<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION NOVEMBER 29, 1995.
File Nos. 33-18774
and 811-5404
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
---- ----
Post-Effective Amendment No. 12 X
---- ----
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 11 X
---- ----
KEYSTONE GLOBAL OPPORTUNITIES FUND
(formerly named Keystone America Global Opportunities Fund)
(Exact name of Registrant as specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(617) 338-3200
Rosemary D. Van Antwerp, Esq., 200 Berkeley Street,
Boston, MA 02116-5034
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
--- immediately upon filing pursuant to paragraph (b) of Rule 485
--- on (date) pursuant to paragraph (b) of Rule 485
X 60 days after filing pursuant to paragraph (a)(i) of Rule 485
---
--- on (date) pursuant to paragraph (a)(i) of Rule 485
--- 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
--- on (date) pursuant to paragraph (a)(ii) of Rule 485
The Registrant has 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 November 7, 1995.
<PAGE>
KEYSTONE GLOBAL OPPORTUNITIES FUND
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 12
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 12 to Registration
Statement No. 33-18774/811-5404 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
Listing of Exhibits
PART C - OTHER INFORMATION - ITEMS 25-32 - AND SIGNATURE PAGES
Number of Holders of Securities
Indemnification
Business and Other Connections
Principal Underwriter
Location of Accounts and Records
Signatures
Exhibits (including Powers of Attorney)
<PAGE>
KEYSTONE GLOBAL OPPORTUNITIES FUND
Cross-Reference Sheet pursuant to Rules 404 and 495 under the Securities Act of
1933.
Items in
Part A of
Form N-1A Prospectus Caption
- --------- ------------------
1 Cover Page
2 Fee Table
3 Financial Highlights
Performance Data
4 Cover Page
The Fund
Investment Objective and Policies
Investment Restrictions
Risk Factors
5 Fund Management and Expenses
Additional Information
5A Not applicable
6 The Fund
Dividends and Taxes
Fund Shares
Shareholder Services
Pricing Shares
7 How to Buy Shares
Distribution Plans
Shareholder Services
8 How to Redeem Shares
9 Not applicable
<PAGE>
KEYSTONE GLOBAL OPPORTUNITIES FUND
Cross-Reference Sheet continued.
Items in
Part B of
Form N-1A Statement of Additional Information Caption
- ---------- -------------------------------------------
10 Cover Page
11 Table of Contents
12 Not applicable
13 The Fund
Investment Objective and Policies
Investment Restrictions
Brokerage
Appendix
14 Trustees and Officers
15 Additional Information
16 Investment Adviser
SubAdviser
Principal Underwriter
Distribution Plans
Sales Charges
Additional Information
17 Brokerage
18 Declaration of Trust
19 Valuation of Securities
Distribution Plans
20 Distributions and Taxes
21 Principal Underwriter
22 Standardized Total Return and Yield Quotations
23 Financial Statements
<PAGE>
KEYSTONE GLOBAL OPPORTUNITIES FUND
PART A
PROSPECTUS
<PAGE>
KEYSTONE GLOBAL OPPORTUNITIES FUND
PROSPECTUS JANUARY 30, 1996
Keystone Global Opportunities Fund (formerly named Keystone America Global
Opportunities Fund) (the "Fund") is a diversified, open-end management
investment company, commonly known as a mutual fund, that is authorized to issue
more than one series of shares ("Portfolios"). At this time, the Fund issues
shares of only one Portfolio, the Global Opportunities Portfolio (the
"Portfolio").
The Portfolio's objective is capital growth. The Portfolio's investments
are globally varied and primarily comprised of equity securities of small to
medium sized companies in a relatively early stage of development.
Generally, the Portfolio offers three classes of shares. Information on
share classes and their fee and sales charge structures may be found in the
Fund's fee table, "Alternative Sales Options," "Contingent Deferred Sales Charge
and Waiver of Sales Charges," "Distribution Plans" and "Fund Shares."
This prospectus concisely states information about the Fund that you should
know before investing. Please read it and retain it for future reference.
Additional information about the Fund, including information about
securities ratings, is contained in a statement of additional information dated
January 30, 1996, which has been filed with the Securities and Exchange
Commission and is incorporated by reference into this prospectus. For a free
copy, or for other information about the Fund, write to the address or call the
telephone number provided on this page.
KEYSTONE GLOBAL OPPORTUNITIES FUND
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
Global Opportunities Portfolio --
Investment Objective and Policies 6
Investment Restrictions 8
Risk Factors 8
Pricing Shares 9
Dividends and Taxes 10
Fund Management and Expenses 11
How to Buy Shares 13
Alternative Sales Options 14
Contingent Deferred Sales Charge and
Waiver of Sales Charges 18
Distribution Plans 20
How to Redeem Shares 21
Shareholder Services 23
Performance Data 25
Fund Shares 25
Additional Information 26
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 GLOBAL OPPORTUNITIES FUND
The purpose of this fee table is to assist investors in understanding the
costs and expenses that an investor in each class will bear directly or
indirectly. For more complete descriptions of the various costs and expenses,
see the following sections of this prospectus: "Fund Management and Expenses";
"How to Buy Shares"; "Distribution Plans" and "Shareholder Services."
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FRONT END BACK END LEVEL LOAD
LOAD OPTION LOAD OPTION(1) OPTION(2)
-------------- --------------- ----------------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C>
Sales Charge ...................................... 5.75%(3) None None
(as a percentage of offering price)
Contingent Deferred Sales Charge .................. 0.00%(4) 5.00% in the first year 1.00% in the first
(as a percentage of the lesser of cost or market declining to 1.00% in year and 0.00%
value of shares redeemed) the sixth year and thereafter
0.00% thereafter
Exchange Fee (per exchange)(5) $10.00 $10.00 $10.00
ANNUAL FUND OPERATING EXPENSES(6)
(as a percentage of average net assets)
Management Fees ................................... 0.98% 0.98% 0.98%
12b-1 Fees ........................................ 0.25% 1.00%(7) 1.00%(7)
Other Expenses .................................... 0.60% 0.60% 0.60%
---- ---- ----
Total Fund Operating Expenses ..................... 1.83% 2.58% 2.58%
==== ==== ====
<CAPTION>
EXAMPLES(8) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
Class A ................................................................... $75.00 $112.00 $151.00 $260.00
Class B ................................................................... $76.00 $110.00 $157.00 N/A
Class C ................................................................... $36.00 $ 80.00 $137.00 $291.00
You would pay the following expenses on the same investment, assuming no
redemption at the end of each period:
Class A ................................................................... $75.00 $112.00 $151.00 $260.00
Class B ................................................................... $26.00 $ 80.00 $137.00 N/A
Class C ................................................................... $26.00 $ 80.00 $137.00 $291.00
AMOUNTS SHOWN IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN.
- ----------
(1)Class B shares purchased on or after June 1, 1995 convert tax free to Class A shares after eight years. See "Class B shares"
for more information.
(2)Class C shares are available only through dealers who have entered into special distribution agreements with Keystone
Investment Distributors Company, the Fund's principal underwriter.
(3 The sales charge applied to purchases of Class A shares declines as the amount invested increases. See "Class A Shares."
(4)Purchases of Class A shares in the amount of $1,000,000 or more and/or purchases made by certain qualifying retirement or
other plans are not subject to a sales charge, but may be subject to a contingent deferred sales charge of 0.25%. See the
"Class A Shares" and "Contingent Deferred Sales Charge and Waiver of Sales Charges" sections of this prospectus for an
explanation of the charge.
(5)There is no fee for exchange orders received by the Fund directly from a shareholder over the Keystone Automated Response
Line ("KARL"). (For a description of KARL, see "Shareholder Services.")
(6)Expense ratios are for the Fund's fiscal year ended September 30, 1995.
(7)Long-term shareholders may pay more than the economic equivalent of the maximum front end sales charges permitted by the
National Association of Securities Dealers, Inc. ("NASD").
(8)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 GLOBAL OPPORTUNITIES FUND -- CLASS A SHARES
GLOBAL OPPORTUNITIES PORTFOLIO
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
The following table contains important financial information relating to
the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors. The table appears in the Fund's Annual Report and should be read in
conjunction with the Fund's financial statements and related notes, which also
appear, together with the independent auditors' report, in the Fund's Annual
Report. The Fund's financial statements, related notes, and independent
auditors' report are included in the statement of additional information.
Additional information about the Fund's performance is contained in its Annual
Report, which will be made available upon request and without charge.
<TABLE>
<CAPTION>
MARCH 16, 1988
(COMMENCMENT OF
YEAR ENDED SEPTEMBER 30, OPERATIONS) TO
------------------------------------------------------------------------------------ SEPTEMBER 30,
1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
BEGINNING OF PERIOD .. $19.42 $18.02 $11.69 $12.89 $ 9.89 $11.17 $ 9.77 $10.00
----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income
(loss) ............... (0.16) (0.04) (0.14) (0.08) 0.17 0.19 0.09 0.05
Net realized and
unrealized gains
(losses) on investment
and foreign currency
related transactions . 4.17 1.60 6.47 0.23 3.06 (1.27) 1.66 (0.28)
----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ........... 4.01 1.56 6.33 0.15 3.23 (1.08) 1.75 (0.23)
----- ----- ----- ----- ----- ----- ----- -----
Less distributions from:
Net investment income .. 0 0 0 0 (0.23) (0.12) (0.09) 0
Net realized gains
(losses) on
investments .......... 0 0 0 (1.35) 0 (0.08) (0.26) 0
----- ----- ----- ----- ----- ----- ----- -----
Total distributions .... 0 (0.16) 0 (1.35) (0.23) (0.20) (0.35) 0
----- ----- ----- ----- ----- ----- ----- -----
Net asset value end of
period ............... $23.43 $19.42 $18.02 $11.69 $12.89 $ 9.89 $11.17 $ 9.77
----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN(b) ........ 20.65% 8.74% 54.15% 1.81% 32.71% (9.65%) 16.94% (1.20%)(c)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets:
Total expenses ....... 1.83%(d) 2.01% 2.84% 2.50%(a) 2.03%(a) 2.00%(a) 2.00%(a) 1.50%(a)(e)
Net investment income
(loss) .............. (0.83%) (0.86%) (1.72%) (0.69%) 1.49% 1.80% 0.86% 1.42%(a)(e)
Portfolio turnover rate 35% 32% 64% 75% 134% 51% 13% 19%
Net assets, end of
period (thousands) ... $94,679 $71,122 $29,942 $10,859 $2,159 $1,519 $1,378 $1,082
(a) 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 3.67%, 7.77%,
10.39%, 13.06%, and 5.54% for the years ended September 30, 1992, 1991, 1990, 1989 and the period March 16, 1988 (Commencement
of Operations) to September 30, 1988, respectively.
(b) Excluding applicable sales charges.
(c) Annualized total return from March 16, 1988 (Commencement of Operations) to September 30, 1988 is (2.20%).
