel, custodian,
transfer agent, Shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as the Trustees may
deem necessary or proper to incur.
Section 8. Investment Management and Other Services. Without limiting the
generality of the powers of the Trustees, subject to applicable law, the
Trustees may enter into a contract with any person or persons, including any
firm, corporation, trust or association in which any Trustee, Shareholder or
officer of the Trust may be interested, to act as investment advisers and/or
managers of the Trust and to provide such investment advice and/or management as
the Trustees may from time to time consider appropriate ("Adviser"). Any such
contract may authorize the Adviser to determine from time to time what
securities shall be acquired, held or disposed of by the Trust and what portion
of the assets of the Trust shall be held uninvested and to take, on behalf of
the Trust, actions which the Adviser deems necessary to implement the investment
policies of the Trust, including the placement of all orders for the purchase,
sale or loan of portfolio securities for the Trust's account with brokers or
dealers or others selected by the Adviser and the giving of instructions to the
custodian of the Trust's assets as to deliveries of securities and payments of
cash for the account of the Trust.
Without limiting the generality of the powers of the Trustees, subject to
applicable law, the Adviser may enter into an agreement
<PAGE>
- 10 -
to retain at its own expense any person or persons, including any firm,
corporation, trust or association in which any Trustee, Shareholder or officer
of the Trust may be interested, to provide the Trust investment advice and/or
management, and any person or persons so retained may be granted all authority
which has been granted to the Adviser under the contract which the Adviser
entered into pursuant to the preceding paragraph.
Without limiting the generality of the powers of the Trustees, the
Trustees may enter into a contract with any person or persons, including any
firm, corporation, trust or association in which any Trustee, Shareholder or
officer of the Trust may be interested, to act as principal underwriter for the
Shares.
Section 9. Affiliations of Trustees or Officers, Etc. The fact that (i)
any of the Shareholders, Trustees or officers of the Trust is a shareholder,
Director, officer, partner, Trustee, employee, manager, adviser or distributor
of or for any partnership, corporation, trust, association or other organization
or for any parent or affiliate of any organization with which any contract,
including, without limitation, contracts for services as manager, investment
adviser, distributor, principal underwriter, custodian, transfer agent or
dividend disbursing agent or for related services may have been or may hereafter
be made, or that any such organization, or any parent or affiliate thereof, is a
Shareholder of or has an interest in the Trust, or that (ii) any partnership,
corporation, trust, association or other organization with which a contract
referred to in (i) above may have been or may hereafter be made also has any one
or more of such contracts with one or more other partnerships, corporations,
trusts, associations or other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2 of Article IV hereof
and the removal of Trustees to the extent provided in Section 16(c) of the 1940
Act, (ii) with respect to approval or termination in accordance with the 1940
Act of any investment advisory or management agreement described in Article IV
hereof, (iii) with respect to any amendment of this Declaration of Trust to the
extent and as provided in Section 7 of Article IX hereof, (iv) to the same
extent as the stockholders of a Massachusetts corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
<PAGE>
- 11 -
derivatively or as a class action on behalf of the Trust or the Shareholders,
and (v) with respect to such additional matters relating to the Trust as may be
required by this Declaration of Trust or the By-Laws, or as to which the
Trustees in their discretion shall determine such Shareholder vote to be
required by law or otherwise to be necessary, appropriate or advisable.
Each whole Share shall be entitled to one vote as to any matter on which
it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. Until Shares are issued, the Trustees
may exercise all rights of Shareholders and may take any action required by law,
this Declaration of Trust or any By-Laws of the Trust to be taken by
Shareholders.
Section 2. Meetings. Meetings of Shareholders shall be held at such times
at the principal office of the Trust or such other place as the Trustees may
designate. Meetings of the Shareholders may be called by the Trustees or such
other person or persons as may be specified in the By-laws. Shareholders shall
be entitled to at least seven days' notice of any meeting.
Section 3. Quorum and Required Vote. Except as otherwise provided by law,
to constitute a quorum for the transaction of business at a Shareholders'
meeting there must be present, in person or by proxy, holders of a majority of
the total number of Shares of the Trust then outstanding and entitled to vote at
the meeting, but any lesser number shall be sufficient for adjournment, and any
adjourned session or sessions may be held within 90 days after the date set for
the original meeting without the necessity of further notice. Subject to any
applicable requirements of law, a majority of the Shares present and entitled to
vote on a question or election shall decide such question or election, except
when a larger vote is required by any provision of this Declaration of Trust,
the By-Laws of the Trust or any applicable provision of law.
Section 4. Action by Written Consent. Except as otherwise required by law,
any action required or permitted to be taken at any meeting may be taken without
a meeting if a consent in writing setting forth such action is signed by the
Shareholders entitled to vote on the subject matter thereof holding a majority
of the Shares entitled to vote thereon.
<PAGE>
- 12 -
Section 5. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Distributions and Redemptions
Section 1. Distributions. The Trustees may, but need not, each year
distribute to the Shareholders of each Series or Class such income and gains as
the Trustees may determine, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with generally accepted accounting practices. The Trustees shall
have full discretion to determine which items shall be treated as income and
which items as capital and their determination shall be binding upon the
Shareholders. Distributions of each year's income of each Series or Class, if
any be made, may be made in one or more payments, which shall be in Shares, in
cash or otherwise and on a date or dates and as of a record date or dates
determined by or under the authority of the Trustees. At any time and from time
to time in their discretion the Trustees may distribute to the Shareholders of
any one or more Series or Class as of a record date or dates determined by or
under the authority of the Trustees, in Shares, in cash or otherwise, all or
part of any gain realized on the sale or disposition of property of the Trust or
otherwise, or all or part of any other principal of the Trust. Each distribution
pursuant to this Section 1 shall be made ratably according to the number of
Shares of the Series or Class held by the several Shareholders on the applicable
record date thereof, provided that no distribution need be made on Shares
purchased pursuant to orders received or for which payment is made after such
time or times as may be determined by or under the authority of the Trustees.
Any such distribution paid in Shares will be paid at the net asset value thereof
as determined in accordance with Section 4 hereof.
Section 2. Redemptions. Upon offer by any Shareholder of all or part of
the Shares held by the Shareholder for redemption hereunder, in accordance with
such methods, upon such terms and subject to such conditions as from time to
time may be determined by or under the authority of the Trustees, the Trust
shall redeem the Shares so offered by distributing to the Shareholder the Net
Asset Value per Share thereof determined as of a time fixed by or under the
authority of the Trustees. The Trust shall have the right at its option and at
any time to redeem the Shares of any Shareholder for their Net Asset Value per
Share if the Shareholder owns Shares of a Series or Class having an aggregate
net asset value of less than such minimum amount as may from time to time be
prescribed by or under the authority of the Trustees or if ownership of such
Shares by the Shareholder could create adverse
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tax consequences for the Trust or any Series or Class thereof. With respect to
all Shares or any Series or Class of Shares, the right to redemption or the date
for payment may, however, be delayed or suspended by the Trustees if there is an
extraordinary closing or restriction of trading on the New York Stock Exchange
as determined under rules and regulations of the Commission, or an emergency
exists as a result of which it is not reasonably practicable for the Trust to
dispose of securities or fairly to determine the value of its net assets, or as
the Commission may permit. The completion of such distribution on redemption of
Shares shall constitute a full discharge of the Trust and Trustees with respect
to such Shares, and the Trustees may require that any certificate or
certificates issued by the Trust to evidence the ownership of the Shares shall
be surrendered to the Trustees for cancellation or notation. Shares so redeemed
shall be cancelled or held by the Trust for reissue, as the Trustees may from
time to time determine.
Section 3. Payment in Kind. Subject to any generally applicable limitation
imposed by the Trustees, any distribution on redemption may, if authorized by
the Trustees, be made wholly or partly in kind, instead of in cash. Such
distribution in kind shall be made by distributing investments constituting, in
the opinion of the Trustees, a fair representation of the various types of
securities then held by the Series or Class of Shares being redeemed (but not
necessarily including a portion of each particular investment) and in each case
having an aggregate value equal to the amount of cash instead of which such
distribution in kind is made.
Section 4. Determination of Net Asset Value per Share. Subject to
applicable law, the Net Asset Value per Share of each Series or Class shall be
computed as of such times as may be determined by or under authority of the
Trustees by determining the value of all the investments of such Series or Class
in such manner as may be determined by or under authority of the Trustees,
adding any other assets of such Series or Class, subtracting all liabilities of
such Series or Class and dividing the result by the number of Shares of such
Series or Class outstanding.
Determination of Net Asset Value per Share so made in good faith and
pursuant to the provisions of the 1940 Act shall be binding on all parties
concerned.
Section 5. Automatic Redemption from Small Accounts. The Trustees shall
have the power to redeem shares at a redemption price determined in accordance
with Section 4 of this Article if at any time the total investment in an account
does not have a value of at least $1,000 or such other minimum amount as the
Trustees may from time to time determine. Before redeeming such Shares, the
Shareholder will be notified that the value of his account is less than the
required minimum amount and be allowed 60 days or such
<PAGE>
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period as is permitted by law to make an additional investment to bring the
total value of such account to such amount or more.
Section 6. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VI, the Trustees may prescribe, in
their absolute discretion, such other bases and times for the declaration and
payment of dividends and distributions as they may deem desirable or necessary
to enable the Trust to comply with any provision of the 1940 Act or the Internal
Revenue Code, including any rule or regulation adopted by the Commission or any
securities association registered under the Securities Exchange Act of 1934, or
any order of exemption issued by the Commission or any rule or regulation issued
under the Internal Revenue Code, all as in effect now or as hereafter amended or
modified.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
Section 2. Limitation of Liability. Provided they have exercised
reasonable care in their selection, the Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer, agent,
employee or Adviser of the Trust nor shall any Trustee be responsible for the
act or omission of any other Trustee, but nothing herein contained shall protect
any Trustee against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
Every note, bond, contract, instrument, certificate, share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in their or his capacity
as Trustees or Trustee, and such Trustees or Trustee shall not be personally
liable thereon.
The Trustees shall use their best efforts to ensure that every note, bond,
contract, instrument, certificate or undertaking made or issued by the Trustees
or by any officers shall give notice of the existence of this Declaration of
Trust and shall recite to the effect that the same was executed or made by or on
behalf of the Trust or by them as Trustees or officers, and not individually,
and is not binding upon any of them or the Shareholders individually, but is
binding only upon the Trust property, or the assets of the
<PAGE>
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particular Series or Class in question, as the case may be, but the omission
thereof shall not operate to bind any Trustee or officer or Shareholder
individually, or to subject the assets of any Series or Class to the obligations
of any other Series or Class.
ARTICLE VIII
Indemnification
Section 1. Trustees, Officers, etc. The Trust shall indemnify each of its
present and former Trustees and officers and may indemnify any of its present or
former employees or agents, and shall indemnify any persons who serve or have
served at the Trust's request as Directors, officers or Trustees of another
organization, and may indemnify persons who serve or have served at the Trust's
request as employees or agents of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise (hereinafter referred to as
a "Covered Person") against all liabilities and expenses, including, but not
limited to, amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any such Covered Person
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office, employed or acting as agent, or thereafter, by
reason of being or having been such a Trustee, officer, Director, employee or
agent, except with respect to any matter as to which such Covered Person shall
have been finally adjudicated in any such action, suit or other proceeding not
to have acted in good faith in the reasonable belief that such Covered Person's
action was in the best interest of the Trust and except that no person shall be
indemnified against any liability to the Trust or its Shareholders to which such
Covered Person shall otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. Expenses, including counsel fees so incurred by any
Covered Person, may in the discretion of the Trustees be paid from time to time
by the Trust in advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Covered Person
to repay amounts so paid to the Trust if it is ultimately determined that
indemnification against such expenses is not authorized under this Article.
Except as otherwise provided by law, the Trust shall have power to
purchase and maintain insurance on behalf of a Covered Person against any
liability asserted against him and incurred by him in his capacity as a Covered
Person, or arising out of his status as such, whether or not the Trust would
have the power to
<PAGE>
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indemnify him against the liability under the provisions of this Section.
Section 2. Compromise Payment. As to any matter disposed of by a
compromise payment by any Covered Person referred to in Section 1 above,
pursuant to a consent decree or otherwise, no such indemnification either for
such payment or for any other expenses shall be provided unless such compromise
shall be approved as in the best interests of the Trust, after notice that it
involved such indemnification, (a) by a disinterested majority of the Trustees
then in office; or (b) by a majority of the disinterested Trustees then in
office; or (c) by any disinterested person or persons to whom the question may
be referred by the Trustees, provided that in the case of approval pursuant to
clause (b) or (c) there has been obtained an opinion in writing of independent
legal counsel to the effect that such Covered Person appears to have acted in
good faith in the reasonable belief that his action was in the best interests of
the Trust and that such indemnification would not protect such person against
any liability to the Trust to which such person would otherwise be subject by
reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office; or (d) by vote of a
majority of the Shares voting thereon, exclusive of any Shares beneficially
owned by any interested Covered Person. Approval by the Trustees pursuant to
clause (a) or (b) or any disinterested person or persons pursuant to clause (c)
of this Section shall not prevent the recovery from any Covered Person of any
amount paid to such Covered Person in accordance with any such clauses as
indemnification if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the reasonable belief
that such person's action was in the best interests of the Trust or to have been
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
Section 3. Indemnification Not Exclusive. The right of indemnification
hereby provided shall not be exclusive or affect any other rights to which any
such Covered Person may be entitled. As used in this Article VIII, the term
"Covered Person" shall include such person's heirs, executors and
administrators. An "interested Covered Person" is one against whom the action,
suit or other proceeding in question or another action, suit or other proceeding
on the same or similar grounds is then or has been pending, and a "disinterested
person" is a person against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article shall
affect any rights to indemnification to which personnel of the Trust other than
Trustees and officers or other persons may be entitled by contract or otherwise
under law.
