<PAGE>
File Nos. 33-11047
and 811-4950
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Pre-Effective Amendment No.
---- ----
Post-Effective Amendment No. 15 X
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 16 X
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KEYSTONE AMERICA FUND FOR TOTAL RETURN
(formerly named Keystone America Equity Income 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:
X immediately upon filing pursuant to paragraph (b) of Rule 485.
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on (date) pursuant to paragraph (b) of Rule 485.
---
60 days after filing pursuant to paragraph (a)(i) of Rule 485.
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on (date) pursuant to paragraph (a)(i) of Rule 485.
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75 days after filing pursuant to paragraph (a)(ii) of Rule 485.
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on (date) pursuant to paragraph (a)(ii) of Rule 485.
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The Registrant has filed a Declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940. A Rule 24f-2 Notice for Registrant's last fiscal
year was filed January 28, 1994.
<PAGE>
KEYSTONE AMERICA FUND FOR TOTAL RETURN
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 15
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 15 to Registration Statement No.
33-11047/811-4950 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 - ITEMS 24(a) and 24(b)
Financial Statements
Independent Auditors' Report
Exhibit Listing
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 FUND FOR TOTAL RETURN
Cross-Reference Sheet required by 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 Performance Data
Financial Highlights
4 Cover Page
The Fund
Investment Objectives 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 Plans
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
12 Not applicable
<PAGE>
KEYSTONE AMERICA FUND FOR TOTAL RETURN
Cross-Reference Sheet continued.
Items in
Part B of
Form N-1A Statement of Additional Information Caption
13 The Fund
Investment Policies
Investment Restrictions
Brokerage
Appendix
14 Trustees and Officers
15 Additional Information
Investment Manager
16 Investment Adviser
Principal Underwriter
Distribution Plan
Sales Charges
Additional Information
17 Brokerage
18 Declaration of Trust
19 Valuation of Securities
Distribution Plan
20 Dividends and Taxes
21 Principal Underwriter
22 Standardized Total Return and
Yield Quotations
23 Financial Statements
<PAGE>
KEYSTONE AMERICA FUND FOR TOTAL RETURN
PART A
PROSPECTUS
<PAGE>
KEYSTONE AMERICA FUND FOR TOTAL RETURN
PROSPECTUS MARCH 31, 1995
Keystone America Fund for Total Return (the "Fund") is a mutual fund that
seeks total return from a combination of capital growth and income. The Fund's
net asset value per share will fluctuate in response to changes in the market
value of its portfolio securities.
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," "Calculation of Contingent Deferred Sales Charge
and Waiver of Sales Charges," "Distribution Plans" and "Fund Shares".
This prospectus concisely states information about the Fund that you should
know before investing. Please read it and retain it for future reference.
Additional information about the Fund, including information about
securities ratings, is contained in a statement of additional information and
its appendix dated March 31, 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.
THE FUND MAY INVEST UP TO 35% OF ITS ASSETS IN (I) LOWER RATED BONDS,
COMMONLY KNOWN AS "JUNK BONDS", AND/OR (II) BONDS ISSUED BY FOREIGN ISSUERS
RATED BELOW INVESTMENT GRADE; BOTH OF WHICH ENTAIL GREATER RISKS, INCLUDING
DEFAULT RISK, UNTIMELY INTEREST AND PRINCIPAL PAYMENTS, AND PRICE VOLATILITY,
THAN THOSE FOUND IN HIGHER RATED SECURITIES, AND MAY PRESENT PROBLEMS OF
LIQUIDITY AND VALUATION. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE
INVESTING. SEE "INVESTMENT OBJECTIVE AND POLICIES," PAGE 6; "RISK FACTORS," PAGE
7.
KEYSTONE AMERICA FUND FOR TOTAL RETURN
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116-5034
CALL TOLL FREE 1-800-343-2898
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
TABLE OF CONTENTS Page
Fee Table ................................................................. 2
Financial Highlights ...................................................... 3
The Fund .................................................................. 6
Investment Objective and Policies ......................................... 6
Investment Restrictions ................................................... 7
Risk Factors .............................................................. 7
Pricing Shares ............................................................ 9
Dividends and Taxes ....................................................... 10
Fund Management and Expenses .............................................. 11
How to Buy Shares ......................................................... 13
Alternative Sales Options ................................................. 14
Calculation of Contingent Deferred Sales
Charge and Waiver of Sales Charges ...................................... 17
Distribution Plans ........................................................ 18
How to Redeem Shares ...................................................... 18
Shareholder Services ...................................................... 20
Performance Data .......................................................... 23
Fund Shares ............................................................... 23
Additional Information .................................................... 23
Additional Investment Information ......................................... (i)
Exhibit A ................................................................. A-1
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
KEYSTONE AMERICA FUND FOR TOTAL RETURN
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>
SHAREHOLDER TRANSACTION EXPENSES
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FRONT END BACK END LEVEL LOAD
LOAD OPTION LOAD OPTION<F1> OPTION<F2>
<S> <C> <C> <C>
Sales Charge
(as a percentage of offering price) 5.75%<F3> None None
Contingent Deferred Sales Charge
(as a percentage of the lesser of
cost or market value of shares redeemed) 0.00%<F4> 3.00% in the first year 1.00% in the first
declining to 1.00% in year and 0.00%
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 ......................... 0.65% 0.65% 0.65%
12b-1 Fees .............................. 0.25% 1.00%<F7> 1.00%<F7>
Other Expenses .......................... 0.69% 0.69%<F6> 0.69%
---- ---- ----
Total Fund Operating Expenses ........... 1.59% 2.34% 2.34%
==== ==== ====
EXAMPLES<F8> 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses
on a $1,000 investment, assuming <F1>
5% annual return and <F2> redemption at
the end of each period:
Class A ............................ $ 73 $105 $139 $236
Class B ............................ $ 54 $ 93 $125 $268
Class C ............................ $ 34 $ 73 $125 $268
You would pay the following expenses
on the same investment, assuming no
redemption at the end of each period:
Class A ............................ $ 73 $105 $139 $236
Class B ............................ $ 24 $ 73 $125 $268
Class C ............................ $ 24 $ 73 $125 $268
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 "Alternative Sales Options."
<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 "Calculation of Contingent Deferred Sales Charge
and Waiver of Sales Charges" for an explanation of the charge.
<F5> There is no fee for exchange orders received by the Fund directly from a
shareholder over the Keystone Automated Response Line ("KARL"). (For a
description of KARL, see "Shareholder Services").
<F6> Expense ratios are for the year ended November 30, 1994, except "Other
Expenses" have been restated to reflect estimated future costs.
<F7> Long term shareholders may pay more than the economic equivalent of the
maximum front end sales charges permitted by rules adopted 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%.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE AMERICA FUND FOR TOTAL RETURN
CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
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 has been taken from the Fund's 1994 Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which also appear, together with the independent auditors'
report, in the Fund's 1994 Annual Report. The Fund's financial statements,
related notes, and independent auditors' report are included in the statement of
additional information. Additional information about the Fund's performance is
contained in its annual report that will be made available upon request and
without charge.
<TABLE>
<CAPTION>
FEBRUARY 13, 1987
(COMMENCMENT OF
CLASS A SHARES OPERATIONS) TO
YEAR ENDED NOVEMBER 30, NOVEMBER 30,
1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... $ 12.31 $ 12.06 $ 11.45 $ 10.29 $ 10.89 $ 9.41 $ 8.59 $ 10.00
------- ------- ------- ------- ------- ------- ------- --------
Income from investment operations
Investment income -- net ................. 0.24 0.21 0.23 0.34 0.41 0.42 0.46 0.30
Net gain (loss) on investments ........... (0.56) 1.31 1.19 1.38 (0.61) 2.01 0.89 (1.47)
------- ------- ------- ------- ------- ------- ------- --------
Total from investment operations ......... (0.32) 1.52 1.42 1.72 (0.20) 2.43 1.35 (1.17)
------- ------- ------- ------- ------- ------- ------- --------
Less distributions
Dividends from investment income -- net .. (0.24) (0.21) (0.23) (0.35) (0.40) (0.42) (0.53) (0.24)
Distributions in excess of
investment income -- net <F1> ......... 0.00 (0.03) (0.05) (0.05) 0.00 0.00 0.00 0.00
Distributions from capital gains ......... 0.00 (1.03) (0.53) (0.16) 0.00 (0.53) 0.00 0.00
------- ------- ------- ------- ------- ------- ------- --------
Total distributions ...................... (0.24) (1.27) (0.81) (0.56) (0.40) (0.95) (0.53) (0.24)
------- ------- ------- ------- ------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD ........... $ 11.75 $ 12.31 $ 12.06 $ 11.45 $ 10.29 $ 10.89 $ 9.41 $ 8.59
------- ------- ------- ------- ------- ------- ------- --------
TOTAL RETURN <F4> ........................ (2.65%) 12.67% 12.56% 16.70% (1.85%) 26.17% 15.98% (11.94%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Operating and management expenses<F2> .. 1.59% 1.85% 1.85% 1.88% 2.00% 2.00% 1.47% 1.00%<F3>
Net investment income .................. 1.93% 1.63% 1.87% 2.98% 3.85% 3.94% 4.87% 4.94%<F3>
Portfolio turnover rate .................. 57% 92% 66% 43% 51% 50% 64% 16%
Net assets, end of period (thousands) .... $23,162 $26,367 $23,607 $22,974 $22,080 $22,764 $20,735 $ 7,672
<FN>
<F1> Effective November 30, 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 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 realized
gains on investments -- net". For the fiscal years ended November 30, 1993,
1992, and 1991 distributions in excess of book basis net income were
charged to paid-in capital. For the fiscal years ended prior to January 31,
1990, these excess distributions were charged to undistributed net
investment income.
<F2> Figures are net of expense reimbursement by Keystone in connection with
voluntary expense limitations. Before the expense reimbursement, the "Ratio
of net operating and management expenses to average net assets" would have
been 2.41%, 2.48%, 2.92%, and 4.77% (on an annualized basis), for the years
ended 1990, 1989, 1988 and the period from February 13, 1987 (Commencement
of Operations) to November 30, 1987, respectively.
<F3> Annualized for the period April 14, 1987 (Commencement of Operations) to
November 30, 1987.
<F4> Excluding applicable sales charges.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE AMERICA FUND FOR TOTAL RETURN
CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
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 has been taken from the Fund's 1994 Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which also appear, together with the independent auditors'
report, in the Fund's 1994 Annual Report. The Fund's financial statements,
related notes, and independent auditors' report are included in the statement of
additional information. Additional information about the Fund's performance is
contained in its annual report that will be made available upon request and
without charge.
FEBRUARY 1, 1993
(DATE OF
YEAR INITIAL PUBLIC
ENDED OFFERING) TO
NOVEMBER NOVEMBER
30, 1994 30, 1993
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 12.32 $ 12.65
------- -------
Income from investment operations
Investment income -- net ....................... 0.15 0.10
Net gain (loss) on investments ................. (0.56) 0.74
------- -------
Total income from investment operations ........ (0.41) 0.84
------- -------
Less distributions
Dividends from investment income -- net ........ (0.14) (0.10)
Distributions in excess of
investment income -- net (b) ................. 0.00 (0.04)
Distributions from capital gains ............... 0.00 (1.03)
------- -------
Total distributions ............................ (0.14) (1.17)
------- -------
NET ASSET VALUE, END OF PERIOD ................. $ 11.77 $ 12.32
======= =======
TOTAL RETURN (c) ............................... (3.36%) 6.68%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Operating and management expenses ............ 2.31% 2.64%(a)
Net investment income ........................ 1.27% 0.84%(a)
Portfolio turnover rate ........................ 57% 92%
Net assets, end of period (thousands) .......... $7,314 $4,283
(a) Annualized.
(b) Effective November 30, 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 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 realized gains
on investments -- net". For the period February 1, 1993 (Date of Initial
Public Offering) to November 30, 1993 distributions in excess of book basis
net income were charged to paid-in capital.
(c) Excluding applicable sales charges.
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE AMERICA FUND FOR TOTAL RETURN
CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
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 has been taken from the Fund's 1994 Annual
Report and should be read in conjunction with the Fund's financial statements
and related notes, which also appear, together with the independent auditors'
report, in the Fund's 1994 Annual Report. The Fund's financial statements,
related notes, and independent auditors' report are included in the statement of
additional information. Additional information about the Fund's performance is
contained in its annual report that will be made available upon request and
without charge.
FEBRUARY 1, 1993
(DATE OF
YEAR INITIAL PUBLIC
ENDED OFFERING) TO
NOVEMBER NOVEMBER
30, 1994 30, 1993
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 12.33 $ 12.65
------- -------
Income from investment operations
Investment income -- net ....................... 0.15 0.10
Net gain (loss) on investments ................. (0.56) 0.75
------- -------
Total income from investment operations ........ (0.41) 0.85
------- -------
Less distributions
Dividends from investment income -- net ........ (0.14) (0.10)
Distributions in excess of
investment income -- net (b) ................. 0.00 (0.04)
Distributions from capital gains ............... 0.00 (1.03)
------- -------
Total distributions ............................ (0.14) (1.17)
------- -------
NET ASSET VALUE, END OF PERIOD ................. $ 11.78 $ 12.33
======= =======
TOTAL RETURN (c) ............................... (3.36%) 6.76%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Operating and management expenses ............ 2.34% 2.64%(a)
Net investment income ........................ 1.21% 0.83%(a)
Portfolio turnover rate ........................ 57% 92%
Net assets, end of period (thousands) .......... $5,968 $5,030
(a) Annualized.
(b) Effective November 30, 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 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 realized gains
on investments -- net". For the period February 1, 1993 (Date of Initial
Public Offering) to November 30, 1993 distributions in excess of book basis
net income were charged to paid-in capital.
(c) Excluding applicable sales charges.
<PAGE>
THE FUND
The Fund is an open-end, diversified management investment company commonly
known as a mutual fund. The Fund was formed as a Massachusetts business trust on
October 24,1986. 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
The Fund seeks total return from a combination of capital growth and
income.
PRINCIPAL INVESTMENTS
Under ordinary circumstances, the Fund will invest principally in dividend
paying common stocks, preferred stocks and securities convertible into common
stocks. While the Fund may invest in securities issued both by domestic and
foreign corporations, it is currently anticipated that the Fund will not invest
more than 25% of its assets in foreign issuers of common stocks, preferred
stocks and securities convertible into common stocks. Non-dividend paying common
stocks may also be owned by the Fund if, in Keystone's judgment, that is
consistent with or will enhance the Fund's ability to achieve its objectives.
The Fund may invest up to 50% of its assets in foreign securities issued by
issuers located in developed countries as well as emerging markets countries.
For this purpose, countries with emerging markets are generally those where the
per capita income is in the low to middle ranges, as determined, from time to
time, by the International Bank for Reconstruction and Development ("World
Bank").
The Fund may invest up to 35% of its total assets in debt securities of
U.S. and foreign issuers, including secured and unsecured debt obligations, of
any assigned rating by Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's") or unrated. The Fund may also invest in
non-investment grade rated zero coupon and payment-in-kind ("PIK") securities.
The Fund may enter into repurchase and reverse repurchase agreements,
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.
OTHER ELIGIBLE SECURITIES
The Fund may invest up to 35% of its total assets under ordinary
circumstances and (when, in Keystone's opinion, market conditions warrant) up to
100% of its assets for temporary defensive purposes in the following types of
money market instruments: (1) commercial paper, including master demand notes,
which at the date of investment is rated A-1, the highest grade, by S&P,
PRIME-1, the highest grade, by Moody's or, if not rated by such services, is
issued by a company which at the date of investment has an outstanding issue
rated A or better by S&P or Moody's; (2) obligations, including certificates of
deposit and bankers' acceptances, of banks or savings and loan associations
having at least $1 billion in assets as of the date of their most recently
published financial statements that are members of the Federal Deposit Insurance
Corporation, including United States ("U.S.") branches of foreign banks and
foreign branches of U.S. banks; (3) corporate obligations that at the date of
investment are rated A or better by S&P or Moody's; and (4) obligations issued
or guaranteed by the U.S. government or by any agency or instrumentality of the
U.S.
The Fund may also make temporary investments in debt securities and high
grade preferred stocks for defensive purposes when it believes market conditions
warrant.
The Fund may invest in restricted securities, including securities eligible
for resale pursuant to Rule 144A under the Securities Act of 1933 (the "1933
Act"). Generally, Rule 144A establishes a safe harbor from the registration
requirements of the 1933 Act for resales by large institutional investors of
securities not publicly traded in the U.S. The Fund intends to purchase Rule
144A securities when such securities present an attractive investment
opportunity and otherwise meet the Fund's selection criteria. The Board of
Trustees has adopted guidelines and procedures pursuant to which the liquidity
of the Fund's Rule 144A securities is determined by Keystone and the Board of
Trustees monitors Keystone's implementation of such guidelines and procedures.
At the present time, the Fund cannot accurately predict exactly how the
market for Rule 144A securities will develop. A Rule 144A security that was
readily marketable upon purchase may subsequently become illiquid. In such an
event, the Board of Trustees will consider what action, if any, is appropriate.
The Fund intends to follow policies of the Securities and Exchange
Commission as they are adopted from time to time with respect to illiquid
securities, including, at this time, (1) treating as illiquid, securities which
may not be sold or disposed of in the ordinary course of business within seven
days at approximately the value at which the Fund has valued the investment on
its books and (2) limiting its holdings of such securities to 15% of net assets.
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.
Of course, there can be no assurance that the Fund will achieve its
investment objectives since there is uncertainty in every investment.
FUNDAMENTAL NATURE OF INVESTMENT OBJECTIVES
The investment objectives of the Fund set forth above are fundamental and
may not be changed without the vote of a majority of the Fund's outstanding
shares (which means the lesser of (1) 67% of the shares represented at a meeting
at which more than 50% of the outstanding shares are represented or (2) more
than 50% of the outstanding shares).
INVESTMENT RESTRICTIONS
The Fund has adopted the fundamental restrictions set forth below, which
may not be changed without the vote of a majority of the Fund's outstanding
shares. These restrictions and certain other fundamental restrictions are set
forth in the statement of additional information.
The Fund may not do the following: (1) invest more than 5% of its total
assets in the securities of any one issuer (other than U.S. government
securities) except that up to 25% of its total assets may be invested without
regard to this limit; (2) borrow money, except that the Fund may borrow money
from banks for temporary or emergency purposes in aggregate amounts up to
one-third of the value of the Fund's net assets (computed at cost) or enter into
reverse repurchase agreements provided that bank borrowings and reverse
repurchase agreements, in aggregate, shall not exceed one-third of the value of
the Fund's net assets; and (3) invest more than 25% of its total assets in
securities of issuers in the same 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.
By itself, the Fund does not constitute a balanced investment plan. The
Fund stresses providing current yield, although it will consider the potential
for capital appreciation. Therefore, you should not expect capital appreciation
comparable to that of funds which have that primary objective. The yield of the
Fund's portfolio securities will fluctuate with changing market conditions and
normally in relation to the yield of stocks in the S&P Index of 500 Common
Stocks. 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 and preferred stocks.
Current income levels should not be considered representative of income 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.
Investing in securities of foreign issuers generally involves greater risk
than investing in securities of domestic issuers for the following reasons: (1)
there may be less public information available about foreign companies than is
available about U.S. companies; (2) foreign companies are not generally subject
to the uniform accounting, auditing and financial reporting standards and
practices applicable to U.S. companies; (3) foreign stock markets have less
volume than the U.S. market, and the securities of some foreign companies are
much less liquid and much more volatile than the securities of comparable U.S.
companies; (4) foreign securities transactions may involve higher brokerage
commissions; (5) there may be less government regulation of stock markets,
brokers, listed companies and banks in foreign countries than in the U.S.; (6)
the Fund may incur fees on currency exchanges when it changes investments from
one country to another; (7) the Fund's foreign investments could be affected by
expropriation, confiscatory taxation, nationalization, establishment of currency
exchange controls, political or social instability or diplomatic developments;
(8) fluctuations in foreign exchange rates will affect the value of the Fund's
investments, the value of dividends and interest earned, gains and losses
realized on the sale of securities, net investment income and unrealized
appreciation or depreciation of investments; and (9) interest and dividends on
foreign securities may be subject to withholding taxes in a foreign country that
could result in a reduction of net investment income available for distribution.
Investing in securities of issuers in emerging markets countries involves
exposure to economic systems that are generally less mature and political
systems that are generally less stable than those of developed countries. In
addition, investing in companies in emerging markets countries may also involve
exposure to national policies that may restrict investment by foreigners and
undeveloped legal systems governing private and foreign investments and private
property. The typically small size of the markets for securities issued by
companies in emerging markets countries and the possibility of a low or
nonexistent volume of trading in those securities may also result in a lack of
liquidity and in price volatility of those securities.
The Fund may invest up to 35% of its assets in bonds issued by foreign
issuers rated below investment grade, which entail greater risks of untimely
interest and principal payments, default and price volatility, than higher rated
securities, and may present problems of liquidity and valuation. Investors
should carefully consider these risks before investing.
The maximum return sought by the Fund with respect to a portion of its
assets is ordinarily associated with securities in the lower rating categories
of the recognized rating agencies or with securities that are unrated. Such high
yield, high risk securities are generally rated BB or lower by S&P or BA or
lower by Moody's. The Fund may invest in securities that are rated as low as D
by S&P and C- by Moody's. For a description of these rating categories see
"Additional Investment Information." The Fund intends to invest in D rated debt
only in cases where, in Keystone's judgment, there is a distinct prospect of
improvement in the issuer's financial position as a result of the completion of
a reorganization or otherwise. The Fund may also invest in unrated securities
which, in Keystone's judgment, offer comparable yields and risks to thoseof
securities that are rated, as well as innon-investment quality zero coupon and
PIK securities.
While providing opportunities to maximize return over time, investors
should be aware of the following: (1) securities rated BB or lower by S&P or BA
or lower by Moody's are considered predominantly speculative with respect to the
ability of the issuer to meet principal and interest payments; (2) the value of
high yield, high risk securities may be more susceptible to real or perceived
adverse economic, company or industry conditions than is the case for higher
quality securities; (3) adverse market, credit or economic conditions could make
it difficult at certain times to sell certain high yield, high risk securities
held by the Fund; (4) the secondary market for high yield, high risk securities
may be less liquid than the secondary market for higher quality securities,
which may affect the value of certain high yield, high risk securities held by
the Fund at certain times; and (5) zero coupon and PIK high yield, high risk
securities may be subject to greater changes in value due to market conditions,
the absence of a cash interest payment and the tendency of issuers of such
securities to have weaker overall credit conditions than other high yield, high
risk securities. These characteristics of high yield, high risk securities make
them generally more appropriate for long term investment.
Non-investment grade securities are commonly referred to as high yield or
high risk securities. High yield bonds are also commonly known as "junk bonds".
High yield, high risk securities are generally riskier than higher quality
securities and are subject to more credit risk, including risk of default, and
greater volatility than higher quality securities. In addition, such securities
may have less liquidity and experience more price fluctuation than higher
quality securities. Non-investment grade rated zero coupon and PIK securities
generally are more speculative and subject to higher fluctuations in value than
other high yield, high risk securities.
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.
Since the Fund takes an aggressive approach to investing a portion of its
assets, Keystone tries to maximize the return by controlling risk through
diversification, credit analysis, review of sector and industry trends, interest
rate forecasts and economic analysis. Keystone's analysis of securities focuses
on values based on factors such as interest or dividend coverage, asset values,
earnings prospects and the quality of management of the company. In making
investment recommendations, Keystone also considers current income, potential
for capital appreciation, maturity structure, quality guidelines, coupon
structure, average yield, percentage of zeros and PIKs, percentage of
non-accruing items and yield to maturity. Keystone also considers the ratings of
Moody's and S&P assigned to various securities but does not rely solely on
ratings assigned by Moody's and S&P because (1) Moody's and S&P assigned ratings
are based largely on historical financial data and may not accurately reflect
the current financial outlook of companies, and (2) there can be large
differences among the current financial conditions of issuers within the same
rating category.
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 or until an
investment decision is made to dispose of them.
For additional information regarding the Fund's investments in 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 purposes 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 is currently
closed on weekends, New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of the Fund is arrived at by determining the value of the Fund's
assets, subtracting its liabilities and dividing the result by the number of its
shares outstanding.
Current values for the Fund's portfolio securities are determined in the
following manner:
1. securities that are traded on a national securities exchange or on the
over-the-counter National Market System ("NMS") are valued on the basis of the
last sales price on the exchange where primarily traded or NMS prior to the
time of the valuation, provided that a sale has occurred and that this price
reflects current market value according to procedures established by the Board
of Trustees;
2. securities traded in the over-the-counter market, other than NMS, are
valued at the mean of the bid and asked prices at the time of valuation;
3. short-term instruments having maturities of more than sixty days for
which market quotations are readily available are valued at current market
value; where market quotations are not available, such instruments are valued
at fair value as determined by the Board of Trustees;
4. short-term instruments which are purchased with maturities of sixty
days or less (including all master demand notes) 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 instruments 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; and in any case, reflects fair value as determined by the
Fund's Board of Trustees; and
5. the following securities are valued at prices deemed in good faith to
be fair under procedures established by the Board of Trustees: (a) securities,
including restricted securities, for which complete quotations are not readily
available; (b) listed securities or those on NMS if, in the Fund's opinion,
the last sales price does not reflect a current market value or if no sale
occurred; and (c) other assets.