(d) The expense ratio includes indirectly paid expenses for the year ended September 30, 1995. Excluding indirectly paid
expenses, the expense ratio would have been 1.81% for the year then ended.
(e) Annualized.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE GLOBAL OPPORTUNITIES FUND -- CLASS B SHARES
GLOBAL OPPORTUNITIES PORTFOLIO
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
The following table contains important financial information relating to
the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors. The table appears in the Fund's Annual Report and should be read in
conjunction with the Fund's financial statements and related notes, which also
appear, together with the independent auditors' report, in the Fund's Annual
Report. The Fund's financial statements, related notes, and independent
auditors' report are included in the statement of additional information.
Additional information about the Fund's performance is contained in its Annual
Report, which will be made available upon request and without charge.
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
YEAR ENDED SEPTEMBER 30, (DATE OF INITIAL
---------------------------------- PUBLIC OFFERING) TO
1995 1994 SEPTEMBER 30, 1993
---- ---- ------------------
<S> <C> <C> <C>
NET ASSET VALUE: BEGINNING OF PERIOD ............................. $19.20 $17.95 $14.04
----- ----- -----
Income from investment operations:
Net investment income (loss) ..................................... (0.25) (0.15) (0.04)
Net realized and unrealized gains (losses) on investment and
foreign currency related transactions .......................... 4.05 1.56 3.95
----- ----- -----
Total from investment operations ................................. 3.80 1.41 3.91
----- ----- -----
Less distributions from:
Net investment income ............................................ 0 0 0
Net realized gains (losses) on investments ....................... 0 (0.16) 0
----- ----- -----
Total distributions .............................................. 0 (0.16) 0
----- ----- -----
Net asset value: end of period ................................... $23.00 $19.20 $17.95
====== ====== ======
TOTAL RETURN (b).................................................. 19.79% 7.93% 27.85%(a)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Total expenses ................................................. 2.58%(c) 2.83% 3.35%(a)
Net investment income (loss) ................................... (1.59%) (1.61%) (1.86%)(a)
Portfolio turnover rate .......................................... 35% 32% 64%
Net assets: end of period (thousands) ............................ $238,320 $131,695 $15,534
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The expense ratio includes indirectly paid expenses for the year ended September 30, 1995. Excluding indirectly paid
expenses, the expense ratio would have been 2.56% for the year then ended.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE GLOBAL OPPORTUNITIES FUND -- CLASS C SHARES
GLOBAL OPPORTUNITIES PORTFOLIO
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
The following table contains important financial information relating to
the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors. The table appears in the Fund's Annual Report and should be read in
conjunction with the Fund's financial statements and related notes, which also
appear, together with the independent auditor's report, in the Fund's 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, which will be made available upon request and without charge.
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
YEAR ENDED SEPTEMBER 30, (DATE OF INITIAL
------------------------------------ PUBLIC OFFERING) TO
1995 1994 SEPTEMBER 30, 1993
---- ---- ------------------
<S> <C> <C> <C>
NET ASSET VALUE: BEGINNING OF PERIOD ........................... $19.26 $17.99 $14.04
----- ----- -----
Income from investment operations:
Net investment income (loss) ................................... (0.27) (0.15) (0.04)
Net realized and unrealized gains (losses) on investment and
foreign currency related transactions ........................ 4.05 1.58 3.99
----- ----- -----
Total from investment operations ............................... 3.78 1.43 3.95
----- ----- -----
Less distributions from:
Investment income -- net ....................................... 0 0 0
Net realized gains (losses) on investments ..................... 0 (0.16) 0
----- ----- -----
Total distributions ............................................ 0 (0.16) 0
----- ----- -----
Net asset value: end of period ................................. $23.04 $19.26 $17.99
====== ====== ======
TOTAL RETURN (b)................................................ 19.63% 8.02% 28.13%(a)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Total expenses ............................................... 2.58%(c) 2.85% 3.04%(a)
Net investment income (loss) ................................. (1.59%) (1.62%) (1.55%)(a)
Portfolio turnover rate ........................................ 35% 32% 64%
Net assets: end of period (thousands) .......................... $86,339 $50,535 $6,217
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The expense ratio includes indirectly paid expenses for the year ended September 30, 1995. Excluding indirectly paid
expenses, the expense ratio would have been 2.56% for the year then ended.
</TABLE>
<PAGE>
THE FUND
The Fund is authorized to issue more than one Portfolio, each investing in
a different portfolio of securities. At this time, the Fund issues only shares
of the Portfolio. The Fund was formed as a Massachusetts business trust on June
17, 1987. The Fund is one of 30 funds advised by Keystone Investment Management
Company (formerly named Keystone Custodian Funds, Inc.) ("Keystone"). Keystone
has retained the services of Credit Lyonnais International Asset Management,
North America ("Credit Lyonnais") to provide the Portfolio with subadvisory
services, subject to the supervision of the Fund's Board of Trustees and
Keystone.
GLOBAL OPPORTUNITIES PORTFOLIO --
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio's investment objective is capital growth. In selecting its
investments, the Portfolio attempts to identify those companies within various
countries and industries that have the best opportunities for above-average
increases in revenues and earnings and strong prospects for continued revenue
growth. In addition, the Portfolio seeks to identify those countries and
industries where economic and political factors, including currency movements,
are likely to produce above-average growth.
In pursuing its objective, the Portfolio may invest in securities of United
States ("U.S.") companies and of issuers located in certain foreign countries
with developed markets as well as those with emerging markets and the formerly
communist countries of Eastern Europe and the People's Republic of China. In its
investments in securities of issuers in the U.S. and other countries with
developed securities markets, the Portfolio seeks to achieve its objective by
investment in equity securities of small to medium sized companies (generally
under $1 billion in market capitalization) that are in a relatively early stage
of development. In its investments in foreign securities, the Portfolio seeks to
achieve its objective by investing in equity securities of issuers that are
managed and positioned to take advantage of opportunities for above average
increases in revenues and earnings and have strong prospects for continued
revenue growth. For this purpose, countries with emerging markets are generally
those where the per capita income is in the low to middle ranges, as determined
by the International Bank for Reconstruction and Development ("World Bank").
It is expected that, under ordinary circumstances, at least 65% of the
Portfolio's assets will be invested in securities of issuers located in at least
three countries, one of which may be the U.S. Under ordinary circumstances, the
Portfolio invests at least 65% of its assets in equity securities.
Some examples of the securities in which the Fund may invest are common
stocks, securities convertible into common stocks or having common stock
characteristics (consisting of rights, warrants and options), preferred stocks,
debt securities convertible into or exchangeable for preferred or common stock,
debt securities of the U.S. and any foreign governments, including their
political subdivisions, debt securities of any international agency (such as the
World Bank, Asian Development Bank or Inter-American Development Bank) and time
deposits with U.S. and foreign banks, and may hold cash and cash equivalents as
discussed below. The Portfolio's securities and other assets may be denominated
in U.S. currency or currency of any foreign nation. Except as described above,
there are no limitations on the type, size, operating history or dividend paying
record of companies or industries in which the Portfolio may invest. The
Portfolio's securities may be traded in the over-the-counter market as well as
being listed on a foreign exchange. The primary investment criterion used by the
Portfolio in the selection of portfolio securities is that the securities
provide opportunities for capital growth.
Although the Portfolio intends to invest primarily in common stocks and
securities convertible into common stocks to achieve its objective of growth of
capital, the Portfolio may invest in any security listed above. For example,
because the market value of debt obligations can be expected to vary inversely
with changes in prevailing interest rates, investing in debt securities may
provide an opportunity for capital appreciation when interest rates are expected
to decline. In addition, the Fund may hold cash and invest in cash equivalents,
including time deposits, for temporary purposes in order to meet redemption
requests or for such periods of time as are necessary to evaluate market
conditions and other factors.
OTHER ELIGIBLE INVESTMENTS
When, in the opinion of Keystone, market conditions warrant, the Portfolio
may invest 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, that at the date of investment is rated A-1 (the highest
grade given by S&P), PRIME-1 (the highest grade given by Moody's) or, if not
rated by such services, is issued by a company that 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 deposits as of the date of
their most recently published financial statements and which are members of the
Federal Deposit Insurance Corporation, including 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. When the Portfolio's assets are being invested for temporary
defensive purposes, the Portfolio is not pursuing its investment objective.
The Fund may enter into repurchase and reverse repurchase agreements,
invest in master demand notes, lend portfolio securities, purchase and sell
securities and currencies on a when issued and delayed delivery basis and
purchase or sell securities on a forward commitment basis, write covered call
and put options and purchase call and put options to close out existing
positions and may employ new investment techniques with respect to such options.
The Fund may also enter into currency and other financial futures contracts and
related options transactions for hedging purposes and not for speculation, and
may employ new investment techniques with respect to such futures contracts and
related options.
The Fund intends to follow policies of the Securities and Exchange
Commission as they are adopted from time to time with respect to illiquid
securities, including at this time (1) treating as illiquid securities that may
not be sold or disposed of in the ordinary course of business within seven days
at approximately the value at which the Fund has valued such securities on its
books and (2) limiting its holdings of such securities to 15% of net assets.
The Fund may invest in restricted securities, including securities eligible
for resale pursuant to Rule 144A under the 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 Keystone
determines the liquidity of the Fund's Rule 144A securities. The Board 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.
For further information about the types of investments and investment
techniques available to the Fund, including the risks associated therewith, see
the sections of this prospectus entitled "Risk Factors" and "Additional
Investment Information" and the statement of additional information.
Of course, there can be no assurance that the Portfolio will achieve its
investment objective since there is uncertainty in every investment.
FUNDAMENTAL NATURE OF INVESTMENT OBJECTIVE
The Portfolio's investment objective is fundamental and may not be changed
without the vote of a majority (as defined in the Investment Company Act of 1940
("1940 Act")) of the Portfolio's outstanding shares.
INVESTMENT RESTRICTIONS
The Fund has adopted the fundamental investment restrictions set forth
below, which may not be changed with respect to the Portfolio without the vote
of a majority (as defined in the 1940 Act) of the Portfolio's outstanding
shares. These restrictions and certain other fundamental restrictions are set
forth in the statement of additional information.
The Portfolio 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, except that the Portfolio may borrow from
banks for temporary or emergency purposes in aggregate amounts up to one-third
of the value of the Portfolio's net assets and/or enter into reverse repurchase
agreements; and (3) concentrate its investments in any particular industry.
RISK FACTORS
Like any investment, your investment in the Fund involves some degree of
risk. Before you buy shares of the Fund, you should carefully evaluate your
ability to assume the risks your investment in the Fund poses. YOU CAN LOSE
MONEY BY INVESTING IN THE FUND. YOUR INVESTMENT IS NOT GUARANTEED. A DECREASE IN
THE VALUE OF THE FUND'S PORTFOLIO SECURITIES CAN RESULT IN A DECREASE IN THE
VALUE OF YOUR INVESTMENT.