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- 17 -
Section 4. Shareholders. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his being or having
been a Shareholder and not because of his acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other successor) shall be entitled out of the
assets of the Trust to be held harmless from and indemnified against all loss
and expense arising from such liability.
ARTICLE IX
Miscellaneous
Section 1. Trust Not a Partnership. It is hereby expressly declared that a
trust and not a partnership is created hereby. Neither the Trust nor the
Trustees, nor any officer, employee or agent of the Trust shall have any power
to bind personally either the Trust's Trustees or officers or any Shareholders.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim, and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Declaration of
Trust shall protect any Trustee against any liability to which such Trustee
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee hereunder.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder in good
faith and with reasonable care under the circumstances then prevailing shall be
binding upon everyone interested. Subject to the provisions of Section 1 of this
Article IX, a Trustee shall be liable for his own willful defaults, and for
nothing else, and shall not be liable for errors of judgment or mistakes of fact
or law. The Trustees may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust and, subject to the
provisions of said Section 1, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees pursuant hereto
or to see to the application
<PAGE>
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of any payments made or property transferred to the Trust or upon its order.
Section 4. Duration; Termination of Trust; Amendments;
Mergers, etc.
(a) This Trust shall continue without limitation of time but subject
to the provisions of this Section 4.
(b) The Trust (as used in this Section 4 the term "Trust"
specifically also means any Series or Class) may be terminated by action
of the Trustees.
(c) Upon the termination of the Trust:
(i) The Trust shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration
of Trust shall continue until the affairs of the Trust shall have
been wound up, including the power to fulfill or discharge the
contracts of the Trust, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the
remaining Trust property to one or more persons at public or private
sale for consideration which may consist in whole or in part of
cash, securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate its
business.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection,
the Trusteees shall distribute the remaining Trust property, in cash
or in kind or partly each, among the Shareholders according to their
respective rights and interests.
(d) After termination of the Trust and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust an instrument in writing setting
forth the fact of such termination, and the Trustees shall thereupon be
discharged from all further liabilities and duties hereunder, and the
rights and interests of all Shareholders shall thereupon cease.
(e) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in paragraphs (c) and (d), the Trust
shall terminate and the Trustees shall be
<PAGE>
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discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties shall be cancelled and
discharged.
Section 5. Filing of Copies, References, Headings. The original or a copy
of this instrument and of each Declaration of Trust supplemental hereto or
Amendment hereof shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any Supplemental
Declaration of Trust or Amendments have been made and as to any matters in
connection with the trust hereunder; and, with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be a copy
of this instrument or of any such Supplemental Declaration of Trust or
Amendment. In this instrument or in any such Amendment or Supplemental
Declaration of Trust, references to this instrument, and all expressions such as
"herein," "hereof," and "hereunder," shall be deemed to refer to this instrument
as amended or affected by any such Supplemental Declaration of Trust or
Amendment. Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this instrument, rather than the headings,
shall control. This instrument may be executed in any number of counterparts
each of which shall be deemed an original.
Section 6. Applicable Law. The Trust set forth in this instrument is made
in The Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of such
Commonwealth. The Trust shall be of the type commonly called a Massachusetts
business trust, and, without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
Section 7. Amendments. (a) This Declaration of Trust may be amended by a
vote or written consent of the Trustees. However, if such amendment adversely
affects the rights of any Shares of any Series or any Class with respect to
matters to which such amendment is applicable, such amendment shall be subject
to approval by holders of a majority of the Shares of such Series or Class. An
amendment or other action which provides for an additional Series of Shares
(and/or Class thereof), which Series (and/or Classes thereof) may vote together
with Shares of other Series (and/or Classes thereof) and makes other provisions
with respect to such Series (and/or Class thereof) and its relation to existing
Series (and/or Classes thereof), shall not be deemed to adversely affect the
rights of any other Series of Shares or Class thereof. The Trustees may also
amend this Declaration of Trust without any Shareholder approval to change the
name of the Trust, to supply any omission, to cure, correct or supplement any
ambiguous, defective or inconsistent provision hereof, or, if they deem it
necessary, to conform this Declaration of Trust to the requirements of
applicable federal laws or regulations or the requirements of the Internal
<PAGE>
- 20 -
Revenue Code, or to eliminate or reduce any federal, state or local taxes which
are or may be payable by the Trust or the Shareholders, but the Trustees shall
not be liable for failing to do so.
(b) Nothing contained in this Declaration of Trust shall permit the
amendment of this Declaration of Trust to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the Secretary
or any Assistant Secretary of the Trust, setting forth an amendment by reciting
that it was duly adopted by the Shareholders or by the Trustees as aforesaid, or
a copy of the Declaration of Trust as amended, and executed by a majority of the
Trustees or certified by the Secretary or any Assistant Secretary of the Trust,
shall be conclusive evidence of such amendment when lodged among the records of
the Trust.
Section 8. Merger, Consolidation and Sale of Assets. The Trust may merge
into or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust property, including its good will, upon such terms and conditions and for
such consideration when and as authorized by the Trustees.
Section 9. Incorporation. The Trustees may cause to be organized or assist
in organizing a corporation or corporations under the laws of any jurisdiction
or any other trust, partnership, association or other organization to take over
all the Trust property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring the
Trust property to such organizations or entities.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals in the City of Boston, Massachusetts, for
<PAGE>
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themselves and their assigns, as of the day and year first above written.
/s/ Frederick Amling
------------------------------
Frederick Amling
/s/ Charles A. Austin, III
------------------------------
Charles A. Austin, III
/s/ George S. Bissell
------------------------------
George S. Bissell
/s/ Edwin D. Campbell
------------------------------
Edwin D. Campbell
/s/ Charles F. Chapin
------------------------------
Charles F. Chapin
/s/ Albert H. Elfner, III
------------------------------
Albert H. Elfner, III
/s/ K. Dun Gifford
------------------------------
K. Dun Gifford
/s/ Leroy Keith, Jr.
------------------------------
Leroy Keith, Jr.
/s/ F. Ray Keyser, Jr.
------------------------------
F. Ray Keyser, Jr.
/s/ David M. Richardson
------------------------------
David M. Richardson
/s/ Richard J. Shima
------------------------------
Richard J. Shima
/s/ Andrew J. Simons
------------------------------
Andrew J. Simons
EXHIBIT 99.24.(b)(2)
FORM OF
BY-LAWS
KEYSTONE AMERICA OMEGA FUND
ARTICLE 1.
Trust Agreement and Principal Office
1.1 Trust Agreement. These By-laws are adopted pursuant to and are subject to
the terms of the Declaration of Trust ("Trust Agreement") of Keystone America
Omega Fund ("Fund").
1.2 Principal Office of the Fund. The principal office of the Fund shall be
located in Boston, Massachusetts, or such other place as the Trustees may
designate from time to time.
ARTICLE 2.
Meetings of Shareholders
2.1 Meetings. Meetings may be called by the Trustees or by the President or by
any other officers designated for the purpose by the Trustees. The portion of
this Section 2.1 relating to special meetings to be called by shareholders may
be altered, amended or repealed by the Trustees without action by the
shareholders.
2.2 Business to be Transacted. At any meeting of shareholders, such business may
be transacted as is referred to in the notice of the meeting, and any other
business considered appropriate by or under authority of the Trustees.
2.3 Notice. A written notice of each meeting of the shareholders, specifying the
time, place and purposes thereof, shall be given as hereinafter provided by the
Secretary of the Fund or any Assistant Secretary or by a person or persons
designated by either of them, to each shareholder who is entitled to vote
thereat at least seven (7) days (including Sundays and holidays) before such
meeting. Notice of a meeting need not be given to any shareholder if a written
waiver of notice, executed by the shareholder or his attorney thereunto duly
authorized before or after the meeting, is filed with the records of the
meeting, or to any shareholder who attends the meeting either in person or by
proxy without protesting, prior thereto or at its commencement, the lack of
notice to such shareholder. Every notice to any shareholder required or provided
for
<PAGE>
herein may be given to him personally or by mailing it to him postage prepaid,
addressed to him at his address specified in the records of the Trust. Notice
shall be deemed to have been given at the time when it is so mailed. In respect
of any share held jointly by several persons notice so given to any one of them
shall be sufficient notice to all of them.
Any notice so sent to the address of any shareholder shall be deemed to
have been duly sent in respect of any such share whether held by him solely or
jointly with others, notwithstanding he be then deceased or be bankrupt or
insolvent or legally incompetent, and whether or not the Trustees or any person
sending such notice have knowledge of his death, bankruptcy or insolvency or
legal incompetence, until some other person or persons shall be registered as
holders. The certificate of the person or persons giving such notice shall be
sufficient evidence thereof, and shall protect all persons acting in good faith
in reliance on such certificate.
2.5 Voting. Shares may be voted in person by the shareholder or by proxy in form
reasonably acceptable to the Trust. If the holder of any share is a minor or a
person of unsound mind, or subject to guardianship or to the legal control of
any other person as regards the charge or management of such share, he may vote
by his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy.
2.6 Record Dates. For the purpose of determining the shareholders who are
entitled to vote or act at any meeting or any adjournment thereof, or who are
entitled to receive payment of any dividend or of any other distribution, the
Trustees may from time to time fix or authorize the fixing by others of a time
as the record date for determining the shareholders having the right to notice
of and to vote at such meeting and any adjournment thereof or the right to
receive such dividend or distribution, and in such case only shareholders of
record on such record date shall have such right, notwithstanding any transfer
of shares on the books of the Fund after the record date; or without fixing such
record date the Trustees may for any of such purposes close the register or
transfer books for all or any part of such period.
ARTICLE 3.
Meetings of Trustees
3.1 Regular Meetings. Regular meetings of the Trustees may be held without call
or notice at such places and at such times as the Trustees may from time to time
determine.
3.2 Special Meetings. Special meetings of the Trustees may be held at any time
and at any place designated in the call of the
2
<PAGE>
meeting when called by the Chairman, the President or the Treasurer, or by any
other officer authorized by the Trustees to do so, or by two or more Trustees,
sufficient notice thereof being given to each Trustee by the Secretary or an
Assistant Secretary or by the officer or one of the Trustees calling the
meeting.
3.3 Notice. It shall be sufficient notice to a Trustee of a special meeting to
send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any Trustee if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any Trustee
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.4 Quorum. At any meeting of the Trustees a majority of the Trustees then in
office shall constitute a quorum. Any meeting may be adjourned from time to time
by a majority of the votes cast upon the question, whether or not a quorum is
present and the meeting may be held as adjourned without further notice.
3.5 Action by Vote. When a quorum is present at any meeting, a majority of the
Trustees present may take any action, except when a larger vote is required by
the Trust Agreement or any applicable law.
3.6 Participation by Conference Telephone. The Trustees may participate in a
meeting of the Trustees by means of conference telephone or similar
communications equipment. Participation by such means shall constitute presence
in person at a meeting.
3.7 Action by Writing. The Trustees may act without a meeting, and the action of
a majority of the Trustees then in office evidenced by a writing signed by such
a majority shall be valid and binding as the action of the Trustees.
ARTICLE 4.
Trustees
4.1 Term. A Trustee shall serve until his death, retirement, resignation or
removal from office or until his successor is elected and qualifies.
3
<PAGE>
ARTICLE 5.
Officers
5.1 Election. The President, the Treasurer and the Secretary shall be elected
annually by the Trustees and shall serve until their successors are elected and
qualified or until their earlier deaths, resignations or removals. Other
officers, if any, including if desired a Controller, may be elected or appointed
by the Trustees at the meeting or at any other time. A Chairman of the Board may
be elected or appointed by the Trustees at the meeting or at any other time.
Vacancies in any office may be filled at any time by the Trustees.
5.2 Tenure. Each officer and each agent shall hold office at the pleasure of the
Trustees.
5.3 Powers. Subject to law and to the other provisions of these By-laws, each
officer shall have, in addition to any duties and powers set forth herein and in
the Trust Agreement, such duties and powers as are commonly incident to the
office occupied by him as if the Fund were organized as a Pennsylvania business
corporation and such other duties and powers as the Trustees may from time to
time designate.
5.4 President. Unless the Trustees otherwise provide, the President shall
preside at all meetings of shareholders and of the Trustees and the President
shall be the chief executive officer.
5.5 Treasurer. The Treasurer shall be the chief financial officer of the Fund.
In the absence of the Treasurer, or if there is then no person serving in such
office, the Controller of the Fund shall be the chief financial officer of the
Fund. He shall, subject to the provisions of the Trust Agreement and subject to
any arrangement made by the Trustees with a bank or other trust company or
organization as custodian, be in charge of valuable papers, books of account and
accounting records, and shall have such other duties and powers as may be
designated from time to time by the Trustees or by the President.
5.6 Secretary. The Secretary shall record all proceedings of the shareholders
and Trustees in books to be kept therefor, which books shall be kept at the
principal office of the Fund. In the absence of the Secretary, an Assistant
Secretary, or if there be none or if he is absent, a temporary Secretary chosen
by the shareholders or the Trustees, as the case may be, shall record the
proceedings in the aforesaid books.
5.7 Resignation and Removals. Any Trustee or officer may resign at any time by
written instrument signed by him and deposited with the Trustees by delivering
such resignation to the President or the Secretary or to a meeting of the
Trustees. Such resignation shall
4
<PAGE>
be effective upon receipt unless specified to be effective at some other time.
The Trustees may remove any officer elected by them with or without cause by
vote of a majority of the Trustees then in office. Except to the extent
expressly provided in a written agreement with the Fund, no Trustee or officer
resigning and no officer removed shall have any right to compensation for any
period following his resignation or removal, or any right to damages on account
of such removal.
ARTICLE 6.