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 on October 31 of such calendar year. Any
taxable distributions would be (1) declared in October, November or December to
shareholders of record in such month, (2) paid by the following January 31, and
(3) taxable income to the shareholder for the year in which such 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 will make distributions
from the Fund's net investment income quarterly. Distributions of capital gains,
if any, will be made 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 than those attributable to Class A shares, and income
distributions paid by the Fund with respect to Class A shares will generally be
greater than those paid with respect to Class B and Class C shares.
Income dividends received by corporate shareholders may be eligible for the
70% dividends received deduction for corporations.
Distributions are payable in shares of the Fund or, at the shareholder's
option (which must be exercised before the record date for the distribution), in
cash. Distributions are reinvested at net asset value without any sales charge.
Income dividends and net short-term gains distributions are taxable as ordinary
income and net long-term gains distributions are taxable as capital gains
regardless of how long you have held the Fund's shares. However, if Fund shares
held for less than six months are sold at a loss, 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. Dividends and distributions may also be subject to
state and local taxes. The Fund advises Fund 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 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.
INVESTMENT MANAGER
Keystone Management, the Fund's investment manager, 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 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 be performed by Keystone Management, to Keystone and has entered into an
Investment Advisory Agreement (the "Advisory Agreement") with Keystone 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 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
of:
Aggregate Net Asset
Management Value of the Shares
Fee Income of the Fund
--------------------------------------------------------------------------------
1.5% of
Gross Dividend and
Interest Income
plus
0.60% of the first $ 100,000,000, plus
0.55% of the next $ 100,000,000, plus
0.50% of the next $ 100,000,000, plus
0.45% of the next $ 100,000,000, plus
0.40% of the next $ 100,000,000, plus
0.35% of the next $ 500,000,000, plus
0.30% of amounts over $ 1,000,000,000
computed as of the close of business each business day and paid daily.
During the year ended November 30, 1994, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$242,315, which represented 0.65% of the Fund's average net assets. Of such
amount paid to Keystone Management, $205,968 was paid to Keystone for its
services to the Fund.
INVESTMENT ADVISER
Keystone, the Fund's investment adviser, located at 200 Berkeley Street,
Boston, Massachusetts 02116-5034, has provided investment advisory and
management services to investment companies and private accounts since it was
organized in 1932. Keystone is a wholly-owned subsidiary of Keystone Group, Inc.
("Keystone Group"), located at 200 Berkeley Street, Boston, Massachusetts
02116-5034.
Keystone Group is a corporation privately owned by current and former
members of management and certain employees 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, Edward F. Godfrey and Ralph J. Spuehler, Jr. Keystone
Group 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 the 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 Trustees 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 Trustees 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 may be terminated by a
vote of shareholders of the Fund. The Management Agreement and the Advisory
Agreement will terminate automatically upon assignment.
FUND EXPENSES
The Fund will pay all of its expenses. In addition to the investment
advisory and management fees discussed above, the principal expenses that the
Fund is expected to pay include, but are not limited to, expenses relating to
certain of its Trustees, its transfer, dividend disbursing and shareholder
servicing agent, its custodian, 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 November 30, 1994, the Fund's Class A shares paid
1.59% of its average net assets in expenses. For the fiscal year ended November
30, 1994, the Fund's Class B and Class C shares paid 2.31% and 2.34%,
respectively, of average net assets in expenses.
During the fiscal year ended November 30, 1994, the Fund paid or accrued to
Keystone Investor Resource Center, Inc. ("KIRC"), the Fund's transfer and
dividend disbursing agent and Keystone Group, $18,517 for certain accounting and
printing services and $116,408 for shareholder services. KIRC is a wholly-owned
subsidiary of Keystone.
PORTFOLIO MANAGER
Walter McCormick has been the Fund's Portfolio Manager since 1987. Mr.
McCormick is also a Vice President and Senior Portfolio Manager of Keystone and
has more than 25 years' investment experience.
SECURITIES TRANSACTIONS
Under policies established by the 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 follow a policy of considering as a factor the number of shares of
the Fund sold by such broker-dealer. In addition, broker-dealers may, from time
to time, be affiliated with the Fund, 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
The Fund's portfolio turnover rates for the fiscal years ended November 30,
1993 and 1994 were 92% and 57%, respectively. High portfolio turnover may
involve correspondingly greater brokerage commissions and other transaction
costs, which would be borne directly by the Fund, as well as additional realized
gains and/or losses to shareholders. For further information about brokerage and
distributions, see the statement of additional information.
HOW TO BUY SHARES
Shares of the Fund may be purchased from any broker-dealer that has a
selling agreement with Keystone Distributors, Inc. ("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 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 KDI (generally as of the close of the
Exchange on that day) plus, in the case of Class A shares, the 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 of the Fund 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 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 shareholders 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 sales charge.
The initial purchase must be at least $1,000. There is no minimum amount
for subsequent purchases.
The Fund reserves the right to withdraw all or any part of the offering
made by this prospectus and to reject purchase orders.
Shareholder inquiries should be directed to KIRC by calling toll free
1-800-343-2898 or writing to KIRC or to the firm from which you received this
prospectus.
ALTERNATIVE SALES OPTIONS
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 calendar
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 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 daily net assets attributable to their respective classes. As a
result, income distributions paid by the Fund with respect to Class B and Class
C shares will generally be less than those paid with respect to Class A shares.
Investors who would rather pay the entire cost of distribution at the time
of investment, rather than spreading such cost over time, might consider Class A
shares. Other investors might consider Class B or Class C shares, in which case
100% of the purchase price is invested immediately, depending on the amount of
the purchase and the intended length of investment. The Fund will not normally
accept any purchase of Class B shares in the amount of $250,000 or more, and
will not normally accept any purchase of Class C shares in the amount of
$1,000,000 or more.
-------------------------------------
CLASS A SHARES
Class A shares are offered at net asset value plus an initial sales charge as
follows:
AS A % OF CONCESSION TO
AS A % OF NET AMOUNT DEALERS AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED* OFFERING PRICE
Less than $50,000 .................... 5.75% 6.10% 5.25%
$50,000 but less than $100,000 ....... 4.75% 4.99% 4.25%
$100,000 but less than $250,000 ...... 3.75% 3.90% 3.25%
$250,000 but less than $500,000 ...... 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 .... 1.50% 1.52% 1.50%
$1,000,000 and over** ................ 0% 0% 0.25%
------------------
*Rounded to the nearest one-hundredth percent.
**Purchases of $1,000,000 or more may be subject to a contingent deferred
sales charge of 0.25%. See "Calculation of Contingent Deferred Sales Charge
and Waiver of Sales Charges".
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 managed fee based program (a "wrap account") through
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 Keystone Distributors, Inc., 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 through June 30, 1995 ("offering
period") and upon prior notification to Keystone Distributors, Inc., 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 Charge 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"), which provides for payments which are
currently limited to 0.25% annually of the average daily net asset value of
Class A shares, in connection with the distribution of Class A shares. Payments
under the Class A Distribution Plan are currently made to 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 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 Charge 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
(the "Class B Distribution Plan"), which provides for payments 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 Fund for specified periods. See
"Distribution Plans" below.
CLASS C SHARES
Class C shares are available only through dealers who have entered into
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 Charge and Waiver
of Sales Charges" below.
CLASS C DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class C shares
( the "Class C Distribution Plan"), which provides for payments at an annual
rate of up to 1.00% of the average daily net asset value of Class C shares, to
pay expenses of the distribution of Class C shares. 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 Fund 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 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 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 also may sell Class A, Class B or Class C shares at net asset
value without any initial sales charge or a contingent deferred sales charge to
certain Directors, Trustees, officers and employees of the Fund and Keystone and
certain of their affiliates, to registered representatives of firms with dealer
agreements with 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 the
Fund. In addition, dealers may, from time to time, receive additional cash
payments. KDI may 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 also may pay banks and other financial services firms that facilitate
transactions in shares of the Fund for their clients a transaction fee up to the
level of the payments made allowable to dealers for the sale of such shares as
described above.
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 and are used to pay shareholder service fees. 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 value of Class B
shares and Class C shares, respectively, of which 0.25% is used to pay
shareholder service fees.
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 which 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% per annum 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. However, after the termination of any Distribution Plan
at the discretion of the Board of Trustees, KDI may receive payment as
compensation for its services which had been earned at any time during which the
Distribution Plan was in effect. Unpaid distribution costs at November 30, 1994
for Class B and Class C shares were $453,354 (7.63% of Class B net assets) and
$417,105 (7.26% of Class C net assets), respectively.
For the fiscal year ended November 30, 1994, the Fund paid KDI $61,310,
$58,824 and $57,474 pursuant to its 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 redemption 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 you must have completed 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 adjusted for
fractions of a cent and may be more or less than your cost depending upon
changes in the value of the Fund's portfolio securities between purchase and
redemption.
REDEMPTION OF SHARES IN GENERAL
At various times the Fund may be requested to redeem shares for which it
has not yet received good payment. In such a case, the Fund will mail the
redemption proceeds upon clearance of the purchase check, which may take up to
15 days or more. Any delay may be avoided by purchasing shares either with a
certified check or by Federal Reserve or bank wire of funds or EFT. Although the
mailing of a redemption check or 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 also may redeem your shares through broker-dealers. KDI, acting as
agent for the Fund, stands ready to repurchase Fund shares upon orders from
dealers at the redemption value described above computed on the day KDI receives
the order. 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 fees for this
service. However, your broker-dealer may do so.
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 U.S. COMMERCIAL BANK OR TRUST COMPANY OR OTHER PERSONS ELIGIBLE TO
GUARANTEE SIGNATURES UNDER THE SECURITIES EXCHANGE ACT OF 1934 AND KIRC'S
POLICIES. The Fund and KIRC may waive this requirement, but may also require
additional documents in certain cases. Currently, the requirement for a
signature guarantee has been waived on redemptions of $50,000 or less where 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.
The Fund has the right, at any time and without prior notice to a
shareholder, to redeem shares held in any account registered in the name of such
shareholder at current net asset value, if and to the extent that such
redemption is necessary to reimburse the Fund for any loss sustained by reason
of the failure of such shareholder to make full payment for shares of the Fund
purchased or subscribed. The Fund may exercise such right regardless of whether
such shareholder was already an existing shareholder of the Fund at the time of
such purchase or subscription.
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 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.
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.
SMALL ACCOUNTS
Because of the high cost of maintaining small accounts, the Fund reserves
the right to redeem your account if its value has fallen below $1,000, the
current minimum investment level, as a result of your redemptions (but not as a
result of market action). You will be notified in writing and allowed 60 days to
increase the value of your account to the minimum investment level.
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 in any 90-day period up to the lesser of $250,000 or 1% of the
Fund's net assets. 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 when these
securities are sold.
REDEMPTION 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."
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 shareholders specific fund account information; price, total
return and yield quotations; and the ability to effect 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
(1) Class A shares where the original purchase was for $1,000,000 or more
and no sales charge was paid,
(2) Class B shares that have been held for less than four years, or
(3) Class C shares that have been held for less than one year,
and are still subject to a deferred sales charge, such charge will carry over to
the shares being acquired in the exchange transaction.
You may exchange shares for another Keystone Fund for a $10 fee by calling
or writing to Keystone. The exchange fee is waived for individual investors who
make an exchange using KARL. Shares purchased by check are eligible for exchange
after 15 days. The Fund reserves the right, after providing the required notice
to shareholders, to terminate this exchange offer or to change its terms,
including the right to change the fee for each 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.
KEYSTONE AMERICA MONEY LINE
Keystone America Money Line eliminates the delay of mailing a check or the
expense of wiring funds. You must request the service on your application.
Keystone America Money Line allows you to authorize electronic transfers of
money to purchase shares in any amount and to redeem up to $50,000 worth of
shares. You can use Keystone America Money Line like an "electronic check" to
move money between your bank account and your account in the Fund with one
telephone call. You must allow two business days after the call for the transfer
to take place. For money recently invested, you must allow normal check clearing
time before redemption proceeds are sent to your bank.
You may also arrange for systematic monthly or quarterly investments in
your Keystone America account. Once proper authorization is given, your bank
account will be debited to purchase shares in the Fund. You will receive
confirmation from KDI for every transaction.
To change the amount of a Keystone America Money Line service or to
terminate such service (which could take up to 30 days), you must write to
Keystone Investor Resource Center, Inc., P.O. Box 2121, Boston, Massachusetts
02106-2121, and include your account number.
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 Pension 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 an 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,
which may cause a lower average cost per share than a less systematic investment
approach.
Prior to participating in dollar cost averaging, you must have established an
account in a Keystone America Fund or a money market fund managed or advised by
Keystone. You should designate on the application the dollar amount of each
monthly or quarterly investment (minimum $100) you wish to make and 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 the application
and indicate the Keystone America Fund(s) into which distributions are to be
invested. The value of shares purchased will be ineligible for Rights of
Accumulation and Letters of Intent.
OTHER SERVICES
Under certain circumstances, you may, within 30 days after a redemption,
reinstate your account 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 industry
publications including Morningstar, Inc., Standard and Poor's Corporation,
Lipper Analytical Services, Inc. and 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 additional classes of shares.
Shareholders of the Fund 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 Declaration of Trust of the Fund, shareholders have the right to remove
Trustees by an affirmative vote of two-thirds of the outstanding shares. A
special meeting of the shareholders will be held when 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 written notice to those shareholders, the Fund intends, when an
annual report or semi-annual report of the Fund is required to be furnished, to
mail one copy of such report to that address.
Except as otherwise stated in this prospectus or required by law, the Fund
reserves the right to change the terms of the offer stated in this prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
CORPORATE BOND RATINGS
Higher yields are usually available on securities that are lower rated or
that are unrated. Bonds rated BAA by Moody's are considered as medium grade
obligations which are neither highly protected nor poorly secured. Debt rated
BBB by S&P is regarded as having an adequate capacity to pay interest and repay
principal, although adverse economic conditions 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. Lower rated securities are usually defined as
BAA or lower by Moody's or BBB or lower by S&P. The Fund may purchase unrated
securities, which are not necessarily of lower quality than rated securities but
may not be attractive to as many buyers. Debt rated BB, B, CCC, CC and C by S&P
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. Debt rated CI by S&P is debt (income
bonds) on which no interest is being paid. Debt rated D by S&P is in default and
payment of interest and/or repayment of principal is in arrears. The Fund
intends to invest in D-rated debt only in cases where in Keystone's judgment
there is a distinct prospect of improvement in the issuer's financial position
as a result of the completion of reorganization or otherwise. Bonds which are
rated CAA by Moody's are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated CA by Moody's represent obligations which are speculative
in a high degree. Such issues are often in default or have other market
shortcomings. Bonds which are rated C by Moody's are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
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, and the
borrower may repay up to the full amount of the note without penalty. Notes
purchased 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 the 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 pay principal and interest on demand. In
connection with master demand notes, 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 typically are not rated by
credit rating agencies. Unless rated, the Fund may invest in them only if the
issuer meets the criteria established for commercial paper discussed in the
statement of additional information, which limit such investments to commercial
paper rated A-1 by S&P, Prime-1 by Moody's or F-1 by Fitch Investors Service,
Inc.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with member banks of the
Federal Reserve System which have at least $1 billion in assets, primary dealers
in U.S. government securities or other financial institutions believed by
Keystone to be creditworthy. Such persons are required to be registered as U.S.
government securities dealers with an appropriate regulatory organization. Under
such agreements, the bank, primary dealer or other financial institution agrees
upon entering into the contract to repurchase the security at a mutually agreed
upon date and price, thereby determining the yield during the term of the
agreement. This results in a fixed rate of return insulated from market
fluctuations during such period. Under a repurchase agreement, the seller must
maintain the value of the securities subject to the agreement at not less than
the repurchase price, and such value will be determined on a daily basis by
marking the underlying securities to their market value. Although the securities
subject to the repurchase agreement might bear maturities exceeding a year, the
Fund only intends to enter into repurchase agreements which provide for
settlement within a year and usually within seven days. Securities subject to
repurchase agreements will be held by the Fund's custodian or in the Federal
Reserve book entry system. The Fund does not bear the risk of a decline in the
value of the underlying security unless the seller defaults under its repurchase
obligation. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, the Fund could experience both delays in liquidating the
underlying securities and losses including (1) possible declines in the value of
the underlying securities during the period while the Fund seeks to enforce its
rights thereto; (2) possible subnormal levels of income and lack of access to
income during this period; and (3) expenses of enforcing its rights. The Board
of Trustees of the Fund has established procedures to evaluate the
creditworthiness of each party with whom the Fund enters into repurchase
agreements by setting guidelines and standards of review for Keystone and
monitoring Keystone's actions with regard to repurchase agreements.
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 having a value not less than the repurchase price (including accrued
interest) and will subsequently monitor the account to maintain such value.
Reverse repurchase agreements involve the risk that the market value of the
securities which 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 Securities and Exchange Commission has taken the position that reverse
repurchase agreements are subject to the percentage limit on borrowings imposed
on a fund under the 1940 Act.
FOREIGN SECURITIES
The Fund may invest up to 50% of its assets in securities principally
traded in securities markets outside the U.S. While investment in foreign
securities is intended to reduce risk by providing further diversification, such
investments involve sovereign risk in addition to the credit and market risks
normally associated with domestic securities. Foreign investments may be
affected favorably or unfavorably by changes in currency rates and exchange
control regulations. There may be less publicly available information about a
foreign company, particularly emerging market country companies, than about a
U.S. company, and foreign companies may not be subject to accounting, auditing
and financial reporting standards and requirements comparable to those
applicable to U.S. companies. Securities of some foreign companies are less
liquid or more volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the United States.
Investments in foreign securities may also be subject to other risks different
from those affecting U.S. investments, including local political or economic
developments, expropriation or nationalization of assets, imposition of
withholding taxes on dividend or interest payments and currency blockage (which
would prevent cash from being brought back to the United States).
"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 for the purpose
of acquiring portfolio securities consistent with its investment objectives and
policies and not for the purpose of investment leverage. The Fund currently does
not intend to invest more than 5% of its assets in when issued or delayed
delivery transactions.
DERIVATIVES
The Fund may use derivatives while seeking to achieve 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 as well as forwards 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, futures,
forwards and swaps, 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.
Debt instruments that incorporate one or more of these building blocks for
the purpose of determining the principal amount of and/or rate of interest
payable on the debt instruments are often referred to as "structured
securities." An example of this type of structured security is indexed
commercial paper. The term is also used to describe certain securities issued in
connection with the restructuring of certain foreign obligations. See "Indexed
Commercial Paper" and "Structured Securities" below. The term "derivative" is
also sometimes used to describe securities involving rights to a portion of the
cash flows from an underlying pool of mortgages or other assets from which
payments are passed through to the owner of, or that collateralize, the
securities. See "Mortgage Related Securities," "Collateralized Mortgage
Obligations," "Adjustable Rate Mortgage Securities," "Stripped Mortgage
Securities," "Mortgage Securities -- Special Considerations," and "Other
Asset-Backed Securities" and the Fund's statement of additional information.
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 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 exists when 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.
* Leverage Risk -- Since many derivatives have a leverage component, adverse
changes in the value or level of the underlying asset, rate or index can
result in a loss substantially greater than the amount invested in the
derivative itself. In the case of swaps, the risk of loss generally is
related to a notional principal amount, even if the parties have not made
any initial investment. Certain derivatives have the potential for unlimited
loss, regardless of the size of the initial investment.
* Other Risks -- Other risks in using derivatives include the risk of
mispricing or improper valuation and the inability of derivatives to
correlate perfectly with underlying assets, rates and indices. Many
derivatives, in particular privately negotiated derivatives, are complex and
often valued subjectively. Improper valuations can result in increased cash
payment requirements to counterparties or a loss of value to a Fund.
Derivatives do not always perfectly or even highly correlate or track the
value of the assets, rates or indices they are designed to closely track.
Consequently, the Fund's use of derivatives may not always be an effective
means of, and sometimes could be counterproductive to, furthering the Fund's
investment objective.
OPTIONS TRANSACTIONS
WRITING COVERED OPTIONS
The Fund may write (i.e., sell) covered call and put 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 also may write straddles (combinations of covered
puts and calls on the same underlying security).
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.
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 with its custodian in a segregated account liquid assets
having a value equal to or greater than the exercise price of the option.
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, and 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 put and call options, including put or call options
for the purpose of offsetting previously written put and 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 or dispose of assets held in a segregated account until
the options expire or are exercised.
An option position may be closed out only in a secondary market for an
option of the same series. Although the Fund generally will 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.
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 objectives.
OPTIONS TRADING MARKETS
Options in which the Fund will trade are generally listed on national
securities 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. Options on some securities may not be listed
on any Exchange but traded in the over-the-counter market. Options traded in the
over-the-counter market involve the additional risk that securities dealers
participating in such transactions would fail to meet their obligations to the
Fund. The use of options traded in the over-the-counter market may be subject to
limitations imposed by certain state securities authorities. In addition to the
limits on its use of options discussed herein, the Fund is subject to the
investment restrictions described in this prospectus and the statement of
additional information.
The staff of the Securities Exchange Commission 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 investment restrictions relating to
illiquid securities.
FUTURES TRANSACTIONS
The Fund may enter into currency and other financial futures contracts and
write options on such contracts. The Fund intends to enter into such contracts
and related options for hedging purposes. The Fund will enter into futures on
securities, currencies or index-based futures contracts in order to hedge
against changes in interest or exchange rates or securities prices. A futures
contract on securities or currencies is an agreement to buy or sell securities
or currencies at a specified price during a designated month. A futures contract
on a securities index does not involve the actual delivery of securities, but
merely requires the payment of a cash settlement based on changes in the
securities index. 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 which continues
until the contract is terminated.
The Fund may sell or purchase currency and other financial 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 sells futures contracts in order to offset a possible
decline in the value of its securities or currencies. If a futures contract is
purchased by the Fund, the value of the contract will tend to rise when the
value of the underlying securities or currencies increases and to fall when the
value of such securities or currencies declines. 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 also intends to purchase put and call options on currency and
other financial 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 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, interest rate or exchange rate risk, unanticipated changes in
interest rates, exchange rates or market prices could result in poorer
performance than if it had not entered into these transactions. Even if Keystone
correctly predicts interest or exchange rate 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 or currencies positions may be caused
by differences between the futures and securities or currencies markets or by
differences between the securities or currencies underlying the Fund's futures
position and the securities or currencies 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 or
leverage. The Fund has the ability to write options on futures, but intends to
write such options only to close out options purchased by the Fund. The Fund
will not change these policies without supplementing the information in its
prospectus and statement of additional information.
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, 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 and 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
rate 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.
LOANS OF SECURITIES TO BROKER-DEALERS
The Fund may lend securities to brokers and dealers pursuant to agreements
requiring that the loans be continuously secured by cash, or securities of the
U.S. government, its agencies or instrumentalities or any combination of cash
and such securities, as collateral equal at all times in value to at least the
market value of the securities loaned. Such securities loans will not be made
with respect to the Fund if as a result the aggregate of all outstanding
securities loans exceeds 15% of the value of the Fund's total assets taken at
their current value. The Fund continues to receive interest or dividends on the
securities loaned and simultaneously earns interest on the investment of the
cash loan collateral in U.S. Treasury notes, certificates of deposit, other
high-grade, short-term obligations or interest bearing cash equivalents.
Although voting rights attendant to securities loaned pass to the borrower, such
loans may be called at any time and will be called so that the securities may be
voted by the Fund if, in the opinion of the Fund, a material event affecting the
investment is to occur. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even loss of rights in the
collateral should the borrower of the securities fail financially. Loans may
only be made, however, to borrowers deemed to be of good standing, under
standards approved by the Board of Trustees, when the income to be earned from
the loan justifies the attendant risks.
<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>
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
KAFTR-P 3/95
26M
KEYSTONE
AMERICA
[PHOTO: MUSICAL INSTRUMENTS LYING ATOP SHEET MUSIC]
FUND FOR
TOTAL RETURN
PROSPECTUS AND
APPLICATION
<PAGE>
KEYSTONE AMERICA FUND FOR TOTAL RETURN
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
KEYSTONE AMERICA FUND FOR TOTAL RETURN
STATEMENT OF ADDITIONAL INFORMATION
MARCH 31, 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 Fund For Total Return (the "Fund") dated March 31, 1995. A copy of the
prospectus may be obtained from Keystone Distributors, Inc. ("KDI"), the Fund's
current principal underwriter ("Principal Underwriter"), 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
TABLE OF CONTENTS
Page
The Fund 2
Investment Policies 2
Investment Restrictions 2
Dividends and Taxes 5
Valuation of Securities 6
Brokerage 7
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-14
<PAGE>
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THE FUND
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The Fund is a diversified, open-end, management investment company
commonly known as a mutual fund. The Fund seeks total return from a combination
of capital growth and income.
The Fund was formed as a Massachusetts business trust on October 24,
1986. The Fund is managed by Keystone Management, Inc. ("Keystone Management")
and advised by Keystone Custodian Funds, Inc. ("Keystone").
The essential information about the Fund is contained in its
prospectus. This statement of additional information provides additional
information about the Fund that may be of interest to some investors.
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INVESTMENT POLICIES
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Under ordinary circumstances, the Fund will invest principally in
dividend paying common stocks, preferred stocks and securities convertible into
common stocks. Certain investments, investment techniques, including the risks
associated with such investments and investment techniques, and ratings criteria
applicable to the Fund are more fully explained in the Appendix to this
statement of additional information.