The Portfolio seeks to provide growth of capital by investing principally
in globally varied equity securities of small to medium sized companies in a
relatively early stage of development.
The Portfolio is best suited for investors who can afford to maintain their
investment over a relatively long period of time, and who are seeking a fund
which is growth oriented and has the potential for returns. The Portfolio
involves risk and is not an appropriate investment for conservative investors
who are seeking preservation of capital and/or income.
Certain risks related to the Portfolio are discussed below. To the extent
not discussed in this section, specific risks attendant to individual securities
or investment practices are discussed in "Additional Investment Information".
Past performance should not be considered representative of results for any
future period of time.
FUND RISKS. Investing in companies with small to medium market
capitalizations in a relatively early stage of development involves greater risk
than investing in larger established companies. The stock prices of developing
companies with smaller market capitalizations can rise very quickly and drop
dramatically in a short period of time. This volatility results from a number of
factors, including reliance by these companies on limited product lines,
markets, and financial and management resources.
These and other factors may make small and mid cap companies more
susceptible to setbacks or downturns. These companies may experience higher
rates of bankruptcy or other failures than larger well established companies.
They may be more likely to be negatively affected by changes in management. In
addition, the stock of small and mid cap companies may be thinly traded.
A need for cash due to large liquidations from the Fund when the prices of
small and mid cap stocks are declining could result in losses to the Fund.
Investing in the Portfolio involves the risk common to investing in any
security, that is that the value of the securities held by the Portfolio will
fluctuate in response to changes in economic conditions or public expectations
about those securities. The net asset value of the Portfolio's shares will
change accordingly.
Investing in securities of foreign issuers generally involves more 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 Portfolio may incur fees on currency exchanges when it changes investments
from one country to another; (7) the Portfolio'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 Portfolio's investments, the value of dividends and interest earned,
gains and losses realized on the sale of securities, net investment income and
unrealized appreciation or depreciation of investments; (9) interest and
dividends on foreign securities may be subject to withholding taxes in a foreign
country that could result in a reduction of net investment income available for
distribution; and (10) to the extent the Portfolio invests in securities of
issuers located in the formerly communist countries of Eastern Europe and the
People's Republic of China, there is the risk that those countries could convert
back to a single economic structure.
Investing in securities of issuers in emerging 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. Furthermore, investing in
securities of companies in the formerly communist countries of Eastern Europe
and the People's Republic of China involves additional risks to those associated
with investments in companies in non-formerly communist emerging markets
countries. Specifically, those countries could convert back to a single economic
system, and the claims of property owners prior to the expropriation by the
communist regime could be settled in favor of the former property owners, in
which case the Portfolio could lose its entire investment in those countries.
These risks are carefully considered by Keystone prior to the purchase of these
securities.
OTHER CONSIDERATIONS. The Fund, which invests in companies within various
countries and industries that have the best opportunities for above-average
growth, does not, by itself, constitute a balanced investment plan. The Fund may
be appropriate as part of an overall investment program. Investors may wish to
consult their financial advisers when considering what portion of their total
assets to invest in small cap stocks.
Past performance should not be considered representative of results for any
future period of time.
PRICING SHARES
The net asset value of a Portfolio 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 Portfolio's securities
do not affect the current net asset value of its shares. The Exchange currently
is closed on weekends, New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net
asset value per share of the Portfolio is arrived at by determining the value of
the Portfolio's assets, subtracting its liabilities and dividing the result by
the number of its shares outstanding.
Current values for the Portfolio's 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, for
which market quotations are readily available, are valued at the mean of the
bid and asked prices at the time of valuation;
3. 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. instruments that 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;
instruments maturing in more than sixty days when purchased that 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
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.
Foreign securities are valued on the basis of valuations provided by a
pricing service, approved by the Fund's Board of Trustees, which uses
information with respect to transactions in such securities, quotations from
broker-dealers, market transactions in comparable securities and various
relationships between securities and yield to maturity in determining value.
DIVIDENDS AND TAXES
The Portfolio has qualified and intends to qualify in the future as a
regulated investment company under the Internal Revenue Code (the "Code"). The
Portfolio qualifies if, among other things, it distributes to its shareholders
at least 90% of its net investment income for its fiscal year. The Portfolio
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 dividend declared in October, November or December to
shareholders of record in such a month and paid by the following January 31 will
be includable in the taxable income of the shareholder as if paid on December 31
of the year in which such dividend was declared. If the Portfolio 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 Portfolio will make distributions from its net investment income and net
capital gains, if any, annually. Because Class A shares bear most of the costs
of distribution of such shares through payment of a front end sales charge while
Class B and Class C shares bear such expenses through a higher annual
distribution fee, expenses attributable to Class B shares and Class C shares
will generally be higher, and income distributions paid by the Portfolio with
respect to Class A shares will generally be greater than those paid with respect
to Class B and Class C shares.
Shareholders receive Portfolio distributions in the form of additional
shares of that class of shares upon which the distribution is based or, at the
shareholder's option, in cash. Portfolio distributions in the form of additional
shares are made at net asset value without the imposition of a sales charge.
Dividends and distributions are taxable whether they are received in cash or in
shares. Income dividends and net short-term gains dividends are taxable as
ordinary income, and net long-term gains dividends are taxable as capital gains
regardless of how long the Portfolio's shares are held. If Portfolio shares held
for less than six months are sold at a loss, however, such loss will be treated
for tax purposes as a long-term capital loss to the extent of any long-term
capital gains dividends received. The Portfolio advises its shareholders
annually as to the federal tax status of all distributions made during the year.
If more than 50% of the value of the Portfolio's total assets at the end of
a fiscal year is represented by securities of foreign corporations and the
Portfolio elects to make foreign tax credits available to its shareholders, a
shareholder will be required to include in his gross income both actual
dividends and the amount the Portfolio advises him is his pro rata portion of
income taxes withheld by foreign governments from interest and dividends paid on
the Portfolio's investments. The shareholder will be entitled, however, to take
the amount of such foreign taxes withheld as a credit against his U.S. income
tax, or to treat the foreign tax withheld as an itemized deduction from his
gross income, if that should be to his advantage. In substance, this policy
enables the shareholder to benefit from the same foreign tax credit or deduction
that he would have received if he had been the individual owner of foreign
securities and had paid foreign income tax on the income therefrom. As in the
case of individuals receiving income directly from foreign sources, the above
described tax credit and deductions are subject to certain limitations.
In the event the Fund establishes additional Portfolios, each Portfolio
will be considered, and intends to qualify as, a regulated investment company.
FUND MANAGEMENT AND EXPENSES
BOARD OF TRUSTEES
Under Massachusetts law, the Fund's Board of Trustees has absolute and
exclusive control over the management and disposition of all assets of the Fund.
Subject to the authority of the Fund's Board of Trustees, Keystone, the Fund's
investment adviser, provides investment advice, management and administrative
services to the Fund.
INVESTMENT ADVISER
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 Investments, Inc. ("Keystone Investments"), located at
200 Berkeley Street, Boston, Massachusetts 02116-5034.
Keystone Investments is a corporation privately owned by current and former
members of management and certain employees of Keystone and its affiliates.
The shares of Keystone Investments common stock beneficially owned by
management are held in a number of voting trusts, the trustees of which are
George S. Bissell, Albert H. Elfner, III, Edward F. Godfrey and Ralph J.
Spuehler, Jr. Keystone Investments provides accounting, bookkeeping, legal,
personnel and general corporate services to Keystone Management, Inc.,
Keystone, their affiliates and the Keystone Investments Family of Funds.
Pursuant to its Investment Advisory and Management Agreement (the "Advisory
Agreement") with the Fund, Keystone provides investment advisory and
management services to the Fund. Keystone manages the investment and
reinvestment of the Fund's assets, supervises the operation of the Fund,
provides all necessary office space, facilities, equipment and personnel and
arranges, at the request of the Fund, for its employees to serve as officers
or agents of the Fund.
The Fund pays Keystone a fee for its services with respect to the Fund at
the annual rate set forth below:
Aggregate Net Asset Value
Management of the Shares
Fee of the Fund
- ------------------------------------------------------------------------------
1.00% of the first $200,000,000, plus
0.95% of the next $200,000,000, plus
0.85% of the next $200,000,000, plus
0.75% of amounts over $600,000,000;
computed as of the close of business each business day and paid daily.
During the fiscal year ended September 30, 1995, the Fund paid or accrued
to Keystone investment management and administrative services fees of
$3,009,974, which represented 0.98% of the Fund's average daily net assets on an
annualized basis. Of such amount, Keystone retained $1,557,883 for its services
to the Fund.
A management fee of 0.75% is higher than that paid by most other investment
companies. However, the Fund's fee structure is comparable to that of other
global and international funds subject to the higher costs involved in managing
a portfolio of predominantly international securities.
The Advisory Agreement continues in effect from year to year only so long
as such continuance is specifically approved at least annually by the Board of
Trustees or by vote of a majority of the outstanding shares of the Fund. In
either case, the terms of 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 Advisory
Agreement may be terminated, without penalty, on 60 days' written notice by the
Fund or Keystone or may be terminated by a vote of shareholders of the Fund. The
Advisory Agreement will terminate automatically upon its assignment.
SUBADVISER
Keystone has entered into a Subadvisory Agreement with Credit Lyonnais
International Asset Management, North America ("CLIAM"), an international
investment management firm located at 1301 Avenue of the Americas, New York,
New York 10019. CLIAM is a subsidiary of Credit Lyonnais, which is among the
world's largest banks, with $250 billion in assets and offices in 76
countries. Under the Subadvisory Agreement, CLIAM provides the Fund with
certain investment advisory services, and Keystone pays CLIAM at the beginning
of each fiscal quarter a fee for its services that represents 50% of the
management fee paid by the Fund to Keystone for the preceding quarter on Fund
assets of up to $250,000,000 and 30% of the management fee paid by the Fund to
Keystone for the preceding quarter on Fund assets in excess of $250,000,000.
The Fund has no responsibility to pay CLIAM's fee.
The Subadvisory Agreement continues in effect from year to year only so
long as such continuance is specifically approved at least annually by the Board
of Trustees or by vote of a majority of the outstanding shares of the Fund. In
either case, the terms of the Subadvisory Agreement and continuance thereof must
be approved by the vote of a majority of Independent Trustees in person at a
meeting called for the purpose of voting on such approval. The Subadvisory
Agreement may be terminated, without penalty, on 60 days' written notice by the
Fund or Keystone or may be terminated by a vote of shareholders of the Fund. The
Subadvisory Agreement will terminate automatically upon its assignment.
For the year ended September 30, 1995, Keystone paid or accrued $1,432,091
to CLIAM for its services as subadviser to the Fund.
The Fund has adopted a Code of Ethics incorporating policies on personal
securities trading as recommended by the Investment Company Institute.