Committees
6.1 General. The Trustees may appoint from their number an executive committee
to serve during their pleasure. The executive committee may, when the Trustees
are not in session at a meeting, exercise such of the powers and authority of
the Trustees as may be conferred from time to time by the Trustees. Rules
governing the actions of the executive committee may be adopted by the Trustees
from time to time as they deem appropriate. The Trustees may appoint from their
number such other committees from time to time as they deem appropriate. The
number composing such committees, the powers and authority conferred upon such
committees and the rules governing the actions of such committees shall be
determined by the Trustees at their discretion.
6.2 Quorum; Voting. A majority of the members of any committee of the Trustees
shall constitute a quorum for the transaction of business, and any action of
such a committee may be taken at a meeting by a vote of a majority of the
members present (a quorum being present) or evidenced by one or more writings
signed by such a majority. Members of a committee may participate in a meeting
of such committee by means of conference telephone or similar communications
equipment. Participation by such means shall constitute presence in person at a
meeting.
ARTICLE 7.
Fiscal Year and Seal
7.1 Fiscal Year. The fiscal year of the Fund shall end on the last day of
December in each year.
7.2 Seal. The seal of the Fund shall consist of a flat-faced die with the name
of the Fund and 1995 cut or engraved thereon.
5
<PAGE>
ARTICLE 8.
Amendments
8.1 Amendment by Trustees. These By-laws may also be altered, amended or
repealed by the Trustees, except with respect to any provision which by law, the
Trust Agreement or these By-laws requires action by the shareholders.
6
EXHIBIT 99.24.(b)(5)(A)
FORM OF
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made the __th day of April, 1995, by and between KEYSTONE AMERICA
OMEGA FUND, a Massachusetts business trust (the "Fund"), and KEYSTONE
MANAGEMENT, INC., a Nevada corporation (the "Manager").
WHEREAS, the Fund and the Manager wish to enter into an Agreement setting
forth the terms on which the Manager will perform certain services for the Fund.
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Fund and the Manager agree as follows:
1. The Fund hereby employs the Manager to manage and administer the
operation of the Fund, to supervise the provision of services to the Fund by
others, and to manage the investment and reinvestment of the assets of the Fund
in conformity with the Fund's investment objectives and restrictions as may be
set forth from time to time in the Fund's then current prospectus and statement
of additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Fund, for the period and on the
terms set forth in this Agreement. The Manager hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Manager shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
2. The Manager shall place all orders for the purchase and sale of
portfolio securities for the account of the Fund with broker-dealers selected by
the Manager. In executing portfolio transactions and selecting broker-dealers,
the Manager will use its best efforts to seek best execution on behalf of the
Fund. In assessing the best execution available for any transaction, the Manager
shall consider all factors it deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker-dealer, and the reasonableness of the
commission, if any (all for the specific transaction and on a continuing basis).
In evaluating the best execution available, and in selecting the broker-dealer
to execute a particular transaction, the Manager may also consider the brokerage
and research services (as those terms are used in Section 28(e) of the
Securities Exchange Act of 1934 (the "1934 Act") provided to the Fund and/or
other accounts over which the Manager or an affiliate of the Manager exercises
investment discretion. The Manager is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Fund which is in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction if, but only if, the Manager determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer viewed in terms of that particular
transaction or in terms of all of the accounts over which investment discretion
is so exercised.
3. The Manager, at its own expense, shall furnish to the Fund office space
in the offices of the Manager or in such other place as may be agreed upon by
the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Fund, for members of the Manager's organization to serve without
salaries from the Fund as officers or, as may be agreed from time to time, as
agents of the Fund. The Manager assumes and shall pay or reimburse the Fund for:
(1) the compensation (if any) of the Directors of the Fund who are affiliated
with the Manager or with its affiliates, or with any adviser retained by the
Manager, and of all officers of the Fund as such, and (2) all expenses of the
Manager incurred in connection with its services hereunder. The Fund assumes and
shall pay all other expenses of the Fund, including, without limitation: (1) all
charges and expenses of any custodian or depository appointed by the Fund for
the safekeeping of its cash, securities and other properly; (2) all charges and
expenses for bookkeeping and auditors; (3) all charges and expenses of any
transfer agents and registrars appointed by the Fund; (4) all fees of all
Trustees of the Fund who are not affiliated with the Manager or any of its
affiliates, or with any adviser retained by the Manager; (5) all broker's fees,
expenses and commissions and issue and transfer taxes chargeable to the Fund in
connection with transactions involving securities and other property to which
the Fund is a party; (6) all costs and expenses of distribution of its shares
incurred pursuant to a Plan of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act"); (7) all taxes and corporate fees
<PAGE>
payable by the Fund to Federal, state or other governmental agencies; (8) all
costs of certificates representing shares of the Fund; (9) all fees and expenses
involved in registering and maintaining registrations of the Fund and of its
shares with the Securities and Exchange Commission (the "Commission") and
registering or qualifying its shares under state or other securities laws,
including, without limitation, the preparation and printing of registration
statements, prospectuses and statements of additional information for filing
with the Commission and other authorities; (10) expenses of preparing, printing
and mailing prospectuses and statements of additional information to
shareholders of the Fund; (11) all expenses of shareholders' and Trustees'
meetings and of preparing, printing and mailing notices, reports and proxy
materials to shareholders of the Fund; (12) all charges and expenses of legal
counsel for the Fund and for Trustees of the Fund in connection with legal
matters relating to the Fund, including, without limitation, legal services
rendered in connection with the Fund's existence, corporate and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state and other laws, issues of securities,
expenses which the Fund has herein assumed, whether customary or not, and
extraordinary matters, including, without limitation, any litigation involving
the Fund, its Trustees, officers, employees or agents; (13) all charges and
expenses of filing annual and other reports with the Commission and other
authorities; and (14) all extraordinary expenses and charges of the Fund. In the
event that the Manager provides any of these services or pays any of these
expenses, the Fund will promptly reimburse the Manager therefor.
The services of the Manager to the Fund hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others.
4. As compensation for the Manager's services to the Fund during the period
of this Agreement, the Fund will pay to the Manager a fee at the annual rate of:
Aggregate Net Asset Value
Management of the Shares Fee of the Fund 75% of the first $ 250,000,000, plus
0.675% of the next $ 250,000,000, plus 0.60% of the next $ 500,000,000, plus
0.50% of amounts over $1,000,000,000 computed as of the close of business on
each business day.
A pro rata portion of the fee shall be payable in arrears at the end of
each day or calendar month as the Manager may from time to time specify to the
Fund. If and when this Agreement terminates, any compensation payable hereunder
for the period ending with the date of such termination shall be payable upon
such termination. Amounts payable hereunder shall be promptly paid when due.
5. The Manager may enter into an agreement to retain, at its own expense,
Keystone Custodian Funds, Inc. or any other firm or firms ("Adviser") to provide
the Fund all of the services to be provided by the Manager hereunder, if such
agreement is approved as required by law. Such agreement may delegate to such
Adviser all of Manager's rights, obligations and duties hereunder.
6. The Manager shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the performance of
this Agreement, except a loss resulting from the Manager's willful misfeasance,
bad faith, gross negligence or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also an officer,
Director, partner, employee, or agent of the Manager, who may be or become an
officer, Director, employee or agent of the Fund, shall be deemed, when
rendering services to the Fund or acting on any business of the Fund (other than
services or business in connection with the Manager's duties hereunder), to be
rendering such services to or acting solely for the Fund and not as an officer,
Director, partner, employee, or agent or one under the control or direction of
the Manager even though paid by it. The Fund agrees to indemnify and hold the
Manager harmless from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Act of 1933, the 1934 Act, the 1940 Act, and any state and foreign
securities and blue sky laws, as amended from time to time) and expenses,
including (without limitation) attorneys' fees and disbursements, arising
directly or indirectly from any action or thing which the Manager takes or does
or omits to take or do hereunder provided that the Manager shall not be
indemnified against any liability to the Fund or to its shareholders (or any
<PAGE>
expenses incident to such liability) arising out of a breach of fiduciary duty
with respect to the receipt of compensation for services, willful misfeasance,
bad faith, or gross negligence on the part of the Manager in the performance of
its duties, or from reckless disregard by it of its obligations and duties under
this Agreement.
7. The Fund shall cause its books and accounts to be audited at least once
each year by a reputable independent public accountant or organization of public
accountants who shall render a report to the Fund.
8. Subject to and in accordance with the Deed of Trust of the Fund, the
Articles of Incorporation of the Manager and the governing documents of any
Adviser, it is understood that Directors, officers, agents and shareholders of
the Fund or any Adviser are or may be interested in the Manager (or any
successor thereof) as Directors and officers of the Manager or its affiliates,
as stockholders of Keystone Group, Inc. or otherwise; that Directors, officers
and agents of the Manager and its affiliates or stockholders of Keystone Group,
Inc. are or may be interested in the Fund or any Adviser as Directors, officers,
shareholders or otherwise; that the Manager (or any such successor) is or may be
interested in the Fund or any Adviser as shareholder, or otherwise; and that the
effect of any such adverse interests shall be governed by said Deed of Trust of
the Fund, Articles of Incorporation of the Manager and governing documents of
any Adviser.
9. This Agreement shall continue in effect for two years from the date set
forth above and thereafter only so long as (1) such continuance is specifically
approved at least annually by the Board of Trustees of the Fund or by a vote of
a majority of the outstanding voting securities of the Fund, and (2) such
renewal has been approved by the vote of a majority of Trustees of the Fund who
are not interested persons, as that term is defined in the 1940 Act, of the
Manager or of the Fund, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Manager, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Fund or by vote of the holders of a majority of the outstanding
voting securities of the Fund; and on sixty days' written notice to the Fund,
this Agreement may be terminated at any time without the payment of any penalty,
by the Manager. This Agreement shall automatically terminate upon its assignment
(as that term is defined in the 1940 Act). Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed postage prepaid, to the
other party at the main office of such party.
11. This Agreement may be amended at any time by an instrument in writing
executed by both parties hereto or their respective successors, provided that
with regard to amendments of substance such execution by the Fund shall have
been first approved by the vote of the holders of a majority of the outstanding
voting securities of the Fund and by the vote of a majority of Trustees of the
Fund who are not interested persons (as that term is defined in the 1940 Act) of
the Manager, any predecessor of the Manager, or of the Fund, cast in person at a
meeting called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Fund" shall have, for all purposes of this
Agreement, the meaning provided therefor in the 1940 Act.
12. Any compensation payable to the Manager hereunder for any period other
than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
KEYSTONE AMERICA
OMEGA FUND
By: ____________________________
Title:
KEYSTONE MANAGEMENT, INC.
By: ____________________________
Title:
EXHIBIT 99.24.(b)(5)(B)
FORM OF
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the __th day of April, 1995, by and between KEYSTONE
MANAGEMENT, INC., a Nevada corporation (the "Manager"), and KEYSTONE CUSTODIAN
FUNDS, INC., a Delaware corporation (the "Adviser").
WHEREAS, the Manager and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Manager and KEYSTONE AMERICA OMEGA FUND (the "Fund").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Manager and the Adviser agree as follows:
1. The Manager hereby employs the Adviser to manage and administer the
operation of the Fund (with the exception of certain managerial and
administrative services to be provided by the Manager), to supervise the
provision of services to the Fund by others, and to manage the investment and
reinvestment of the assets of the Fund in conformity with the Fund's investment
objectives and restrictions as may be set forth from time to time in the Fund's
then current prospectus and statement of additional information, if any, and
other governing documents, all subject to the supervision of the Manager and
Board of Trustees of the Fund, for the period and on the terms set forth in this
Agreement. The Adviser hereby accepts such employment and agrees during such
period, at its own expense, to render the services and to assume the obligations
set forth herein, for the compensation provided herein. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Manager or the Fund in any way or otherwise be deemed an agent of
the Manager or the Fund.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of the Fund with broker-dealers selected by
the Adviser. In executing portfolio transactions and selecting broker-dealers,
the Adviser will use its best efforts to seek best execution on behalf of the
Fund. In assessing the best execution available for any transaction, the Adviser
shall consider all factors it deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker-dealer, and the reasonableness of the
commission, if any (all for the specific transaction and on a continuing basis).
In evaluating the best execution available, and in selecting the broker-dealer
to execute a particular transaction, the Adviser may also consider the brokerage
and research services (as those terms are used in Section 28(e) of the
Securities Exchange Act of 1934 (the "1934 Act") provided to the Fund and/or
other accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Fund which is in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction if, but only if, the Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer viewed in terms of that particular
transaction or in terms of all of the accounts over which investment discretion
is so exercised.
3. The Adviser, at its own expense, shall furnish to the Fund office space
in the offices of the Adviser or in such other place as may be agreed upon by
the parties and the Fund from time to time, all necessary office facilities,
equipment and personnel in connection with its services hereunder, and shall
arrange, if desired by the Fund, for members of the Adviser's organization to
serve without salaries from the Fund as officers or, as may be agreed from time
to time, as agents of the Fund. The Adviser assumes and shall pay or reimburse
the Manager or the Fund, as the case may be, for: (1) the compensation (if any)
of the Directors of the Fund who are affiliated with the Adviser, any of its
affiliates, or the Manager, and of all officers of the Fund as such, and (2) all
expenses of the Adviser incurred in connection with its services hereunder. The
Manager represents and warrants that the Fund has assumed and has agreed to pay
all other expenses of the Fund, including, without limitation: (1) all charges
and expenses of any custodian or depository appointed by the Fund for the
safekeeping of its cash, securities and other property, (2) all charges and
expenses for bookkeeping and auditors; (3) all charges and expenses of any
transfer agents and registrars appointed by the Fund; (4) all fees of all
Trustees of the Fund who are not affiliated with the Adviser, any of its
affiliates, or the Manager, (5) all broker's fees, expenses and commissions and
<PAGE>
issue and transfer taxes chargeable to the Fund in connection with transactions
involving securities and other property to which the Fund is a party, (6) all
costs and expenses of distribution of its shares incurred pursuant to a Plan of
Distribution adopted under Rule 12b-1 under the Investment Company Act of 1940
("1940 Act"); (7) all taxes and corporate fees payable by the Fund to Federal,
state or other governmental agencies; (8) all costs of certificates representing
shares of the Fund; (9) all fees and expenses involved in registering and
maintaining registrations of the Fund and of its shares with the Securities and
Exchange Commission (the "Commission") and registering or qualifying its shares
under state or other securities laws, including, without limitation, the
preparation and printing of registration statements, prospectuses and statements
of additional information for filing with the Commission and other authorities;
(10) expenses of preparing, printing and mailing prospectuses and statements of
additional information to shareholders of the Fund; (11) all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
notices, reports and proxy materials to shareholders of the Fund; (12) all
charges and expenses of legal counsel for the Fund and for Trustees of the Fund
in connection with legal matters relating to the Fund, including, without
limitation, legal services rendered in connection with the Fund's existence,
corporate and financial structure and relations with its shareholders,
registrations and qualifications of securities under Federal, state and other
laws, issues of securities, expenses which the Fund has herein assumed, whether
customary or not, and extraordinary matters, including, without limitation, any
litigation involving the Fund, its Trustees, officers, employees or agents; (13)
all charges and expenses of filing annual and other reports with the Commission
and other authorities; (14) all charges and expenses of any manager appointed by
the Fund; and (15) all extraordinary expenses and charges of the Fund; and that
in the event that the Adviser provides any of these services or pays any of
these expenses, the Fund will promptly reimburse the Adviser therefor.