FUNDAMENTAL NATURE OF INVESTMENT OBJECTIVES
The investment objectives of the Fund are fundamental and may not be
changed without approval of the holders of a majority of the Fund's outstanding
voting shares (which means the lesser of (1) 67% of the shares represented at a
meeting at which more than 50% of the outstanding shares are represented or (2)
more than 50% of the outstanding shares).
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INVESTMENT RESTRICTIONS
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The following investment restrictions are fundamental and may not be
changed without the vote of a majority of the Fund's outstanding voting shares.
Unless otherwise stated, all references to the assets of the Fund are in terms
of current market value.
The Fund may not do any of the following:
(1) purchase any security (other than United States ("U.S.") government
securities) of any issuer if as a result more than 5% of its total assets would
be invested in securities of the issuer, except that up to 25% of its total
assets may be invested without regard to this limit;
(2) purchase securities on margin except that it may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of securities;
(3) 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 or of securities which, without payment of any further consideration,
are convertible into or exchangeable for securities of the same issue as, and
equal in amount to, the securities sold short;
(4) borrow money or enter into reverse repurchase agreements, except
that the Fund may enter into reverse repurchase agreements or borrow money from
banks for temporary or emergency purposes in aggregate amounts up to one-third
of the value of the Fund's net assets; provided that while borrowings from banks
(not including reverse repurchase agreements) exceed 5% of the Fund's net
assets, any such borrowings will be repaid before additional investments are
made;
(5) pledge more than 15% of its net assets to secure indebtedness; the
purchase or sale of securities on a "when issued" basis or collateral
arrangement with respect to the writing of options on securities are not deemed
to be a pledge of assets;
(6) issue senior securities; the purchase or sale of securities on a
"when issued" basis or collateral arrangement with respect to the writing of
options on securities are not deemed to be the issuance of a senior security;
(7) make loans, except that the Fund may purchase or hold debt
securities consistent with its investment objective, lend portfolio securities
valued at not more than 15% of its total assets to broker-dealers and enter into
repurchase agreements;
(8) purchase any security (other than U.S. government securities) of
any issuer if as a result more than 25% of its total assets would be invested in
a single industry; except that (a) there is no restriction with respect to
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities; (b) wholly-owned finance companies will be considered to be
in the industries of their parents if their activities are primarily related to
financing the activities of the parents; (c) the industry classification of
utilities will be determined according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (d) the industry classification of medically related industries
will be determined according to their services (for example, management,
hospital supply, medical equipment and pharmaceuticals will each be considered a
separate industry);
(9) invest more than 5% of its total assets in securities of any
company having a record, together with its predecessors, of less than three
years of continuous operation;
(10) purchase securities of other investment companies, except as part
of a merger, consolidation, purchase of assets or similar transaction;
(11) purchase or sell commodities or commodity contracts or real
estate, except that it may purchase and sell securities secured by real estate
and securities of companies which invest in real estate and may engage in
currency or other financial futures contracts and related options transactions;
(12) underwrite securities of other issuers, except that the Fund may
purchase securities from the issuer or others and dispose of such securities in
a manner consistent with its investment objectives;
(13) purchase any security (other than U.S. government securities) of
any issuer if as a result the Fund would hold more than 10% of the voting
securities of the issuer; and
(14) purchase any security for the purpose of control or management.
If a percentage limit is satisfied at the time of investment or
borrowing, a later increase or decrease resulting from a change in asset value
is not a violation of the limit.
Additional restrictions adopted by the Fund, which may be changed by
the Board of Trustees, provide that the Fund may not purchase or retain
securities of an issuer if, to the knowledge of the Fund, any officer, Trustee
or Director of the Fund, Keystone Management or Keystone each owning
beneficially more than 1/2 of 1% of the securities of such issuer own in the
aggregate more than 5% of the securities of such issuer, or such persons or
management personnel of the Fund, Keystone Management or Keystone have a
substantial beneficial interest in the securities of such issuer. Portfolio
securities of the Fund may not be purchased from or sold or loaned to Keystone
Management, Keystone or any affiliate thereof or any of their Directors,
officers or employees.
Although not fundamental restrictions or policies requiring a
shareholders' vote to change, the Fund has undertaken to a state securities
authority that, so long as the state authority requires and shares of the Fund
are registered for sale in that state, the Fund (1) will not write puts and
calls on securities unless (a) the options issued by the Options Clearing
Corporation, (b) the security underlying the put or call is within the
investment policies of the Fund, and (c) the aggregate value of the securities
underlying the calls or obligations underlying the puts, determined as of the
date of sale, does not exceed 25% of its net assets; (2) will not buy and sell
puts and calls written by others unless (a) the options are listed on a national
securities or commodities exchange or offered through certain approved national
securities associations, and (b) the aggregate premiums paid on such options
held at any time do not exceed 20% of the Fund's net assets; (3) limit its
purchase of warrants to 5% of the net assets, of which 2% may be warrants not
listed on the New York or American Stock Exchange; (4) will not invest in
interests in oil, gas or other mineral leases, or exploration, or development
programs, except publicly traded securities of companies engaging in such
activities; (5) not invest in real estate limited partnership interests; (6)
will not invest more than 5% of its assets in securities of issuers that the
Fund may not sell to the public without registration under the Securities Act of
1933; (7) will not invest in securities (other than U.S. government securities)
of any isser if, as a result, more than 5% of its total assets would be invested
in securities of a single issuer; and (8) maintain 300% asset coverage on any
bank borrowings.
In order to permit the sale of Fund shares in certain states, the Fund
may make commitments more restrictive than the investment restrictions described
above. Should the Fund determine that any such commitment is no longer in the
best interests of the Fund, it will revoke the commitment by terminating sales
of its shares in the state involved.
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DIVIDENDS AND TAXES
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The Fund intends to distribute to its shareholders dividends from net
investment income quarterly and all net realized long-term capital gains
annually. Dividends will be distributed 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 such shares
determined on the basis of the Fund's net asset value per share computed at the
end of the day on the record date after adjustment for the distribution. Net
asset value is used in computing the number of shares in both gains and income
distribution reinvestments. Account statements and/or checks as appropriate will
be mailed to shareholders within seven days after the Fund pays the
distribution. Unless the Fund receives instructions to the contrary from a
shareholder before the record date, it will assume that the shareholder wishes
to receive that distribution and future gains and income distributions in
shares. Instructions continue in effect until changed in writing.
Distributed long-term capital gains are taxable as such to the
shareholder 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.
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VALUATION OF SECURITIES
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Current values for the Fund's portfolio securities are determined in
the following manner:
(1) securities that are traded on a national securities exchange or the
over-the-counter National Market System ("NMS") are valued on the basis of the
last sales price on the exchange where primarily traded or NMS prior to the time
of the valuation, provided that a sale has occurred and that this price reflects
current market value according to procedures established by the Board of
Trustees;
(2) securities traded in the over-the-counter market, other than on
NMS, for which market quotations are readily available, are valued at the mean
of the bid and asked prices at the time of valuation;
(3) short-term instruments which are purchased with maturities of sixty
days or less (including all master demand notes) 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 instruments 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; and
which in either case reflects fair value as determined by the Fund's Board of
Trustees; and
(4) short-term instruments having maturities of more than sixty days
for which market quotations are readily available, are valued at current market
value; where market quotations are not available, such instruments are valued at
fair value as determined by the Board of Trustees;
(5) the following securities are valued at prices deemed in good faith
to be fair under procedures established by the Board of Trustees: (a)
securities, including restricted securities; for which complete quotations are
not readily available; (b) listed securities or those on NMS if, in the Fund's
opinion, the last sales price does not reflect a current market value or if no
sale occurred; and (c) other assets.
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BROKERAGE
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It is the policy of the Fund, in effecting transactions in portfolio
securities, to seek best execution of orders at the most favorable prices. The
determination of what may constitute best execution and price in the execution
of a securities transaction by a broker involves a number of considerations,
including, without limitation, the overall direct net economic result to the
Fund, involving both price paid or received and any commissions and other costs
paid, the efficiency with which the transaction is effected, the ability to
effect the transaction at all where a large block is involved, the availability
of the broker to stand ready to execute potentially difficult transactions in
the future and the financial strength and stability of the broker. Management
weighs such considerations when 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, Keystone Management or Keystone is
considered to be in addition to and not in lieu of services required to be
performed by Keystone Management under its Investment Management Agreement with
the Fund or Keystone under its Investment Advisory Agreement with Keystone
Management. The cost, value and specific application of such information are
indeterminable and cannot be practically allocated among the Fund and other
clients of Keystone Management or 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 Management Agreement and the Investment
Advisory Agreement, Keystone Management and Keystone are permitted to pay higher
brokerage commissions for brokerage and research services in accordance with
Section 28(e) of the Securities Exchange Act of 1934. In the event Keystone
Management and Keystone do follow such a practice, they will do so on a basis
that is fair and equitable to the Fund.
The Fund expects that purchases and sales of securities usually will be
effected through brokerage transactions for which commissions are payable.
Purchases from underwriters will include the underwriting commission or
concession, and purchases from dealers serving as market makers will include a
dealer's mark up or reflect a dealer's mark down. Where transactions are made in
the over-the-counter market, the Fund will deal with primary market makers
unless more favorable prices are otherwise obtainable.
The Fund may participate, if and when practicable, in group bidding for
the purchase directly from an issuer of certain securities for the Fund's
portfolio in order to take advantage of the lower purchase price available to
members of such a group.
Neither Keystone Management, 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
Management or Keystone from those of the other funds and investment accounts
managed by Keystone Management or Keystone. It may frequently develop that the
same investment decision is made for more than one fund. Simultaneous
transactions are inevitable when the same security is suitable for the
investment objective of more than one account. When two or more funds or
accounts are engaged in the purchase or sale of the same security, the
transactions are allocated as to amount in accordance with a formula 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 November 30, 1992 and 1993, the Fund paid
$24,924 and $59,217, respectively in brokerage commissions. For the fiscal year
ended November 30, 1994, the Fund paid $65,514 in brokerage commissions.
In no instance are portfolio securities purchased from or sold to
Keystone Management, Keystone, KDI or any of their affiliated persons, as
defined in the Investment Company Act of 1940 ("1940 Act") and rules and
regulations issued thereunder.
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SALES CHARGES
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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 charge payable upon redemption during the calendar year of
purchase or 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 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 applicable to subsequent purchases and a description of applicable
contingent deferred sales charges.
<PAGE>
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 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 exchange purchase is assumed to be the year shares tendered
for exchange were originally purchased.
WAIVER OF SALES CHARGES
Shares also may be sold, to the extent permitted by applicable law,
regulations, interpretations or exemptions, at net asset value without the
imposition of an initial sales charge to (1) certain Directors, Trustees,
officers, full-time employees and sales representatives of the Fund, Keystone
Management, Keystone, Keystone Group, Inc. ("Keystone Group"), Hartwell
Management Company, Inc., Harbor Capital Management Company, Inc., their
subsidiaries or KDI, who have been such for not less than ninety days; (2) a
pension and profit-sharing plan established by any such company, their
subsidiaries and affiliates, for the benefit of their Trustees, Directors,
officers, full-time employees and sales representatives; or (3) a registered
representative of a firm with a dealer agreement with KDI, provided all such
sales are made upon the written assurance that the purchase is made for
investment purposes and that the securities will not be resold except through
redemption by the Fund.
No initial sales charge is charged on purchases of shares of the Fund
by a bank or trust company in a single account in the name of such bank or trust
company as trustee, if the initial investment in shares of the Fund or any
Keystone Group Fund 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. In addition, no contingent deferred sales charge is imposed on
redemptions of such shares.
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
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.
<PAGE>
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DISTRIBUTION PLANS
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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 National Association of Securities Dealers, Inc.
("NASD") limits the amount that a 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 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 that is primarily intended to result in the sale of Class A 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 specific 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 attributable to Class B shares to finance any activity that is primarily
intended to result in the sale of Class B shares, including, without limitation,
expenditures consisting of payments to the Principal Underwriter of the Fund
(currently KDI) to enable the Principal Underwriter to pay to others (dealers)
commissions in respect of Class B shares of the Fund sold since inception of the
Distribution Plan; and (2) to enable the Principal Underwriter to pay or to have
paid to others a service fee, at such intervals as the Principal Underwriter may
determine, in respect of Class B shares maintained by any such recipients
outstanding on the books of the Fcund 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.
CLASS C DISTRIBUTION PLAN
The Class C Distribution Plan provides that the Fund may expend daily
amounts at an annual rate of up to 1.00% of the Fund's average daily net asset
value attributable to Class C shares to finance any activity that is primarily
intended to result in the sale of Class C shares, including, without limitation,
expenditures consisting of payments to a Principal Underwriter of the Fund
(currently KDI) to enable the Principal Underwriter to pay to others (dealers)
(1) commissions in respect of Class C shares sold since inception of the
Distribution Plan; and (2) to enable the Principal Underwriter to pay or to have
paid to others a service fee, at such intervals as the Principal Underwriter may
determine, in respect of Class C shares maintained by any such recipients
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; such payment to consist of a commission in the amount of
0.75% plus the first year's service fee in advance in the amount of 0.25%, and
(2) 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 at an annual rate of 0.25%, respectively, of the average daily 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 Distribution Plan is subject to a state
expense limit will depend upon the nature of the expenditure and the terms of
the state law, regulation or order imposing the limit. The Fund does not treat
Distribution Plan expenses as 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 Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
shares of the respective Class of the Fund. 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 that had been earned at any time during which the
Class B Distribution Plan was in effect. Unpaid distribution costs at November
30, 1994 for the Class B and C shares were $453,354 (7.63% of net class assets)
and $417,105 (7.26% of net class assets), respectively.
Any change in the Distribution Plan that would materially increase the
distribution expenses of the Fund provided for in the Distribution Plans
requires shareholder approval. Otherwise, the Distribution Plans may be amended
by the Trustees, including the Rule 12b-1 Trustees.
While a Distribution Plan is in effect, the Fund will be required to
commit the selection and nomination of candidates for Independent Trustees to
the discretion of the Independent Trustees.
The total amounts paid by the Fund under the foregoing arrangements may
not exceed the maximum Distribution Plan limit specified above, and the amounts
and purposes of expenditures under a Distribution Plan must be reported to the
Rule 12b-1 Trustees quarterly. The Rule 12b-1 Trustees may require or approve
changes in the implementation or operation of a Distribution Plan, and may also
require that total expenditures by the Fund under a Distribution Plan be kept
within limits lower than the maximum amount permitted by a Distribution Plan as
stated above.
For the fiscal year ended November 30, 1994, the Fund paid KDI $61,310,
$58,824 and $57,474 pursuant to its Class A, Class B and Class C Distribution
Plans, respectively. This amount was used to pay commissions and service fees.
The Independent Trustees of the Fund have determined that the sales of
the Fund's shares resulting from payments under the Distribution Plans have
benefited the Fund.
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TRUSTEES AND OFFICERS
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The 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 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 of all 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).
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 recruitment); and Director, Commerce and
Industry Association of New Jersey, 411 International, Inc. and J & M
Cumming Paper Co.
RICHARD J. SHIMA: Trustee of the Fund; Trustee or Director of all other
Keystone 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.
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 November 30, 1994, no Trustee affiliated
with Keystone or any officer received any direct remuneration from the Fund. The
unaffiliated Trustees of the Fund, as a group, received no amounts for expenses
incurred. Annual retainers and meeting fees paid by all Keystone Group funds
(which included over 30 mutual funds) for the fiscal year ended November 30,
1994, totalled $585,970. As of December 31, 1994, 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.
<PAGE>
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INVESTMENT MANAGER
--------------------------------------------------------------------------------
Subject to the general supervision of the Fund's Board of Trustees,
Keystone Management, located 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 other Keystone Custodian Funds and to certain
other funds in the Keystone Group of Mutual 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 has agreed to
manage and administer the operation of the Fund, and manage 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 officers and
trustees of the Fund who are affiliated with the investment manager and will 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
information, notices, reports and proxy materials to shareholders of the Fund;
expenses of shareholders' and Trustees' meetings; charges and expenses of legal
counsel for the Fund and for the Trustees of the Fund on matters relating to the
Fund, charges and expenses of filing annual and other reports with the SEC and
other authorities; and all extraordinary charges and expenses of the Fund.
The Management Agreement permits Keystone Management to enter into an
agreement with Keystone or another investment adviser under which Keystone or
another 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 presently provides the Fund with certain admistrative and
management services, such 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; (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:
Aggregate Net Asset Value
Management of the Shares
Fee Income of the Fund
--------------------------------------------------------------------------------
1.5% of
Gross Dividend and
Interest Income
Plus
0.60% of the first $ 100,000,000, plus
0.55% of the next $ 100,000,000, plus
0.50% of the next $ 100,000,000, plus
0.45% of the next $ 100,000,000, plus
0.40% of the next $ 100,000,000, plus
0.35% of the next $ 500,000,000, plus
0.30% of amounts over $1,000,000,000;
computed as of the close of business each business day and paid 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.
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. Keystone Management is not required, however,
to make such reimbursements to the extent it would result in the Fund's
inability to qualify as a regulated investment company under provisions of the
Internal Revenue Code. This condition may be modified or eliminated in the
future.
The Management Agreement continues in effect 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. The Management Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
For an additional discussion of fees paid to Keystone Management, see
"Investment Adviser" below.
--------------------------------------------------------------------------------
INVESTMENT ADVISER
--------------------------------------------------------------------------------
Pursuant to the Management Agreement, Keystone Management has delegated
its investment management functions, except for certain administrative and
management services to be performed by Keystone Management, to Keystone and has
entered into an Investment Advisory Agreement, (the "Advisory Agreement") with
Keystone under 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, 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
Keystone Group is a corporation privately owned by current and former
members of management and certain employees 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, Edward F. Godfrey, and Ralph J. Spuehler, Jr. Keystone
Group 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.
Pursuant to the Advisory Agreement and subject to the supervision of
the Fund's Board of Trustees, Keystone manages and administers the Fund's
operation, 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
officers and Trustees of the Fund who are affiliated with the investment manager
as well as pay all expenses of Keystone incurred in connection with the
provisions of its services. All charges and expenses other than those
specifically referred to as being borne by Keystone will be paid by the Fund,
including, but not limited to, custodian charges and expenses, bookkeeping and
auditors' charges and expenses; transfer agent charges and expenses; fees of
Independent Trustees; brokerage commissions, brokers' fees and expenses; issue
and transfer taxes; costs and expenses under the Distribution Plans; taxes and
trust fees payable to governmental agencies; the cost of share certificates;
fees and expenses of the registration and qualification of the Fund and its
shares with the 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 year ended November 30, 1992, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$160,094, which represented 0.66% of the Fund's average daily net assets. Of
such amount paid to Keystone Management, $136,080 was paid to Keystone for its
services to the Fund.
During the year ended November 30, 1993, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$200,203, which represented 0.65% of the Fund's average daily net assets. Of
such amount paid to Keystone Management, $170,173 was paid to Keystone for its
services to the Fund.
During the fiscal year ended November 30, 1994, the Fund paid or
accrued to Keystone Management investment management and administrative services
fees of $242,315, which represented 0.65% of the Fund's average daily net
assets. Of such amount paid to Keystone Management, $205,968 was paid to
Keystone for its services to the Fund.
--------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER
--------------------------------------------------------------------------------
The Fund has entered into a Principal Underwriting Agreement (the
"Underwriting Agreement") with KDI, pursuant to which KDI acts as the Fund's
Principal Underwriter. KDI located at 200 Berkeley Street, Boston,
Massachusetts, 02116-5034, is a Delaware corporation wholly-owned by Keystone.
KDI, as agent, has agreed to use its best efforts to find purchasers for the
shares. KDI may retain and employ representatives to promote distribution of
the shares and may obtain orders from brokers, dealers and others, acting as
principals, for sales of shares to them. The Underwriting Agreement provides
that KDI will bear the expense of preparing, printing and distributing
advertising and sales literature and prospectuses used by it. In its capacity as
Principal Underwriter, KDI may receive payments from the Fund pursuant to the
Fund's Distribution Plans.
All subscriptions and sales of shares by KDI are at the offering price
of the shares in accordance with the provisions of the Fund's Declaration of
Trust, By-Laws, the current prospectus and statement of additional information.
All orders are subject to acceptance by the Fund, and the Fund reserves the
right in its sole discretion to reject any order received. Under the
Underwriting 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
connection with any claim or in connection with any action, suit or proceeding
to which any of them may be a party, which 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 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.
--------------------------------------------------------------------------------
DECLARATION OF TRUST
--------------------------------------------------------------------------------
MASSACHUSETTS BUSINESS TRUST
The Fund is a Massachusetts business trust established under a
Declaration of Trust dated October 24, 1986 ("Declaration of Trust"). 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 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 in the Fund with each other share of
that class. Upon liquidation, shares are entitled to a pro rata share of the
Fund based on the relative net assets of each class. Shareholders have no
preemptive or conversion rights. Shares are redeemable and transferable. The
Fund currently issues three classes of shares, but may issue additional classes
or series of shares.
SHAREHOLDER LIABILITY
Pursuant to certain decisions of the Supreme Judicial Court of
Massachusetts, shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable 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) the Declaration of Trust Agreement
provides for indemnification out of Fund property for any shareholder held
personally liable for the obligations of the Fund.
VOTING RIGHTS
Under the Declaration of Trust Agreement 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 Agreement 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, 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 a
Trustee becomes mentally or physically incapacitated; or (3) at a special
meeting of shareholders by a two-thirds vote of the outstanding shares. Any
Trustee may voluntarily resign from office.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only
for his own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, shall not be
liable for any neglect or wrongdoing of any such person; provided, however, that
nothing in the Declaration of Trust shall protect a Trustee against any
liability for his willful misfeasance, bad faith, gross negligence or reckless
disregard of his duties.
The Trustees have absolute and exclusive control over the management
and disposition of all assets of the Fund and may perform such acts as in their
sole judgment and discretion are necessary and proper for conducting the
business and affairs of the Fund or promoting the interests of the Fund and the
shareholders.
--------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS
--------------------------------------------------------------------------------
Total return quotations for a class of shares of the Fund as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one, five and ten year periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added and the maximum sales
charge and all recurring fees charged to all shareholder accounts are deducted.
The ending redeemable value assumes a complete redemption at the end of the
relevant periods.
The average annual total return for Class A of the Fund for the period
April 14, 1987 (commencement of investment operations) through November 30, 1994
was 71.73%. The average annual total returns for Class A of the Fund for the one
and five year periods ended November 30, 1994 were 33.27% and (8.25)%,
respectively. The average annual compounded rate of return for Class A of the
Fund for the period April 14, 1987 (commencement of investment operations)
through November 30, 1994 was 7.34%. The average annual compounded rate of
return for Class A of the Fund for the five year period ended November 30, 1994
was (8.25)%. The average annual total returns for Class B and Class C of the
Fund for the period February 1, 1993 (date of initial public offering) through
November 30, 1994 were .31% and 3.18%, respectively. The average annual total
returns for Class B and Class C for the one year ended November 30, 1994 were
(6.23)% and (3.36)%, respectively.
Current yield quotations as they may appear from time to time in
advertisements will consist of a quotation based on a 30-day period ended on the
date of the most recent balance sheet of the Fund computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the base period. The Fund does not presently
intend to advertise current yield.
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is custodian of all securities and cash of the Fund (the
"Custodian"). 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, are the Fund's independent auditors.
KIRC, located at 101 Main Street, Cambridge, Massachusetts 02142-1519,
is a wholly-owned subsidiary of Keystone and acts as transfer agent and dividend
disbursing agent for the Fund.
Except as otherwise stated in its prospectus or required by law, the
Fund reserves the right to change the terms of the offer stated in its
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Fund's
prospectus, statement of additional information or in supplemental sales
literature issued by the Fund or KDI, and no person is entitled to rely on any
information or representation not contained therein.
As of February 28, 1995, Merrill Lynch Pierce Fenner & Smith, Attn:
Book Entry, 4800 Deer Lake Dr. E 3rd FL, Jacksonville, FL 32246-6468 owned 6.58%
of the outstanding Class A shares of the Fund.
As of February 28, 1995, Merrill Lynch Pierce Fenner & Smith, Attn:
Book Entry, 4800 Deer Lake Dr. E 3rd FL, Jacksonville, FL 32246-6468 owned
11.80% of the outstanding Class B shares of the Fund. As of January 31, 1995,
The Knapp Foundation, Inc., Box O, St. Michaels, MD 21663 owned 8.46% of the
outstanding Class B shares of the Fund.
As of February 28, 1995, the following shareholders owned 5% or more of
the outstanding Class C shares of the Fund: Lavedna Ellingson, Douglas Ellingson
TTEE, U/A DTD 05/01/86, Lavedna Ellingson Marital Trust, 8510 McClintock, Tempe,
AZ 85284-2527 owned 22.95%; Merrill Lynch Pierce Fenner & Smith, Attn: Book
Entry, 4800 Deer Lake Dr. E 3rd FL, Jacksonville, FL 32246-6468 owned 14.91%;
and Lavedna Ellingson, Douglas Ellingson TTEE, U/A DTD 09/03/84, Ellingson
Revocable Trust, 8510 McClintock, Tempe, AZ 85284-2527 owned 6.63%.
The Fund's prospectus and statement of additional information omit
certain information contained in the registration statement filed with the
Securities and Exchange Commission, which may be obtained from the Securities
and Exchange Commission's principal office in Washington, D.C. upon payment of
the fee prescribed by the rules and regulations promulgated by the Securities
and Exchange Commission.