PORTFOLIO MANAGER
Christopher R. Ely has been the Fund's Portfolio Manager since 1995. He is
a Keystone Senior Vice President and Senior Portfolio Manager and has more than
15 years' experience in equity investing.
FUND EXPENSES
The Portfolio will pay all of its expenses. In addition to the investment
management and distribution plan fees discussed herein, the principal expenses
that the Portfolio is expected to pay include, but are not limited to, expenses
of certain of its Trustees; transfer, dividend disbursing and shareholder
servicing agent expenses; custodian expenses; fees of its independent auditors
and legal counsel to its Trustees; fees payable to government agencies,
including registration and qualification fees attributable to the Portfolio 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
Portfolio also pays its brokerage commissions, interest charges and taxes.
For the fiscal year ended September 30, 1995, the Portfolio's Class A,
Class B and Class C shares paid 1.83%, 2.58% and 2.58%, respectively, of their
respective average class net assets in expenses.
During the fiscal year ended September 30, 1995, the Portfolio paid or
accrued to Keystone Investor Resource Center, Inc. ("KIRC"), the Fund's transfer
and dividend disbursing agent, and Keystone Investments, $59,106 for certain
accounting and printing services and $1,214,494 for shareholder services. KIRC
is a wholly-owned subsidiary of Keystone.
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
Portfolio, Keystone may follow a policy of considering as a factor the number of
shares of the Portfolio sold by such broker-dealer. In addition, broker-dealers
executing portfolio transactions may, from time to time, be affiliated with the
Fund, Keystone, the Fund's principal underwriter, or their affiliates.
The Portfolio may pay higher commissions to broker-dealers that provide
research services. Keystone may use these services in advising the Portfolio as
well as in advising its other clients.
PORTFOLIO TURNOVER
The Portfolio's portfolio turnover rate for the fiscal years ended
September 30, 1994 and 1995 were 32% and 35%, 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
You may purchase shares of the Fund from any broker-dealer that has a
selling agreement with Keystone Investment Distributors Company (formerly named
Keystone Distributors, Inc.) (the "Principal Underwriter"), the Fund's principal
underwriter. The Principal Underwriter, a wholly-owned subsidiary of Keystone,
is located at 200 Berkeley Street, Boston, Massachusetts 02116-5034.
In addition, you may open an account for the purchase of shares of the Fund
by mailing to the Fund c/o Keystone Investor Resource Center, Inc., P.O. Box
2121, Boston, Massachusetts 02106-2121, a completed account application and a
check payable to the Fund, or you may telephone 1-800-343-2898 to obtain the
number of an account to which you can wire or electronically transfer funds and
then send in a completed account application. Subsequent investments in any
amount may be made by check, by wiring Federal funds or by an electronic funds
transfer ("EFT").
Orders for the purchase of shares of the Fund will be confirmed at an
offering price equal to the net asset value per share next determined after
receipt of the order in proper form by the Principal Underwriter (generally as
of the close of the Exchange on that day) plus, in the case of Class A shares,
the front end sales charge. Orders received by dealers or other firms prior to
the close of the Exchange and received by the Principal Underwriter prior to the
close of its business day will be confirmed at the offering price effective as
of the close of the Exchange on that day. The Fund reserves the right to
determine the net asset value more frequently than once a day if deemed
desirable. Dealers and other financial services firms are obligated to transmit
orders promptly.
Orders for shares received by broker-dealers prior to that day's close of
trading on the Exchange and transmitted to the Fund prior to its close of
business that day will receive the offering price equal to the net asset value
per share computed at the close of trading on the Exchange on the same day plus,
in the case of Class A shares, the front end sales charge. Orders received by
broker-dealers after that day's close of trading on the Exchange and transmitted
to the Fund prior to the close of business on the next business day will receive
the next business day's offering price.
Orders for shares received directly by the Fund from you will receive the
offering price equal to the net asset value per share next computed after the
Fund receives the purchase order plus, in the case of Class A shares, the front
end sales charge.
The initial purchase must be at least $1,000. There is no minimum amount
for subsequent purchases.
The Fund reserves the right to withdraw all or any part of the offering
made by this prospectus and to reject purchase orders.
Shareholder inquiries should be directed to KIRC by calling toll free
1-800-343-2898 or writing to KIRC or to the firm from which you received this
prospectus.
ALTERNATIVE SALES OPTIONS
Generally, 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 deferred sales charge when they are redeemed
except as follows: Class A shares purchased on or after April 10, 1995 (1) in an
amount equal to or exceeding $1,000,000 or (2) by a corporate qualified
retirement plan or a non-qualified deferred compensation plan sponsored by a
corporation having 100 or more eligible employees (a "Qualifying Plan"), in
either case without a front end sales charge, will be subject to a contingent
deferred sales charge for the 24 month period following the date of purchase.
Certain Class A shares purchased prior to April 10, 1995 may be subject to a
deferred sales charge upon redemption during the one year period following the
date of purchase.
CLASS B SHARES -- BACK END LOAD OPTION
Class B shares are sold without a sales charge at the time of purchase, but
are, with certain exceptions, subject to a contingent deferred sales charge if
they are redeemed. Class B shares purchased on or after June 1, 1995 are subject
to a contingent deferred sales charge if redeemed during the 72 month period
commencing with and including the month of purchase. Class B shares purchased
prior to June 1, 1995 are subject to a deferred sales charge upon redemption
during the four calendar years following purchase. Class B shares purchased on
or after June 1, 1995 that have been outstanding for eight years from and
including the month of purchase will automatically convert to Class A shares
without the imposition of a front-end sales charge or exchange fee. Class B
shares purchased prior to June 1, 1995 will retain their existing conversion
rights.
CLASS C SHARES -- LEVEL LOAD OPTION
Class C shares are sold without a sales charge at the time of purchase, but
are subject to a 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 the Principal
Underwriter.
Each class of shares, pursuant to its Distribution Plan or other plan, pays
an annual service fee of 0.25% of the Fund's average daily net assets
attributable to that class. In addition to the 0.25% service fee, the Class B
and C Distribution Plans provide for the payment of an annual distribution fee
of up to 0.75% of the average daily net assets attributable to their respective
classes. 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%
- ----------
*Rounded to the nearest one-hundredth percent.
----------------------------------------------
Purchases of the Fund's Class A shares in the amount of $1 million or more
and/or purchases of Class A shares made by a Qualifying Plan or a tax sheltered
annuity plan sponsored by a public educational entity having 5,000 or more
eligible employees (a "TSA Plan") will be at net asset value without the
imposition of a front-end sales charge (each such purchase, an "NAV Purchase").
With respect to NAV Purchases, the Principal Underwriter will pay broker/
dealers or others concessions based on (1) the investor's cumulative purchases
during the one-year period beginning with the date of the initial NAV Purchase
and (2) the investor's cumulative purchases during each subsequent one-year
period beginning with the first NAV Purchase following the end of the prior
period. For such purchases, concessions will be paid at the following rate:
1.00% of the investment amount up to $2,999,999; plus 0.50% of the investment
amount between $3,000,000 and $4,999,999; plus 0.25% of the investment amount
over $4,999,999.
With the exception of Class A shares acquired by a TSA Plan, Class A shares
acquired on or after April 10, 1995 in an NAV Purchase are subject to a
contingent deferred sales charge of 1.00% upon redemption during the 24 month
period commencing on the date the shares were originally purchased. Class A
shares acquired by a TSA Plan in an NAV Purchase are not subject to a contingent
deferred sales charge. Certain Class A shares purchased without a front-end
sales charge prior to April 10, 1995 are subject to a contingent deferred sales
charge of 0.25% upon redemption during the one year period commencing on the
date such shares were originally purchased.
The sales charge is paid to the Principal Underwriter, which in turn
normally reallows a portion to your broker-dealer. In addition, your broker-
dealer currently will be paid periodic service fees at an annual rate of up to
0.25% of the average daily net asset value of Class A shares maintained by such
recipient outstanding on the books of the Fund for specified periods.
Upon written notice to dealers with whom it has dealer agreements, the
Principal Underwriter may reallow up to the full applicable sales charge.
Initial sales charges may be eliminated for persons purchasing Class A
shares which are included in a broker-dealer or investment adviser managed fee
based program (a "wrap account") with broker dealers or investment advisers who
have entered into special agreements with the Principal Underwriter. Initial
sales charges may be reduced or eliminated for persons or organizations
purchasing Class A shares of the Fund alone or in combination with Class A
shares of other Keystone America Funds. See Exhibit A to this prospectus.
Upon prior notification to the Principal Underwriter, Class A shares may be
purchased at net asset value by clients of registered representatives within six
months after a change in the registered representative's employment, 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 (1) paid a front end sales charge, or (2)
was at some time subject to, but did not actually pay, a contingent deferred
sales charge with respect to the redemption proceeds.
Since January 1, 1995 through December 31, 1995 and upon prior notification
to the Principal Underwriter, Class A shares may be purchased at net asset value
by clients of registered representatives within six months after the redemption
of shares of any registered open-end investment company not distributed or
managed by Keystone or its affiliates, where the amount invested represents
redemption proceeds from such unrelated registered open-end investment company,
and the shareholder either (1) paid a front end sales charge, or (2) was at some
time subject to, but did not actually pay, a contingent deferred sales charge
with respect to the redemption proceeds.
CLASS A DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class A shares
(the "Class A Distribution Plan") that provides for expenditures by the Fund,
currently limited to 0.25% annually of the average daily net asset value of
Class A shares, in connection with the distribution of Class A shares. Payments
under the Class A Distribution Plan are currently made to the Principal
Underwriter (which may reallow all or part to others, such as dealers), as
service fees at an annual rate of up to 0.25% of the average daily net asset
value of Class A shares maintained by the recipients outstanding on the books of
the Fund for specified periods.
Since September 1, 1995 through December 31, 1995 ("Offering Period"), the
Principal Underwriter will reallow to brokers or others a commission based on
the price paid for each Class A Fund share sold, at the following rates: full
reallowance plus an additional .50% for each Class A Fund share sold with
respect to purchases in an amount not exceeding $499,999, and full reallowance
for each Class A Fund share sold with respect to purchases in an amount in
excess of $499,999. Such payments will be made to those dealers and others
selling such shares who pay to their registered representatives making such
sales a portion of the additional amount payable under this special dealer
offer, determined in accordance with their regular payment arrangements with
such persons for sales not made under a special dealer offer.
CLASS B SHARES
Class B shares are offered at net asset value, without an initial sales
charge.
With respect to Class B shares purchased on or after June 1, 1995, the Fund,
with certain exceptions, imposes a deferred sales charge in accordance with
the following schedule:
DEFERRED
SALES
CHARGE
REDEMPTION TIMING IMPOSED
- ----------------- -------
First twelve month period ................... 5.00%
Second twelve month period .................. 4.00%
Third twelve month period ................... 3.00%
Fourth twelve month period .................. 3.00%
Fifth twelve month period ................... 2.00%
Sixth twelve month period ................... 1.00%
No deferred sales charge is imposed on amounts redeemed thereafter.