The services of the Adviser to the Fund and the Manager hereunder are not
to be deemed exclusive, and the Adviser shall be free to render similar services
to others.
4. As compensation for the Adviser's services to the Fund during the period
of this Agreement, the Manager will pay to the Adviser a fee at the annual rate
of 85% of the management fee paid by the Fund to the Manager.
A pro rata portion of the fee shall be payable in arrears at the end of
each day or calendar month as the Adviser may from time to time specify to the
Manager. If and when this Agreement terminates, any compensation payable
hereunder for the period ending with the date of such termination shall be
payable upon such termination. Amounts payable hereunder shall be promptly paid
when due.
5. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund or the Manager in connection with the
performance of this Agreement, except a loss resulting from the Adviser's
willful misfeasance, bad faith, gross negligence or from reckless disregard by
it of its obligations and duties under this Agreement. Any person, even though
also an officer, Director, partner, employee, or agent of the Adviser, who may
be or become an officer, Director, employee or agent of the Fund or the Manager,
shall be deemed, when rendering services to the Fund or the Manager or acting on
any business of the Fund or the Manager (other than services or business in
connection with the Adviser's duties hereunder), to be rendering such services
to or acting solely for the Fund or the Manager, as the case may be, and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it. The Manager agrees to indemnify
and hold the Adviser harmless from all taxes, charges, expenses, assessments,
claims and liabilities (including, without limitation, liabilities arising under
the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state and
foreign securities and blue sky laws, as amended from time to time) and
expenses, including (without limitation) attorneys' fees and disbursements,
arising directly or indirectly from any action or thing which the Adviser takes
or does or omits to take or do hereunder; provided that the Adviser shall not be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of a breach of fiduciary duty
with respect to the receipt of compensation for services, willful misfeasance,
bad faith, or gross negligence on the part of the Adviser in the performance of
its duties, or from reckless disregard by it of its obligations and duties under
this Agreement.
6. The Manager represents and warrants that the Fund has agreed to cause
its books and accounts to be audited at least once each year by a reputable
independent public accountant or organization of public accountants who shall
render a report to the Fund.
7. Subject to and in accordance with the Deed of Trust of the Fund, the
Certificate of Incorporation of the Adviser and Articles of
<PAGE>
Incorporation of the Manager, respectively, it is understood that Directors,
officers, agents and shareholders of the Fund or the Manager are or may be
interested in the Adviser (or any successor thereof) as Directors and officers
of the Adviser or its affiliates, as stockholders of Keystone Group, Inc. or
otherwise; that Directors, officers and agents of the Adviser and its affiliates
or stockholders of Keystone Group, Inc. are or may be interested in the Fund or
the Manager as Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Fund or the Manager as
shareholder or otherwise; and that the effect of any such adverse interests
shall be governed by said Deed of Trust of the Fund, Certificate of
Incorporation of the Adviser, and Articles of Incorporation of the Manager.
8. This Agreement shall continue in effect for two years from the date set
forth above and thereafter only so long as (1) such continuance is specifically
approved at least annually by the Board of Trustees of the Fund or by a vote of
a majority of the outstanding voting securities of the Fund, and (2) such
renewal has been approved by the vote of a majority of Trustees of the Fund who
are not interested persons, as that term is defined in the 1940 Act, of the
Adviser, the Manager or of the Fund, cast in person at a meeting called for the
purpose of voting on such approval.
9. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Manager, by the
Board of Trustees of the Fund or by vote of the holders of a majority of the
outstanding voting securities of the Fund; and on sixty days' written notice to
the Manager and the Fund, this Agreement may be terminated at any time without
the payment of any penalty, by the Adviser. This Agreement shall automatically
terminate upon its assignment (as that term is defined in the 1940 Act). Any
notice under this Agreement shall be given in writing, addressed and delivered,
or mailed postage prepaid, to the other party at the main office of such party.
10. This Agreement may be amended at any time by an instrument in writing
executed by both parties hereto or their respective successors, provided that
with regard to amendments of substance such execution shall have been first
approved by the vote of the holders of a majority of the outstanding voting
securities of the Fund and by the vote of a majority of Trustees of the Fund who
are not interested persons (as that term is defined in the 1940 Act) of the
Adviser, the Manager, or of any predecessor of either, or of the Fund, cast in
person at a meeting called for the purpose of voting on such approval. A
"majority of the outstanding voting securities of the Fund" shall have, for all
purposes of this Agreement, the meaning provided therefor in the 1940 Act.
11. Any compensation payable to the Adviser hereunder for any period other
than a full year shall be proportionately adjusted.
12. The provisions of this Agreement shall be governed, construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
KEYSTONE MANAGEMENT, INC.
By: _______________________________
Title:
KEYSTONE CUSTODIAN FUNDS, INC.
By: ________________________________
Title:
EXHIBIT 99.24.(b)(6)
FORM OF
PRINCIPAL UNDERWRITING AGREEMENT
KEYSTONE AMERICA OMEGA FUND
AGREEMENT made this ____ day of April, 1995 by and between Keystone
America Omega Fund, a Massachusetts business trust ("Fund"), and Keystone
Distributors, Inc., a Delaware corporation ("Principal Underwriter").
It is hereby mutually agreed as follows:
1. The Fund hereby appoints Principal Underwriter a principal underwriter
of the shares of beneficial interest of the Fund ("Shares") as an independent
contractor upon the terms and conditions hereinafter set forth. Except as the
Fund may from time to time agree, Principal Underwriter will act as agent for
the Fund and not as principal.
2. Principal Underwriter will use its best efforts to find purchasers for
the Shares, to promote distribution of the Shares and may obtain orders from
brokers, dealers or other persons for sales of Shares to them. No such brokers,
dealers or other persons shall have any authority to act as agent for the Fund;
such brokers, dealers or other persons shall act only as principal in the sale
of Shares.
3. Sales of Shares by Principal Underwriter shall be at the applicable
public offering price determined in the manner set forth in the prospectus
and/or statement of additional information of the Fund current at the time of
the Fund's acceptance of the order for Shares; provided that Principal
Underwriter also shall have the right to sell Shares at net asset value, if such
sale is permissible under and consistent with applicable statutes, rules,
regulations and orders. All orders shall be subject to acceptance by the Fund,
and the Fund reserves the right, in its sole discretion, to reject any order
received. The Fund shall not be liable to anyone for failure to accept any
order.
4. On all sales of Shares, the Fund shall receive the current net asset
value, and Principal Underwriter shall be entitled to receive payments in
accordance with the 12b-1 Plan(s) and as set forth in the then current
prospectus and/or statement of additional information of the Fund, and to the
contingent deferred sales charges as set forth in the then current prospectus
and/or statement of additional information of the Fund. Principal Underwriter
may reallow all or a part of the 12b-1 payments to such
<PAGE>
- 2 -
brokers, dealers or other persons as Principal Underwriter may determine.
5. Payment to the Fund for Shares shall be in New York or Boston Clearing
House funds received by Principal Underwriter within ten (10) business days
after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such ten-day period, the Fund reserves the right,
without further notice, forthwith to cancel its acceptance of any such order.
The Fund shall pay such issue taxes as may be required by law in connection with
the issuance of the Shares.
6. Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the Shares any representations concerning the Shares
except those contained in the then current prospectus and/or statement of
additional information covering the Shares and in printed information approved
by the Fund as information supplemental to such prospectus and statement of
additional information. Copies of the then current prospectus and statement of
additional information and any such printed supplemental information will be
supplied by the Fund to Principal Underwriter in reasonable quantities upon
request.
7. Principal Underwriter agrees to comply with the Rules of Fair Practice
of the National Association of Securities Dealers, Inc.
8. The Fund appoints Principal Underwriter as its agent to accept orders
for redemptions and repurchases of Shares at values and in the manner determined
in accordance with the then current prospectus and/or statement of additional
information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a) any untrue statement or alleged untrue statement of a material
fact contained in the Fund's registration
<PAGE>
- 3 -
statement, prospectus or statement of additional information (including
amendments and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement, prospectus or
statement of additional information necessary to make the statements
therein not misleading, provided, however, that insofar as losses, claims,
damages, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made
in reliance and in conformity with information furnished to the Fund by
the Principal Underwriter for use in the Fund's registration statement,
prospectus or statement of additional information, such indemnification is
not applicable. In no case shall the Fund indemnify the Principal
Underwriter or its controlling person as to any amounts incurred for any
liability arising out of or based upon any action for which the Principal
Underwriter, its officers and Directors or any controlling person would
otherwise be subject to liability by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
the reckless disregard of its obligations and duties under this Agreement.
10. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers, Directors and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any legal fees incurred
in connection therewith) which the Fund, its officers, Directors or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
a) may be based upon any wrongful act by the Principal Underwriter
or any of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's registration
statement, prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged omission
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such statement or omission
was made in reliance upon information furnished or confirmed in writing to
the Fund by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and things
as shall from time to time be reasonably requested by Principal Underwriter for
the purpose of qualifying the Shares for sale under the so-called "blue sky"
laws of any state or for
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registering Shares under the 1933 Act or the Fund under the Investment Company
Act of 1940 ("1940 Act"). Principal Underwriter shall bear the expense of
preparing, printing and distributing advertising, sales literature, prospectuses
and statements of additional information. The Fund shall bear the expense of
registering Shares under the 1933 Act and the Fund under the 1940 Act,
qualifying Shares for sale under the so-called "blue sky" laws of any state, the
preparation and printing of prospectuses, statements of additional information
and reports required to be filed with the Securities and Exchange Commission and
other authorities, the preparation, printing and mailing of prospectuses and
statements of additional information to shareholders of the Fund, and the direct
expenses of the issuance of Shares.
12. To the extent required by any 12b-1 Plan of the Fund, Principal
Underwriter shall provide to the Board of Trustees of the Fund in connection
with the 12b-1 Plan, not less than quarterly, a written report of the amounts
expended pursuant to such 12b-1 Plan and the purposes for which such
expenditures were made.
13. The term of this Agreement shall begin on the date hereof and, unless
sooner terminated or continued as provided below, shall expire after two years.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the Trustees of the Fund and a majority
of the 12b-1 Trustees referred to in any 12b-1 Plan of the Fund ("Rule 12b-1
Trustees") at least annually in accordance with the 1940 Act and the rules and
regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of a
majority of the Fund's outstanding Shares on not more than sixty days written
notice to any other party to the Agreement; and shall terminate automatically in
the event of its assignment (as defined in the 1940 Act).
14. This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts. All sales hereunder are to be made, and title to
the Shares shall pass, in Boston, Massachusetts.
<PAGE>
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, on the day and year first written above.
KEYSTONE AMERICA OMEGA FUND
By:_______________________________
Title:
KEYSTONE DISTRIBUTORS, INC.
By:_______________________________
Title:
EXHIBIT 99.24(b)(8)(a)
FORM OF
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
by and between
KEYSTONE AMERICA OMEGA FUND
and
STATE STREET BANK AND TRUST COMPANY
Agreement made as of this ____ day of April, 1995 by and between KEYSTONE
AMERICA OMEGA FUND, a Massachusetts business trust, ("Fund") having its
principal place of business at 200 Berkeley Street, Boston, Massachusetts,
02116, and STATE STREET BANK AND TRUST COMPANY, a Massachusetts banking
corporation ("State Street"), having its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110.
In consideration of the mutual agreements herein contained, the Fund and
State Street agree as follows:
1. The Fund appoints State Street as its Custodian, subject to the
provisions hereof. State Street hereby accepts such appointment as Custodian. As
such Custodian, State Street shall retain all securities, cash and other assets
now owned or hereafter acquired by the Fund, and the Fund shall deliver and pay
or cause to be delivered and paid to State Street, as Custodian, all securities,
cash and other assets now owned or hereafter acquired by the Fund during the
period of this Agreement.
2. All securities delivered to State Street (other than in bearer form)
shall be properly endorsed and in proper form for transfer into or in the name
of the Fund, of a nominee of State Street for the exclusive use of the Fund or
of such other nominee as may be mutually agreed upon by State Street and the
Fund.
3. The Fund shall deliver to State Street certified or authenticated
copies of its Declaration of Trust and By-Laws, all amendments thereto, a
certified copy of the resolution of the Fund's Board of Trustees appointing
State Street to act in the capacities covered by this Agreement and authorizing
the signing of this Agreement and copies of such resolutions of its Board of
Trustees, contracts and other documents as may be reasonably required by State
Street in the performance of its duties hereunder.