The Fund is one of 15 different investment companies in the Keystone
America family, which offers a range of choices to serve shareholder needs. The
Keystone America family consists of the following funds having the various
investment objectives described below:
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 total return from a combination
of capital growth and income from dividend paying common stocks, preferred
stocks, convertible bonds, other fixed-income securities and foreign securities
(up to 50%).
KEYSTONE AMERICA GOVERNMENT SECURITIES FUND - Seeks income and capital
preservation from U.S. government securities.
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC. - Seeks capital
appreciation by investment primarily in small and medium-sized companies in a
relatively early stage of development that are principally traded in the
over-the-counter market.
KEYSTONE AMERICA HARTWELL GROWTH FUND, INC. - Seeks capital appreciation by
investment in securities selected for their long-term growth prospects.
KEYSTONE AMERICA INTERMEDIATE TERM BOND FUND - Seeks income, capital
preservation and price appreciation potential from investment grade corporate
bonds.
KEYSTONE AMERICA OMEGA FUND, INC. - 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.
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>
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APPENDIX
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COMMON AND PREFERRED STOCK RATINGS
A. S&P'S EARNINGS AND DIVIDEND RANKINGS FOR COMMON STOCKS
Because the investment process involves assessment of various factors,
such as product and industry position, corporate resources and financial policy,
with results that make some common stocks more highly esteemed than others, S&P
believes that earnings and dividend performance is the end result of the
interplay of these factors and that, over the long run, the record of this
performance has a considerable bearing on relative quality. S&P rankings,
however, do not reflect all of the factors, tangible or intangible, that bear on
stock quality.
Growth and stability of earnings and dividends are deemed key elements
in establishing S&P earnings and dividend rankings for common stocks, which
capsulize the nature of this record in a single symbol.
S&P has established a computerized scoring system based on per-share
earnings and dividend records of the most recent ten years, a period deemed long
enough to measure a company's performance under varying economic conditions. S&P
measures growth, stability within the trend line and cyclicality. The ranking
system also makes allowances for company size, since large companies have
certain inherent advantages over small ones. From these scores for earnings and
dividends are determined.
The final score for each stock is measured against a scoring matrix
determined by analysis of the scores of a large and representative sample which
is reviewed and sometimes modified with the following ladder of rankings:
A+ Highest B+ Average C Lowest
A High B Below Average D In Reorganization
A- Above Average B- Lower
S&P believes its rankings are not a forecast of future market price
performance, but are basically an appraisal of past performance of earnings and
dividends, and relative current standing.
B. MOODY'S COMMON STOCK RANKINGS
Moody's presents a concise statement of the important characteristics
of a company and an evaluation of the grade (quality) of its common stock. Data
presented includes: (a) capsule stock information which reveals short and long
term growth and yield afforded by the indicated dividend, based on a recent
price; (b) a long term price chart which shows patterns of monthly stock price
movements and monthly trading volumes; (c) a breakdown of a company's capital
account which aids in determining the degree of conservatism or financial
leverage in a company's balance sheet; (d) interim earnings for the current year
to date, plus three previous years; (e) dividend information; (f) company
background; (g) recent corporate developments; (h) prospects for a company in
the immediate future and the next few years; and (i) a ten-year comparative
statistical analysis.
This information provides investors with information on what a company
does, how it has performed in the past, how it is performing currently and what
its future performance prospects appear to be.
These characteristics are then evaluated and result in a grading, or
indication of quality. The grade is based on an analysis of each company's
financial strength, stability of earnings and record of dividend payments. Other
considerations include conservativeness of capitalization, depth and caliber of
management, accounting practices, technological capabilities and industry
position. Evaluation is represented by the following grades:
(1) High Grade
(2) Investment Grade
(3) Medium Grade
(4) Speculative Grade
C. MOODY'S PREFERRED STOCK RATINGS
Preferred stock ratings and their definitions are as follows:
1. aaa: An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
2. aa: An issue which is rated "aa" is considered a high-grade
preferred stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well maintained in the
foreseeable future.
3. a: An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater then in the
"AAA" and "AA" classification, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
4. baa: An issue 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.
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.
6. CI - The rating CI is reserved for income bonds on which no interest
is being paid.
7. D - Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears.
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.
7. Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
8. Ca - Bonds which are Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other market
shortcomings.
9. C - Bonds which are rated as C are the lowest rated class of bonds
and 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 generic rating
classification from Aa through B in its corporate bond rating system. 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.
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 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.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. These securities, which
include bonds, debentures, corporate notes, preferred stocks and other
securities, are securities which 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 is
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.
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 (including master demand notes) and obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities, some of
which may be subject to repurchase agreements.
COMMERCIAL PAPER
Commercial paper will consist of issues rated at the time of purchase
A-1, A-2 or higher by S&P, PRIME-1 by Moody's, or F-1 by Fitch Investors
Service, Inc. (Fitch'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.
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,
or of savings and loan associations which are members of the Federal Savings and
Loan 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 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.
UNITED STATES GOVERNMENT SECURITIES
Securities issued or guaranteed by the U.S. 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.
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 Trustees 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 or Federal Savings and Loan Insurance Corporation.
LIMITED PARTNERSHIPS
The Fund may invest in limited and master limited partnerships. A
limited partnership is a partnership consisting of one or more general partners,
jointly and severally responsible as ordinary partners, and by whom the business
is conducted, and one or more limited partners who contribute cash as capital to
the partnership and who generally are not liable for the debts of the
partnership beyond the amounts contributed. Limited partners are not involved in
the day-to-day management of the partnership. They receive income, capital gains
and other tax benefits associated with the partnership project in accordance
with terms established in the partnership agreement. Typical limited
partnerships are in real estate, oil and gas and equipment leasing, but they
also finance movies, research and development and other projects.
Generally, for an organization classified as a partnership under the
Internal Revenue Code, each item of income, gain, loss, deduction and credit is
not taxed at the partnership level but flows through to the holder of the
partnership unit. This allows the partnership to avoid double taxation and to
pass through income to the holder of the partnership unit at lower individual
rates. However, under provisions of tax and budget legislation enacted into law
on December 22, 1987, and effective for taxable years after December 31, 1987,
with certain exceptions, partnerships with interests that are traded on
regularly established securities markets or are tradable on a secondary market
will be treated as corporations for federal income tax purposes, thus
eliminating the pass-through tax benefits.
A master limited partnership is a publicly traded limited partnership.
The partnership units are registered with the Securities and Exchange Commission
and are freely exchanged on a securities exchange or in the over-the-counter
market.
OPTIONS TRANSACTIONS
OPTION WRITING AND RELATED RISKS
The Fund may write covered call and put options. 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 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 price of the underlying security above the exercise price so
long as the option remains open, but retains the risk of loss 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
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 debt 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 trans action, 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, 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 may purchase put and call options, including purchasing put
and call options, for the purpose of off-setting previously written put and call
options of the same series.
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. In addition, in a
transaction in which the Fund does not own the security underlying a put option
it has purchased, the Fund would be required, in the absence of a secondary
market, to purchase the underlying security before it could exercise the option.
In each such instance, the Fund would incur additional transaction costs.
The Fund will not purchase a put option if, as a result of such
purchase, more than 10% of its total assets would be invested in premiums for
such options. 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. The use of options on some securities may not be listed on any
exchange but traded in the over-the-counter market. Options traded in the
over-the-counter market involve the additional risk that securities dealers
participating in such transactions would fail to meet their obligations to the
Fund. The use of options traded in the over-the-counter market may be subject to
limitations imposed by certain state securities authorities. In addition to the
limits on its use of options discussed herein, the Fund is subject to the
investment restrictions described in its prospectus and statement of additional
information.
The staff of the Commission 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 relating to illiquid
securities.
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 in the
over-the-counter market or, 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 ind that its
GNMA certificates no longer have a sufficient remaining principal balance for
this purpose. Should this occur, the Fund will enter 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.
FUTURES CONTRACTS AND RELATED OPTIONS TRANSACTIONS
The Fund intends to enter into currency and other financial 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 to 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.
<PAGE>
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 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.
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).
INTEREST RATE FUTURES CONTRACTS
The sale of an interest rate futures contract creates an obligation by
the Fund, as seller, to deliver the type of financial instrument specified in
the contract at a specified future time for a specified price. The purchase of
an interest rate futures contract creates an obligation by the Fund, as
purchaser, to accept delivery of the type of financial instrument specified at a
specified future time for a specified price. The specific securities delivered
or accepted, respectively, at settlement date, are not determined until at or
near that date. The determination is in accordance with the rules of the
exchange on which the futures contract sale or purchase was made.
Currently interest rate futures contracts can be purchased or sold on
90-day U.S. Treasury bills, U.S. Treasury bonds, U.S. Treasury notes with
maturities between 6 1/2 and 10 years, Government National Mortgage Association
(GNMA) certificates, 90-day domestic bank certificates of deposit, 90-day
Commercial paper, and 90-day Eurodollar certificates of deposit. It is expected
that futures contracts trading in additional financial instruments will be
authorized. The standard contract size is $100,000 for futures contracts in U.S.
Treasury bonds, U.S. Treasury notes and GNMA certificates, and $1,000,000 for
the other designated contracts. While U.S. Treasury bonds, U.S. Treasury bills
and U.S. Treasury notes are backed by the full faith and credit of the U.S.
government and GNMA certificates are guaranteed by a U.S. government agency, the
futures contracts in U.S. government securities are not obligations of the U.S.
Treasury.
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 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 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.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of financial instruments and index based futures
contracts call for the delivery of cash equal to the difference between the
closing value of the index on the expiration date of the contract and the price
at which the futures contract is originally made, in most cases such futures
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out a futures contract sale is effected by an offsetting
transaction in which the Fund enters into a futures contract purchase for the
same aggregate amount of the specific type of financial instrument or index and
same delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund is paid the difference and thus realizes a gain. If the
offsetting purchase price exceeds the sale price, the Fund pays the difference
and realizes a loss. Similarly, the closing out of a futures contract purchase
is effected by an offsetting transaction in which the Fund enters into a futures
contract sale. If the offsetting sale price exceeds the purchase price, the Fund
realizes a gain. If the purchase price exceeds the offsetting sale price the
Fund realizes a loss. The amount of the Fund's gain or loss on any transaction
is reduced or increased, respectively, by the amount of any transaction costs
incurred by the Fund.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one contract of September U.S. Treasury bills on an
exchange may be fulfilled at any time before delivery of the contract is
required (i.e. on a specified date in September, the "delivery month") by the
purchase of one contract of September U.S. Treasury bills on the same exchange.
In such instance the difference between the price at which the futures contract
was sold and the price paid for the offsetting purchase after allowance for
transaction costs, represents the profit or loss to the Fund.
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.
OPTIONS ON CURRENCY AND OTHER FINANCIAL FUTURES
The Fund intends to purchase call and put options on currency and other
financial futures contracts and sell such options to terminate an existing
position. Options on currency and other financial futures are similar to options
on stocks except that an option on a currency and other financial futures
contracts gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract (a long position if the option is a call
and a short position if the option is a put) rather than to purchase or sell
stock, at a specified exercise price at any time during the period of the
option. Upon exercise of the option, the delivery of the futures position by the
writer of the option to the holder of the option will be accompanied by delivery
of the accumulated balance in the writer's futures margin account. This amount
represents the amount by which the market price of the futures contract at
exercise exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract. If an option is
exercised the last trading day prior to the expiration date of the option, the
settlement will be made entirely in cash equal to the difference between the
exercise price of the option and value of the futures contract.
The Fund intends to use options on currency and other financial futures
contracts in connection with hedging strategies. In the future the Fund may use
such options for other purposes.
PURCHASE OF PUT OPTIONS ON FUTURES CONTRACTS
The purchase of protective put options on currency and 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 commodity futures contracts may be
purchased to hedge against an interest rate increase or a market advance when
the Fund is not fully invested.
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.
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 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.
<PAGE>
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 be unable to
fulfill its obligations 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
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 contract 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.
FOREIGN CURRENCY TRANSACTIONS
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 a
Fund share will be affected by changes in exchange rates.
FORWARD CURRENCY CONTRACTS
As one way of managing exchange rate risk, the Fund may enter into
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 rate 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 rate 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.
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 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 and Swiss 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
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 foreign stocks or 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,
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 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.
<PAGE>
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. The Fund does not intend to trade more
than 5% of its net assets under foreign exchange contracts with one 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 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
payments 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 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>
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 TRANSACTIONS. 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 if the
writer 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 broker/dealer
carrying the writer's position or if the writer 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.
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. he time during which an option may be exercised generally from
the date the option is written through its expiration date.
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.
INDEX BASED FUTURES CONTRACT. An index based futures contract is a bilateral
agreement pursuant to which a party, agrees to buy or deliver at settlement an
amount of cash equal to $500 times the difference between the closing value of
an index on the expiration date and the price at which the futures contract is
originally struck. Index based futures are traded on Commodities Exchanges.
Currently index based stock index futures contracts can be purchased or sold
with respect to the Standard & Poor's Corporation (S&P) 500 Stock Index and S&P
100 Stock Index on the Chicago Mercantile Exchange, the New York Stock Exchange
Composite Index on the New York Futures Exchange and the Value Line Stock Index
and Major Market Index on the Kansas City Board of Trade.
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.
<PAGE>
SCHEDULE OF INVESTMENTS--November 30, 1994
Market
Shares Value
COMMON STOCKS/RIGHTS (57.6%)
CAPITAL GOODS (3.5%)
General Electric Co. 14,000 $ 644,000
Regal Beloit Corp. 50,000 631,250
1,275,250
CHEMICALS (6.4%)
Dow Chemical Co. 15,000 960,000
E.I. du Pont de Nemours
& Co. 15,000 808,125
Union Carbide Corp. 20,000 572,500
2,340,625
CONSUMER GOODS (5.2%)
Eastman Kodak Co. 10,000 456,250
Gillette Co. 7,500 551,250
International Flavors &
Fragrances, Inc., Common
Rts. 20,000 880,000
1,887,500
DRUGS (3.1%)
American Home Products
Corp. 9,000 586,125
Johnson & Johnson 10,000 533,750
1,119,875
FINANCE (7.3%)
Beacon Properties Corp. 30,000 540,000
Chase Manhattan Corp.,
Common Rts. 15,000 536,250
FHLMC* 10,000 498,750
Liberty Property Trust 25,000 440,625
State Street Boston
Corp. 20,000 631,250
2,646,875
FOODS (2.1%)
Philip Morris Cos., Inc. 12,500 746,875
INSURANCE (0.6%)
General Reinsurance
Corp. 2,000 234,750
NATURAL GAS (3.0%)
Enron Corp. 20,000 540,000
Sonat, Inc. 20,000 562,500
1,102,500
OFFICE & BUSINESS EQUIPMENT (1.9%)
IBM Corp. 10,000 707,500
OIL (6.7%)
Amoco Corp. 6,000 $364,500
Atlantic Richfield Co. 3,500 362,250
Chevron Corp., Common
Rts. 15,000 654,375
Mobil Corp., Common Rts. 6,000 511,500
Unocal Corp. 20,000 532,500
2,425,125
OIL SERVICES (2.4%)
Baker Hughes, Inc. 10,000 180,000
Halliburton Co. 20,000 697,500
877,500
PAPER & PACKAGING (1.1%)
Weyerhaeuser Co. 10,000 383,750
RETAIL (3.5%)
J.C. Penney Co., Inc. 15,000 690,000
Wal-Mart Stores, Inc. 25,000 578,125
1,268,125
SERVICES (1.0%)
Loewen Group, Inc. 15,000 379,687
TELECOMMUNICATIONS
(6.2%)
AT&T Credit Corp. 12,000 589,500
Bell South Corp. 7,000 363,125
GTE Corp. 18,000 551,250
Indosat Co., ADR* 20,000 760,000
2,263,875
TRANSPORTATION (1.7%)
Conrail, Inc. 12,000 624,000
UTILITIES (1.9%)
Central & South West
Corp. 20,000 425,000
Florida Progress Corp.,
Rts. 9,000 273,375
698,375
TOTAL COMMON STOCKS
(Cost--$17,705,758) $20,982,187
PREFERRED STOCKS (9.7%)
CAPITAL GOODS (1.6%)
Agco Corp., Conv.,
Depository Shares 10,000 597,500
<PAGE>
Keystone America Fund for Total Return
SCHEDULE OF INVESTMENTS--November 30, 1994
Market
Shares Value
CHEMICALS (1.0%)
Atlantic Richfield Co. 15,000 $ 369,375
DIVERSIFIED COMPANIES (2.3%)
Alco Standard Corp.,
Depository Shares 12,500 825,000
REAL ESTATE (1.3%)
Rouse Co. (The), Conv.,
Series A 10,000 482,500
RETAIL (1.6%)
Best Buy Capital L.P.,
Conv. 10,000 565,000
TRANSPORTATION (1.9%)
Burlington Northern,
Inc., 6.25% Cumulative
Conv., Series A 12,500 698,438
TOTAL PREFERRED STOCKS
(Cost--$3,122,917) $3,537,813
Par
Value
FIXED INCOME (9.7%)
CONVERTIBLE BONDS (1.5%)
CONSTRUCTION & HOUSING (1.5%)
Empresas Ica Sociedad
Controladora, S.A. de
C.V., Conv. (Subord.)
Debenture, 5.000%, 2004 $ 500,000 535,000
FOREIGN BONDS (NON U.S. DOLLARS) (2.8%)
Commonwealth of
Australia Government
Bond, 12.500%, 1997 A$1,250,000 1,018,800
FOREIGN BONDS (U.S. DOLLARS) (1.5%)
Banco Nacional De Mexico
S.A., Conv. (Subord.)
Exch. Debentures (a),
7.000%, 1999 $ 500,000 542,500
PRIVATE PLACEMENT BONDS & NOTES (2.3%)
Cemex S.A., Unsecured
Conv. (Subord.)
Euro-dollar Notes (a),
4.250%, 1997 800,000 831,000
Par Market
Value Value
BANK & FINANCE BONDS & NOTES (1.6%)
EMC Corp., Conv.
Debentures, 4.250%, 2001 $ 500,000 $ 606,250
TOTAL FIXED INCOME
(Cost--$3,299,084) $ 3,533,550
Maturity
Value
SHORT-TERM INVESTMENTS (19.5%)
REPURCHASE AGREEMENTS (19.5%)
Goldman, Sachs & Co.,
purchased 11/30/94
(collateralized by
$4,220,000 Federal Home
Loan Mortgage, 4.34%,
due 12/1/23) (Cost
$3,600,000), 5.650%,
12/01/94 3,600,565 3,600,000
HSBC Securities, Inc.,
purchased 11/30/94
(collateralized by
$2,950,000 U.S. Treasury
Bond, 10.75%, due
8/15/05) (Cost
$3,531,000), 5.600%,
12/01/94 3,531,549 3,531,000
TOTAL SHORT-TERM INVESTMENTS
(Cost--$7,131,000) $7,131,000
TOTAL INVESTMENTS
(Cost--$31,258,759)(b) 35,184,550
OTHER ASSETS AND LIABILITIES--
NET (3.5%) 1,259,176
NET ASSETS (100.0%) $36,443,726
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Securities that may be resold to "qualified institutional buyers" under
Rule 144A of the Federal Securities Act of 1933. These securities have been
determined to be liquid under guidelines established by the Board of
Trustees.
(b) The cost of investments for federal income tax purposes is identical. Gross
unrealized appreciation and depreciation of investments, based on identified
tax cost, at November 30, 1994 are as follows:
Gross unrealized appreciation $4,142,952
Gross unrealized depreciation (217,161)
Net unrealized appreciation $3,925,791
*Legend of Portfolio abbreviations:
FHLMC--Federal Home Loan Mortgage Corporation.
ADR--American Depository Receipts.
<PAGE>
Keystone America Fund for Total Return
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
February 13, 1987
(Commencement of
CLASS A SHARES Operations) to
Year Ended November 30, November 30,
1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period $ 12.31 $ 12.06 $ 11.45 $ 10.29 $ 10.89 $ 9.41 $ 8.59 $ 10.00
Income from investment operations
Investment income--net 0.24 0.21 0.23 0.34 0.41 0.42 0.46 0.30
Net gain (loss) on investments (0.56) 1.31 1.19 1.38 (0.61) 2.01 0.89 (1.47)
Total from investment operations (0.32) 1.52 1.42 1.72 (0.20) 2.43 1.35 (1.17)
Less distributions
Dividends from investment
income--net (0.24) (0.21) (0.23) (0.35) (0.40) (0.42) (0.53) (0.24)
Distributions in excess of
investment income--net (a) 0.00 (0.03) (0.05) (0.05) 0.00 0.00 0.00 0.00
Distributions from capital gains 0.00 (1.03) (0.53) (0.16) 0.00 (0.53) 0.00 0.00
Total distributions (0.24) (1.27) (0.81) (0.56) (0.40) (0.95) (0.53) (0.24)
Net asset value: End of period $ 11.75 $ 12.31 $ 12.06 $ 11.45 $ 10.29 $ 10.89 $ 9.41 $ 8.59
Total return (d) (2.65%) 12.67% 12.56% 16.70% (1.85%) 26.17% 15.98 (11.94%)
Ratios/supplemental data
Ratios to average net assets:
Operating and management
expenses (b) 1.59% 1.85% 1.85% 1.88% 2.00% 2.00% 1.47% 1.00%(c)
Net investment income 1.93% 1.63% 1.87% 2.98% 3.85% 3.94% 4.87% 4.94%(c)
Portfolio turnover rate 57% 92% 66% 43% 51% 50% 64% 16%
Net assets, end of period
(thousands) $23,162 $26,367 $23,607 $22,974 $22,080 $22,764 $20,735 $7,672
<FN>
(a) Effective November 30, 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 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
realized gains on investments--net". For the fiscal years ended 1993, 1992,
and 1991 distributions in excess of book basis net income were charged to
paid-in capital. For the fiscal years ended prior to January 31, 1990, these
excess distributions were charged to undistributed net investment income.
(b) Figures are net of expense reimbursement by Keystone in connection with
voluntary expense limitations. Before the expense reimbursement, the "Ratio
of net operating and management expenses to average net assets" would have
been 2.41%, 2.48%, 2.92%, and 4.77% (on an annualized basis), respectively,
for the years ended 1990, 1989, 1988 and the period from February 13, 1987
(Commencement of Operations) to November 30, 1987.
(c) Annualized for the period April 14, 1987 (Commencement of Investment
Operations) to November 30, 1987.
(d) Excluding applicable sales charges.
</FN>
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(For a share outstanding throughout the period)
February 1, 1993
Year (Date of Initial
Ended Public Offering) to
November 30, 1994 November 30, 1993
Net asset value:
Beginning of period $12.32 $12.65
Income from investment operations
Investment income--net 0.15 0.10
Net gain (loss) on investments (0.56) 0.74
Total income from investment operations (0.41) 0.84
Less distributions
Dividends from investment income--net (0.14) (0.10)
Distributions in excess of investment
income--net (b) 0.00 (0.04)
Distributions from capital gains 0.00 (1.03)
Total distributions (0.14) (1.17)
Net asset value: End of period $11.77 $12.32
Total return(c) (3.36%) 6.68%
Ratios/supplemental data
Ratios to average net assets:
Operating and management expenses 2.31% 2.64%(a)
Net investment income 1.27% 0.84%(a)
Portfolio turnover rate 57% 92%
Net assets, end of period (thousands) $7,314 $4,283
(a) Annualized.
(b) Effective November 30, 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 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 realized gains on
investments--net". For the period February 1, 1993 (Date of Initial Public
Offering) to November 30, 1993 distributions in excess of book basis net
income were charged to paid-in capital.
(c) Excluding applicable sales charges.
See Notes to Financial Statements.
<PAGE>
Keystone America Fund for Total Return
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(For a share outstanding throughout the period)
February 1, 1993
Year (Date of Initial
Ended Public Offering) to
November 30, 1994 November 30, 1993
Net asset value:
Beginning of period $12.33 $12.65
Income from investment
operations
Investment income--net 0.15 0.10
Net gain (loss) on
investments (0.56) 0.75
Total income from
investment operations (0.41) 0.85
Less distributions
Dividends from investment
income--net (0.14) (0.10)
Distributions in excess
of investment income--
net (b) 0.00 (0.04)
Distributions from
capital gains 0.00 (1.03)
Total distributions (0.14) (1.17)
Net asset value:
End of period $11.78 $12.33
Total return(c) 3.36%) 6.76%
Ratios/supplemental data
Ratios to average net assets:
Operating and management
expenses 2.34% 2.64%(a)
Net investment income 1.21% 0.83%(a)
Portfolio turnover rate 57% 92%
Net assets, end of
period (thousands) $5,968 $5,030
(a) Annualized.
(b) Effective November 30, 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 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 realized gains on
investments--net". For the period February 1, 1993 (Date of Initial Public
Offering) to November 30, 1993 distributions in excess of book basis net
income were charged to paid-in capital.
(c) Excluding applicable sales charges.
See Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES--
November 30, 1994
Assets:
Investments at market value (identified
cost--$31,258,759) (Note 1) $35,184,550
Cash 551
Receivable for:
Investments sold 1,047,620
Fund shares sold 93,616
Interest and dividends (net of withholding
taxes of $4,332) 190,968
Prepaid expenses 2,689
Total assets 36,519,994
Liabilities:
Payable for:
Fund shares redeemed 30,981
Income distribution 19,542
Accrued reimbursable expenses (Note 4) 16,947
Other accrued expenses 8,798
Total liabilities 76,268
Net assets $36,443,726
Net assets represented by:
Paid-in capital $32,579,237
Distributions in excess of investment
income--net (20,169)
Accumulated realized gains (losses) on
investment transactions--net (41,777)
Net unrealized appreciation on investments
and other assets and liabilities 3,926,435
Total net assets $36,443,726
Net asset value per share and redemption
price per share (Notes 1 and 2):
Class A Shares ($11.75 on 1,970,607 shares
outstanding) $23,162,495
Class B Shares ($11.77 on 621,259 shares
outstanding) 7,313,546
Class C Shares ($11.78 on 506,766 shares
outstanding) 5,967,685
$36,443,726
Offering price per share:
Class A Shares (including sales charge of
5.75%) $12.47
Class B Shares $11.77
Class C Shares $11.78
See Notes to Financial Statements.
STATEMENT OF OPERATIONS--
Year Ended November 30, 1994
Investment Income (Note 1):
Dividends $1,038,250
Interest 275,708
Total income 1,313,958
Expenses (Notes 2 and 4):
Management fee $242,315
Shareholder services 116,408
Accounting, auditing and legal 41,009
Custodian fees 39,340
Printing 13,167
Distribution Plan expenses 177,608
Registration fees 41,928
Miscellaneous expenses 4,359
Total expenses 676,134
Investment income--net 637,824
Realized and unrealized gain (loss) on
investments--net
(Notes 1 and 3):
Realized gain on investment transactions:
Proceeds from sales 24,528,115
Cost of investments sold 24,569,892
Realized loss on investment
transactions--net (41,777)
Net unrealized appreciation (depreciation)
on investments and other assets and
liabilities:
Beginning of year 5,634,298
End of year 3,926,435
Net change in unrealized appreciation or
depreciation (1,707,863)
Net loss on investment transactions (1,749,640)
Net decrease in net assets resulting from
operations ($1,111,816)
<PAGE>
Keystone America Fund for Total Return
STATEMENT OF CHANGES IN NET ASSETS
Year Ended November 30,
1994 1993
Operations:
Investment income--net $ 637,824 $ 463,192
Realized gain (loss) on investments--net (41,777) 2,683,025
Net change in unrealized appreciation or
depreciation (1,707,863) 166,265
Net increase (decrease) in net assets
resulting from operations (1,111,816) 3,312,482
Net equalization charges and credits (Note
1) 0 2,820
Distributions to shareholders from (Notes 1
and 5):
Investment income--net--Class A Shares (490,921) (424,258)
In excess of investment income--net--Class A
Shares 0 (56,403)
Realized gain from investment
transactions--net--Class A Shares 0 (2,038,726)
Investment income--net--Class B Shares (71,686) (17,336)
In excess of investment income--net--Class B
Shares 0 (8,147)
Realized gain from investment
transactions--net--Class B Shares 0 (330,636)
Investment income--net--Class C Shares (68,622) (24,418)
In excess of investment income--net--Class C
Shares 0 (10,182)
Realized gain from investment
transactions--net--Class C Shares 0 (387,702)
Total distributions to shareholders (631,229) (3,297,808)
Capital share transactions (exclusive of net
equalization charges and credits) (Note 2):
Proceeds from shares sold--Class A Shares 2,393,728 2,706,520
Proceeds from shares sold--Class B Shares 4,728,142 5,100,034
Proceeds from shares sold--Class C Shares 2,716,402 5,525,860
Payment for shares redeemed--Class A Shares (4,913,128) (3,643,603)
Payment for shares redeemed--Class B Shares (1,410,354) (848,265)
Payment for shares redeemed--Class C Shares (1,547,569) (629,167)
Net asset value of shares issued in
reinvestment of distributions from:
Investment income--net and
paid-in-capital--Class A Shares 423,378 518,734
Investment income--net and
paid-in-capital--Class B Shares 56,510 18,387
Investment income--net and
paid-in-capital--Class C Shares 59,476 31,618
Capital Gain Distributions--Class A Shares 0 2,651,528
Capital Gain Distributions--Class B Shares 0 264,383
Capital Gain Distributions--Class C Shares 0 360,116
Net increase in net assets resulting from
capital share transactions 2,506,585 12,056,145
Total increase in net assets 763,540 12,073,639
Net assets:
Beginning of year 35,680,186 23,606,547
End of year [including distributions in
excess of investment income--net as follows:
1994 ($20,169) and 1993 ($28,912)] $36,443,726 $35,680,186
See Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1.) Significant Accounting Policies
Keystone America Fund for Total Return (the "Fund"), formerly known as
Keystone America Equity Income Fund, is a Massachusetts business trust for
which Keystone Management, Inc. ("KMI") is the Investment Manager and
Keystone Custodian Funds, Inc. ("Keystone") is the Investment Advisor. The
Fund was organized on October 24, 1986 and had no operations prior to
February 13, 1987. It is registered under the Investment Company Act of 1940
as a diversified open-end 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 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 management of Keystone and its affiliates. 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 sales price, or in the
absence of sales and for over-the-counter securities, the mean of bid and
asked quotations. Management values the following securities at prices it
deems in good faith, by or under the direction of the Board of Trustees, to
be fair: (a) securities (including restricted securities) for which complete
quotations are not readily available and (b) listed securities if, in the
opinion of management, the last sales price does not reflect a current value,
or if no sale occurred.
Short-term investments, 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. All other securities and other assets
are valued at fair value as determined in good faith using methods prescribed
by the Board of Trustees.
Short-term investments denominated in a foreign currency are adjusted daily
to reflect changes in exchange rates. Market quotations are not considered to
be readily available for long-term corporate bonds and notes; such
investments are stated at fair value on the basis of valuations furnished by
a pricing service, approved by the Trustees, which determines valuations for
normal, institutional-size trading units of such securities using methods
based on market transactions
<PAGE>
Keystone America Fund for Total Return
for comparable securities that are generally recognized by institutional
traders.
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security, financial instrument, or in the
case of a stock index, cash at a set price on a future date.
Upon entering into a futures contract, the Fund is required to deposit with a
broker an amount ("initial margin") equal to a certain percentage of the
purchase price indicated in the futures contract. Subsequent payments
("variation margin") are made or received by the Fund each day, as the value
of the underlying instrument or index fluctuated, and are recorded for book
purposes as unrealized gains or losses by the Fund. For federal income tax
purposes, any futures contracts which remain open at fiscal year-end are
marked-to-market and the resultant net gain or loss is included in federal
taxable income.
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
at the close of business on the record date.
C. The Fund has qualified, and intends to qualify in the future, as a
regulated investment company under the Internal Revenue Code of 1986, as
amended ("Internal Revenue Code"). Thus, the Fund is relieved of any federal
income or excise tax liability by distributing all of its net taxable
investment income and net taxable capital gains, if any, to its shareholders.
The Fund intends to avoid excise tax liability by making the required
distributions under the Internal Revenue Code.
D. For the year ended November 30, 1993 the Fund used the accounting practice
known as equalization by which a portion of the proceeds from sales and costs
of redemption of capital shares (equivalent on a per share basis to the
amount of undistributed net investment income on the date of the
transactions) was credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share was not affected
by sales or redemption of shares. Effective December 1, 1993 the Fund
discontinued equalization accounting.
E. 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, which generally will be maintained at 101% of
the repurchase price. The Fund monitors the value of collateral on a daily
basis, and if the value of the collateral falls below required levels, the
Fund intends to seek additional collateral from the seller or terminate the
repurchase agreement. If the seller defaults, the Fund would suffer a loss to
the extent that the proceeds from the sale of the underlying securities were
less than the repurchase price. Any such loss would be increased by any cost
incurred on disposing of such securities. If bankruptcy proceedings are
commenced against the seller under the repurchase agreement, the realization
on the collateral may be delayed or limited. Repurchase agreements entered
into by the Fund will be limited to transactions with dealers or domestic
banks believed to present minimal credit risks, and the Fund will take
constructive receipt of all securities underlying repurchase agreements until
such agreements expire.
<PAGE>
F. The Fund distributes net investment income quarterly, and net capital
gains, if any, annually. Distributions from net investment income are based
on tax basis net income. From time to time the Fund may distribute dividends
which exceed book basis net income. Effective December 1, 1993, the Fund
adopted Statement of Position: 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. Accordingly, the following reclassifications have been made as
of November 30, 1993: an increase in distributions in excess of investment
income--net of $28,912 and increases in paid-in-capital and accumulated
realized gains (losses) on investment transactions--net of $28,683 and $229,
respectively to reflect adoption of the statement.
(2.) Capital Share Transactions
The Trust Agreement authorizes the issuance of an unlimited number of shares
of beneficial interest without par value. Transactions in shares of the Fund
were as follows:
Class A Shares
Year Ended November 30,
1994 1993
Shares sold 194,554 208,856
Shares redeemed (400,894) (281,584)
Shares issued in
reinvestment of
distributions from:
Investment income--net
and distributions in
excess of investment
income--net 34,783 40,868
Realized gains--net 0 216,901
Net increase (decrease) (171,557) 185,041
Class B Shares
February 1, 1993
(Date of Initial
Public Offering)
Year Ended to
November 30, November 30,
1994 1993
Shares sold 384,290 389,311
Shares redeemed (115,399) (64,524)
Shares issued in
reinvestment of
distributions from:
Investment income--net
and distributions in
excess of investment
income--net 4,656 1,430
Realized gains--net 0 21,495
Net increase 273,547 347,712
<PAGE>
Keystone America Fund for Total Return
Class C Shares
February 1, 1993
(Date of Initial
Public Offering)
Year Ended to
November 30, November 30,
1994 1993
Shares sold 220,445 423,857
Shares redeemed (126,563) (47,567)
Shares issued in
reinvestment of
distributions from:
Investment income--net
and distributions in
excess of investment
income--net 4,885 2,455
Realized gains--net 0 29,254
Net increase 98,767 407,999
The Fund bears some of the costs of selling its shares under a Distribution
Plan adopted with respect to Class A, Class B, and Class C shares pursuant to
Rule 12b-1 under the Investment Company Act of 1940 ("1940 Act").
The Class A Distribution Plan provides for payments which are currently
limited to 0.25% annually of the average daily net asset value 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 0.25% of the average net asset value of the shares sold by
such others remaining outstanding on the books for the Fund for specified
periods.
The Class B Distribution Plan provides for payments at an annual rate of
1.00% of the average daily net asset value of Class B shares to pay expenses
of the distribution of Class B shares. Amounts paid by the Fund under the
Class B Distribution Plan are currently used to pay others (dealers) (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 up
to 1.00% of the average daily net asset value of Class C shares to pay
expenses of the distribution of Class C shares. Amounts paid by the Fund
under the Class C Distribution Plan are currently used to pay others
(dealers) (i) a payment at the 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 limitations imposed by the rules of
National Association of Securities Dealers, Inc.) and 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.
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. 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 the Class B shares, as compensation
for its services which had been earned while the Class B Distribution Plan
was in effect. Unreimbursed distribution expenses at November 30, 1994 were
$111,482 and $9,726 for Class B and Class C Distribution Plans, respectively.
For the year ended November 30, 1994, the Fund paid KDI $61,310, $58,824, and
$57,474 under its
<PAGE>
Class A, Class B, and Class C Distribution Plans, respectively.
Presently, the Fund's class specific expenses are limited to Distribution
Plan expense incurred by a class of shares.
(3.) Securities Transactions
As of November 30, 1994, the Fund had a capital loss carryover for Federal
income tax purposes of approximately $42,000 which expires in the year 2002.
Purchases and sales of investment securities (including proceeds received at
maturity) for the year ended November 30, 1994 were as follows:
Cost of Proceeds
Purchases From Sales
Portfolio securities $ 21,033,507 $ 24,528,115
Short-term investments 878,765,305 873,032,976
$899,798,812 $897,561,091
(4.) Investment Management and Transactions with Affiliates
Under the terms of the Investment Management Agreement between KMI and the
Fund, KMI provided investment management and administrative services to the
Fund. In return, KMI is paid a management fee computed and paid daily
calculated at a rate of 1.5% of the Fund's gross investment income plus an
amount determined by applying percentage rates, which start at 0.60% and
decline, as net assets increase, to 0.30% per annum, to the net asset value
of the Fund. KMI has entered into an Investment Advisory Agreement with
Keystone, under which Keystone provides investment advisory and management
services to the Fund and receives for its services an annual fee representing
85% of the management fee received by KMI. During the year ended November 30,
1994 the Fund paid or accrued to KMI investment management and administrative
service fees of $242,315, which represent 0.65% of the Fund's average net
assets. Of such amounts paid to KMI, $205,968 was paid to Keystone for its
services to the Fund.
During the year ended November 30, 1994, the Fund paid or accrued to KIRC and
KGI a total of $18,517 as reimbursement for the cost of accounting and
printing expenses provided to the Fund. During the year ended November 30,
1994, $116,408 was paid or accrued to KIRC for shareholder services.
Certain officers and/or Directors of Keystone are also officers and/or
Trustees of the Fund. Officers of Keystone and affiliated Trustees receive no
compensation directly from the Fund.
(5.) Distributions to Shareholders
The Fund intends to distribute to its shareholders dividends from net
investment income quarterly 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:
Income
Dividends
Class A shares $0.240
Class B shares $0.140
Class C shares $0.140
In January 1995, we will send you information on the distributions paid
during the calendar year to help you in completing your federal income tax
return.
<PAGE>
Keystone America Fund for Total Return
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders
Keystone America Fund for Total Return
We have audited the accompanying statement of assets and liabilities of
Keystone America Fund for Total Return (formerly known as Keystone America
Equity Income Fund), including the schedule of investments, as of November
30, 1994, and related statement of operations for the year then ended, the
statement 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
seven-year period ended November 30, 1994, and for the period from February
13, 1987 (Commencement of Operations) to November 30, 1987 for Class A shares
and for the year ended November 30, 1994 and the period from February 1, 1993
(Initial Public Offering) to November 30, 1993 for Class B and Class C
shares. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
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 November 30, 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 Fund for Total Return as of November 30, 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 or periods referred to above in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
January 6, 1995
<PAGE>
KEYSTONE AMERICA FUND FOR TOTAL RETURN
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). Financial Statements
All Financial Statements listed below are included in Registrant's Statement of
Additional Information.
Schedule of Investments November 30, 1994
Financial Highlights For fiscal years
ended
November 30, 1987
through
November 30, 1994
Statement of Assets and Liabilities November 30, 1994
Statement of Operations Year ended
November 30, 1994
Statement of Changes in Net Assets Two years ended
November 30, 1994
Notes to Financial Statements
Independent Auditors' Report
dated January 6, 1995
All other schedules are omitted as the required information is inapplicable.
<PAGE>
(24)(b) Exhibits
(1) A copy of Registrant's Declaration of Trust and First Supplemental
Declaration of Trust dated September 15, 1994 are filed herewith.
(2) A copy of Registrant's By-Laws together with the First, Second and
Third Amendments are filed herewith.
(3) Not applicable.
(4) A copy of the form of Registrant's share certificate was filed with
Pre-Effective Amendment No. 1 to Registration Statement No.
33-11047/811-4950 as Exhibit 24(b)(4) and is incorporated by reference
herein.
(5) (A) A copy of the form of Investment Management Agreement between
Keystone Management, Inc. and Registrant dated August 19, 1993 is
filed herewith.
(B) A copy of the form of Investment Advisory Agreement between
Keystone Management, Inc. and Keystone Custodian Funds, Inc. dated
August 19, 1993 is filed herewith.
(6) A copy of the form of Principal Underwriting Agreement dated August
19, 1993 between Registrant and Keystone Distributors, Inc. is filed
herewith. A copy of the form of Dealer Agreement used by Keystone
Distributors, Inc. was filed with Post-Effective Amendment No. 10 to
Registration Statement No. 33-11047/811-4950 as part of Exhibit
24(b)(6) and is incorporated by reference herein.
(7) Not applicable.
(8) A copy of the Custodian, Fund Accounting and Recordkeeping Agreement
between Registrant and State Street Bank & Trust Company together with
the First through Fifth Amendments thereto are filed herewith.
(9) Not applicable.
(10) An opinion and consent of counsel as to the legality of the securities
registered hereunder was filed with Registrant's Rule 24f-2 Notice on
January 28, 1994 and is incorporated by reference herein.
(11) A consent as to the use of opinion of Registrant's Independent
Auditors' is filed herewith.
(12) Not applicable.
<PAGE>
Item 24(b) Exhibits (continued).
(13) Copies of Subscription Agreements were filed with Registration
Statement No. 33-11047/811-4950 as Exhibit 24(b)(13) and are
incorporated by reference herein. Copies of the release of one
Subscription Agreement and a new Subscription Agreement were filed
with Pre-Effective Amendment No. 1 to Registration Statement No.
33-11047/811-4950 and are incorporated by reference herein.
(14) Copies of model plans used in the establishment of retirement plans in
connection with which Registrant offers its securities were filed with
Post-Effective Amendment No. 66 to Registration Statement No.
2-10527/811-96 as Exhibit 24(b)(14) and are incorporated by reference
herein.
(15) A copy of the form of Registrant's Distribution Plans for Classes A, B
and C shares are filed herewith.
(16) Schedules for computation of total return and current yield are filed
herewith.
(17) 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 Holder as of February 28, 1995
-------------- ------------------------------
Shares of Beneficial Class A - 1,888,331,872
Interest, without par Class B - 808,475,714
value Class C - 589,643,895
Item 27. Indemnification
Provisions for the indemnification of Registrant's Trustees and
officers are contained in Article VIII of Registrant's Declaration of
Trust, a copy of which is filed herewith as Exhibit 24(b)(1).
Provisions for the indemnification of Keystone Distributors, Inc.,
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 is filed herewith.
Provisions for the indemnification of Keystone Management, Inc.,
investment manager to the Registrant, are contained in Section 6 of the
Investment Management Agreement between the Registrant and Keystone
Management, 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 Management, Inc. and Keystone Custodian Funds,
Inc., Registrant's investment manager and adviser, respectively, and
their respective positions. For each named individual, the tables list,
for at least the past two fiscal years, (i) any other organizations
(for Keystone Custodian Funds, Inc., excluding investment advisory
clients) with which the officer and/or director has had or has
significant involvement; and (ii) positions held with such
organizations.
<PAGE>
LIST OF OFFICERS AND DIRECTORS OF KEYSTONE MANAGEMENT, INC.
Position with
Keystone Other
Management, Business
Name Inc. Affiliations
---- ------------- ------------
Albert H. Chairman of Chairman of the Board,
Elfner, III the Board, Chief Executive Officer,
Chief Executive President and Director:
Officer, Keystone Group, Inc.
President and Keystone Custodian
Director Funds, Inc.
Keystone Software, Inc.
Keystone Asset
Corporation
Keystone Capital
Corporation
Keystone Group Funds
Chairman of the Board and
Director:
Keystone Investment
Management Corporation
Keystone Fixed Income
Advisers, Inc.
President and Director:
Keystone Trust Company
Director or Trustee:
Fiduciary Investment
Company, Inc.
Keystone Investor
Resource Center, Inc.
Robert Van Partners, Inc.
Boston Children's
Services Association
Associate Fiduciary
Investment Company, Inc.
Middlesex School
Middlebury College
Keystone Distributors,
Inc.
Former Trustee or
Director:
Neworld Bank
<PAGE>
Position with
Keystone Other
Management, Business
Name Inc. Affiliations
---- ------------- ------------
Edward F. Godfrey Treasurer and Senior Vice President,
Director Chief Financial Officer,
Treasurer and Director:
Keystone Group, Inc.
Keystone Custodian
Funds, Inc.
Keystone Distributors,
Inc.
Treasurer:
Keystone Investment
Management Corporation
Keystone Software, Inc.
Fiduciary Investment
Company, Inc.
Treasurer and Director:
Hartwell Keystone
Advisers, Inc.
Senior Vice President:
Keystone Group Funds
Ralph J. Director President and Director:
Spuehler, Jr. Keystone Distributors,
Inc.
Director:
Keystone Investor
Resource Center, Inc.
Keystone Custodian
Funds, Inc.
Senior Vice President and
Director:
Keystone Group, Inc.
Treasurer:
Hartwell Emerging Growth
Fund
Hartwell Growth Fund
Former President:
Keystone Management, Inc.
Former Treasurer:
Keystone Group, Inc.
The Kent Funds
Keystone Custodian
Funds, Inc.
<PAGE>
Position with
Keystone Other
Management, Business
Name Inc. Affiliations
---- ------------- ------------
Rosemary D. Van Senior Vice Senior Vice President,
Antwerp President, General Counsel and
General Counsel Director:
and Secretary Fiduciary Investment
Company, Inc.
Keystone Group, Inc.
Keystone Investor
Resource Center, Inc.
Keystone Distributors,
Inc.
Keystone Software, Inc.
Senior Vice President and
General Counsel:
Keystone Investment
Management Corporation
Senior Vice President and
Secretary:
Hartwell Keystone
Advisers, Inc.
Vice President and
Secretary:
Keystone Fixed Income
Advisers, Inc.
Former Assistant Secretary:
The Kent Funds
Kevin Morrissey Assistant Vice President:
Treasurer Keystone Group, Inc.
Assistant Treasurer:
Fiduciary Investment
Company, Inc.
Former Assistant Treasurer:
The Kent Funds
J. Kevin Kenely Vice President Vice President and
and Controller Controller:
Keystone Group, Inc.
Keystone Custodian
Funds, Inc.
Keystone Distributors,
Inc.
Keystone Investment
Management Corporation
Hartwell Keystone
Advisers, Inc.
Fiduciary Investment
Company, Inc.
Keystone Software, Inc.
<PAGE>
Position with
Keystone Other
Management, Business
Name Inc. Affiliations
---- ------------- ------------
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.
Clerk:
Keystone Investment
Management Corporation
Fiduciary Investment
Company, Inc.
Assistant Secretary:
Keystone Asset
Corporation
Keystone Capital
Corporation
Keystone Fixed Income
Advisers, Inc.
Keystone Group Funds
Hartwell Keystone
Advisers, Inc.
Keystone Software, Inc.
Keystone Distributors,
Inc.
Keystone Custodian
Funds, Inc.
10150266
<PAGE>
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
Fiduciary Investment
Company, Inc.
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 Other
Custodian Business
Name Funds, Inc. Affiliations
---- ------------- ------------
Herbert L. Senior Vice None
Bishop, Jr. President
Donald C. Dates Senior Vice None
President
Gilman Gunn Senior Vice None
President
Edward F. Godfrey Director, Director, Senior Vice
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. Spuehler, Jr. Director President and Director:
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.
Formerly President:
Keystone Management,
Inc.
Formerly Treasurer:
The Kent Funds
Keystone Group, Inc.
Keystone Custodian
Funds, Inc.
<PAGE>
Position with
Keystone Other
Custodian Business
Name Funds, Inc. Affiliations
---- ------------- ------------
Rosemary D. Van Antwerp Senior Vice General Counsel, Senior
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. Baumback Vice President None
<PAGE>
Position with
Keystone Other
Custodian Business
Name Funds, Inc. Affiliations
---- ------------- ------------
Betsy A. Blacher Vice President None
Francis X. Claro Vice President None
Kristine R. Cloyes Vice President None
Christopher P. Conkey Vice President None
Richard Cryan Vice President None
Maureen E. Cullinane Vice President None
George E. Dlugos Vice President None
Antonio T. Docal Vice President None
Christopher R. Ely Vice President None
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. Madden, Jr. Vice President None
Stephen A. Marks Vice President None
Eleanor H. Marsh Vice President None
Walter T. McCormick Vice President None
Barbara McCue Vice President None
<PAGE>
Position with
Keystone Other
Custodian Business
Name Funds, Inc. Affiliations
---- ------------- ------------
Stanley M. Niksa Vice President None
Robert E. O'Brien Vice President None
Margery C. Parker Vice President None
William H. Parsons Vice President None
Daniel A. Rabasco Vice President None
David L. Smith Vice President None
Kathy K. Wang Vice President None
Judith A. Warners Vice President None
Marcia Waterman Vice President None
J. Kevin Kenely Vice President None
Joseph J. Decristofaro Vice President None
Jean Susan Loewenberg Assistant Vice President and
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.
Clerk:
Keystone Investment
Management Corporation
Fiduciary Investment
Company, Inc.
Assistant Secretary:
Hartwell Keystone
Advisers, Inc.
Keystone Distributors,
Inc.
<PAGE>
Position with
Keystone Other
Custodian Business
Name Funds, Inc. Affiliations
---- ------------- ------------
Colleen L. Mette Assistant Assistant Secretary:
Secretary Keystone Distributors,
Inc.
Keystone Group, Inc.
Kevin J. Morrissey Assistant Vice President:
Treasurer Keystone Group, Inc.
Assistant Treasurer:
Fiduciary Investment
Company, Inc.
Formerly Assistant
Treasurer:
The Kent Funds
<PAGE>
Item 29. Principal Underwriters
Keystone Distributors, Inc., which acts as Registrant's principal
underwriter, also acts as principal underwriter for the following
entities:
Keystone America Hartwell Emerging Growth Fund, Inc.
Keystone America Hartwell Growth Fund, Inc.
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 Global Opportunities Fund
Keystone America Government Securities Fund
Keystone America Intermediate Term Bond Fund
Keystone America Omega Fund, Inc.
Keystone America State Tax Free Fund
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.
(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, MA 02142-1519
Data Valult Inc.
3431 Sharp Slot Road
Swansea, Massachusetts 02277
State Street Bank & 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 to each person to whom a copy of Registrant's
prospectus is delivered with a copy of Registrant's latest
annual report to shareholders.