With respect to Class B shares sold prior to June 1, 1995, the Fund, with
certain exceptions, imposes a 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.
When imposed, the deferred sales charge is deducted from the redemption
proceeds otherwise payable to you. The deferred sales charge is retained by the
Principal Underwriter. Amounts received by the Principal Underwriter under the
Class B Distribution Plans are reduced by deferred sales charges retained by the
Principal Underwriter. See "Contingent Deferred Sales Charges and Waiver of
Sales Charges" below.
Class B shares purchased on or after June 1, 1995 that have been
outstanding for eight years from and including the month of purchase will
automatically convert to Class A shares (which are subject to a lower
Distribution Plan charge) without imposition of a front-end sales charge or
exchange fee. (Conversion of Class B shares represented by stock certificates
will require the return of the stock certificates to KIRC.) 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 such Class B shareholders.
In addition to the exchange privileges described in the section of the
prospectus entitled "Exchanges," Class B shares purchased prior to June 1, 1995
that have been outstanding during seven calendar years, as a general matter, may
be exchanged for Class A shares of the Fund without imposition of a front end
sales charge.
The Class B shares so converted or exchanged will no longer be subject to
the higher distribution expenses and other expenses, if any, borne by Class B
shares. Because the net asset value per share of Class A shares may be higher or
lower than that of the Class B shares at the time of conversion or exchange,
although the dollar value will be the same, a shareholder may receive more or
fewer Class A shares than the number of Class B shares converted or exchanged.
For more information on current exchange privileges, see "Exchanges."
CLASS B DISTRIBUTION PLANS
The Fund has adopted Distribution Plans with respect to its Class B shares
(the "Class B Distribution Plans") that provide for expenditures by the Fund at
an annual rate of up to 1.00% of the average daily net asset value of Class B
shares to pay expenses of the distribution of Class B shares. Payments under the
Class B Distribution Plans are currently made to the Principal Underwriter
(which may reallow all or part to others, such as dealers) (1) as commissions
for Class B shares sold and (2) as shareholder service fees. Amounts paid or
accrued to the Principal Underwriter under (1) and (2) in the aggregate may not
exceed the annual limitation referred to above.
The Principal Underwriter generally reallows to brokers or others a
commission equal to 4.00% of the price paid for each Class B share sold plus the
first year's service fee in advance in the amount of 0.25% of the price paid for
each Class B share sold. Beginning approximately 12 months after the purchase of
a Class B share, the broker or other party will receive service fees at an
annual rate of 0.25% of the average daily net asset value of such Class B share
maintained by the recipient outstanding on the books of the Fund for specified
periods. See "Distribution Plans" below.
Since September 1, 1995 through December 31, 1995 ("Offering Period"), the
Principal Underwriter will reallow to brokers or others a commission equal to
4.75% of the price paid for each Class B Fund share sold as well as payment in
advance of a shareholder service fee at a rate of 0.25% per annum of the net
asset value of shares maintained by such recipients outstanding on the books of
the Fund for specified periods, as described in each Fund's prospectus. Such
payments will be made to those dealers and others selling such shares who pay to
their registered representatives making such sales a portion of the additional
amount payable under this special dealer offer, determined in accordance with
their regular payment arrangements with such persons for sales not made under a
special dealer offer.
CLASS C SHARES
Class C shares are offered only through dealers who have special
distribution agreements with the Principal Underwriter. Class C shares are
offered at net asset value, without an initial sales charge. With certain
exceptions, the Fund imposes a 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 the Principal Underwriter. See "Contingent Deferred
Sales Charges and Waiver of Sales Charges" below.
CLASS C DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to Class C shares
(the "Class C Distribution Plan") that provides for expenditures by the Fund at
an annual rate of up to 1.00% of the average daily net asset value of Class C
shares to pay expenses of the distribution of Class C shares. Payments under the
Class C Distribution Plan are currently made to the Principal Underwriter (which
may reallow all or part to others, such as dealers) (1) as commissions for Class
C shares sold and (2) as shareholder service fees. Amounts paid or accrued to
the Principal Underwriter under (1) and (2) in the aggregate may not exceed the
annual limitation referred to above.
The Principal Underwriter generally reallows to 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 NASD rules
- -- see "Distribution Plans") plus service fees which are paid at the annual rate
of 0.25%, respectively, of the average daily net asset value of each Class C
share maintained by the recipients outstanding on the books of the Fund for
specified periods. See "Distribution Plans" below.
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 asset value at the time of purchase
of such shares.
No contingent deferred sales charge is imposed when you redeem amounts
derived from (1) increases in the value of your account above the net cost of
such shares due to increases in the net asset value per share of such shares;
(2) certain shares with respect to which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of dividend income and
capital gains distributions; (3) certain Class A shares held for more than one
or two years, as the case may be, from the date of purchase; (4) Class B shares
held for more than four consecutive calendar years or more than 72 months after
purchase, as the case may be; or (5) Class C shares held for more than one year
from the date of purchase. Upon request for redemption, shares not subject to
the contingent deferred sales charge will be redeemed first. Thereafter, shares
held the longest will be the first to be redeemed.
With respect to Class A shares purchased by a Qualifying Plan at net asset
value or Class C shares purchased by a Qualifying Plan, no contingent deferred
sales charge will be imposed on any redemptions made specifically by an
individual participant in the Qualifying Plan. This waiver is not available in
the event a Qualifying Plan (as a whole) redeems substantially all of its
assets.
In addition, no 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; (5) automatic withdrawals under
an automatic withdrawal plan of up to 1 1/2% per month of the shareholder's
initial account balance; (6) withdrawals consisting of loan proceeds to a
retirement plan participant; (7) financial hardship withdrawals made by a
retirement plan participant; or (8) withdrawals consisting of returns of excess
contributions or excess deferral amounts made to a retirement plan participant.
The Fund may also sell Class A, Class B or Class C shares at net asset
value without any initial sales charge or a 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 the Principal Underwriter and to a bank or trust company acting
as a trustee for a single account.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS
The Principal Underwriter may, from time to time, provide promotional
incentives, including reallowance of up to the entire sales charge, to certain
dealers whose representatives have sold or are expected to sell significant
amounts of Fund shares. In addition, dealers may, from time to time, receive
additional cash payments. The Principal Underwriter may also provide written
information to dealers with whom it has dealer agreements that relates to sales
incentive campaigns conducted by such dealers for their representatives as well
as financial assistance in connection with pre-approved seminars, conferences
and advertising. No such programs or additional compensation will be offered to
the extent they are prohibited by the laws of any state or any self-regulatory
agency such as the NASD. Dealers to whom substantially the entire sales charge
on Class A shares is reallowed may be deemed to be underwriters as that term is
defined under the 1933 Act.
The Principal Underwriter 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 the Principal Underwriter. 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 periodic and may be up to 0.25% of
the value of shares sold by such dealer.
The Principal Underwriter may also pay a transaction fee (up to the level
of payments allowed to dealers for the sale of shares, as described above) to
banks and other financial services firms that facilitate transactions in shares
of the Fund for their clients.
The Glass-Steagall Act currently limits the ability of a depository
institution (such as a commercial bank or a savings and loan association) to
become an underwriter or distributor of securities. In the event the Glass-
Steagall Act is deemed to prohibit depository institutions from accepting
payments under the arrangement described above, or should Congress relax current
restrictions on depository institutions, the Board of Trustees will consider
what action, if any, is appropriate.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
DISTRIBUTION PLANS
As discussed above, the Fund bears some of the costs of selling its shares
under Distribution Plans adopted with respect to its Class A, Class B and Class
C shares pursuant to Rule 12b-1 under the 1940 Act.
The NASD limits the amount that a Fund may pay annually in distribution
costs for the sale of its shares and shareholder service fees. The NASD limits
annual expenditures to 1% of the aggregate average daily net asset value of its
shares, of which 0.75% may be used to pay such distribution costs and 0.25% may
be used to pay shareholder service fees. The NASD also limits the aggregate
amount that the Fund may pay for such distribution costs to 6.25% of gross share
sales since the inception of the 12b-1 Distribution Plan, plus interest at the
prime rate plus 1% on such amounts (less any deferred sales charges paid by
shareholders to the Principal Underwriter), remaining unpaid from time to time.
The Principal Underwriter intends, but is not obligated, to continue to pay
or accrue distribution charges incurred in connection with the Class B
Distribution Plans that exceed current annual payments permitted to be received
by the Principal Underwriter from the Fund. The Principal Underwriter intends to
seek full payment of such charges from the Fund (together with annual interest
thereon at the prime rate plus 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.
If the Fund's Independent Trustees authorize such payments, the effect
would be to extend the period of time during which the Fund incurs the maximum
amount of costs allowed by a Distribution Plan. If a Distribution Plan is
terminated, the Principal Underwriter will ask the Independent Trustees to take
whatever action they deem appropriate under the circumstances with respect to
payment of such amounts.
In connection with financing its distribution costs, including commission
advances to dealers and others, the Principal Underwriter has sold to a
financial institution substantially all of its 12b-1 fee collection rights and
contingent deferred sales charge collection rights in respect of Class B shares
sold during the two-year period commencing approximately June 1, 1995. The Fund
has agreed not to reduce the rate of payment of 12b-1 fees in respect of such
Class B shares, unless it terminates such shares' Distribution Plan completely.
If it terminates such Distribution Plan, the Fund may be subject to possible
adverse distribution consequences.
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. Unpaid distribution costs at fiscal year end September
30, 1995 were: $9,557,717 for Class B purchased prior to June 1, 1995 (4.01% of
net class assets of such Class B shares); $2,611,116 for Class B shares
purchased on or after June 1, 1995 (1.10% of net class assets of such Class B
shares); and $5,094,255 for Class C shares (5.90% of Class C net class assets).
During the fiscal year ended September 30, 1995, the Portfolio paid the
Principal Underwriter: $185,409 under its Class A Distribution Plan; $1,606,135
for Class B shares sold prior to June 1, 1995; $64,006 for Class B shares sold
on or after June 1, 1995; and $636,417 under its Class C Distribution Plan.
These amounts were used to pay commissions and service fees. The Portfolio makes
no payments in connection with the sale of its shares other than the fee paid to
the Fund's Principal Underwriter.
Dealers or others may receive different levels of compensation depending on
which class of shares they sell. Payments pursuant to a Distribution Plan are
included in the operating expenses of the class.
HOW TO REDEEM SHARES
You may redeem Fund shares for cash at their net asset value upon written
order to the Fund c/o KIRC, and presentation to the Fund of a properly endorsed
share certificate (if certificates have been issued). Your signature(s) on the
written order and certificates must be guaranteed as described below. In order
to redeem by telephone or to engage in telephone transactions generally, you
must complete the authorization in your account application. Proceeds for shares
redeemed on telephonic order will be deposited by wire or EFT only to the bank
account designated in your account application.