4. As Custodian, State Street shall promptly:
A. Safekeeping. Keep safely in a separate account the securities and
other assets of the Fund, including without limitation all securities in bearer
form, other than (a) securities
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which are maintained pursuant to paragraph 4B in a Securities System (as defined
in paragraph 4B) and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which
is deposited and/or maintained in the Direct Paper System of State Street
pursuant to paragraph 4C, and, on behalf of the Fund, receive delivery of
certificates, including without limitation all securities in bearer form, for
safekeeping and keep such certificates physically segregated at all times from
those of any other person. State Street shall maintain records of all receipts,
deliveries and locations of such securities, together with a current inventory
thereof and shall conduct periodic physical inspections of certificates
representing bonds and other securities held by it under this Agreement at least
annually in such manner as State Street shall determine from time to time to be
advisable in order to verify the accuracy of such inventory. State Street shall
provide the Fund with copies of any reports of its internal count or other
verification of the securities of the Fund held in its custody, including
reports on its own system of internal accounting control. In addition, if and
when independent certified public accountants retained by State Street shall
count or otherwise verify the securities of the Fund held in State Street's
custody, State Street shall provide the Fund with a copy of the report of such
accountants. With respect to securities held by any agent or Subcustodian
appointed pursuant to paragraph 7C hereof, State Street may rely upon
certificates from such agent or Subcustodian as to the holdings of such agent or
Subcustodian, it being understood that such reliance in no way releases State
Street of its responsibilities or liabilities under this Agreement. State Street
shall promptly report to the Fund the results of such inspections, indicating
any shortages or discrepancies uncovered thereby, and take appropriate action to
remedy any such shortages or discrepancies.
B. Deposit of Fund Assets in Securities Systems. Notwithstanding any
other provision of this Agreement, State Street may deposit and/or maintain
securities owned by the Fund in Depository Trust Company, a clearing agency
registered with the Securities and Exchange Commission ("Commission") under
Section 17A of the Securities Exchange Act of 1934 ("Exchange Act"), which acts
as a securities depository, in any other clearing agency registered under
Section 17A of the Exchange Act and which has been authorized by the Fund's
Board of Trustees, in the book-entry system authorized by the U.S. Department of
the Treasury and certain federal agencies or in any other book entry system
which the Commission has authorized for use by investment companies as a
securities depository by order or interpretive or no-action letter and which has
been authorized by the Fund's Board of Trustees, collectively referred to herein
as "Securities System(s)," in accordance with applicable Federal Reserve Board
and Commission rules and regulations, if any, and subject to the following
provisions:
<PAGE>
- 3 -
1) State Street may keep securities of the Fund in a Securities
System provided that such securities are deposited in an account ("Account") of
State Street in the Securities System which shall not include any assets of
State Street other than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of State Street with respect to securities of the
Fund which are maintained in a Securities System shall identify by book entry
those securities belonging to the Fund;
3) State Street shall pay for securities purchased for the account
of the Fund upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of an entry
on the records of State Street to reflect such payment and transfer for the
account of the Fund. State Street shall transfer securities sold for the account
of the Fund upon (i) receipt of advice from the Securities System that payment
for such securities has been transferred to the Account, and (ii) the making of
an entry on the records of State Street to reflect such transfer and payment for
the account of the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall identify the Fund, be
maintained for the Fund State Street and be provided to the Fund at its request.
State Street shall furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice and shall furnish
to the Fund copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the Fund on the next
business day;
4) State Street shall promptly provide the Fund with any report
obtained by State Street on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Securities System. State Street shall promptly provide the Fund with any report
on State Street's accounting system, internal accounting control and procedures
for safeguarding securities deposited with State Street which is reasonably
requested by the Fund;
5) Anything to the contrary in this Agreement notwithstanding, State
Street shall be liable to the Fund for any claim, loss, liability, damage or
expense to the Fund, including attorney's fees, resulting from use of a
Securities System by reason of any negligence, misfeasance or misconduct of
State Street, its agents or any of its or their employees or from failure of
State Street or any such agent to enforce effectively such rights as it may have
against a Securities System. At the election of the Fund, it shall be entitled
to be subrogated to the rights of State Street or its agents with respect to any
claim against the Securities System or any other person which State Street or
its agents may have as a consequence of any such claim, loss,
<PAGE>
- 4 -
liability, damage or expense if and to the extent that the Fund has not been
made whole for any such loss or damage.
C. Assets Held in State Street's Direct Paper System. State Street
may deposit and/or maintain securities owned by the Fund in the Direct Paper
System of State Street subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;
2) State Street may keep securities of the Fund in the Direct Paper
System only if such securities are represented in an account ("Account") of
State Street in the Direct Paper System which shall not include any assets of
State Street other than assets held as a fiduciary, custodian or otherwise for
customers;
3) The records of State Street with respect to securities of the
Fund which are maintained in the Direct Paper System shall identify by
book-entry those securities belonging to the Fund;
4) State Street shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of State Street to
reflect such payment and transfer of securities to the account of the Fund.
State Street shall transfer securities sold for the account of the Fund upon the
making of an entry on the records of State Street to reflect such transfer and
receipt of payment for the account of the Fund;
5) State Street shall furnish the Fund confirmation of each transfer
to or from the account of the Fund, in the form of a written advice or notice,
of Direct Paper on the next business day following such transfer and shall
furnish to the Fund copies of daily transaction sheets reflecting each day's
transaction in the Securities System for the account of the Fund;
6) State Street shall provide the Fund with any report on its system
of internal accounting control as the Fund may reasonably request from time to
time.
D. State Street's Records. The records of State Street (and its
agents and Subcustodians) with respect to its services for the Fund shall at all
times during the regular business hours of State Street (or its agents or
Subcustodians) be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Commission.
E. Delivery of Securities. State Street shall release and deliver
securities owned by the Fund held by State Street or in a Securities System
account of State Street or in State Street's
<PAGE>
- 5 -
Direct Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the cases specified in paragraphs 4F,
4G, 4H, 4I, 4J, 4K, 4L, 4M, 4N and 4O hereof.
F. Registered Name, Nominee. Register securities of the Fund held by
State Street in the name of the Fund, of a nominee of State Street for the
exclusive use of the Fund, or of such other nominee as may be mutually agreed
upon, or of any mutually acceptable nominee of any agent or Subcustodian
appointed pursuant to paragraph 7C hereof.
G. Purchases. Upon receipt of proper instructions (as defined in
paragraph 6A hereof; hereafter "Proper Instructions") and insofar as cash is
available for the purpose, pay for and receive all securities purchased for the
account of the Fund, payment being made only upon receipt of the securities by
State Street (or any bank, banking firm, responsible commercial agent or trust
company doing business in the United States and appointed pursuant to paragraph
7C hereof as State Street's agent or Subcustodian for this purpose) registered
as provided in paragraph 4F hereof or in form for transfer satisfactory to State
Street, or, in the case of repurchase agreements entered into between the Fund
and a bank or a dealer, delivery of the securities either in certificate form or
through an entry crediting State Street's account at the Federal Reserve Bank
with such securities, or, upon receipt by State Street of a facsimile copy of a
letter of understanding with respect to a time deposit account of the Fund
signed by any bank, whether domestic or foreign, and pursuant to Proper
Instructions from the Fund, for transfer to the time deposit account of the Fund
in such bank; such transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank or in the case of a purchase involving
the Direct Paper System, in accordance with the conditions set forth in
paragraph 4C. All securities accepted by State Street shall be accompanied by
payment of, or a "due bill" for, any dividends, interest or other distributions
of the issuer due the purchaser. In any and every case of a purchase of
securities for the account of the Fund where payment is made by State Street in
advance of receipt of the securities purchased, State Street shall be absolutely
liable to the Fund for such securities to the same extent as if the securities
had been received by State Street, except that in the case of repurchase
agreements entered into by the Fund with a bank which is a member of the Federal
Reserve System, State Street may transfer funds to the account of such bank
prior to the receipt of written evidence that the securities subject to such
repurchase agreement have been transferred by book-entry into a segregated
nonproprietary account of State Street maintained with the Federal Reserve Bank
of Boston, provided that such securities have in fact been so transferred by
book-entry; provided, further, however, that State Street and the Fund agree to
<PAGE>
- 6 -
use their best efforts to insure receipt by State Street of copies of
documentation for each such transaction as promptly as possible.
H. Exchanges. Upon receipt of Proper Instructions, exchange
securities, interim receipts or temporary securities held by it or by any agent
or Subcustodian appointed by it pursuant to paragraph 7C hereof for the account
of the Fund for other securities alone or for other securities and cash, and
expend cash insofar as cash is available in connection with any merger,
consolidation, reorganization, recapitalization, split-up of shares, changes of
par value, conversion or in connection with the exercise of warrants,
subscription or purchase rights, or otherwise, and deliver securities to the
designated depository or other receiving agent or Subcustodian in response to
tender offers or similar offers to purchase received in writing; provided that
in any such case the securities and/or cash to be received as a result of any
such exchange, expenditure or delivery are to be delivered to State Street (or
its agents or Subcustodians). State Street shall give notice as provided under
paragraph 14 hereof to the Fund in connection with any transaction specified in
this paragraph and at the same time shall specify to the Fund whether such
notice relates to securities held by an agent or Subcustodian appointed pursuant
to paragraph 7C hereof, so that the Fund may issue to State Street Proper
Instructions for State Street to act thereon prior to any expiration date (which
shall be presumed to be two business days prior to such date unless State Street
has previously advised the Fund of a different period). The Fund shall give to
State Street full details of the time and method of submitting securities in
response to any tender or similar offer, exercising any subscription or purchase
right or making any exchange pursuant to this paragraph. When such securities
are in the possession of an agent or Subcustodian appointed by State Street
pursuant to paragraph 7C hereof, the Proper Instructions referred to in the
preceding sentence must be received by State Street in timely enough fashion
(which shall be presumed to be three business days unless State Street has
advised the Fund in writing of a different period) for State Street to notify
the agent or Subcustodian in sufficient time to permit such agent to act prior
to any expiration date.
I. Sales. Upon receipt of Proper Instructions and upon receipt of
full payment therefor, release and deliver securities which have been sold for
the account of the Fund. At the time of delivery all such payments are to be
made in cash, by a certified check upon or a treasurer's or cashier's check of a
bank, by effective bank wire transfer through the Federal Reserve Wire System
or, if appropriate, outside of the Federal Reserve Wire System and subsequent
credit to the Fund's custodian account, or, in case of delivery through a stock
clearing company, by book-entry credit by the stock clearing company in
accordance with the then current "street" custom.
<PAGE>
- 7 -
J. Purchases by Issuer. Upon receipt of Proper Instructions, release
and deliver securities owned by the Fund to the issuer thereof or its agent when
such securities are called, redeemed, retired or otherwise become payable;
provided that in any such case, the cash or other consideration is to be
delivered to State Street.
K. Changes of Name and Denomination. Upon receipt of Proper
Instructions, release and deliver securities owned by the Fund to the issuer
thereof or its agent for transfer into the name of the Fund or of a nominee of
State Street or of the Fund for the exclusive use of the Fund or for exchange
for a different number of bonds, certificates or other evidence representing the
same aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions if any; provided that in any such case, the
new securities are to be delivered to State Street.
L. Street Delivery. In connection with delivery in New York City and
upon receipt of Proper Instructions, which in the case of registered securities
may be standing instructions, release securities owned by the Fund upon receipt
of a written receipt for such securities to the broker selling the same for
examination in accordance with the existing "street delivery" custom. In every
instance, either payment in full for such securities shall be made or such
securities shall be returned to State Street that same day. In the event
existing "street delivery" custom is modified, State Street shall obtain
authorization from the Board of Trustees of the Fund prior to any use of such
modified "street delivery" custom.
M. Release of Securities for Use as Collateral. Upon receipt of
Proper Instructions and subject to the Declaration of Trust, release securities
belonging to the Fund to any bank or trust company for the purpose of pledge,
mortgage or hypothecation to secure any loan incurred by the Fund; provided,
however, that securities shall be released only upon payment to State Street of
the monies borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, subject to proper prior
authorization from the Fund, further securities may be released for that
purpose. Upon receipt of Proper Instructions, pay such loan upon redelivery to
it of the securities pledged or hypothecated therefor and upon surrender of the
note or notes evidencing the loan.
N. Compliance with Applicable Rules and Regulations of The Options
Clearing Corporation and National Securities or Commodities Exchanges or
Commissions. Upon receipt of Proper Instructions, deliver securities of the Fund
in accordance with the provisions of any agreement among the Fund, State Street
and a broker-dealer registered under the Exchange Act and a member of the
National Association of Securities Dealers, Inc. ("NASD") relating to compliance
with the rules of The Options Clearing Corporation
<PAGE>
- 8 -
and of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Fund; or, upon receipt of Proper
Instructions, deliver securities in accordance with the provisions of any
agreement among the Fund, State Street, and a Futures Commission Merchant
registered under the Commodity Exchange Act relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any contract market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund.
O. Release or Delivery of Securities for Other Purposes. Upon
receipt of Proper Instructions, release or deliver any securities held by it for
the account of the Fund for any other purpose (in addition to those specified in
paragraphs 4E, 4F, 4G, 4H, 4I, 4J, 4K, 4L, 4M and 4N hereof) which the Fund
declares is a proper corporate purpose pursuant to Proper Instructions.
P. Proxies, Notices, Etc. State Street shall, upon receipt, promptly
forward to the Fund all forms of proxies and all notices of meetings and any
other notices or announcements affecting or relating to the securities,
including without limitation, notices relating to class action claims and
bankruptcy claims, and upon receipt of Proper Instructions execute and deliver
or cause its nominee to execute and deliver such proxies or other authorizations
as may be required. State Street, its nominee or its agents or Subcustodian
shall not vote upon any of the securities or execute any proxy to vote thereon
or give any consent or take any other action with respect thereto (except as
otherwise herein provided) unless ordered to do so by Proper Instructions. State
Street shall require its agents and Subcustodians appointed pursuant to
paragraph 7C hereof to forward any such announcements and notices to State
Street upon receipt.