<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) and the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston, in the
Commonwealth of Massachusetts, on the 31st day of March, 1995.
KEYSTONE AMERICA FUND FOR TOTAL
RETURN
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
the Registrant's Registration Statement has been signed below by the following
persons in the capacities indicated on the 31st day of March, 1995.
SIGNATURES TITLE
---------- -----
/s/ George S. Bissell Chairman of the Board and Trustee
George S. Bissell*
/s/ Albert H. Elfner, III Chief Executive Officer, President and Trustee
Albert H. Elfner, III*
/s/ Kevin J. Morrissey Treasurer (Principal Financial
Kevin J. Morrissey* and Accounting Officer)
*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/ Edwin D. Campbell Trustee
Edwin D. Campbell*
/s/ Charles F. Chapin Trustee
Charles F. Chapin*
/s/ K. Dun Gifford Trustee
K. Dun Gifford*
/s/ Leroy Keith, Jr. Trustee
Leroy Keith, Jr.*
/s/ F. Ray Keyser, Jr. Trustee
F. Ray Keyser, Jr.*
/s/ David M. Richardson Trustee
David M. Richardson*
/s/ Richard J. Shima Trustee
Richard J. Shima*
/s/ Andrew J. Simons Trustee
Andrew J. Simons*
*By: /s/ Melina M. T. Murphy
Melina M. T. Murphy**
Attorney-in-Fact
** Melina M. T. Murphy, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers
of attorney duly executed by such persons and attached hereto as Exhibit
24(b)(17).
<PAGE>
INDEX TO EXHIBITS
Page Number
in Sequential
Exhibit Number Exhibit Numbering System
-------------- ------- ----------------
1 Declaration of Trust
2 By-Laws
First, Second and Third Amendments to By-Laws
4 Specimen Share Certificate(2)
5 Investment Management Agreement
Investment Advisory Agreement
6 (A) Principal Underwriting Agreement
(B) Dealers Agreement(3)
8 Custodian, Fund Accounting
and Recordkeeping Agreement
Amendments to Custody Agreement
10 Opinion and Consent of Counsel(5)
11 Independent Auditors Consent
13 Subscription Agreements(1),(2)
14 Model Retirement Plans(4)
15 Class A, B and C Distribution Plans
16 Performance Data Schedules
17 Powers of Attorney
---------------
(1) Incorporated herein by reference to Registration Statement No.
33-11047/811-4950.
(2) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registration Statement No. 33-11047/811-4950.
(3) Incorporated herein by reference to Post-Effective Amendment No. 10 to
Registration Statement No. 33-11047/811-4950.
(4) Incorporated herein by reference to Post-Effective Amendment No. 66 to
Registration Statement No. 2-10527/811-96.
(5) Incorporated by reference to Registrant's Rule 24f-2 Notice filed on January
28, 1994.
EXHIBIT 99.24(b)(1)
KEYSTONE AMERICA EQUITY INCOME FUND
DECLARATION OF TRUST
Dated October 24, 1986
DECLARATION OF TRUST, made at Boston, Massachusetts on October 24, 1986 by
George S. Bissell, K. Dun Gifford, John M. Haffenreffer, F. Ray Keyser, Jr.,
James Reed, John W. Sharp, Richard J. Shima, Spencer R. Stuart, Thomas O.
Thorsen, Rodney M. Vining and Charles M. Williams (hereinafter with their
successors referred to as the "Trustees").
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 the "KEYSTONE AMERICA EQUITY
INCOME 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 this Declaration of Trust, as amended from time to time;
(c) "Declaration of Trust" shall mean this Declaration of Trust as
amended or restated from time to time;
(d) "Majority Shareholder Vote" means the vote of at least a majority,
as defined in the 1940 Act, of Shares entitled to vote on a matter at a
meeting of Shareholders entitled to vote on such matters;
(e) "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 5;
(f) "Shareholder" means a record owner of Shares of the Trust;
(g) "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 a Series of Shares is authorized by the Trustees, the equal
proportionate units into which each such Series or Class of Shares shall be
divided form 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.
(h) "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
(i) 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 transferrable 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 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 maycreate
additional Series and/or Classes of Series 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 other rights
and restrictions as the Trustees deem appropriate).
Section 2. Ownership of Shares. The ownership of Shares shall be recorded
in 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 Class or Series and as to the number of
Shares of each Class or Series 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 to represent the
contribution may in the Trustees' discretion be considered as outstanding and
the amount receivable by the Trustees on account of the contribution may be
treated as an asset of the Series.
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 of Shares. Whenever no Shares of a
Series are outstanding, then the Trustees may abolish such Series (or any Class
of Shares of a Series for which there are no outstanding Shares). Whenever more
than one Series of Shares is outstanding, then the following provisions shall
apply:
(a) Assets Belonging to Each Series. All consideration received by the
Trust for the issue or sale of Shares of a particular Series, 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 irrevocably belong to that Series 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, then the Trustees shall allocate such
items to the various Series 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 by the Trustees shall then
belong to that Series, and each such allocation shall be conclusive and
binding upon the Shareholders of all Series for all purposes.
(b) Liabilities Belonging to Each Series. The assets belonging to each
particular Series shall be charged with the liabilities, expenses, costs
and reserves of the Trust attributable to that Series; and any general
liabilities, expenses, costs and reserves of the Trust which are not
readily identifiable as attributable to a particular Series shall be
allocated by the Trustees to the various Series 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 for all purposes.
(c) Series Shares, Dividends and Liquidation. Each Share of each
respective Class of a Series shall have the same rights and pro rata
beneficial interest in the assets and liabilities of the Series as any
other such Share. Any dividends paid on the Shares of any Series shall only
be payable from and to the extent of the assets (net of liabilities)
belonging to that Series. In the event of liquidation of a Series, only the
assets (less provision for liabilities) of that Series shall be distributed
to the holders of the Shares of that Series.
(d) Voting by Series. 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 a particular
Series or Classes, 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 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. Thereafter, subject
to Section 16(a) of the 1940 Act, the Trustees may elect themselves or their
successors at such regular intervals, if any, as they deem proper, and may
appoint Trustees to fill vacancies as provided in Section 4 hereof; provided,
that Trustees shall be elected by a Majority Shareholder Vote 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 envent of such Trustee's death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of Trustsee. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms of
this Declaration. 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 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 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
in the manner provided by this Declaration. 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 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 as 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.
Without limiting the foregoing, the Trustees in addition to all powers
granted by law shall have power and authority:
(a) To invest and reinvest cash, and to hold cash uninvested, without
in any wise 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 its
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 securitiy 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.
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 7. 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 by 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 of Shares of which he is a holder, subject to any
rights or restrictions applicable to any Class or any Series of Shares of which
he is a holder.
Section 8. 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 9. 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 (the "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 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 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 be interested, to act as principal underwriter for the Shares.
Section 10. 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
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 to the extent
and as provided in Section 7 of Article IX hereof, (iv) with respect to any
merger, consolidation or sale of assets as provided in Section 4 of Article IX
hereof, (v) with repsect to incorporation of the Trust to the extent and as
provided in Section 4 of Article IX hereof, (vi) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
and (vii) with respect to such additional matters relating to the Trust as may
be required by this Declaration, the By-Laws or any undertaking filed by the
Trust with the Securities and Exchange Commission (or any successor agency) or
with any state, 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 and shall be called
by the Trustees upon the written request of Shareholders owning at least 25% of
the outstanding Shares entitled to vote. 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.
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 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 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 liabili- ties
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 5 of this Article if at any time the total investment in such
account does not have a value of at least $1,000. Before redeeming such Shares,
Shareholders will be notified that the value of each of their accounts is less
than $1,000 and be allowed 60 days to make an additional investment to bring the
total value of such account to $1,000 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 necessary or desirable to enable
the Trust to comply with any provision of the 1940 Act, 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, 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 wilful
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 that this Declaration of Trust is on file
with the Secretary of The Commonwealth of Massachusetts 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 are not binding upon any
of them or the Shareholders individually, but are binding only upon the Trust
property, or the assets of the 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
Trustees and officers, may indemnify any of its employees or agents, and shall
indemnify any persons who serve at the Trust's request as Directors, officers or
Trustees of another organization, and may indemnify persons who serve at the
Trust'srequest 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 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 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 or thereafter, by reason of being or having
been such a Trustee or officer or Director, 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 to reason of wilful 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 of 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 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 office; or (d) by vote of Shareholders holding a
majority of the Shares entitled to vote 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 person in accordance with either of such
clauses as indemnification if such 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 wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of 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 pro-
ceeding 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.
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 general successor) shall be entitled out of
the assets of the Trust to be held harmless from and indem nified 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 wilful 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 wilful 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 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. 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 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 may distribute the remaining Trust
property, in cash or in kind or partly each, among the
Shareholders according to their respective rights and
interests.
(c) 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.
(d) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in paragraphs (b) and (c), the Trust shall
terminate and the Trustees shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties shall be canceled 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. A copy of this instrument and of each such
Supplemental Declaration of Trust or Amendment shall be filed by the Trust with
the Massachusetts Secretary of State and the Boston City Clerk, as well as any
other governmental office where such filing may from time to time be required.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any Supplemental Declarations 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, subject, however, if such amendment
adversely affects the rights of any Shares of any Series or any Class thereof
with respect to matters to which such amendment is applicable, to approval of
such amendments 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 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 relations 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 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 to the requirements of applicable federal laws or regulations or the
requirements of the Internal 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 shall permit the amendment of
this Declaration 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, 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 organization or entities.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
in the City of Boston, Massachusetts, for themselves and their assigns, as of
the day and year first above written.
--------------------------------------------
George S. Bissell
--------------------------------------------
K. Dun Gifford
--------------------------------------------
John M. Haffenreffer
--------------------------------------------
F. Ray Keyser, Jr.
--------------------------------------------
James A. Reed
--------------------------------------------
John W. Sharp
--------------------------------------------
Richard J. Shima
--------------------------------------------
Spencer R. Stuart
--------------------------------------------
Thomas O. Thorsen
--------------------------------------------
Rodney M. Vining
--------------------------------------------
Charles M. Williams
<PAGE>
KEYSTONE AMERICA EQUITY INCOME FUND
FIRST SUPPLEMENTAL
DECLARATION OF TRUST
Dated September 15, 1994
FIRST SUPPLEMENTAL DECLARATION OF TRUST dated September 15, 1994 made by George
S. Bissell, Albert H. Elfner, III, Frederick Amling, Charles A. Austin, III,
Edwin D. Campbell, Charles F. Chapin, Leroy Keith, Jr., K. Dun Gifford, F. Ray
Keyser, Jr., David M. Richardson, Richard J. Shima and Andrew J. Simons
(hereinafter with their successors referred to as the "Trustees") to DECLARATION
OF TRUST, dated October 24, 1986.
WHEREAS the Trustees have determined to change the name of the Trust.
NOW, THEREFORE, the Trustees hereby declare that they will amend the Declaration
of Trust of this Trust as hereinafter set forth:
ARTICLE I, Name and Definitions, Section 1. Name., is hereby amended to
read as follows:
"This Trust shall be known as the "Keystone America Fund for Total
Return" 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."
All other provisions of the Declaration of Trust shall continue as originally
stated.
IN WITNESS WHEREOF, the undersigned majority of all the Trustees of the Trust
have caused this Supplemental Declaration of Trust to be executed on the day of
1994.
----------------------------------
George S. Bissell, Trustee
----------------------------------
Albert H. Elfner, III, Trustee
----------------------------------
Frederick Amling, Trustee
----------------------------------
Charles A. Austin, III, Trustee
----------------------------------
Edwin D. Campbell, Trustee
----------------------------------
Charles F. Chapin, Trustee
----------------------------------
Leroy Keith, Jr., Trustee
----------------------------------
K. Dun Gifford, Trustee
----------------------------------
R. Ray Keyser, Jr., Trustee
----------------------------------
David M. Richardson, Trustee
----------------------------------
Richard J. Shima, Trustee
----------------------------------
Andrew J. Simons, Trustee
<PAGE>
EXHIBIT 99.24(b)(2)
KEYSTONE AMERICA EQUITY INCOME FUND
BY-LAWS
ARTICLE 1.
Declaration of Trust and Principal Office
1.1 Declaration of Trust. These By-laws are adopted pursuant to and are subject
to the terms of the Declaration of Trust ("Declaration of Trust") of Keystone
America Equity Income 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.
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 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 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 Declaration of Trust 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, resignation or removal from
office or until his successor is elected and qualifies. No Trustee shall stand
for reelection after he has passed his seventieth birthday.
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 death, resignation or removal. 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 Declaration of Trust, such duties and powers as are commonly incident to the
office occupied by him as if the Fund were organized as a Massachusetts 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 Declaration of Trust 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 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
October 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 1987 cut or engraved thereon.
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
Declaration of Trust or these By-laws requires action by the shareholders.
<PAGE>
AMENDMENT NO. 1
to
BY-LAWS
of
KEYSTONE AMERICA EQUITY INCOME FUND
EFFECTIVE JANUARY 1, 1987
Article 6, Fiscal Year and Seal, Section 6.1, Fiscal Year, is hereby
amended to read as follows:
"The fiscal year of the Trust shall end on the last day of November in
each year."
<PAGE>
AMENDMENT NO. 2
to
BY-LAWS
of
KEYSTONE AMERICA EQUITY INCOME FUND
EFFECTIVE DECEMBER 17, 1986
Article 4, Trustees, Section 4.1, Term, is hereby amended to delete the
last sentence.
<PAGE>
EXHIBIT 99.24(b)(5)(A)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made the day of August, 1993, by and between KEYSTONE AMERICA
EQUITY INCOME 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 Trustees 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 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 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 business trust
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, business trust 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
INCOME
--------------------------------------------------------------------------------
1.5% of
Gross Dividend and
Interest Income
Plus
0.60% of the first $ 100,000,000, plus
0.55% of the next $ 100,000,000, plus
0.50% of the next $ 100,000,000, plus
0.45% of the next $ 100,000,000, plus
0.40% of the next $ 100,000,000, plus
0.35% of the next $ 500,000,000, plus
0.30% 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, Trustee, 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 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 Declaration of Trust of the Fund,
the Articles of Incorporation of the Manager and the governing documents of any
Adviser, it is understood that Trustees, 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
Trustees, 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 Declaration of Trust of the Fund, Articles of
Incorporation of the Manager and governing documents of any Adviser.
9. This Agreement shall continue in effect after July 1, 1994 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.
14. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts. This instrument is executed on
behalf of the Trustees of the Fund as trustees and not individually and the
obligations of this instrument are not binding upon the Trustees or holders of
shares of the Fund individually but are binding only upon the assets and
property of the Fund.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
KEYSTONE AMERICA
EQUITY INCOME FUND
By: ------------------------------------------------------
Title:
KEYSTONE MANAGEMENT, INC.
By: ------------------------------------------------------
Title:
<PAGE>
EXHIBIT 99.24(b)(5)(B)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the day of August, 1993, 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 EQUITY INCOME 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 Trustees 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
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 business trust 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, business trust 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, Trustee, 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 Declaration of Trust of the Fund,
the Certificate of Incorporation of the Adviser and Articles of Incorporation of
the Manager, respectively, it is understood that Trustees, 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
Trustees, 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 Declaration 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 after July 1, 1994 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:
<PAGE>
EXHIBIT 99.24(b)(6)
PRINCIPAL UNDERWRITING AGREEMENT
KEYSTONE AMERICA FUND FOR TOTAL RETURN
AGREEMENT made this 19th day of August, 1993 by and between Keystone
America Fund For Total Return, 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 brokers, dealers or
other persons as Principal Underwriter may determine.
5. Payment to the Fund for Shares shall be in New York or Boston
Clearing House funds received by Principal Underwriter within ten (10) business
days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such ten-day period, the Fund reserves the right,
without further notice, forthwith to cancel its acceptance of any such order.
The Fund shall pay such issue taxes as may be required by law in connection with
the issuance of the Shares.
6. Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the Shares any representations concerning the Shares
except those contained in the then current prospectus and/or statement of
additional information covering the Shares and in printed information approved
by the Fund as information supplemental to such prospectus and statement of
additional information. Copies of the then current prospectus and statement of
additional information and any such printed supplemental information will be
supplied by the Fund to Principal Underwriter in reasonable quantities upon
request.
7. Principal Underwriter agrees to comply with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
8. The Fund appoints Principal Underwriter as its agent to accept
orders for redemptions and repurchases of Shares at values and in the manner
determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a) any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including amendments
and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement, prospectus
or statement of additional information necessary to make the statements
therein not misleading, provided, however, that insofar as losses,
claims, damages, liabilities or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information furnished
to the Fund by the Principal Underwriter for use in the Fund's
registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall
the Fund indemnify the Principal Underwriter or its controlling person
as to any amounts incurred for any liability arising out of or based
upon any action for which the Principal Underwriter, its officers and
Directors or any controlling person would otherwise be subject to
liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement.
10. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers, Trustees and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any legal fees incurred
in connection therewith) which the Fund, its officers, Trustees or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
a) may be based upon any wrongful act by the Principal
Underwriter or any of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's registration
statement, prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
or confirmed in writing to the Fund by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and
things as shall from time to time be reasonably requested by Principal
Underwriter for the purpose of qualifying the Shares for sale under the
so-called "blue sky" laws of any state or for registering Shares under the 1933
Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). Principal
Underwriter shall bear the expense of preparing, printing and distributing
advertising, sales literature, prospectuses and statements of additional
information. The Fund shall bear the expense of registering Shares under the
1933 Act and the Fund under the 1940 Act, qualifying Shares for sale under the
so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to shareholders of the Fund, and the direct expenses of the issuance
of Shares.
12. To the extent required by any 12b-1 Plan of the Fund, Principal
Underwriter shall provide to the Board of Trustees of the Fund in connection
with the 12b-1 Plan, not less than quarterly, a written report of the amounts
expended pursuant to such 12b-1 Plan and the purposes for which such
expenditures were made.
13. The term of this Agreement shall begin on the date hereof and,
unless sooner terminated or continued as provided below, shall expire after two
years. This Agreement shall continue in effect after such term if its
continuance is specifically approved by a majority of the Trustees of the Fund
and a majority of the 12b-1 Trustees referred to in any 12b-1 Plan of the Fund
("Rule 12b-1 Trustees") at least annually in accordance with the 1940 Act and
the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of a
majority of the Fund's outstanding Shares on not more than sixty 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.
15. The Fund is a Massachusetts business trust established under a
Declaration of Trust, as it may be amended from time to time. The obligations of
the Fund are not personally binding upon, nor shall recourse be had against the
private property of any of the Trustees, shareholders, officers, employees or
agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, on the day and year first written above.
KEYSTONE AMERICA FUND FOR TOTAL RETURN
By: _______________________________________
Title:
KEYSTONE DISTRIBUTORS, INC.
By: _______________________________________
Title:
EXHIBIT 99.24(b)(8)
CUSTODIAN, FUND ACCOUNTING AND
RECORDKEEPING AGREEMENT
by and between
KEYSTONE AMERICA EQUITY INCOME FUND
and
STATE STREET BANK AND TRUST COMPANY
Agreement made as of this 12th day of February, 1987 by and between
KEYSTONE AMERICA EQUITY INCOME FUND, a Massachusetts business trust (the "Fund")
having its principal place of business at 99 High Street, Boston, Massachusetts
02110, 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:
I. Depository.
The Fund hereby appoints State Street as its Depository subject to the
provisions hereof. 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 resonably required by
State Street in the performance of its duties hereunder.
II. Custodian.
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. As Custodian, State Street shall promptly:
A. Safekeeping. Keep safely in a separate account the securities of the
Fund, including without limitation all securities in bearer form, 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 6-C of Section II 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 under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities depository, or in
the book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "Securities
Systems(s)" in accordance with applicable Federal Reserve Board and Securities
and Exchange Commission rules and regulations, if any, and subject to the
following provisions:
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 by 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 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,
liability, damage or expense if and to the extent that the Fund has not
been made whole for any such loss or damage.
BB. 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 Securities and Exchange
Commission.
C. 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 6-C of Section II hereof.
D. Purchases. Upon receipt of proper instructions (as defined in
paragraph 5-A of Section II 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 6-C of Section II hereof as StateStreet's agent
or Subcustodian for this purpose) registered as provided in paragraph 3-C of
Section II 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. 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
use their best efforts to insure receipt by State Street of copies of
documentation for each such transaction as promptly as possible.
E. Exchanges. Upon receipt of proper instruction, exchange securities,
interim receipts or temporary securities held by it or by any agent or
Subcustodian appointed by it pursuant to paragraph 6-C of Section II 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 12 of Section II 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 6-C of Section II 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 6-C of Section II
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.
F. 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.
G. 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.
H. 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.
I. 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.
J. 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 therefore and upon surrender of the
note or notes evidencing the loan.
K. 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 3-E, 3-F, 3-G, 3-H, 3-I and 3-J of Section II hereof) which the Fund
declares is a proper corporate purpose pursuant to proper instructions.
L. Proxies, Notices, Etc. State Street shall promptly forward upon
receipt 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 6-C of Section II hereof to forward any such announcements and notices
to State Street upon receipt.
M. 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 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.
4. 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 acount established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940, as amended, 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
Agreement. State Street shall furnish 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 4-A of Section II 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 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 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 for 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 shareholder.
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 Adviser 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 3-D, 3-E, 4-D, 4-E, and 4-G of this Agreement) which the
Fund declares is a proper corporate purpose.
I. Records. Create, maintain and retain all records a) relating to its
activities and obligations under this Agreement in such manner as shall meet the
obligations of the Fund under the Investment Company Act of 1940, as amended,
particularly Section 31 thereof and Rules 31a-1 and 31a-2 thereunder, under
applicable federal and state tax laws and under any other law or administrative
rules or procedures which may be applicable to the Fund, b) necessary to comply
with the representations of Part I - Fund Custodian Services and Part II -
Portfolio Pricing and Accounting of State Street's Response, dated May 1, 1979,
as amended, to Keystone Custodian Funds, Inc.'s and the Massachusetts Company,
Inc.'s Request for Proposal, dated March 19, 1979, as amended, (amendments after
June 22, 1979 are set forth in Exhibit B) ("Parts I and II"), insofar as such
representations relate to the creation, maintenance and retention of records for
the Fund or c) 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 8 below.
J. Miscellaneous. Assist generally in the preparation of routine
reports to holders of shares of the Fund, to the Securities and Exchange
Commission, including form N-SAR, to State "Blue Sky" authorities, to others in
the auditing of accounts and in other matters of like nature, as required to
comply with the representations of Parts I and II insofar as such
representations relate to the preparation of reports for the Fund 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 for the Fund's portfolio. 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 reasonbly requested
from time to time by the Fund.
L. Services under Part I and Part II. In addition to the services
specified herein, State Street shall perform those services set forth in Parts I
and II, including without limitation general ledger accounting, daily Fund
portfolio pricing and custodian services to the extent such services relate to
the Fund; provided, however, that in the event that Parts I and II as they
relate to the Fund are in conflict with the terms of this Agreement, the terms
of this Agreement shall govern.
5. 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 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
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
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.
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 Declaration of Trust of the Fund, as
amended, or resolutions or proceedings of the Trustees of the Fund.
6. State Street and the Fund further agree as follows:
A. Indemnification. State Street, as Depository and 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, 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 Sub-Custodian 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
Sub-Custodian 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 Depository
and Custodian, shall not be responsible for the title, 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 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 reasonble times by
the Trustees of, attorneys for, auditors employed by the Fund or any other
person as the Fund's Trustees shall direct.
F. Record-Keeping. 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 and shall comply with the representations of Parts I and II as
such representations relate to maintaining records of the Fund.
7. The Fund shall pay State Street for its services as Custo dian such
compensation as shall be specified in the attached Exhibit A. Such compensation
shall remain fixed until December 31, 1988, unless this Agreement is terminated
as provided in Section 8A.
8. State Street and the Fund further agree as follows:
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 Trustees substitute
another bank or trust company for State Street by giving notice as provided
above to State Street. 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 and By-Laws, 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 6-B of Section II 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 Trustees of the Fund in
accordance with the Fund's Declaration of Trust, as amended, 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
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 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 Steet 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.
9. 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 merely identifies State Street as
Depository or 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.
10. 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.
11. 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 said Commonwealth.
12. Notices and other writings delivered or mailed postage prepaid to
Keystone America Equity Income Fund, c/o Keystone Custodian Funds, Inc., 99 High
Street, 32nd Floor, Boston, Massachusetts 02110 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.
13. It is understood and is expressly stipulated that neither the holders
of shares in the Fund nor the Fund's Trustees, officers or employees shall be
personally liable hereunder, but only the assets of the Fund shall be bound.
14. This Agreement shall be binding upon and shall inure to the benefit of
the Fund and State Street and their respective successors or assigns.
15. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
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 EQUITY
INCOME FUND
_____________________________ By: _____________________________
President
ATTEST: STATE STREET BANK AND TRUST
COMPANY
_____________________________ By: _____________________________
Vice President
<PAGE>
Schedule A
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
KEYSTONE AMERICA EQUITY INCOME FUND
I. Administration
Custodian, Portfolio and Fund Accounting Service - Maintain custody of Fund
assets. Settle portfolio purchases and sales. Report buy and sell fails.
Determine and collect portfolio income. Make cash disbursements and report cash
transactions. Maintain investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain general ledger and capital
stock accounts. Prepare daily trial balance. Calculate net asset value daily.