The redemption value equals the net asset value per share then determined
and may be more or less than your cost depending upon changes in the value of
the Fund's portfolio securities between purchase and redemption.
If imposed, the deferred sales charge is deducted from the redemption
proceeds otherwise payable to you.
REDEMPTION OF SHARES IN GENERAL
At various times, the Fund may be requested to redeem shares for which it
has not yet received good payment. In such a case, the Fund will mail the
redemption proceeds upon clearance of the purchase check, which may take 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 by EFT. Although the
mailing of a redemption check or the wiring or EFT of redemption proceeds may be
delayed, the redemption value will be determined and the redemption processed in
the ordinary course of business upon receipt of proper documentation. In such a
case, after the redemption and prior to the release of the proceeds, no
appreciation or depreciation will occur in the value of the redeemed shares, and
no interest will be paid on the redemption proceeds. If the payment of a
redemption has been delayed, the check will be mailed or the proceeds wired or
sent EFT promptly after good payment has been collected.
The Fund computes the amount due you at the close of the Exchange at the
end of the day on which it has received all proper documentation from you.
Payment of the amount due on redemption, less any applicable contingent deferred
sales charge (as described above), will be made within seven days thereafter
except as discussed herein.
You may also redeem your shares through broker-dealers. The Principal
Underwriter, acting as agent for the Fund, stands ready to repurchase Fund
shares upon orders from dealers and will calculate the net asset value on the
same terms as those orders for the purchase of shares received from broker-
dealers and described under "How to Buy Shares." If the Principal Underwriter
has received proper documentation, it will pay the redemption proceeds, less any
applicable deferred sales charge, to the broker-dealer placing the order within
seven days thereafter. The Principal Underwriter charges no fee for this
service. Your broker-dealer, however, may charge a service fee.
For your protection, SIGNATURES ON CERTIFICATES, STOCK POWERS AND ALL
WRITTEN ORDERS OR AUTHORIZATIONS MUST BE GUARANTEED BY A U.S. STOCK EXCHANGE
MEMBER, A BANK OR OTHER PERSONS ELIGIBLE TO GUARANTEE SIGNATURES UNDER THE
SECURITIES EXCHANGE ACT OF 1934 AND KIRC'S POLICIES. The Fund or KIRC may waive
this requirement, but also may require additional documents in certain cases.
Currently, the requirement for a signature guarantee has been waived on
redemptions of $50,000 or less when the account address of record has been the
same for a minimum period of 30 days. The Fund and KIRC reserve the right to
withdraw this waiver at any time.
If the Fund receives a redemption order, but you have not clearly indicated
the amount of money or number of shares involved, the Fund cannot execute the
order. In such cases, the Fund will request the missing information from you and
process the order on the day such information is received.
TELEPHONE
Under ordinary circumstances, you may redeem up to $50,000 from your
account by telephone by calling toll free 1-800-343-2898. You must complete the
Telephone Redemptions section of the application to enjoy telephone redemption
privileges.
In order to insure that instructions received by KIRC are genuine when you
initiate a telephone transaction, you will be asked to verify certain criteria
specific to your account. At the conclusion of the transaction, you will be
given a transaction number confirming your request, and written confirmation of
your transaction will be mailed the next business day. Your telephone
instructions will be recorded. Redemptions by telephone are allowed only if the
address and bank account of record have been the same for a minimum period of 30
days.
If the redemption proceeds are less than $2,500, they will be mailed by
check. If they are $2,500 or more, they will be mailed, wired or sent by EFT to
your previously designated bank account as you direct. If you do not specify how
you wish your redemption proceeds to be sent, they will be mailed by check.
If you cannot reach the Fund by telephone, you should follow the procedures
for redeeming by mail or through a broker as set forth herein.
SMALL ACCOUNTS
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem your account if its value has fallen below $1,000, the current
minimum investment level, as a result of your redemptions (but not as a result
of market action). You will be notified in writing and allowed 60 days to
increase the value of your account to the minimum investment level. No deferred
sales charges are applied to such redemptions.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Fund to pay for
all redemptions in cash, the Fund may authorize payment to be made in portfolio
securities or other property. The Fund has obligated itself, however, under the
1940 Act to redeem for cash all shares presented for redemption by any one
shareholder up to the lesser of $250,000 or 1% of the Fund's net assets in any
90-day period. Securities delivered in payment of redemptions would be valued at
the same value assigned to them in computing the net asset value per share and
would, to the extent permitted by law, be readily marketable. Shareholders
receiving such securities would incur brokerage costs upon the securities' sale.
GENERAL
The Fund reserves the right at any time to terminate, suspend or change the
terms of any redemption method described in this prospectus, except redemption
by mail, and to impose fees.
Except as otherwise noted, neither the Fund, KIRC nor the Principal
Underwriter assumes responsibility for the authenticity of any instructions
received by any of them from a shareholder in writing, over the Keystone
Automated Response Line ("KARL") or by telephone. KIRC will employ reasonable
procedures to confirm that instructions received over KARL or by telephone are
genuine. Neither the Fund, KIRC nor the Principal Underwriter will be liable
when following instructions received over KARL or by telephone that KIRC
reasonably believes to be genuine.
The Fund may temporarily suspend the right to redeem its shares when (1)
the Exchange is closed, other than customary weekend and holiday closings; (2)
trading on the Exchange is restricted; (3) an emergency exists and the Fund
cannot dispose of its investments or fairly determine their value; or (4) the
Securities and Exchange Commission so orders.
SHAREHOLDER SERVICES
Details on all shareholder services may be obtained from KIRC by writing or
by calling toll free 1-800-343-2898.
KEYSTONE AUTOMATED RESPONSE LINE
KARL offers you specific fund account information and price and yield
quotations as well as the ability to do account transactions, including
investments, exchanges and redemptions. You may access KARL by dialing toll free
1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a week.
EXCHANGES
A shareholder who has obtained the appropriate prospectus may exchange
shares of the Fund for shares of certain other Keystone America Funds and
Keystone Liquid Trust ("KLT") as follows:
Class A shares may be exchanged for Class A shares of other Keystone
America Funds and Class A shares of KLT;
Class B shares, except as noted below, may be exchanged for the same type
of Class B shares of other Keystone America Funds and the same type of Class B
shares of KLT; and
Class C shares may be exchanged for Class C shares of other Keystone
America Funds and Class C shares of KLT.
Class B shares purchased on or after June 1, 1995 cannot be exchanged for
Class B shares of Keystone Capital Preservation and Income Fund during the 24
month period commencing with and including the month of original purchase.
The exchange of Class B shares and Class C shares will not be subject to a
contingent deferred sales charge. However, if the shares being tendered for
exchange are
(i) Class A shares acquired in an NAV Purchase or otherwise without a front
end sales charge,
(ii) Class B shares that have been held for less than 72 months or four
years, as the case may be, or
(iii) Class C shares that have been held for less than one year,
and are still subject to a deferred sales charge, such charge will carry over
to the shares being acquired in the exchange transaction.
You may exchange shares for another Keystone fund for a $10 fee by calling
or writing to Keystone. The exchange fee is waived for individual investors who
make an exchange using KARL. Shares purchased by check are eligible for exchange
after 15 days. If the shares being tendered for exchange are still subject to a
deferred sales charge, such charge will carry over to the shares being acquired
in the exchange transaction. The Fund reserves the right, after providing the
required notice to shareholders, to terminate this exchange offer or to change
its terms, including the right to change the fee for any exchange.
Orders to exchange a certain class of shares of the Fund for the
corresponding class of shares of KLT will be executed by redeeming the shares of
the Fund and purchasing the corresponding class of shares of KLT at the net
asset value of such shares next determined after the proceeds from such
redemption become available, which may be up to seven days after such
redemption. In all other cases, orders for exchanges received by the Fund prior
to 4:00 p.m. eastern time on any day the 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. eastern time on
any business day will be executed at the respective net asset values determined
at the close of the next business day.
An excessive number of exchanges may be disadvantageous to the Fund.
Therefore, the Fund, in addition to its right to reject any exchange, reserves
the right to terminate the exchange privilege of any shareholder who makes more
than five exchanges of shares of the funds in a year or three in a calendar
quarter.
An exchange order must comply with the requirements for a redemption or
repurchase order and must specify the dollar value or number of shares to be
exchanged. 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 the Principal Underwriter for every transaction.
To change the amount of a Keystone America Money Line or to terminate the
service (which could take up to 30 days), you must write to KIRC and include
account numbers.
RETIREMENT PLANS
The Fund has various retirement plans available to investors, including
Individual Retirement Accounts ("IRAs"); Rollover IRAs; Simplified Employee
Pension Plans ("SEPs"); Tax Sheltered Annuity Plans ("TSAs"), 403(b) Plans;
401(k) Plans; Keogh Plans; Corporate Profit-Sharing Plans; and Money Purchase
Plans. For details, including fees and application forms, call toll free
1-800-247-4075 or write to KIRC.
AUTOMATIC WITHDRAWAL PLAN
Under an Automatic Withdrawal Plan, if your account has a value of at least
$10,000, you may arrange for regular monthly or quarterly fixed withdrawal
payments. Each payment must be at least $100 and may be as much as 1.5% per
month or 4.5% per quarter of the total net asset value of the Fund shares in
your account when the Automatic Withdrawal Plan is opened. Fixed withdrawal
payments are not subject to a deferred sales charge. Excessive withdrawals may
decrease or deplete the value of your account. Moreover, because of the effect
of the applicable sales charge, a Class A investor should not make continuous
purchases of the Fund's shares while participating in the Automatic Withdrawal
Plan.
DOLLAR COST AVERAGING
Through dollar cost averaging you can invest a fixed dollar amount each
month or each quarter in any Keystone America Fund. This results in more shares
being purchased when the selected fund's net asset value is relatively low and
fewer shares being purchased when the fund's net asset value is relatively high
and may result in a lower average cost per share than a less systematic
investment approach.
Prior to participating in dollar cost averaging, you must establish an
account in a Keystone America Fund or a money market fund managed or advised by
Keystone. You should designate on the application (1) the dollar amount of each
monthly or quarterly investment (minimum $100) you wish to make and (2) the fund
in which the investment is to be made. Thereafter, on the first day of the
designated month, an amount equal to the specified monthly or quarterly
investment will automatically be redeemed from your initial account and invested
in shares of the designated fund. If you are a Class A investor and paid a sales
charge on your initial purchase, the shares purchased will be eligible for
Rights of Accumulation and the sales charge applicable to the purchase will be
determined accordingly. In addition, the value of shares purchased will be
included in the total amount required to fulfill a Letter of Intent. If a sales
charge was not paid on the initial purchase, a sales charge will be imposed at
the time of subsequent purchases, and the value of shares purchased will become
eligible for Rights of Accumulation and Letters of Intent.