Q. Segregated Account. State Street shall, upon receipt of Proper
Instructions, establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by State Street
pursuant to paragraph 4B hereof, (i) in accordance with the provisions of any
agreement among the Fund, State Street and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the Fund, (iii) for
the
<PAGE>
- 9 -
purposes of compliance by the Fund with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release or releases of the
Commission relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Trustees signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary, setting forth
the purpose or purposes of such segregated account and declaring such purposes
to be proper corporate purposes.
R. Property of the Fund Held Outside of the United States.
(1) Appointment of Foreign Subcustodians. State Street is authorized and
instructed to employ as Subcustodians for the Fund's securities and other assets
maintained outside of the United States, the foreign banking institutions and
foreign securities depositories designated on Schedule B hereto as revised from
time to time ("Foreign Subcustodians"). Upon receipt of Proper Instructions,
together with a certified resolution of the Fund's Board of Trustees, State
Street and the Fund may agree to amend Schedule B hereto from time to time to
designate additional foreign banking institutions and foreign securities
depositories to act as Foreign Subcustodians. Upon receipt of Proper
Instructions, the Fund may instruct State Street to cease the employment of any
one or more of such Subcustodians for maintaining custody of the Fund's assets.
(2) Assets to be Held. State Street shall limit the securities and other
assets maintained in the custody of the Foreign Subcustodians to: (a) "foreign
securities," as defined in paragraph (c)(1) of Rule 17f-5 under the Investment
Company Act of 1940 ("1940 Act"), and (b) cash and cash equivalents in such
amounts as State Street or the Fund may determine to be reasonably necessary to
effect the Fund's foreign securities transactions.
(3) Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by State Street and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Foreign Subcustodians
pursuant to the terms hereof.
(4) Segregation of Securities. State Street shall identify on its books as
belonging to the Fund the foreign securities of the Fund held by each Foreign
Subcustodian. Each agreement pursuant to which State Street employs a foreign
banking institution shall require that such institution establish a custody
account for State Street on behalf of the Fund and physically segregate in that
account securities and other assets of the Fund, and, in the event that such
institution deposits the Fund's securities in a foreign securities depository,
that it shall identify on its books as
<PAGE>
- 10 -
belonging to State Street, as agent for the Fund, the securities so deposited
(all collectively referred to as the "account").
(5) Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set forth in
Schedule C hereto and shall provide that: (a) the Fund's assets will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of the foreign banking institution or its creditors or agent, except a
claim of payment for their safe custody or administration; (b) the Foreign
Subcustodian shall maintain insurance covering the Fund's assets; (c) beneficial
ownership of the Fund's assets will be freely transferable without the payment
of money or value other than for custody or administration; (d) adequate records
will be maintained identifying the assets as belonging to the Fund; (e) officers
or auditors employed by, or other representatives of State Street, including, to
the extent permitted under applicable law, the independent public accountants
for the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with State
Street; (f) assets of the Fund held by the Foreign Subcustodian will be subject
only to the instructions of State Street or its agents; and (g) the Foreign
Subcustodian will provide periodic reports with respect to the safekeeping of
the Fund's assets, including notification of any transfer to or from the Fund's
account.
(6) Access of Independent Accountants of the Fund. Upon request of the
Fund, State Street will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a Foreign Subcustodian insofar as such
books and records relate to the performance of such foreign banking institution
under its agreement with State Street.
(7) Reports by State Street. State Street will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Fund held by Foreign Subcustodians, including, but not
limited to, an identification of entities having possession of the Fund's
securities and other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a foreign banking
institution for State Street on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical possession of
such securities.
(8) Transactions in Foreign Custody Account. (a) Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, State Street shall make or cause its Foreign Subcustodians to
transfer, exchange or deliver foreign securities owned by the Fund, but, except
to the extent explicitly provided in paragraph 4R(8)(b), only in any of
<PAGE>
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the cases specified in this Agreement. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the parties,
State Street shall pay out or cause its Foreign Subcustodians to pay out monies
of the Fund, but, except to the extent explicitly provided in paragraph
4R(8)(b), only in any of the cases specified in this Agreement.
(b) Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of the Fund and
delivery of securities maintained for the account of the Fund may be effected in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer. Securities maintained in the
custody of a Foreign Subcustodian may be maintained in the name of such entity's
nominee to the same extent as set forth in paragraphs 2 and 4F of this
Agreement, and the Fund agrees to hold any such nominee harmless from any
liability as a holder of record of such securities.
(9) Liability of Foreign Subcustodians. Each agreement pursuant to which
State Street employs a foreign banking institution as a Foreign Subcustodian
shall require the institution to exercise reasonable care in the performance of
its duties and to indemnify, and hold harmless, State Street and Fund from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At the
election of the Fund, it shall be entitled to be subrogated to the rights of
State Street with respect to any claims against a foreign banking institution as
a consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Fund has not been made whole for any such loss, damage,
cost, expense, liability or claim.
(10) Liability of State Street. State Street shall be liable to the Fund
for the acts or omissions of a foreign banking institution appointed pursuant to
these provisions to the same extent that such foreign banking institution is
liable to State Street as provided under paragraph 4R(9); provided however that
State Street shall not be liable to the Fund for any loss resulting from or
caused by nationalization, expropriation, currency restrictions, acts of war or
terrorism or other similar events or acts.
(11) Monitoring Responsibilities. State Street shall furnish annually to
the Fund, during the month of June, information concerning the Foreign
Subcustodians employed by State Street. Such information shall be similar in
kind and scope to that furnished to
<PAGE>
- 12 -
the Fund in connection with the initial approval of this Agreement. In addition,
State Street will promptly inform the Fund in the event that State Street learns
of a material adverse change in the financial condition of a Foreign
Subcustodian or any material loss in the assets of the Fund, or is notified by a
foreign banking institution employed as a Foreign Subcustodian that there
appears to be a substantial likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the equivalent thereof) or that its
shareholders equity has declined below $200 million (in each case computed in
accordance with generally accepted U.S. accounting principles).
(12) Branches of U.S. Banks. Except as otherwise set forth in this
Agreement, the provisions hereof shall not apply where the custody of the Fund's
assets are maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the 1940 Act and which meets the
qualifications set forth in Section 26(a) of the 1940 Act. The appointment of
any such branch as a subcustodian shall be governed by paragraph 7C of this
Agreement.
S. Miscellaneous. In general, attend to all nondiscretionary details
in connection with the sale, exchange, substitution, purchase, transfer or other
dealing with such securities or property of the Fund, except as otherwise
directed by the Fund pursuant to Proper Instructions. State Street shall render
to the Fund daily a report of all monies received or paid on behalf of the Fund,
an itemized statement of the securities and cash for which it is accountable to
the Fund under this Agreement and an itemized statement of security transactions
which settled the day before and shall render to the Fund weekly an itemized
statement of security transactions which failed to settle as scheduled. At the
end of each week State Street shall provide a list of all security transactions
that remain unsettled at such time.
5. Additionally, as Custodian, State Street shall promptly:
A. Bank Account. Retain safely all cash of the Fund, other than cash
maintained by the Fund in a bank account established and used in accordance with
Rule 17f-3 under the 1940 Act, in the banking department of State Street in a
separate account or accounts in the name of the Fund, subject only to draft or
order by State Street acting pursuant to the terms of this Agreement. If and
when authorized by Proper Instructions in accordance with a vote of the Board of
Trustees of the Fund, State Street may open and maintain an additional account
or accounts in such other bank or trust companies as may be designated by such
instructions, such account or accounts, however, to be solely in the name of
State Street in its capacity as Custodian and subject only to its draft or order
in accordance with the terms of this
<PAGE>
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Agreement. State Street shall furnish to the Fund, not later than thirty (30)
calendar days after the last business day of each month, a statement reflecting
the current status of its internal reconciliation of the closing balance as of
that day in all accounts described in this paragraph to the balance shown on the
daily cash report for that day rendered to the Fund.
B. Collections. Unless otherwise instructed by receipt of Proper
Instructions, collect, receive and deposit in the bank account or accounts
maintained pursuant to paragraph 5A hereof all income and other payments with
respect to the securities held hereunder, execute ownership and other
certificates and affidavits for all federal and state tax purposes in connection
with the collection of bond and note coupons, do all other things necessary or
proper in connection with the collection of such income, and without waiving the
generality of the foregoing:
1) present for payment on the date of payment all coupons and
other income items requiring presentation;
2) present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable on the
date such securities become payable;
3) endorse and deposit for collection, in the name of the Fund,
checks, drafts or other negotiable instruments on the same
day as received.
In any case in which State Street does not receive any such due and unpaid
income within a reasonable time after it has made proper demands for the same
(which shall be presumed to consist of at least three demand letters and at
least one telephonic demand), it shall so notify the Fund in writing, including
copies of all demand letters, any written responses thereto, and memoranda of
all oral responses thereto and to telephonic demands, and await proper
instruction; State Street shall not be obliged to take legal action for
collection unless and until reasonably indemnified to its satisfaction for the
reasonable costs of such legal action for collection. It shall also notify the
Fund as soon as reasonably practicable whenever income due on securities is not
collected in due course.
C. Sale of Shares of the Fund. Make such arrangements with the
Transfer Agent of the Fund as will enable State Street to make certain it
receives the cash consideration due to the Fund for shares of beneficial
interest ("shares") of the Fund as may be issued or sold from time to time by
the Fund, all in accordance with the Fund's Declaration of Trust and By-Laws, as
amended.
D. Dividends and Distributions. Upon receipt of Proper Instructions,
release or otherwise apply cash insofar as cash is
<PAGE>
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available for the purpose of the payment of dividends or other distributions to
shareholders of the Fund.
E. Redemption of Shares of the Fund. From such funds as may be
available for the purpose, but subject to the limitation of the Fund's
Declaration of Trust and By-Laws, as amended, and applicable resolutions of the
Board of Trustees of the Fund pursuant thereto, make funds available for payment
to shareholders who have delivered to the Transfer Agent a request for
redemption of their shares by the Fund pursuant to such Declaration of Trust, as
amended.
In connection with the redemption of shares of the Fund pursuant to the
Fund's Declaration of Trust and By-Laws, as amended, State Street is authorized
and directed upon receipt of Proper Instructions from the Transfer Agent of the
Fund to make funds available for transfer through the Federal Reserve Wire
System or by other bank wire to a commercial bank account designated by the
redeeming stockholder.
F. Stock Dividends, Rights, Etc. Receive and collect all stock
dividends, rights and other items of like nature; and deal with the same
pursuant to Proper Instructions relative thereto.
G. Disbursements. Upon receipt of Proper Instructions, make or cause
to be made, insofar as cash is available for the purpose, disbursements for the
payment on behalf of the Fund of its expenses, including without limitation,
interest, taxes and fees or reimbursement to State Street or to the Fund's
investment advisers for their payment of any such expenses.
H. Other Proper Corporate Purposes. Upon receipt of Proper
Instructions, make or cause to be made, insofar as cash is available for the
purpose, disbursements for any other purpose (in addition to the purposes
specified in paragraphs 4G, 4H, 5D, 5E, and 5G of this Agreement) which the Fund
declares is a proper corporate purpose.
I. Records. Create, maintain and retain all records relating to its
activities and obligations under this Agreement in such manner as shall meet the
obligations of the Fund under the 1940 Act, particularly Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder or as reasonably requested from time to time by
the Fund. All records maintained by State Street in connection with the
performance of its duties under this Agreement shall remain the property of the
Fund, and, in the event of termination of this Agreement, shall be delivered in
accordance with the terms of paragraph 10 below.
J. Miscellaneous. Assist generally in the preparation of routine
reports to holders of shares of the Fund, to the
<PAGE>
- 15 -
Commission, including form N-SAR, to state "Blue Sky" authorities, to others in
the auditing of accounts and in other matters of like nature and as otherwise
reasonably requested by the Fund.
K. Fund Accounting and Net Asset Value Computation. State Street
shall maintain the general ledger and all other books of account of the Fund,
including the accounting of the Fund. In addition, upon receipt of Proper
Instructions, which may be deemed to be continuing instructions, State Street
shall daily compute the net asset value of the shares of the Fund and the total
net asset value of the Fund. State Street shall, in addition, perform such other
services incidental to its duties hereunder as may be reasonably requested from
time to time by the Fund.
6. State Street and the Fund further agree as follows:
A. Proper Instructions. State Street shall be deemed to have
received Proper Instructions upon receipt of written instructions signed by the
Fund's Trustees or by one or more person or persons as the Fund's Board of
Trustees shall have from time to time authorized to give the particular class of
instructions for different purposes. Different persons may be authorized to give
instructions for different purposes. A copy of a resolution or action of the
Trustees certified by the Secretary or an Assistant Secretary of the Fund may be
received and accepted by State Street as conclusive evidence of the instruction
of the Fund's Board of Trustees and/or the authority of any person or persons to
act on behalf of the Fund and may be considered as in full force and effect
until receipt of written notice to the contrary. Such instruction may be general
or specific in terms. Oral instructions will be considered Proper Instructions
if State Street reasonably believes them to have been given by a person
authorized by the Board of Trustees to give such oral instructions with respect
to the class of instruction involved. The Fund shall cause all oral instructions
to be confirmed in writing. Proper instructions may include communications
effected directly between electromechanical or electronic devices provided that
the Fund and State Street are satisfied that such procedures afford adequate
safeguards for the assets of the Fund. Use by the Fund of such communication
systems shall constitute approval by the Fund of the safeguards available
therewith.