Provide from Fund approved pricing sources or vendors daily pricing for Fund
portfolio securities. Provide selected general ledger reports. Securities yield
or market value quotations for short term Fund portfolio securities will be
provided to State Street from a source designated by the Fund.
The administration fee shown below is an annual charge, billed and payable
monthly, based on average net assets and calculated in the same manner as the
Fund advisory and management fee.
ANNUAL FEES PER PORTFOLIO
Fund Net Assets Annual Fee
First $35 million 1/15 of 1%
Next $65 million 1/30 of 1%
Excess 1/100 of 1%
No minimum
II. Portfolio Trades - For each line item processed
a) Depository Trust Company and Federal Reserve
Book-Entry System $12.25
b) New York Physical Settlements
Receive $16.00
Deliver $16.00
Transfer $ 6.00
c) Options and All Other Trades $16.00
III. Holdings & Appraisal Charge
For each issue maintained - monthly charge $ 5.00
Paydown on government securities - monthly charge $ 5.00
Dividend charges (for items held at the request
of traders over record date in street form) $50.00
IV. Out of Pocket Expense
A billing for the recovery of applicable out-of-pocket expenses will
be made as of the end of each month. Out-of-pocket expenses include,
but are not limited to the following:
Telephone
Wire charges ($4.70 per wire in and $4.55 out)
Postage and insurance
Courier service
Duplicating
Legal fees
Supplies related to Fund records
Rush transfer - $8.00 each
Transfer fees
Sub-custodian charges
Price Waterhouse audit letter
Checkwriting ($.50 per check)
Federal Reserve Fee for returned check
items over $2,500 - $4.25
GNMA transfer - $15.00 each
V. Additional Accounting and Reporting Functions
$150 per month
This fee schedule will terminate 12/31/88
<PAGE>
SCHEDULE B
I. Operating Plan - Fund Custodian Services
1. Page 1
a) Trade instructions by tape input compatible with the SPARK system
will not be given.
b) System 34 terminals will not be provided for trade input.
2. Page 2
a) Distributions will be charged against the custodian account and
credited to the disbursement account on the payable date.
b) Reports - improved or new SPARK Reports will be made available to
the Fund at its request for no additional cost, if made available
at no additional cost to other customers of State Street.
II. Fund Custodian Services
A. Page 1
1) The Fund will receive Custody and Full Accounting Services.
B. Page 2
1) Polaris Fund Inc. is now Keystone International Fund Inc.
III. Custodian Reports
A. Page 1
2) Analytics - SPARK information reports - the Funds will receive none
of these.
IV. KM - SSB Reports Comparison
A. Page 1 - MassCo Report
1) (9) Different form with similar content to be prepared for Keystone
Tax Free Fund (and Keystone Tax Exempt Trust) rather than Master
Reserves Trust (MRT).
2) (12) To be prepared for all Funds.
3) (13) Trade Settlement Authorizations and all other reports as
provided to the Keystone Funds will be provided MassCo Funds.
4) (26) Initial instructions in memo from Mr. Joseph Naples.
Instructions may be changed from time to time by proper
instructions.
5) (30) Letter to be supplied by Mellon Bank, N.A.
6) (31) Report to be supplied by Mellon Bank, N.A.
B. Keystone Reports
1) (3) Information to be supplied by Open Order System.
2) (16) Will be prepared manually by State Street. Calculations to be
based on initial instructions provided under (4) (26) memo.
3) (18) To be prepared by State Street.
4) (30) New SPARK Report to be provided the Funds.
5) (31) Pricing Quotes for foreign issues, restricted securities and
private placements not otherwise available to State Street to be
supplied by the Fund.
6) (46) KIMCO Reports unnecessary.
7) (58) State Street to prepare manually.
8) (57) Keystone to provide.
9) (70) New SPARK Report to be provided the Funds.
10) (73) SPARK Report to be provided the Funds.
11) (74) New SPARK Report and hard copy tape to be provided the Funds.
12) (75) State Street to provide weekly report of fails for each Fund.
13) All new SPARK reports must be reviewed and accepted by the Funds
before they will be considered to comply with State Street's
Custodian, Fund Accounting and Recordkeeping Agreements with the
Funds, such acceptance not to be unreasonably withheld.
VI. Responses
I. Fund Custodian Services
a) Page 2
Checkwriting privilege is $.35 per check - charged only for
Keystone Liquid Trust at this time. Other Fund agreements to be
amended to include this charge if such privilege is ever offered to
shareholders of other Funds.
b) Page 3 (6) Individuals responsible for Fund services may change as
long as the quality of the personnel is maintained.
c) Page 6 (11) State Street is liable for the acts of its
sub-custodians to the same extent that it is liable for the acts of
its agents.
II. Exhibits
1. Exhibit 1-2
a) (6) Notices of corporate actions shall include, without limitation,
notices of class actions and bankruptcy actions in connection with
issues held by the Funds.
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 Declaration of Trust of the Fund, as amended, or
resolutions or proceedings of the Trustees of the Fund.
6. State Street and the Fund further agree as follows:
A. Indemnification. State Street, as Depository and 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, as set forth in
Schedule A.
C. Appointment of Agents and Subcustodians
1) State Street, as Custodian, may appoint (and may-remove) any
other bank, trust company or responsible commercial agent as its agent 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 shall not
relieve State Street of any of its responsibilities or liabilities under this
Agreement.
2) Upon receipt of proper instructions (within the meaning of
Section 5A), State Street as Custodian, shall from time to time employ one or
more Subcustodians, but only in accordance with an applicable vote by the Board
of Trustees; State Street shall be liable to the Fund as to any action taken or
omitted by any such Subcustodian, its subsidiaries, affiliates or subcustodians;
provided, however, that State Street shall have no more or less responsibility
or liability to the Fund on account of any actions or omissions of any
Subcustodian so employed than any such Subcustodian has to State Street.
3) At the election of the Fund, the Fund shall be entitled to be
subrogated to the rights of State Street, as Custodian, with respect to any
claim against any such Subcustodian which State Street may have as a consequence
of any liability arising from any actions or omissions of any such Subcustodian
if and to the extent that the Fund has not been made whole for any such
liability.
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 Depository
and Custodian, shall not be responsible for the title, 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 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 reasonble times by
the Trustees of, attorneys for, auditors employed by the Fund or any other
person as the Fund's Trustees shall direct.
F. Record-Keeping. 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 and shall comply with the representations of Parts I and II as
such representations relate to maintaining records of the Fund.
<PAGE>
FIRST
AMENDMENT
TO
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
KEYSTONE AMERICA EQUITY INCOME FUND
AND
STATE STREET BANK AND TRUST COMPANY
This First Amendment to the Custodian, Fund Accounting and
Recordkeeping Agreement by and between KEYSTONE AMERICA EQUITY INCOME FUND
("Fund") and STATE STREET BANK AND TRUST COMPANY ("State Street"), dated
February 12, 1987 ("Agreement") is made by and between the Fund and State Street
as of September 1, 1988.
In consideration of the mutual agreements contained herein, State Street and
the Fund hereby agree to amend the Agreement as follows:
1. Section II, Paragraph 3(K) is amended by inserting the following
language after Paragraph 3(J) and by renumbering existing Paragraph 3(K) as
Paragraph 3(L):
"K. 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 in
accordance with the provisions of any agreement among the Fund, the Custodian
and a broker-dealer registered under the Securities Exchange Act of 1934
("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 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, the Custodian, 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."
2. Existing Section II, Paragraph 3(L) is renumbered as
Paragraph 3(M).
3. The following language is inserted after new Section II,
Paragraph 3(M) as Paragraph 3(N):
"N. Segregated Account. The Custodian 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 the
Custodian pursuant to Paragraph 3(B) hereof, (i) in accordance with the
provisions of any agreement among the Fund, the Custodian 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 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 Securities and Exchange 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."
4. Existing Section II, Paragraphs 3(M) and 3(N) are
renumbered as Paragraphs 3(O) and 3(Q).
5. The following language in inserted after new Section II,
Paragraph 3(O) as Paragraph 3(P):
P. 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 C hereto ("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 C 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 from the Fund, State Street
shall 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 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 D 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 for 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
of 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 institutions
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 of 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 Subcustodian to
transfer, exchange or deliver foreign securities owned by the Fund, but, except
to the extent explicitly provided in this Section II(3)(P), only in any of the
cases specified in this Agreement; (b) 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 this Section
II(3)(P), only in any of the cases specified in this Agreement; (c)
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; (d) 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 Section II, Paragraphs (2) and (3)(P)
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 Section 3(P)(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 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
assets maintained in a foreign branch of a banking institution which is a "bank"
as defined by Section 2(a)-(5) of the 1940 Act 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 6-C of Section II of this
Agreement."
10. In all other respects the Agreement shall remain in full force and
effect.
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
EQUITY INCOME FUND
_____________________________ By: _____________________________
President
ATTEST: STATE STREET BANK AND
TRUST COMPANY
_____________________________ By: _____________________________
Vice President
<PAGE>
SECOND
AMENDMENT
TO
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
KEYSTONE AMERICA EQUITY INCOME FUND
AND
STATE STREET BANK AND TRUST COMPANY
This Second Amendment to the Custodian, Fund Accounting and Recordkeeping
Agreement by and between KEYSTONE AMERICA EQUITY INCOME FUND ("Fund") and STATE
STREET BANK AND TRUST COMPANY ("State Street"), dated February 12, 1987 and
amended through September 1, 1988 ("Agreement") is made by and between the Fund
and State Street as of January 1, 1989.
In consideration of the mutual agreements contained herein, State Street
and the Fund hereby agree to amend the Agreement as follows:
1. Section 3-D of Section II entitled, Purchases is amended by concluding
the first sentence of such paragraph with the following:
"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 as defined in Section 5-A, 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."
2. Section II is amended by deleting existing Paragraph 7 and by inserting
the following as Paragraphs 7 and 8:
" 7. Lien on Assets. 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 assets to the extent necessary to obtain reimbursement; provided,
however, that the total value of any property of any Portfolio of the Fund
which at any time is security for any payment by State Street hereunder
shall not exceed 15% of such Portfolio's total net asset value.
8. The Fund shall pay State Street for its services as Custodian such
compensation as shall be specified in the attached Exhibit A. Such
compensation shall remain fixed until December 31, 1989, unless this
Agreement is terminated as provided in Section 8A."
3. In all other respects the Agreement shall remain in full force and
effect.
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 EQUITY
INCOME FUND
____________________________ By: ____________________________
ATTEST: STATE STREET BANK AND
TRUST COMPANY
____________________________ By: ____________________________
Vice President
<PAGE>
THIRD
AMENDMENT
TO
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
KEYSTONE AMERICA EQUITY INCOME FUND
AND
STATE STREET BANK AND TRUST COMPANY
This Third Amendment to the Custodian, Fund Accounting and Recordkeeping
Agreement by and between KEYSTONE AMERICA EQUITY INCOME FUND ("Fund") and STATE
STREET BANK AND TRUST COMPANY ("State Street"), dated February 12, 1987 and
amended through January 1, 1989 ("Agreement"), is made by and between the Fund
and State Street as of February __, 1990.
In consideration of the mutual agreements contained herein, State Street and
the Fund hereby agree to amend the Agreement as follows:
1. Section II is amended by deleting Paragraph 8 and by inserting the
following as Paragraph 7A:
" 7A. The Fund shall pay State Street for its services as Custodian
such compensation as specified in the existing Schedule A. Such
compensation shall remain fixed until March 31, 1990 unless this Agreement
is terminated as provided in Paragraph 8A."
2. In all other respects the Agreement shall remain in full force and
effect.
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
EQUITY INCOME FUND
____________________________ By: ____________________________
ATTEST: STATE STREET BANK AND
TRUST COMPANY
____________________________ By: ____________________________
Vice President
<PAGE>
FOURTH
AMENDMENT
TO
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
KEYSTONE AMERICA EQUITY INCOME FUND
AND
STATE STREET BANK AND TRUST COMPANY
This Fourth Amendment to the Custodian, Fund Accounting and
Recordkeeping Agreement by and between KEYSTONE AMERICA EQUITY INCOME FUND, a
Massachusetts business trust organized and existing under the laws of the
Commonwealth of Massachusetts and having a principal place of business at 99
High Street, Boston, Massachusetts 02110 (hereinafter called the "Fund"), and
State Street Bank and Trust Company, a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston, Massachusetts 02110
(hereinafter called the "Custodian").
WHEREAS: The Fund and the Custodian are parties to a Custodian, Fund
Accounting and Recordkeeping Agreement dated February 12, 1987, as most recently
amended January 1, 1989 (the "Custodian Contract");
WHEREAS: The Fund desires that the Custodian issue a letter of credit
(the "Letter of Credit") on behalf of the Fund for the benefit of ICI Mutual
Insurance Company (the "Company") in accordance with the Continuing Letter of
Credit and Security Agreement and that the Fund's obligations to the Custodian
with respect to the Letter of Credit shall be fully collateralized at all times
while the Letter of Credit is outstanding by, among other things, segregated
assets of the Fund equal to 100% of the Fund's proportionate share of the face
amount of the Letter of Credit;
WHEREAS: the Custodian Contract provides for the establishment of
segregated accounts for proper Fund purposes upon Proper Instructions (as
defined in the Custodian Contract); and
WHEREAS: The Fund and the Custodian desire to establish a segregated
account to hold the collateral for the Fund's obligations to the Custodian with
respect to the Letter of Credit and to amend the Custodian Contract to provide
for the establishment and maintenance thereof:
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto hereby amend the Custodian Contract as
follows:
1. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Custodian Contract.
2. The Fund hereby instructs the Custodian to establish and maintain a
segregated account (the "Letter of Credit Custody Account") for and
on behalf of the Fund as contemplated by Section II, Paragraph 3N
(iv) of the Custodian Contract for the purpose of collateralizing
the Fund's obligations under this Amendment to the Custodian
Contract.
3. The Fund shall deposit with the Custodian and the Custodian shall
hold in the Letter of Credit Custody Account cash, certificates of
deposit, U.S. government securities or other high-grade debt
securities owned by the Fund acceptable to the Custodian
(collectively "Collateral Securities") equal to 100% of the Fund's
proportionate share of the face amount which the Company may draw
under the Letter of Credit. Upon receipt of such Collateral
Securities in the Letter of Credit Custody Account, the Custodian
shall issue the Letter of Credit to the Company.
4. The Fund hereby grants to the Custodian a security interest in the
Collateral Securities from time to time in the Letter of Credit
Custody Account (the "Collateral") to secure the performance of the
Fund's obligations to the Custodian with respect to the Letter of
Credit, including, without limitation, under Section 5-144(3) of the
Uniform Commercial Code. The Fund shall register the pledge of
Collateral and execute and deliver to the Custodian such powers and
instruments of assignment as may be requested by the Custodian to
evidence and perfect the limited interest in the Collateral granted
hereby.
5. The Collateral Securities in the Letter of Credit Custody Account
may be substituted or exchanged (including substitutions or
exchanges which increase or decrease the aggregate value of the
Collateral) only pursuant to Proper Instructions from the Fund after
the Fund notifies the Custodian of the contemplated substitution or
exchange and the Custodian agrees that such substitution or exchange
is acceptable to the Custodian.
6. Upon any payment made pursuant to the Letter of Credit by the
Custodian to the Company, the Custodian may withdraw from the Letter
of Credit Custody Account Collateral Securities in an amount equal
in value to the amount actually so paid. The Custodian shall have
with respect to the Collateral so withdrawn all of the rights of a
secured creditor under the Uniform Commercial Code as adopted in the
Commonwealth of Massachusetts at the time of such withdrawal and all
other rights granted or permitted to it under law.
7. The Custodian will transfer upon receipt all income earned on the
Collateral to the Fund custody account unless the Custodian receives
Proper Instructions from the Fund to the contrary.
8. Upon the drawing by the Company of all amounts which may become
payable to it under the Letter of Credit and the withdrawal of all
Collateral Securities with respect thereto by the Custodian pursuant
to Section 6 hereof, or upon the termination of the Letter of Credit
by the Fund with the written consent of the Company, the Custodian
shall transfer any Collateral Securities then remaining in the
Letter of Credit Custody Account to another fund custody account.
9. Collateral held in the Letter of Credit Custody Account shall be
released only in accordance with the provisions of this Amendment to
Custodian Contract. The Collateral shall at all times until
withdrawn pursuant to Section 6 hereof remain the property of the
Fund, subject only to the extent of the interest granted herein to
the Custodian.
10. Notwithstanding any other termination of the Custodian Contract, the
Custodian Contract shall remain in full force and effect with
respect to the Letter of Credit Custody Account until transfer of
all Collateral Securities pursuant to Section 8 hereof.
11. The Custodian shall be entitled to reasonable compensation for its
issuance of the Letter of Credit and for its services in connection
with the Letter of Credit Custody Account as agreed upon from time
to time between the Fund and the Custodian.
12. The Custodian Contract as amended hereby shall be governed by, and
construed and interpreted under, the laws of the Commonwealth of
Massachusetts.
13. The parties agree to execute and deliver all such further documents
and instruments and to take such further action as may be required
to carry out the purposes of the Custodian Contract, as amended
hereby.
14. Except as provided in this Amendment, the Custodian Contract shall
remain in full force and effect, without amendment or modification,
and all applicable provisions of the Custodian Contract, as amended
hereby, shall govern the Letter of Credit Custody Account and the
rights and obligations of the Fund and the Custodian under this
Amendment to Custodian Contract. No provision of this Amendment to
Custodian Contract shall be deemed to constitute a waiver of any
rights of the Custodian under the Custodian Contract or under law.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to
Custodian Contract to be executed in its name and behalf by its duly authorized
representatives and its seal to be hereunder affixed as of the _____ day of
February, 1990.
ATTEST: KEYSTONE AMERICA EQUITY INCOME FUND
____________________________ By: _______________________________
ATTEST: STATE STREET BANK AND TRUST COMPANY
____________________________ By: _______________________________
Assistant Secretary Vice President
<PAGE>
FIFTH
AMENDMENT
TO
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
KEYSTONE AMERICA EQUITY INCOME FUND
AND
STATE STREET BANK AND TRUST COMPANY
This Fifth Amendment to the Custodian, Fund Accounting and Recordkeeping
Agreement by and between KEYSTONE AMERICA EQUITY INCOME FUND ("Fund") and STATE
STREET BANK AND TRUST COMPANY ("State Street"), dated February 12, 1987 and
amended through February 8, 1990 ("Agreement"), is made by and between the Fund
and State Street as of April __, 1990.
In consideration of the mutual agreements contained herein, State Street
and the Fund hereby agree to amend the Agreement as follows:
1. Section II is amended by deleting Paragraph 8 and by inserting the
following as Paragraph 7A:
" 7A. The Fund shall pay State Street for its services as Custodian
such compensation as specified in the existing Schedule A. Such
compensation shall remain fixed until December 31, 1990 unless this
Agreement is terminated as provided in Paragraph 8A."
2. In all other respects the Agreement shall remain in full force and
effect.
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
EQUITY INCOME FUND
____________________________ By: _______________________________
ATTEST: STATE STREET BANK AND
TRUST COMPANY
____________________________ By: _______________________________
Vice President
<PAGE>
EXHIBIT 99.24(b)(11)
CONSENT OF INDEPENDENT AUDITORS
The Trustees and Shareholders
Keystone America Fund For Total Return
We consent to the use of our report dated January 6, 1995 included herein and to
the references to our firm under the captions "FINANCIAL HIGHLIGHTS" in the
Prospectus and "ADDITIONAL INFORMATION" in the Statement of Additional
Information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
March , 1995
<PAGE>
EXHIBIT 99.24(b)(15)
KEYSTONE AMERICA EQUITY INCOME FUND
CLASS A DISTRIBUTION PLAN
SECTION 1. Keystone America Equity Income Fund ("Fund") may act as the
distributor of securities of which it is the issuer, pursuant to Rule 12b-1
under the Investment Company Act of 1940 ("Act") according to the terms of this
Distribution Plan ("Plan").
SECTION 2. The Fund may expend daily amounts at an annual rate of 0.75%
of the average daily net asset value of Class A shares of the Fund to finance
any activity which is principally intended to result in the sale of Class A
shares of the Fund, including, without limitation, expenditures consisting of
payments to a principal underwriter of the Fund (Principal Underwriter) in order
(i) to enable the Principal Underwriter to pay to others commissions in respect
of sales of Class A shares since inception of the Plan; (ii) to enable the
Principal Underwriter to pay or have paid to others who sell Class A ahares a
maintenance or other fee, at such intervals as the Principal Underwriter may
deterimine, 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 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 Trustees of the Fund and (b) those Trustees 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 (the "Rule 12b-1
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan or such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 7, this Plan
shall continue in effect for a period of one year from the date it takes effect
and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board, and the Board shall review at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 7. This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees, or by vote of a majority of the Fund's
outstanding Class A shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide:
A. That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule 12b-1
Trustees or by a vote of majority of the Fund's outstanding Class A
shares on not more than sixty days written notice to any other party to
the agreement; and
B. That such agreement shall terminate automatically in the
event of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 3 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided in Section 4 hereof.
<PAGE>
KEYSTONE AMERICA EQUITY INCOME FUND
CLASS B DISTRIBUTION PLAN
SECTION 1. Keystone America Equity Income 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 (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
Underwriter") or others as sales commissions or other compensation for their
services that have been earned or as reimbursement for expenses that have been
incurred or accrued at any time during which this Plan has been in effect,
together with interest at a rate approved from time to time by the Rule 12b-1
Trustees (as defined below) on any such amounts; 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 Trustees of the Fund and (b) those Trustees of the Fund who are
not "interested persons" of the Fund (as said term is defined in the 1940 Act)
and who have no direct or indirect financial interest in the operation of this
Plan or any agreements of the Fund or any other person related to this Plan (the
"Rule 12b-1 Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan or such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 7 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4 hereof.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board of Trustees, and the Board shall review at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
SECTION 7. This Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or by vote of a majority of the outstanding
Class 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, without
payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees or by a vote of a majority of the outstanding
Class 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 materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 3 hereof, and no
material amendment to this Plan shall be made unless approved in the manner
provided in Section 4 hereof.
<PAGE>
KEYSTONE AMERICA EQUITY INCOME FUND
CLASS C DISTRIBUTION PLAN
SECTION 1. Keystone America Equity Income Fund (the "Fund") may act as
the distributor of securities of which it is the issuer pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") according to the terms
of this Distribution Plan ("Plan").
SECTION 2. The Fund may expend daily amounts at an annual rate of 1.00%
of the average daily net asset value of the Fund attributable to the Fund's
Class C shares to finance any activity that is principally intended to result in
the sale of Class C shares, including, without limitation, expenditures
consisting of payments to a principal underwriter of the Fund ("Principal Under-
writer") or others as sales commissions or other compensation for their services
that have been earned or as reimbursement for expenses that have been incurred
or accrued at any time during which this Plan has been in effect together with
interest at a rate approved from time to time by the Rule 12b-1 Trustees (as
defined below) on any such amounts.
SECTION 3. This Plan shall not take effect until it has been approved
by a vote of at least a majority (as defined in the 1940 Act) of the outstanding
Class C shares.
SECTION 4. This Plan shall not take effect until it has been approved,
together with any related agreements of the Fund, by votes of a majority of both
(a) the Board of Trustees/Directors ofthe 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"), cast in person at a meeting
called for the purpose of voting on this Plan or such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 7 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4 hereof.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board of Trustees/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 or by vote of a majority of the outstanding
Class C shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees or by a vote of a majority of the outstanding
Class C shares on not more than sixty days written notice to
any other party to the agreement; and
(b) That such agreement shall terminate automatically in the event
of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 3 hereof, and no
material amendment to this Plan shall be made unless approved in the manner
provided in Section 4 hereof.