TWO DIMENSIONAL INVESTING
You may elect to have income and capital gains distributions from any class
Keystone America Fund shares you may own automatically invested to purchase the
same class of shares of any other Keystone America Fund. You may select this
service on your application and indicate the Keystone America Fund(s) into which
distributions are to be invested. The value of shares purchased will be
ineligible for Rights of Accumulation and Letters of Intent.
OTHER SERVICES
Under certain circumstances, you may, within 30 days after a redemption,
reinstate your account in the same class of shares that you redeemed at current
net asset value.
PERFORMANCE DATA
From time to time the Fund may advertise "total return" and "current
yield". ALL DATA IS BASED ON HISTORICAL EARNINGS AND IS NOT INTENDED TO INDICATE
FUTURE PERFORMANCE. Total return and current yield are computed separately for
each class of shares of the Fund. Total return refers to average annual
compounded rates of return over specified periods determined by comparing the
initial amount invested in a particular class to the ending redeemable value of
that amount. The resulting equation assumes reinvestment of all dividends and
distributions and deduction of the maximum sales charge or applicable contingent
deferred sales charge and all recurring charges, if any, applicable to all
shareholder accounts. The exchange fee is not included in the calculation.
Current yield quotations represent the yield on an investment for a stated
30-day period computed by dividing net investment income earned per share during
the base period by the maximum offering price per share on the last day of the
base period.
The Fund may also include comparative performance data for each class of
shares in advertising or marketing the Fund's shares, such as data from Lipper
Analytical Services, Inc., Morningstar, Inc., Standard & Poor's Corporation,
Ibbotson Associates or other industry publications.
FUND SHARES
Generally, the Fund currently issues one series of shares, which offers
three classes of shares that 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 series or 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 series or class; (2) each series or class of shares has exclusive voting
rights with respect to its Distribution Plan; (3) each series or class has
different exchange privileges; and (4) each series or class generally has a
different designation. When issued and paid for, the shares will be fully paid
and nonassessable by the Fund. Shares may be exchanged as explained under
"Shareholder Services", but will have no other preference, conversion, exchange
or preemptive rights. Shares are redeemable, transferable and freely assignable
as collateral. The Fund is authorized to issue additional series or classes of
shares.
Shareholders are entitled to one vote for each full share owned and
fractional votes for fractional shares. Shares of the Fund vote together except
when required by law to vote separately by series or class. The Fund does not
have annual meetings. The Fund will have special meetings, from time to time, as
required under its Declaration of Trust and under the 1940 Act. As provided in
the Fund's Declaration of Trust, shareholders have the right to remove Trustees
by an affirmative vote of two-thirds of the outstanding shares. A special
meeting of the shareholders will be held when 10% of the outstanding shares
request a meeting for the purpose of removing a Trustee. The Fund is prepared to
assist shareholders in communications with one another for the purpose of
convening such a meeting as prescribed by Section 16(c) of the 1940 Act.
Under Massachusetts law, it is possible that a Fund shareholder may be held
personally liable for the Fund's obligations. The Fund's Declaration of Trust
provides, however, that shareholders shall not be subject to any personal
liability for the Fund's obligations and provides indemnification from Fund
assets for any shareholder held personally liable for the Fund's obligations.
Disclaimers of such liability are included in each Fund agreement.
ADDITIONAL INFORMATION
KIRC, located at 101 Main Street, Cambridge, Massachusetts 02142-1519, is a
wholly-owned subsidiary of Keystone, serves as the Fund's transfer agent and
dividend disbursing agent.
When the Fund determines from its records that more than one account in the
Fund is registered in the name of a shareholder or shareholders having the same
address, upon notice to those shareholders, the Fund intends, when an annual
report or a semi-annual report of the Fund is required to be furnished, to mail
one copy of such report to that address.
Except as otherwise stated in this prospectus or required by law, the Fund
reserves the right to change the terms of the offer stated in this prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
The Portfolio may engage in the following investment practices to the
extent described in the prospectus and the statement of additional information.
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 also may 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 Portfolio 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.
TIME DEPOSITS
The Portfolio may acquire time deposits or obligations issued by
international agencies, such as the International Bank for Reconstruction and
Development, the Asian Development Bank or the Inter-American Bank.
Additionally, the Portfolio may purchase certificates of deposit, bankers'
acceptances, time deposits or other similar obligations issued by foreign banks.
MASTER DEMAND NOTES
Master demand notes are unsecured obligations that permit the investment of
fluctuating amounts by the Portfolio at varying rates of interest pursuant to
direct arrangements between the Portfolio, as lender, and the issuer, as
borrower. Master demand notes may permit daily fluctuations in the interest rate
and daily changes in the amounts borrowed. The Portfolio 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 Portfolio
permit the Portfolio to demand payment of principal and accrued interest at any
time (on not more than seven days' notice). Notes acquired by the Portfolio may
have maturities of more than one year, provided (1) the Portfolio 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 are 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 repayable by the borrower at
face value plus accrued interest at any time. Accordingly, the Portfolio's right
to redeem is dependent on the ability of the borrower to pay principal and
interest on demand. In connection with master demand note arrangements, Keystone
considers, under standards established by the Board of Trustees, earning power,
cash flow and other liquidity ratios of the borrower and will monitor the
ability of the borrower to pay principal and interest on demand. These notes are
not typically rated by credit rating agencies. Unless rated, the Portfolio will
invest in them only if the issuer meets the criteria established for commercial
paper.
REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements; i.e., the Portfolio
purchases a security subject to the Fund's obligation to resell and the seller's
obligation to repurchase that security at an agreed upon price and date, such
date usually being not more than seven days from the date of purchase. The
resale price is based on the purchase price plus an agreed upon current market
rate of interest that (for purposes of the transaction) is generally unrelated
to the coupon rate or maturity of the purchased security. A repurchase agreement
imposes an obligation on the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security. The
value of the underlying security is at least equal to the amount of the agreed
upon resale price and marked to market daily to cover such amount. The Portfolio
may enter into such agreements only with respect to U.S. government and foreign
government securities, which may be denominated in U.S. or foreign currencies.
The Portfolio may enter into such repurchase agreements with foreign banks and
securities dealers approved in advance by the Fund's Trustees. Whether a
repurchase agreement is the purchase and sale of a security or a collateralized
loan has not been definitively established. This might become an issue in the
event of the bankruptcy of the other party to the transaction. It does not
presently appear possible to eliminate all risks involved in repurchase
agreements. These risks include the possibility of an increase in the market
value of the underlying securities or inability of the repurchaser to perform
its obligation to repurchase coupled with an uncovered decline in the market
value of the collateral, including the underlying securities, as well as delay
and costs to the Portfolio in connection with enforcement or bankruptcy
proceedings. Therefore, it is the policy of the Portfolio to enter into
repurchase agreements only with large, well-capitalized banks that are members
of the Federal Reserve System and with primary dealers in U.S. government
securities (as designated by the Federal Reserve Board) whose creditworthiness
has been reviewed and found satisfactory by the Portfolio's advisers.
REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, the Portfolio would sell securities
and agree to repurchase them at a mutually agreed upon date and price. The
Portfolio 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 Portfolio enters into a reverse repurchase
agreement, it will establish a segregated account with the Portfolio's custodian
containing liquid assets having a value not less than the repurchase price
(including accrued interest) and will subsequently monitor the account to ensure
such value is maintained. Reverse repurchase agreements involve the risk that
the market value of the securities which the Portfolio is obligated to
repurchase may decline below the repurchase price. Borrowing and reverse
repurchase agreements magnify the potential for gain or loss on the securities
of the Portfolio and, therefore, increase the possibility of fluctuation in the
Portfolio's net asset value. Such practice may constitute leverage. 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 Portfolio's
obligation to repurchase the securities and the Portfolio's use of the proceeds
of the reverse repurchase agreement may effectively be restricted pending such
determination. The staff of the SEC has taken the position that the Investment
Company Act of 1940 treats reverse repurchase agreements as being included in
the percentage limit on borrowings imposed on a Fund.
FOREIGN SECURITIES
The Portfolio may invest in securities principally traded in securities
markets outside the United States. While investment in foreign securities is
intended to reduce risk by providing further diversification, such investments
involve sovereign risk in addition to the credit and market risks normally
associated with domestic securities. Foreign investments may be affected
favorably or unfavorably by changes in currency rates and exchange control
regulations. There may be less publicly available information about a foreign
company, 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,
particularly with respect to companies in the formerly communist countries of
Eastern Europe and the People's Republic of China, 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 Portfolio may also purchase and sell securities or currencies on a when
issued and delayed delivery basis. When issued and delayed delivery transactions
arise when securities or currencies are purchased or sold by the Portfolio 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 Portfolio at the time of
entering into the transaction. When the Portfolio engages in when issued and
delayed delivery transactions, the Portfolio relies on the buyer or seller, as
the case may be, to consummate the sale. Failure to do so may result in the
Portfolio 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. No payment or delivery is made by
the Fund however, until it receives payment or delivery from the other party to
the transaction. The Fund will maintain a separate account of liquid assets
equal to the value of such 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 and other market
factors, both before and after delivery. The Portfolio does not accrue any
income on such securities prior to their delivery. To the extent the Portfolio
engages in when issued and delayed delivery transactions, it will do so for the
purposes consistent with its investment objective and policies and not for the
purpose of investment leverage.
DERIVATIVES
The Portfolio may use derivatives in furtherance of its investment
objective. Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. These
assets, rates and indices may include bonds, stocks, mortgages, commodities,
interest rates, currency exchange rates, bond indices and stock indices.
Derivatives can be used to earn income or protect against risk, or both. For
example, one party with unwanted risk may agree to pass that risk to another
party who is willing to accept the risk, the second party being motivated, for
example, by the desire either to earn income in the form of a fee or premium
from the first party, or to reduce its own unwanted risk by attempting to pass
all or part of that risk to the first party.
Derivatives can be used by investors such as the Portfolio 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 Portfolio is permitted to use derivatives
for one or more of these purposes, although the Portfolio 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 Portfolio uses futures
contracts and related options for hedging purposes. Derivatives are a valuable
tool which, when used properly, can provide significant benefit to Portfolio
shareholders. Keystone is not an aggressive user of derivatives with respect to
the Portfolio. However, the Portfolio 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 Portfolio's investment objectives and
policies.
Derivatives may be (1) standardized, exchange-traded contracts or (2)
customized, privately negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated.
There are four principal types of derivative instruments -- options,
futures, forwards and swaps -- from which virtually any type of derivative
transaction can be created. Further information regarding options and futures is
provided later in this section and is provided in the Portfolio's statement of
additional information. The Portfolio does not presently engage in the use of
swaps.
While the judicious use of derivatives by experienced investment managers
such as Keystone can be beneficial, derivatives also involve risks different
from, and, in certain cases, greater than, the risks presented by more
traditional investments.
Following is a general discussion of important risk factors and issues
concerning the use of derivatives that investors should understand before
investing in the Portfolio.