B. Investments, Limitations. In performing its duties generally, and
more particularly in connection with the purchase, sale and exchange of
securities made by or for the Fund, State Street may take cognizance of the
provisions of the Declaration of Trust of the Fund, as amended; provided,
however, that except as otherwise expressly provided herein, State Street may
assume unless and until notified in writing to the contrary that instructions
purporting to be Proper Instructions received by it are not in conflict with or
in any way contrary to any provision of the
<PAGE>
- 16 -
Declaration of Trust of the Fund, as amended, or resolutions or proceedings of
the Board of Trustees of the Fund.
7. State Street and the Fund further agree as follows:
A. Indemnification. State Street, as Custodian, shall be entitled to
receive and act upon advice of counsel (who may be counsel for the Fund) and
shall be without liability for any action reasonably taken or thing reasonably
done pursuant to such advice; provided that such action is not in violation of
applicable federal or state laws or regulations or contrary to written
instructions received from the Fund, and shall be indemnified by the Fund and
without liability for any action taken or thing done by it in carrying out the
terms and provisions of this Agreement in good faith and without negligence,
misfeasance or misconduct. In order that the indemnification provision contained
in this paragraph shall apply, however, if the Fund is asked to indemnify or
save State Street harmless, the Fund shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and State Street shall use
all reasonable care to identify and notify the Fund fully and promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Fund. The Fund shall
have the option to defend State Street against any claim which may be the
subject of this indemnification, and, in the event that the Fund so elects, it
will so notify State Street, and thereupon the Fund shall take over complete
defense of the claim, and State Street shall initiate no further legal or other
expenses for which it shall seek indemnification under this paragraph. State
Street shall in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify State Street except with the Fund's
prior written consent.
B. Expenses Reimbursement. State Street shall be entitled to receive
from the Fund on demand reimbursement for its cash disbursements, expenses and
charges, excluding salaries and usual overhead expenses with respect to the
Fund, as set forth in Schedule A.
C. Appointment of Agents and Subcustodians. State Street, as
Custodian, may appoint (and may remove), only in compliance with the terms and
conditions of the Fund's Declaration of Trust and By-Laws, as amended, any other
bank, trust company or responsible commercial agent as its agent or Subcustodian
to carry out such of the provisions of this Agreement as State Street may from
time to time direct; provided, however, that the appointment of any such agent
or Subcustodian shall not relieve State Street of any of its responsibilities
under this Agreement.
D. Reliance on Documents. So long as and to the extent that it is in
good faith and in the exercise of reasonable care, State Street, as Custodian,
shall not be responsible for the title,
<PAGE>
- 17 -
validity or genuineness of any property or evidence of title thereto received by
it or delivered by it pursuant to this Agreement, shall be protected in acting
upon any instructions, notice, request, consent, certificate or other instrument
or paper reasonably believed by it to be genuine and to constitute Proper
Instructions under this Agreement and shall, except as otherwise specifically
provided in this Agreement, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained by it hereunder a certificate signed
by the Fund's Trustees, the Secretary or an Assistant Secretary of the Fund or
any other person expressly authorized by the Board of Trustees of the Fund.
E. Access to Records. Subject to security requirements of State
Street applicable to its own employees having access to similar records within
State Street and such regulations as to the conduct of such monitors as may be
reasonably imposed by State Street after prior consultation with an authorized
officer of the Fund, books and records of State Street pertaining to its actions
under this Agreement shall be open to inspection and audit at reasonable times
by the Trustees of, attorneys for, auditors employed by the Fund or any other
person as the Fund's Board of Trustees shall direct.
F. Recordkeeping. State Street shall maintain such records as shall
enable the Fund to comply with the requirements of all federal and state laws
and regulations applicable to the Fund with respect to the matters covered by
this Agreement.
8. If the Fund requires State Street to advance cash or securities for any
purpose or in the event that State Street or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay State Street promptly, State
Street shall be entitled to utilize available cash and to dispose of the Fund's
assets to the extent necessary to obtain reimbursement; provided, however, that
the total value of any property of the Fund which at any time is security for
any payment by State Street hereunder shall not exceed 15% of the Fund's total
net asset value.
9. The Fund shall pay State Street for its services as Custodian such
compensation as shall be specified on the attached Schedule A. Such compensation
shall remain fixed until December 31, 1994, unless this Agreement is terminated
as provided in paragraph 10.
10. State Street and the Fund further agree as follows:
<PAGE>
- 18 -
A. Effective Period, Termination, Amendment and Interpretive and
Additional Provisions. This Agreement shall become effective as of the date of
its execution, shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid, to the other party, such termination to
take effect sixty (60) days after the date of such delivery or mailing; and
further provided that the Fund may, by action of the Fund's Board of Trustees,
substitute another bank or trust company for State Street by giving notice as
provided above to State Street, provided, however that State Street shall not
act under paragraphs 4B or 4C hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Fund has approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Trustees has reviewed the use by the Fund of such
Securities System, as required in each case by Rule 17f-4 under the 1940 Act,
and that State Street shall not act under paragraph 4C hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has approved the initial use of the Direct Paper
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Trustees has reviewed the use by the Fund of the
Direct Paper System. The Fund or State Street shall not amend or terminate this
Agreement in contravention of any applicable federal or state laws or
regulations, or any provision of the Declaration of Trust of the Fund, as
amended; provided, however, that in the event of such termination State Street
shall remain as Custodian hereunder for a reasonable period thereafter if the
Fund after using its best efforts is unable to find a Successor Custodian.
In connection with the operation of this Agreement, State Street and the
Fund may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement, any such interpretive or
additional provision to be signed by both parties and annexed hereto, provided
that no such interpretive or additional provisions shall contravene any
applicable federal or state laws or regulations, or any provision of the Fund's
Declaration of Trust as amended. No interpretive provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
B. Successor Custodian. Upon termination hereof or the inability of
State Street to continue to serve hereunder, the Fund shall pay to State Street
such compensation as may be due for services through the date of such
termination and shall likewise reimburse State Street for its costs, expenses
and disbursements incurred prior to such termination in accordance with
paragraph 7B
<PAGE>
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hereof and such reasonable costs, expenses and disbursements as may be incurred
by State Street in connection with such termination.
If a Successor Custodian is appointed by the Board of Trustees of the Fund
in accordance with the Fund's Declaration of Trust, State Street shall, upon
termination, deliver to such Successor Custodian at the office of State Street,
properly endorsed and in proper form for transfer, all securities then held
hereunder, all cash and other assets of the Fund deposited with or held by it
hereunder.
If no such Successor Custodian is appointed, State Street shall, in like
manner at its office, upon receipt of a certified copy of a resolution of the
shareholders pursuant to the Fund's Declaration of Trust and By-Laws, as
amended, deliver such securities, cash and other properties in accordance with
such resolutions.
In the event that no written order designating a Successor Custodian or
certified copy of a resolution of the shareholders shall have been delivered to
State Street on or before the date when such termination shall become effective,
then State Street shall have the right to deliver to a bank or trust company
doing business in Boston, Massachusetts of its own selection, having an
aggregate capital, surplus and undivided profits, as shown by its last published
report, of not less than $5,000,000, all securities, cash and other properties
held by State Street and all instruments held by it relative thereto and all
other property held by it under this Agreement. Thereafter, such bank or trust
company shall be the Successor of State Street under this Agreement and subject
to the restrictions, limitations and other requirements of the Fund's
Declaration of Trust and By-Laws, both as amended.
In the event that securities, funds, and other properties remain in the
possession of State Street after the date of termination hereof owing to failure
of the Fund to procure the certified copy above referred to, or of the Fund's
Board of Trustees to appoint a Successor Custodian, State Street shall be
entitled to fair compensation for its services during such period, and the
provisions of this Agreement relating to the duties and obligations of State
Street shall remain in full force and effect.
C. Duplicate Records and Backup Facilities. State Street shall not
be liable for loss of data occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or military authority,
national emergencies, fire, flood or catastrophe, acts of God, insurrection,
war, riots or failure of transportation, communication or power supply. However,
State Street shall keep in a separate and safe place additional copies of all
records required to be maintained pursuant to this Agreement or additional
tapes, disks or other sources of information necessary to reproduce all such
records. Furthermore, at all times during
<PAGE>
- 20 -
this Agreement, State Street shall maintain a contractual arrangement whereby
State Street will have a back-up computer facility available for its use in
providing the services required hereunder in the event circumstances beyond
State Street's control result in State Street not being able to process the
necessary work at its principal computer facility, State Street shall, from time
to time, upon request from the Fund provide written evidence and details of its
arrangement for obtaining the use of such a back-up computer facility. State
Street shall use its best efforts to minimize the likelihood of all damage, loss
of data, delays and errors resulting from an uncontrollable event, and should
such damage, loss of data, delays or errors occur, State Street shall use its
best efforts to mitigate the effects of such occurrence. Representatives of the
Fund shall be entitled to inspect the State Street premises and operating
capabilities within reasonable business hours upon reasonable notice to State
Street, and, upon request of such representative or representatives, State
Street shall from time to time as appropriate, furnish to the Fund a letter
setting forth the insurance coverage thereon, any changes in such coverage which
may occur and any claim relating to the Fund which State Street may have made
under such insurance.
D. Confidentiality. State Street agrees to treat all records and
other information relative to the Fund confidentially and State Street, on
behalf of itself and its officers, employees and agents, agrees to keep
confidential all such information, except after prior notification to and
approval by the Fund (which approval shall not be unreasonably withheld and may
not be withheld where State Street may be exposed to civil or criminal contempt
proceedings), when requested to divulge such information by duly constituted
authorities or when so requested by a properly authorized person.
State Street and the Fund agree that they, their officers, employees and
agents shall maintain all information disclosed to them by the other in
connection with this Agreement in confidence and will not disclose any such
information to any other person, nor use such information for their own benefit
or for the benefit of third parties without the consent in writing of the other;
provided, however, that each party shall have the right to use any such
information for its own necessary internal purposes while this Agreement is in
effect. The provisions of the paragraph shall not apply to information which (i)
is in or becomes part of the public domain, or (ii) is demonstrably known
previously to the party to whom it is disclosed, or (iii) is independently
developed outside this Agreement by the party to whom it is disclosed or (iv) is
rightfully obtained from third parties by the party to whom it is disclosed.
11. The Fund shall not circulate any printed matter which contains any
reference to State Street without the prior written approval of State Street,
excepting solely such printed matter as
<PAGE>
- 21 -
merely identifies State Street as Custodian. The Fund will submit printed matter
requiring approval to State Street in draft form, allowing sufficient time for
review by State Street and its counsel prior to any deadline for printing.
12. In the event of a reorganization of the Fund through a merger,
consolidation, sale of assets or other reorganization, State Street, at the
request of the Fund, shall act as Custodian for shares of any investment company
or other company obtained in any such reorganization by the Fund for
distribution to those Fund shareholders whose shares are represented by
certificates. The Fund shall give notice to each such shareholder of his or her
right to exchange his or her Fund shares represented by certificates for shares
held by State Street upon surrender to State Street of his or her certificates
representing such Fund shares properly endorsed and in proper form for transfer.
Upon the surrender of such Fund certificates, State Street will issue a
certificate or certificates to the surrendering shareholder for an approximate
number of shares held by State Street, unless such shareholder establishes an
Open Account Plan or other similar account at that time in which case such
shares will be credited to his or her account. State Street shall not be
required to issue certificates for any fractional shares held by it. Instead,
fractional interests in such shares shall be distributed to the shareholder in
cash at their then current market value or, if the fractional share represents
an interest in an investment company, it shall be redeemed by State Street at
the then current redemption price for such shares and the proceeds of such
redemption shall be distributed to such shareholder in cash. State Street shall
not release to any shareholder any such shares held by it until such shareholder
has properly surrendered for exchange his or her Fund shares represented by
certificates.
13. This Agreement is executed and delivered in The Commonwealth of
Massachusetts and shall be subject to and be construed in accordance with the
laws of the Commonwealth.
14. Notices and other writings delivered or mailed postage prepaid to
Keystone America Omega Fund, c/o Keystone Custodian Funds, Inc., 200 Berkeley
Street, Boston, Massachusetts 02116, or to State Street at 225 Franklin Street,
Boston, Massachusetts 02110, or to such other address as the Fund or State
Street may hereafter specify, shall be deemed to have been properly delivered or
given hereunder to the respective address.
15. This Agreement shall be binding upon and shall inure to the benefit of
the Fund and State Street and their respective successors or assigns.
16. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
<PAGE>
- 22 -
17. This Agreement is made on behalf of the Fund by an officer or Trustee
of the Fund, not individually but solely as an officer or Trustee under the
Fund's Declaration of Trust, and the obligations under this Agreement are not
binding upon, nor shall resort be had to the property of any of the Trustees,
shareholders, officers, employees or agents of the fund personally, but are
binding only on the property of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by a duly authorized officer as of
the day and year first above written.
ATTEST: KEYSTONE AMERICA OMEGA FUND
By:__________________________________
Treasurer
ATTEST: STATE STREET BANK AND TRUST
COMPANY
By:__________________________________
Vice President
<PAGE>
- 23 -
***SEE State Street Fee Schedule for Fees
EXHIBIT 99.24.(b)(8)(B)
FORM OF
KEYSTONE AMERICA OMEGA FUND
200 Berkeley Street
Boston, MA 02116-5034
April ____, 1995
Keystone Investor Resource Center, Inc.
101 Main Street
Cambridge, Massachusetts 02142
Re: Keystone America Omega Fund
---------------------------
Gentlemen:
On April ____, 1995 Keystone America Omega Fund ("Fund") was organized as a
Massachusetts business trust and as such elected to become a party to the Master
Transfer and Recordkeeping Agreement dated as of October 1, 1987 between
Keystone Investor Resource Center, Inc. and those investment companies managed,
administered or advised by Keystone Custodian Funds, Inc.
Please acknowledge your acceptance by signing and returning the enclosed
duplicate of this letter.
Very truly yours,
KEYSTONE AMERICA OMEGA FUND
By:________________________________
Albert H. Elfner, III
President
Accepted and Agreed To:
KEYSTONE INVESTOR RESOURCE CENTER, INC.