<TABLE>
EXHIBIT 99.24(b)(16)
<CAPTION>
KAEIF CLASS A MTD YTD ONE YEAR THREE YEAR THREE YEAR FIVE YEAR FIVE YEAR TEN YEAR INCEPTION
30-Nov-94 TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.75% LOAD -9.43% -8.25% 16.35% 5.18% 33.27% 5.91% 71.73% 7.34%
no load -4.21% -3.90% -2.65% 23.45% 7.27% 41.40% 7.17% 82.21% 8.18%
Beg dates 31-Oct-94 31-Dec-93 30-Nov-93 29-Nov-91 29-Nov-91 30-Nov-89 30-Nov-89 14-Apr-87 14-Apr-87
Beg Value (LOAD) 20,183 20,118 19,859 15,661 15,661 13,673 13,673 10,610 10,610
Beg Value (no load) 19,022 18,961 18,718 14,760 14,760 12,886 12,886 10,000 10,000
End Value 18,221 18,221 18,221 18,221 18,221 18,221 18,221 18,221 18,221
TIME 3 5 7.6305555556
<PAGE>
<CAPTION>
KAEIF-B MTD YTD ONE YEAR INCEPTION THREE YEAR FIVE YEAR FIVE YEAR TEN YEAR INCEPTION
30-Nov-94 TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
with cdsc N/A -7.36% -6.23% 0.31% 0.17% NA NA NA 0.17%
W/O CDSC -4.33% -4.52% -3.36% 3.10% 1.68% NA NA NA 1.68%
Beg dates 31-Oct-94 31-Dec-93 30-Nov-93 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93
Beg Value (no load) 10,777 10,798 10,668 10,000 10,000 10,000 10,000 10,000 10,000
End Value (W/O CDSC) 10,310 10,310 10,310 10,310 10,310 10,310 10,310 10,310 10,310
End Value (with cdsc) 10,004 10,004 10,031 10,217 10,216 10,310 10,309 10,031
beg nav 12.34 12.47 12.32 12.65 12.65 12.65 12.65 12.65 12.65
end nav 11.77 11.77 11.77 11.77 11.77 11.77 11.77 11.77 11.77
shares originally
purchased 873.32 865.95 865.95 790.51 790.51 790.51 790.51 790.51 790.51
--------- ------ ------ ------ ------ ----- ------ ------ ------
3% cdsc thru date=> 31-Dec-94
TIME 2% cdsc thru date=> 31-Dec-95 1.8333333333
<PAGE>
<CAPTION>
KAEIF-C MTD YTD ONE YEAR INCEPTION INCEPTION FIVE YEAR FIVE YEAR TEN YEAR TEN YEAR
30-Nov-94 TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED TOTAL RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
with cdsc N/A -5.54% -3.36% 3.18% 1.72% NA NA NA NA
W/O CDSC -4.25% -4.60% -3.36% 3.18% 1.72% NA NA NA NA
--------- ------ ------ ------ ------ ----- ------ ------ ------
Beg dates 31-Oct-94 31-Dec-93 30-Nov-93 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93
Beg Value (no load) 10,776 10,815 10,676 10,000 10,000 10,000 10,000 10,000 10,000
End Value (W/O CDSC) 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318 10,318
End Value (with cdsc) 10,216 10,216 10,318 10,318 10,318 10,317.835840510,318 10,317.8358405
beg nav 12.34 12.49 12.33 12.65 12.65 12.65 12.65 12.65 12.65
end nav 11.78 11.78 11.78 11.78 11.78 11.78 11.78 11.78 11.78
shares originally
purchased 873.25 865.89 865.89 790.51 790.51 790.51 790.51 790.51 790.51
TIME 1.8333333333 1.8333333333 1.8333333333
</TABLE>
<PAGE>
<TABLE>
FUND #: 4224
FUND NAME: KEYSTONE AMERICA FUND FOR TOTAL RETURN CLASS A
Input PRICING DATE 22-Nov-94
============
30 DAY YTM 1.43573%
==========
Fund Fund Ad Yd Rt Class
--- ---------- -------- ------- ------- -------- ---------- ------- -------
<CAPTION>
PRICE ST FIXED EQUITY ZERO GAIN/ LONG TERM TOTAL DIV
DATE INCOME INCOME COUPON LOSS ADJ INCOME INCOME FACTOR
Input Input Input Input input Input
--- ---------- -------- ------- ------- -------- ---------- ------- -------
<C> <C> <C> <C> <C> <C> <C> <C>
1 24-Oct-94 590.46 2278.26 0 234.62 3,103.34 64.6354487
2 25-Oct-94 508.77 2380.59 0 242.77 3,132.13 64.5553830
3 26-Oct-94 503.91 2502.7 0 221.59 3,228.20 64.6220367
4 27-Oct-94 501.06 2500.03 0 219.40 3,220.49 64.6604990
5 28-Oct-94 502.20 2500.03 0 223.83 3,226.06 64.6300900
6 29-Oct-94 502.20 2500.03 0 223.83 3,226.06 64.5734103
7 30-Oct-94 502.20 2500.03 0 223.83 3,226.06 64.5734103
8 31-Oct-94 510.61 2500.03 0 222.26 3,232.90 64.5734103
9 01-Nov-94 501.71 2500.03 0 222.26 3,224.00 64.6435461
10 02-Nov-94 498.63 2504.48 0 204.85 3,207.96 64.5946728
11 03-Nov-94 493.65 2504.48 0 229.63 3,227.76 64.5602669
12 04-Nov-94 424.34 2571.06 0 224.30 3,219.70 64.5510027
13 05-Nov-94 424.34 2571.06 0 224.30 3,219.70 64.3797933
14 06-Nov-94 424.34 2571.06 0 224.30 3,219.70 64.3797933
15 07-Nov-94 254.93 2571.06 0 505.08 3,331.07 64.3797933
16 08-Nov-94 293.50 2576.06 0 496.47 3,366.03 64.1695784
17 09-Nov-94 309.73 2576.06 0 491.50 3,377.29 64.1636673
18 10-Nov-94 298.37 2576.06 0 479.51 3,353.94 64.1162528
19 11-Nov-94 298.37 2576.06 0 484.86 3,359.29 64.0809531
20 12-Nov-94 298.37 2576.06 0 484.86 3,359.29 64.0805069
21 13-Nov-94 298.37 2576.06 0 484.86 3,359.29 64.0805069
22 14-Nov-94 318.23 2576.06 0 486.86 3,381.15 64.0805069
23 15-Nov-94 385.74 2548.04 0 489.94 3,423.72 64.1334861
24 16-Nov-94 480.90 2537.73 0 493.38 3,512.01 63.7112909
25 17-Nov-94 505.80 2537.73 0 503.80 3,547.33 63.6569059
26 18-Nov-94 499.33 2537.73 0 507.67 3,544.73 63.7167493
27 19-Nov-94 499.33 2537.73 0 507.67 3,544.73 63.8833467
28 20-Nov-94 499.33 2537.73 0 507.67 3,544.73 63.8833467
29 21-Nov-94 498.23 2537.73 0 515.65 3,551.61 63.8833467
30 22-Nov-94 502.75 2579.4 0 512.84 3,594.99 63.8028622
<CAPTION>
SEC STANDARDIZED ADVERTISING YIELD
PHASE II-ROLLING
TOTAL INCOME FOR PERIOD 64,287.59
TOTAL EXPENSES FOR PERIOD 35,320.19
AVERAGE SHARES OUTSTANDING 1,967,876.12
LAST PRICE DURING PERIOD 12.34
Class Class Class
----- --------- --------- -------------- ----------- -------- 30 DAY 30 DAY 30 DAY
PRICE ADJUSTED DAILY FD & DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
DATE INCOME CLASS EXPENSES SHARES PRICE INCOME EXPENSES SHARES
Input Input input
----- --------- --------- -------------- ----------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 24-Oct-94 2,005.86 1,088.75 1,975,466.323 12.820 2,005.86 1,088.75 1,975,466.323
2 25-Oct-94 2,021.96 1,194.79 1,974,102.048 12.820 4,027.82 2,283.54 3,949,568.371
3 26-Oct-94 2,086.13 1,206.42 1,972,831.594 12.840 6,113.95 3,489.96 5,922,399.965
4 27-Oct-94 2,082.38 1,213.42 1,973,280.804 12.940 8,196.33 4,703.38 7,895,680.769
5 28-Oct-94 2,085.01 1,094.73 1,974,125.076 13.140 10,281.34 5,798.11 9,869,805.845
6 29-Oct-94 2,083.18 1,090.58 1,974,125.076 13.140 12,364.52 6,888.69 11,843,930.921
7 30-Oct-94 2,083.18 1,090.58 1,974,125.076 13.140 14,447.70 7,979.27 13,818,055.997
8 31-Oct-94 2,087.59 1,090.58 1,973,133.024 13.080 16,535.29 9,069.85 15,791,189.021
9 01-Nov-94 2,084.11 2,213.39 1,971,862.200 12.970 18,619.40 11,283.24 17,763,051.221
10 02-Nov-94 2,072.17 1,161.32 1,971,176.679 12.910 20,691.57 12,444.56 19,734,227.900
11 03-Nov-94 2,083.85 1,213.47 1,968,351.867 12.910 22,775.42 13,658.03 21,702,579.767
12 04-Nov-94 2,078.35 1,123.51 1,967,942.563 12.820 24,853.77 14,781.54 23,670,522.330
13 05-Nov-94 2,072.84 1,190.61 1,967,942.563 12.820 26,926.61 15,972.15 25,638,464.893
14 06-Nov-94 2,072.84 1,190.61 1,967,942.563 12.820 28,999.45 17,162.76 27,606,407.456
15 07-Nov-94 2,144.54 1,190.61 1,969,678.851 12.800 31,143.99 18,353.37 29,576,086.307
16 08-Nov-94 2,159.97 1,094.64 1,970,131.477 12.850 33,303.96 19,448.01 31,546,217.784
17 09-Nov-94 2,166.99 1,263.88 1,970,077.052 12.850 35,470.95 20,711.89 33,516,294.836
18 10-Nov-94 2,150.42 1,083.79 1,961,389.443 12.820 37,621.37 21,795.68 35,477,684.279
19 11-Nov-94 2,152.67 1,079.58 1,960,494.841 12.740 39,774.04 22,875.26 37,438,179.120
20 12-Nov-94 2,152.65 1,124.56 1,960,494.841 12.740 41,926.69 23,999.82 39,398,673.961
21 13-Nov-94 2,152.65 1,124.56 1,960,494.841 12.740 44,079.34 25,124.38 41,359,168.802
22 14-Nov-94 2,166.66 1,124.56 1,960,081.561 12.810 46,246.00 26,248.94 43,319,250.363
23 15-Nov-94 2,195.75 1,182.14 1,969,583.874 12.800 48,441.75 27,431.08 45,288,834.237
24 16-Nov-94 2,237.55 1,100.12 1,968,350.011 12.760 50,679.30 28,531.20 47,257,184.248
25 17-Nov-94 2,258.12 1,181.75 1,963,337.213 12.710 52,937.42 29,712.95 49,220,521.461
26 18-Nov-94 2,258.59 1,099.02 1,962,825.729 12.640 55,196.01 30,811.97 51,183,347.190
27 19-Nov-94 2,264.49 1,130.99 1,962,825.729 12.640 57,460.50 31,942.96 53,146,172.919
28 20-Nov-94 2,264.49 1,130.99 1,962,825.729 12.640 59,724.99 33,073.95 55,108,998.648
29 21-Nov-94 2,268.89 1,130.99 1,963,274.339 12.580 61,993.88 34,204.94 57,072,272.987
30 22-Nov-94 2,293.71 1,115.25 1,964,010.626 12.340 64,287.59 35,320.19 59,036,283.613
</TABLE>
<PAGE>
<TABLE>
FUND NAME: KEYSTONE AMERICA FUND FOR TOTAL RETURN CLASS B
PRICING DATE 22-Nov-94
=
30 DAY YTM 0.75582%
=
---- -------- -------- --------- ------- -------- ---------- -------- ---------
<CAPTION>
PRICE ST FIXED MORTGAGE AMORT. GAIN/ LONG TERM TOTAL DIV
DATE INCOME INCOME INCOME LOSS ADJ INCOME INCOME FACTOR
INPUT
---- -------- -------- --------- ------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 24-Oct-94 590.46 2,278.26 0 0 234.62 3,103.34 19.0073630
2 25-Oct-94 508.77 2,380.59 0 0 242.77 3,132.13 19.0886471
3 26-Oct-94 503.91 2,502.70 0 0 221.59 3,228.20 19.0354189
4 27-Oct-94 501.06 2,500.03 0 0 219.40 3,220.49 18.9912805
5 28-Oct-94 502.2 2,500.03 0 0 223.83 3,226.06 19.0431037
6 29-Oct-94 502.2 2,500.03 0 0 223.83 3,226.06 19.0854618
7 30-Oct-94 502.2 2,500.03 0 0 223.83 3,226.06 19.0854618
8 31-Oct-94 510.61 2,500.03 0 0 222.26 3,232.90 19.0854618
9 01-Nov-94 501.71 2,500.03 0 0 222.26 3,224.00 18.9878526
10 02-Nov-94 498.63 2,504.48 0 0 204.85 3,207.96 19.0373467
11 03-Nov-94 493.65 2,504.48 0 0 229.63 3,227.76 19.0707691
12 04-Nov-94 424.34 2,571.06 0 0 224.30 3,219.70 19.0606542
13 05-Nov-94 424.34 2,571.06 0 0 224.30 3,219.70 19.2847624
14 06-Nov-94 424.34 2,571.06 0 0 224.30 3,219.70 19.2847624
15 07-Nov-94 254.93 2,571.06 0 0 505.08 3,331.07 19.2847624
16 08-Nov-94 293.5 2,576.06 0 0 496.47 3,366.03 19.5319334
17 09-Nov-94 309.73 2,576.06 0 0 491.50 3,377.29 19.5392748
18 10-Nov-94 298.37 2,576.06 0 0 479.51 3,353.94 19.5255905
19 11-Nov-94 298.37 2,576.06 0 0 484.86 3,359.29 19.5347993
20 12-Nov-94 298.37 2,576.06 0 0 484.86 3,359.29 19.5322556
21 13-Nov-94 298.37 2,576.06 0 0 484.86 3,359.29 19.5322556
22 14-Nov-94 318.23 2,576.06 0 0 486.86 3,381.15 19.5322556
23 15-Nov-94 385.74 2,548.04 0 0 489.94 3,423.72 19.5429853
24 16-Nov-94 480.9 2,537.73 0 0 493.38 3,512.01 20.0425815
25 17-Nov-94 505.8 2,537.73 0 0 503.80 3,547.33 20.0756005
26 18-Nov-94 499.33 2,537.73 0 0 507.67 3,544.73 19.9952739
27 19-Nov-94 499.33 2,537.73 0 0 507.67 3,544.73 19.7834975
28 20-Nov-94 499.33 2,537.73 0 0 507.67 3,544.73 19.7834975
29 21-Nov-94 498.23 2,537.73 0 0 515.65 3,551.61 19.7834975
30 22-Nov-94 502.75 2,579.40 0 0 512.84 3,594.99 19.8267574
<CAPTION>
SEC STANDARDIZED ADVERTISING YIELD
PHASE II-ROLLING
TOTAL INCOME FOR PERIOD 19,426.01
TOTAL EXPENSES FOR PERIOD 15,073.92
AVERAGE SHARES OUTSTANDING 594,045.14
LAST PRICE DURING PERIOD 11.65
Class Class Class
---- -------- -------- --------- ------------ -------- 30 DAY 30 DAY 30 DAY
PRICE ADJUSTED DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
DATE INCOME EXPENSES SHARES PRICE INCOME EXPENSES SHARES
Input Input Input
---- -------- -------- --------- ------------ -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 24-Oct-94 589.86 465.35 580,757.224 12.08 589.86 465.35 580,757.224
2 25-Oct-94 597.88 497.21 583,597.021 12.08 1,187.74 962.56 1,164,354.245
3 26-Oct-94 614.50 500.40 581,005.815 12.10 1,802.24 1,462.96 1,745,360.060
4 27-Oct-94 611.61 501.03 579,457.934 12.20 2,413.85 1,963.99 2,324,817.994
5 28-Oct-94 614.34 467.63 581,572.590 12.38 3,028.19 2,431.62 2,906,390.584
6 29-Oct-94 615.71 470.15 581,572.590 12.38 3,643.90 2,901.77 3,487,963.174
7 30-Oct-94 615.71 470.15 581,572.590 12.38 4,259.61 3,371.92 4,069,535.764
8 31-Oct-94 617.01 470.15 583,096.013 12.34 4,876.62 3,842.07 4,652,631.777
9 01-Nov-94 612.17 798.25 579,147.542 12.22 5,488.79 4,640.32 5,231,779.319
10 02-Nov-94 610.71 487.57 580,907.791 12.17 6,099.50 5,127.89 5,812,687.110
11 03-Nov-94 615.56 503.64 581,416.127 12.17 6,715.06 5,631.53 6,394,103.237
12 04-Nov-94 613.70 477.17 581,082.706 12.08 7,328.76 6,108.70 6,975,185.943
13 05-Nov-94 620.91 500.22 581,082.706 12.08 7,949.67 6,608.92 7,556,268.649
14 06-Nov-94 620.91 500.22 581,082.706 12.08 8,570.58 7,109.14 8,137,351.355
15 07-Nov-94 642.39 500.22 590,013.967 12.06 9,212.97 7,609.36 8,727,365.322
16 08-Nov-94 657.45 478.60 599,710.301 12.10 9,870.42 8,087.96 9,327,075.623
17 09-Nov-94 659.90 534.01 599,987.633 12.11 10,530.32 8,621.97 9,927,063.256
18 10-Nov-94 654.88 479.36 597,377.202 12.08 11,185.20 9,101.33 10,524,440.458
19 11-Nov-94 656.23 477.32 597,727.968 12.01 11,841.43 9,578.65 11,122,168.426
20 12-Nov-94 656.15 490.32 597,727.968 12.01 12,497.58 10,068.97 11,719,896.394
21 13-Nov-94 656.15 490.32 597,727.968 12.01 13,153.73 10,559.29 12,317,624.362
22 14-Nov-94 660.41 490.32 597,540.688 12.06 13,814.14 11,049.61 12,915,165.050
23 15-Nov-94 669.10 508.35 600,307.993 12.06 14,483.24 11,557.96 13,515,473.043
24 16-Nov-94 703.90 493.24 619,360.168 12.03 15,187.14 12,051.20 14,134,833.211
25 17-Nov-94 712.15 525.61 619,343.077 11.98 15,899.29 12,576.81 14,754,176.288
26 18-Nov-94 708.78 497.60 616,138.509 11.91 16,608.07 13,074.41 15,370,314.797
27 19-Nov-94 701.27 501.66 616,138.509 11.91 17,309.34 13,576.07 15,986,453.306
28 20-Nov-94 701.27 501.66 616,138.509 11.91 18,010.61 14,077.73 16,602,591.815
29 21-Nov-94 702.63 501.66 608,191.649 11.85 18,713.24 14,579.39 17,210,783.464
30 22-Nov-94 712.77 494.53 610,570.686 11.65 19,426.0 15,073.92 17,821,354.150
</TABLE>
<PAGE>
<TABLE>
FUND #: 4224
FUND NAME: KEYSTONE AMERICA FUND FOR TOTAL RETURN CLASS C
PRICING DATE 22-Nov-94
=========
30 DAY YTM 0.74588%
=========
--- -------- -------- -------- ------- -------- ---------- ------- ---------
<CAPTION>
PRICE ST FIXED MORTGAGE AMORT. GAIN / LONG TERM TOTAL DIV
DATE INCOME INCOME INCOME LOSS ADJ. INCOME INCOME FACTOR
--- -------- -------- -------- ------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 24-Oct-94 590.46 2,278.26 0.00 0.00 234.62 3,103.34 16.3571883
2 25-Oct-94 508.77 2,380.59 0.00 0.00 242.77 3,132.13 16.3559699
3 26-Oct-94 503.91 2,502.70 0.00 0.00 221.59 3,228.20 16.3425444
4 27-Oct-94 501.06 2,500.03 0.00 0.00 219.40 3,220.49 16.3482205
5 28-Oct-94 502.2 2,500.03 0.00 0.00 223.83 3,226.06 16.3268063
6 29-Oct-94 502.2 2,500.03 0.00 0.00 223.83 3,226.06 16.3411279
7 30-Oct-94 502.2 2,500.03 0.00 0.00 223.83 3,226.06 16.3411279
8 31-Oct-94 510.61 2,500.03 0.00 0.00 222.26 3,232.90 16.3411279
9 01-Nov-94 501.71 2,500.03 0.00 0.00 222.26 3,224.00 16.3686013
10 02-Nov-94 498.63 2,504.48 0.00 0.00 204.85 3,207.96 16.3679805
11 03-Nov-94 493.65 2,504.48 0.00 0.00 229.63 3,227.76 16.3689640
12 04-Nov-94 424.34 2,571.06 0.00 0.00 224.30 3,219.70 16.3883431
13 05-Nov-94 424.34 2,571.06 0.00 0.00 224.30 3,219.70 16.3354443
14 06-Nov-94 424.34 2,571.06 0.00 0.00 224.30 3,219.70 16.3354443
15 07-Nov-94 254.93 2,571.06 0.00 0.00 505.08 3,331.07 16.3354443
16 08-Nov-94 293.5 2,576.06 0.00 0.00 496.47 3,366.03 16.2984882
17 09-Nov-94 309.73 2,576.06 0.00 0.00 491.50 3,377.29 16.2970579
18 10-Nov-94 298.37 2,576.06 0.00 0.00 479.51 3,353.94 16.3581567
19 11-Nov-94 298.37 2,576.06 0.00 0.00 484.86 3,359.29 16.3842476
20 12-Nov-94 298.37 2,576.06 0.00 0.00 484.86 3,359.29 16.3872375
21 13-Nov-94 298.37 2,576.06 0.00 0.00 484.86 3,359.29 16.3872375
22 14-Nov-94 318.23 2,576.06 0.00 0.00 486.86 3,381.15 16.3872375
23 15-Nov-94 385.74 2,548.04 0.00 0.00 489.94 3,423.72 16.3235286
24 16-Nov-94 480.9 2,537.73 0.00 0.00 493.38 3,512.01 16.2461276
25 17-Nov-94 505.8 2,537.73 0.00 0.00 503.80 3,547.33 16.2674936
26 18-Nov-94 499.33 2,537.73 0.00 0.00 507.67 3,544.73 16.2879768
27 19-Nov-94 499.33 2,537.73 0.00 0.00 507.67 3,544.73 16.3331558
28 20-Nov-94 499.33 2,537.73 0.00 0.00 507.67 3,544.73 16.3331558
29 21-Nov-94 498.23 2,537.73 0.00 0.00 515.65 3,551.61 16.3331558
30 22-Nov-94 502.75 2,579.40 0.00 0.00 512.84 3,594.99 16.3703804
<CAPTION>
SEC STANDARDIZED ADVERTISING YIELD
PHASE II-ROLLING
TOTAL INCOME FOR PERIOD 16,351.67
TOTAL EXPENSES FOR PERIOD 12,711.49
AVERAGE SHARES OUTSTANDING 503,477.82
LAST PRICE DURING PERIOD 11.65
Class Class Class
--- -------- -------- -------- ------- -------- ---------- --------- ------------
30 DAY 30 DAY 30 DAY
PRICE ADJUSTED DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
DATE INCOME EXPENSES SHARES PRICE INCOME EXPENSES SHARES
Input input Input
--- -------- -------- -------- ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 24-Oct-94 507.62 400.06 499,621.829 12.09 507.62 400.06 499,621.829
2 25-Oct-94 512.29 426.74 499,889.964 12.08 1,019.91 826.80 999,511.793
3 26-Oct-94 527.57 429.29 498,651.950 12.11 1,547.48 1,256.09 1,498,163.743
4 27-Oct-94 526.49 430.86 498,651.950 12.20 2,073.97 1,686.95 1,996,815.693
5 28-Oct-94 526.71 401.60 498,456.810 12.39 2,600.68 2,088.55 2,495,272.503
6 29-Oct-94 527.17 402.77 498,456.810 12.39 3,127.85 2,491.32 2,993,729.313
7 30-Oct-94 527.17 402.77 498,456.810 12.39 3,655.02 2,894.09 3,492,186.123
8 31-Oct-94 528.29 402.77 499,090.737 12.34 4,183.31 3,296.86 3,991,276.860
9 01-Nov-94 527.72 686.97 499,096.865 12.23 4,711.03 3,983.83 4,490,373.725
10 02-Nov-94 525.08 419.66 499,292.290 12.18 5,236.11 4,403.49 4,989,666.015
11 03-Nov-94 528.35 432.58 498,882.290 12.17 5,764.46 4,836.07 5,488,548.305
12 04-Nov-94 527.66 409.98 499,451.761 12.09 6,292.12 5,246.05 5,988,000.066
13 05-Nov-94 525.95 426.17 499,451.761 12.09 6,818.07 5,672.22 6,487,451.827
14 06-Nov-94 525.95 426.17 499,451.761 12.09 7,344.02 6,098.39 6,986,903.588
15 07-Nov-94 544.15 426.17 499,617.187 12.06 7,888.17 6,524.56 7,486,520.775
16 08-Nov-94 548.61 401.32 500,265.611 12.11 8,436.78 6,925.88 7,986,786.386
17 09-Nov-94 550.40 445.98 500,265.611 12.11 8,987.18 7,371.86 8,487,051.997
18 10-Nov-94 548.64 401.35 500,306.899 12.08 9,535.82 7,773.21 8,987,358.896
19 11-Nov-94 550.39 399.66 501,162.737 12.02 10,086.21 8,172.87 9,488,521.633
20 12-Nov-94 550.49 411.32 501,162.737 12.02 10,636.70 8,584.19 9,989,684.370
21 13-Nov-94 550.49 411.32 501,162.737 12.02 11,187.19 8,995.51 10,490,847.107
22 14-Nov-94 554.08 411.32 597,540.688 12.07 11,741.27 9,406.83 11,088,387.795
23 15-Nov-94 558.87 425.34 501,250.816 12.07 12,300.14 9,832.17 11,589,638.611
24 16-Nov-94 570.57 404.71 501,876.968 12.03 12,870.71 10,236.88 12,091,515.579
25 17-Nov-94 577.06 425.97 501,696.578 11.98 13,447.77 10,662.85 12,593,212.157
26 18-Nov-94 577.36 404.48 501,736.513 11.91 14,025.13 11,067.33 13,094,948.670
27 19-Nov-94 578.97 411.95 501,736.513 11.91 14,604.10 11,479.28 13,596,685.183
28 20-Nov-94 578.97 411.95 501,736.513 11.91 15,183.07 11,891.23 14,098,421.696
29 21-Nov-94 580.09 411.95 501,941.220 11.86 15,763.16 12,303.18 14,600,362.916
30 22-Nov-94 588.51 408.31 503,971.557 11.65 16,351.67 12,711.49 15,104,334.473
</TABLE>
<PAGE>
EXHIBIT 99.24(b)(17)
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
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