By:____________________________________
Edward J. Falvey, President
Date:
EXHIBIT 99.24(b)(10)
February 27, 1995
Keystone America Omega Fund
200 Berkeley Street
Boston, MA 02116-5034
Gentlemen:
You have asked for my opinion with respect to the issuance of Class A,
B and C shares of Keystone America Omega Fund (the "Fund") under the Declaration
of Trust of the Fund. A prospectus and statement of additional information are
expected to be filed with the Securities and Exchange Commission as part of the
Fund's Registration Statement covering the registration of the Fund as an
investment company and the public offering and sale of the Fund's Class A, B and
C shares. In my opinion, after the effectiveness of the Registration Statement,
such shares, when issued and sold, will be legally issued, fully paid and
non-assessable by the Fund, entitling the holders thereof to the rights set
forth in the Declaration of Trust, and subject to the limitations stated
therein.
My opinion is based upon my examination of the Funds Declara- tion of
Trust and the Fund's prospectus and statement of additional information as they
are proposed to be filed in the Registration Statement.
I hereby consent to the use of this opinion in connection with the
registration of the Fund and its shares with the Securities and Exchange
Commission.
Very truly yours,
Rosemary D. Van Antwerp
General Counsel
#101f02bb
EXHIBIT 99.24.(b)(11)
Consent of Independent Auditors
The Directors and Shareholders
Keystone America Omega Fund, Inc.
We consent to the use of our report dated February 3, 1995 included herein
and to the reference to our firm under the captions "FINANCIAL HIGHLIGHTS" in
the Prospectus and "ADDITIONAL INFORMATION" in the Statement of Additional
Information.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 27, 1995
EXHIBIT 99.24(b)(15)
FORM OF
KEYSTONE AMERICA OMEGA FUND
CLASS A DISTRIBUTION PLAN
SECTION 1. Keystone America Omega Fund ("Fund") may act as the distributor
of securities of which it is the issuer, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act") according to the terms of this
Distribution Plan ("Plan").
SECTION 2. The Fund may expend daily amounts at an annual rate of 0.75% of
the average daily net asset value of Class A shares of the Fund to finance any
activity which is principally intended to result in the sale of Class A shares
of Fund common stock ("shares"), including, without limitation, expenditures
consisting of payments to a principal underwriter of the Fund ("Principal
Underwriter") in order (i) to enable the Principal Underwriter to pay to others
commissions in respect of sales of Class A shares of the Fund since inception of
the Plan; (ii) to enable the Principal Underwriter to pay or to have paid to
others who sell Class A shares a maintenance or other fee, at such intervals as
the Principal Underwriter may determine, in respect of Class A shares previously
sold by any such others and remaining outstanding during the period in respect
of which such fee is or has been paid; and/or (iii) to compensate the Principal
Underwriter for its efforts in respect of sales of Class A shares of the Fund
since inception of the Plan.
SECTION 3. This Plan shall not take effect until it has been approved by a
vote of at least a majority (as defined in the 1940 Act) of the outstanding
Class A shares of the Fund.
SECTION 4. This Plan shall not take effect until it has been approved
together with any related agreements of the Fund by votes of a majority of both
(a) the Board of Directors of the Fund and (b) those Directors of the Fund who
are not "interested persons" of the Fund (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation of this Plan or
any agreements of the Fund or any other person related to this Plan ("Rule 12b-1
Directors"), cast in person at a meeting called for the purpose of voting on
this Plan or such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 7, this Plan shall
continue in effect for a period of one year from the date it takes effect and
thereafter shall continue in effect so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 4.
<PAGE>
SECTION 6. Any person authorized to direct the disposition of monies paid
or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board and the Board shall review at least quarterly a
written report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 7. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Directors, or by vote of a majority of the Fund's outstanding
Class A shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide:
A. That such agreement may be terminated at any time, with- out payment
of any penalty, by vote of a majority of the Rule 12b-1 Directors or
by a vote of a majority of the Fund's outstanding Class A shares on
not more than sixty days written notice to any other party to the
agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
SECTION 9. This Plan may not be amended to increase materi- ally the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 3 hereof and no material
amendment to this Plan shall be made unless approved in the manner provided for
in Section 4 hereof.
<PAGE>
FORM OF
KEYSTONE AMERICA OMEGA FUND
CLASS B DISTRIBUTION PLAN
SECTION 1. Keystone America Omega Fund (the "Fund") may act as the
distributor of securities of which it is the issuer pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "1940 Act") according to the terms of
this Distribution Plan ("Plan").
SECTION 2. The Fund may expend daily amounts at an annual rate of 1.00%
of the average daily net asset value of the Fund attributable to the Fund's
Class B shares to finance any activity that is principally intended to result in
the sale of Class B shares, including, without limitation, expenditures
consisting of payments to a principal underwriter of the Fund ("Principal Under-
writer") or others as sales commissions or other compensation for their services
that have been earned or as reimbursement for expenses that have been incurred
or accrued at any time during which this Plan has been in effect together with
interest at a rate approved from time to time by the Rule 12b-1 Directors (as
defined below) on any such amounts; provided that, at the time any such payment
is made, whether or not this Plan continues in effect, the making thereof will
not cause the limitation upon such payments established by this Plan to be
exceeded.
SECTION 3. This Plan shall not take effect until it has been approved
by a vote of at least a majority (as defined in the 1940 Act) of the outstanding
Class B shares.
SECTION 4. This Plan shall not take effect until it has been approved
together with any related agreements of the Fund by votes of a majority of both
(a) the Board of Directors of the Fund and (b) those Directors of the Fund who
are not "interested persons" of the Fund (as said term is defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of
this Plan or any agreements of the Fund or any other person related to this Plan
(the "Rule 12b-1 Directors"), cast in person at a meeting called for the purpose
of voting on this Plan or such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 7 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4 hereof.
<PAGE>
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board of Directors, and the Board shall review, at least
quarterly a written report of the amounts so expended and the purposes for which
such expenditures were made.
SECTION 7. This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Directors or by vote of a majority of the outstanding
Class B shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, with- out payment
of any penalty, by vote of a majority of the Rule 12b-1 Directors or
by a vote of a majority of the outstanding Class B shares on not more
than sixty days written notice to any other party to the agreement;
and
(b) That such agreement shall terminate automatically in the event of its
assignment.
SECTION 9. This Plan may not be amended to increase material- ly the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 3 hereof, and no
material amendment to this Plan shall be made unless approved in the manner
provided for in Section 4 hereof.
#101F016B
<PAGE>
FORM OF
KEYSTONE AMERICA OMEGA FUND
CLASS C DISTRIBUTION PLAN
SECTION 1. Keystone America Omega Fund (the "Fund") may act as the
distributor of securities of which it is the issuer pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "1940 Act") according to the terms of
this Distribution Plan ("Plan").
SECTION 2. The Fund may expend daily amounts at an annual rate of 1.00%
of the average daily net asset value of the Fund attributable to the Fund's
Class C shares to finance any activity that is principally intended to result in
the sale of Class C shares, including, without limitation, expenditures
consisting of payments to a principal underwriter of the Fund ("Principal Under-
writer") or others as sales commissions or other compensation for their services
that have been earned or as reimbursement for expenses that have been incurred
or accrued at any time during which this Plan has been in effect together with
interest at a rate approved from time to time by the Rule 12b-1
Trustees/Directors (as defined below) on any such amounts.
SECTION 3. This Plan shall not take effect until it has been approved
by a vote of at least a majority (as defined in the 1940 Act) of the outstanding
Class C shares.
SECTION 4. This Plan shall not take effect until it has been approved
together with any related agreements of the Fund by votes of a majority of both
(a) the Board of Trustees/Directors of the Fund and (b) those Trustees/Directors
of the Fund who are not "interested persons" of the Fund (as said term is
defined in the 1940 Act) and who have no direct or indirect financial interest
in the operation of this Plan or any agreements of the Fund or any other person
related to this Plan (the "Rule 12b-1 Trustees/Directors"), cast in person at a
meeting called for the purpose of voting on this Plan or such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 7 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4 hereof.
<PAGE>
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board of Trustees/Directors and the Board shall review at
least quarterly a written report of the amounts so expended and the purposes for
which such expenditures were made.
SECTION 7. This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees/Directors or by vote of a majority of the
outstanding Class C shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, with- out payment
of any penalty, by vote of a majority of the Rule 12b-1
Trustees/Directors or by a vote of a majority of the outstanding Class
C shares on not more than sixty days written notice to any other party
to the agreement; and
(b) That such agreement shall terminate automatically in the event of its
assignment.
SECTION 9. This Plan may not be amended to increase material- ly the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 3 hereof and no material
amendment to this Plan shall be made unless approved in the manner provided for
in Section 4 hereof.
#100E03FA
<TABLE>
EXHIBIT 99.24(b)(16)
<CAPTION>
KAOFI CLASS A MTD YTD ONE YEAR THREE YEAR THREE YEAR FIVE YEAR FIVE YEAR TEN YEAR TEN YEAR
31-Oct-94 TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5.75% LOAD -7.77% -9.02% 25.43% 7.85% 81.25% 12.63% 327.19% 15.63%
no load 2.35% -2.14% -3.47% 33.08% 10.00% 92.31% 13.97% 353.25% 16.31%
Beg dates 30-Sep-94 31-Dec-93 29-Oct-93 31-Oct-91 31-Oct-91 31-Oct-89 31-Oct-89 31-Oct-84 31-Oct-84
Beg Value (LOAD) 96,116 100,525 101,906 73,919 73,919 51,154 51,154 21,704 21,704
Beg Value (no load) 90,590 94,745 96,046 69,668 69,668 48,212 48,212 20,456 20,456
End Value 92,718 92,718 92,718 92,718 92,718 92,718 92,718 92,718 92,718
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KAOFI-B MTD YTD ONE YEAR THREE YEAR THREE YEAR FIVE YEAR FIVE YEAR TEN YEAR TEN YEAR
31-Oct-94 TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
*** *** *** *** *** ***
n/a till n/a till n/a till n/a till n/a till n/a till
8/31/01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
with cdsc N/A -5.72% -6.96% 3.07% 2.45% NA NA NA NA
W/O CDSC 2.25% -2.92% -4.40% 5.84% 4.65% NA NA NA NA
Beg dates 30-Sep-94 31-Dec-93 29-Oct-93 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93
Beg Value (no load) 10,351 10,902 11,070 10,000 10,000 10,000 10,000 10,000 10,000
End Value (W/O CDSC) 10584 10,584 10,584 10,584 10,584 10,584 10,584 10,584 10,584
End Value (with cdsc) 10,278 10,300 10,307 10,307 10,491 10491.44277 10,584 10583.63478
beg nav 15.59 17.06 18.66 17.29 17.29 17.29 17.29 17.29 17.29
end nav 15.94 15.94 15.94 15.94 15.94 15.94 15.94 15.94 15.94
shares originally
purhased 663.97 639.01 593.27 578.37 578.37 578.37 578.37 578.37 578.37
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KAOFI-C MTD YTD ONE YEAR THREE YEAR THREE YEAR FIVE YEAR FIVE YEAR TEN YEAR TEN YEAR
31-Oct-94 TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
*** *** *** *** *** ***
n/a till n/a till n/a till n/a till n/a till n/a till 8/2/01
8/2/01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
with cdsc N/A -3.84% -4.28% 6.02% 4.80% NA NA NA NA
W/O CDSC 2.24% -2.91% -4.28% 6.02% 4.80% NA NA NA NA
Beg dates 0-Sep-94 31-Dec-93 29-Oct-93 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93 02-Aug-93
Beg Value (no load) 10,370 10,920 11,076 10,000 10,000 10,000 10,000 10,000 10,000
End Value (W/O CDSC) 10,602 10,602 10,602 10,602 10,602 10,602 10,602 10,602 10,602
End Value (with cdsc) 10,500 10,602 10,602 10,602 10,602 10602.12352 10,602 10602.12352
beg nav 15.62 17.09 18.67 17.29 17.29 17.29 17.29 17.29 17.29
end nav 15.97 15.97 15.97 15.97 15.97 15.97 15.97 15.97 15.97
shares originally
purhased 663.88 638.96 593.27 578.37 578.37 578.37 578.37 578.37 578.37
</TABLE>
EXHIBIT 99.24(b)(18)
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and/or Chairman of the Board and Chief
Executive Officer and for which Keystone Custodian Funds, Inc. serves as Adviser
or Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and in my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
/s/ George S. Bissell
George S. Bissell
Director/Trustee,
Chairman of the Board
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and/or Chief Executive Officer and for
which Keystone Custodian Funds, Inc. serves as Adviser or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and in my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
/s/ Albert H. Elfner, III
Albert H. Elfner, III
Director/Trustee,
President and Chief
Executive Officer
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director, Trustee or officer and for which Keystone
Custodian Funds, Inc. serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and in my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Kevin J. Morrissey
Kevin J. Morrissey
Treasurer
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Frederick Amling
Frederick Amling
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Charles A. Austin III
Charles A. Austin III
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Edwin D. Campbell
Edwin D. Campbell
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Charles F. Chapin
Charles F. Chapin
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ K. Dun Gifford
K. Dun Gifford
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Leroy Keith, Jr.
Leroy Keith, Jr.
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ F. Ray Keyser, Jr.
F. Ray Keyser, Jr.
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ David M. Richardson
David M. Richardson
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Richard J. Shima
Richard J. Shima
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Andrew J. Simons
Andrew J. Simons
Director/Trustee
Dated: December 14, 1994
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
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RECORDS.
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<CIK> 0000074458
<NAME> KEYSTONE OMEGA FUND, INC.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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THIS SCHEWDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
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RECORDS.
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<CIK> 0000074458
<NAME> KEYSTONE OMEGA FUND, INC.
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RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<CIK> 0000074458
<NAME> KEYSTONE OMEGA FUND, INC.
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