* 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 Portfolio'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 Portfolio'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
Portfolio 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 Portfolio 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 Risk -- 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 Portfolio. 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
Portfolio'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 Portfolio may write (i.e., sell) covered call
and put options. By writing a call option, the Portfolio 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 Portfolio
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
Portfolio also may write straddles (combinations of covered puts and calls on
the same underlying security).
The Portfolio may only write "covered" options. This means that so long as
the Portfolio 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 Portfolio might own substantially similar U.S. Treasury
bills. If the Portfolio has written options against all of its securities that
are available for writing options, the Portfolio may be unable to write
additional options unless it sells a portion of its portfolio holdings to obtain
new securities against which it can write options. If this were to occur, higher
portfolio turnover and correspondingly greater brokerage commissions and other
transaction costs may result. The Portfolio does not expect, however, that this
will occur.
The Portfolio 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 Portfolio 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 Portfolio might lose the potential for gain on the
underlying security while the option is open, and by writing a put option, the
Portfolio might become obligated to purchase the underlying security for more
than its current market price upon exercise.
PURCHASING OPTIONS
The Portfolio may purchase put or call options for the purpose of
offsetting previously written put or call options of the same series.
If the Portfolio is unable to effect a closing purchase transaction with
respect to covered options it has written, the Portfolio 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 Portfolio 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 Portfolio's
ability to use such options to achieve its investment objective.
OPTIONS TRADING MARKETS. Options which the Portfolio 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 could fail to
meet their obligations to the Portfolio. 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 Portfolio is subject to the investment restrictions
described in this prospectus and the statement of additional information.
The staff of the SEC 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.
FUTURES TRANSACTIONS
The Portfolio may enter into currency and other financial futures contracts
and write options on such contracts. The Portfolio intends to enter into such
contracts and related options for hedging purposes. The Portfolio will enter
into futures for 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 Portfolio 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 remains in effect until the contract is terminated.
The Portfolio may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by the Portfolio, 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 Portfolio 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 Portfolio, 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 Portfolio
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 Portfolio intends to purchase.
The Portfolio also intends to purchase put and call options on currency and
other financial futures contracts for hedging purposes. A put option purchased
by the Portfolio would give it the right to assume a position as the seller of a
futures contract. A call option purchased by the Portfolio 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 Portfolio to pay a premium. In
exchange for the premium, the Portfolio 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 Portfolio's loss will be limited to the amount of the
premium and any transaction costs.
The Portfolio 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 Portfolio'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 Portfolio will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If the
Portfolio is not able to enter into an offsetting transaction, the Portfolio
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
Portfolio 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 Portfolio's futures position did
not correspond to changes in the value of its investments. This lack of
correlation between the Portfolio'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 Portfolio's futures position and the securities or currencies
held by or to be purchased for the Portfolio. In addition, futures contracts
transactions involve the remote risk that a party participating in a transaction
will not be able to fulfill its obligations and the amount of the obligation
will exceed the ability of the clearing broker to satisfy. Keystone will attempt
to minimize these risks through careful selection and monitoring of the
Portfolio's futures and options positions.
The Portfolio does not intend to use futures transactions for speculation
or leverage. The Portfolio has the ability to write options on futures, but
intends to write such options only to close out options purchased by the
Portfolio. The Portfolio will not change these policies without supplementing
the information in its prospectus and statement of additional information.
FOREIGN CURRENCY TRANSACTIONS
As discussed above, the Portfolio may invest in securities of foreign
issuers. When the Portfolio invests in foreign securities they usually will be
denominated in foreign currencies, and the Portfolio temporarily may hold funds
in foreign currencies. Thus, the value of Portfolio shares will be affected by
changes in exchange rates.
As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the Portfolio 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 Portfolio will deliver and receive when the contract is completed) is fixed
when the Portfolio enters into the contract. The Portfolio usually will enter
into these contracts to stabilize the U.S. dollar value of a security it has
agreed to buy or sell. The Portfolio intends to use these contracts to hedge the
U.S. dollar value of a security it already owns, particularly if the Portfolio
expects a decrease in the value of the currency in which the foreign security is
denominated. Although the Portfolio 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 Portfolio's investments denominated in foreign
currencies will depend on the relative strength of those currencies and the U.S.
dollar, and the Portfolio 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 Portfolio. The Portfolio may also purchase and sell options
related to foreign currencies in connection with hedging strategies.
LOANS OF SECURITIES
The Portfolio 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 Portfolio if as a result the
aggregate of all outstanding securities loans exceeds 15% of the value of the
Portfolio's total assets taken at their current value. The Portfolio 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 Portfolio if, in the
opinion of the Portfolio, 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.
ZERO COUPON BONDS
A zero coupon (interest) "stripped" bond represents ownership in serially
maturing interest or principal payments on specific underlying notes and bonds,
including coupons relating to such notes and bonds. The interest and principal
payments are direct obligations of the issuer. These bonds mature on the payment
dates of the interest or principal which they represent. Each zero coupon bond
entitles the holder to receive a single payment at maturity. There are no
periodic interest payments on a zero coupon bond. Zero coupon bonds are offered
at discounts from their face amounts.
In general, owners of zero coupon bonds have substantially all the rights
and privileges of owners of the underlying coupon obligations or principal
obligations. Owners of zero coupon bonds have the right upon default on the
underlying coupon obligations or principal obligations to proceed directly and
individally against the issuer and are not required to act in concert with other
holders of zero coupon bonds.
For federal income tax purposes, a purchaser of principal zero coupon bonds
(either initially or in the secondary market) is treated as if the buyer had
purchased a corporate obligation issued on the purchase date with an original
issue discount equal to the excess of the amount payable at maturity over the
purchase price. The purchaser is required to take into income each year as
ordinary income an allocaable portion of such discounts determined on a
"constant yield" method. Any such income increases the holder's tax basis for
the zero coupon bond, and any gain or loss on a sale of the zero coupon bonds
relative to the holder's basis, as so adjusted, is a capital gain or loss. If
the holder owns zero coupon bonds representing separate interests in the coupon
(interest) payments and the principal payments from the same underlying issue of
securities, a special basis allocation rule (requiring the aggregate basis to be
allocated among the items sold and retained based on their relative fair market
values at the time of sale) may apply to determine the gain or loss on a sale of
any such zero coupon bonds.
If and when the Fund invests in zero coupon bonds, the Fund does not expect
to have enough zero coupon bonds to have a material effect on dividends. The
Fund has undertaken to a state securities authority to disclose that zero coupon
securities pay no interest to holders prior to maturity, and that 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.
<PAGE>
EXHIBIT A
REDUCED SALES CHARGES
Initial sales charges may be reduced or eliminated for persons or
organizations purchasing Class A shares of the Fund alone or in combination
with Class A shares of other Keystone America Funds. Only Class A shares
subject to an initial or deferred sales charge are eligible for inclusion in
reduced sales charge programs.
For purposes of qualifying for reduced sales charges on purchases made
pursuant to Rights of Accumulation or Letters of Intent, the term "Purchaser"
includes the following persons: an individual; an individual, his or her spouse
and children under the age of 21; a trustee or other fiduciary of a single trust
estate or single fiduciary account established for their benefit; an
organization exempt from federal income tax under Section 501 (c)(3) or (13) of
the Internal Revenue Code; a pension, profit-sharing or other employee benefit
plan whether or not qualified under Section 401 of the Internal Revenue Code; or
other organized groups of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some purpose
other than the purchase of redeemable securities of a registered investment
company at a discount. In order to qualify for a lower sales charge, all orders
from an organized group will have to be placed through a single investment
dealer or other firm and identified as originating from a qualifying purchaser.
CONCURRENT PURCHASES
For purposes of qualifying for a reduced sales charge, a Purchaser may
combine concurrent direct purchases of Class A shares of two or more of the
"Eligible Funds," as defined below. For example, if a Purchaser concurrently
invested $75,000 in one of the other "Eligible Funds" and $75,000 in the Fund,
the sales charge would be that applicable to a $150,000 purchase, i.e., 3.75% of
the offering price, as indicated in the Sales Charge Schedule in the prospectus.
RIGHT OF ACCUMULATION
In calculating the sales charge applicable to current purchases of the
Fund's Class A shares, a Purchaser is entitled to accumulate current purchases
with the current value of previously purchased Class A shares of the Fund and
Class A shares of certain other eligible funds that are still held in (or
exchanged for shares of and are still held in) the same or another eligible fund
("Eligible Fund(s)"). The Eligible Funds are the Keystone America Funds and
Keystone Liquid Trust.
For example, if a Purchaser held shares valued at $99,999 and purchased an
additional $5,000, the sales charge for the $5,000 purchase would be at the next
lower sales charge of 3.75% of the offering price as indicated in the Sales
Charge schedule. KIRC must be notified at the time of purchase that the
Purchaser is entitled to a reduced sales charge, which reduction will be granted
subject to confirmation of the Purchaser's holdings. The Right of Accumulation
may be modified or discontinued at any time.
LETTER OF INTENT
A Purchaser may qualify for a reduced sales charge on a purchase of Class A
shares of the Fund alone or in combination with purchases of Class A shares of
any of the other Eligible Funds by completing the Letter of Intent section of
the application. By so doing, the Purchaser agrees to invest within a
thirteen-month period a specified amount which, if invested at one time, would
qualify for a reduced sales charge. Each purchase will be made at a public
offering price applicable to a single transaction of the dollar amount specified
on the application, as described in this prospectus. The Letter of Intent does
not obligate the Purchaser to purchase, nor the Fund to sell, the amount
indicated.
After the Letter of Intent is received by KIRC, each investment made will
be entitled to the sales charge applicable to the level of investment indicated
on the application. The Letter of Intent may be back-dated up to ninety days so
that any investments made in any of the Eligible Funds during the preceding
ninety-day period, valued at the Purchaser's cost, can be applied toward
fulfillment of the Letter of Intent. However, there will be no refund of sales
charges already paid during the ninety-day period. No retroactive adjustment
will be made if purchases exceed the amount specified in the Letter of Intent.
Income and capital gains distributions taken in additional shares will not apply
toward completion of the Letter of Intent.
If total purchases made pursuant to the Letter of Intent are less than the
amount specified, the Purchaser will be required to remit an amount equal to the
difference between the sales charge paid and the sales charge applicable to
purchases actually made. Out of the initial purchase (or subsequent purchases,
if necessary) 5% of the dollar amount specified on the application will be held
in escrow by KIRC in the form of shares registered in the Purchaser's name. The
escrowed shares will not be available for redemption, transfer or encumbrance by
the Purchaser until the Letter of Intent is completed or the higher sales charge
paid. All income and capital gains distributions on escrowed shares will be paid
to the Purchaser or his order.
When the minimum investment specified in the Letter of Intent is completed
(either prior to or by the end of the thirteen-month period), the Purchaser will
be notified and the escrowed shares will be released. If the intended investment
is not completed, the Purchaser will be asked to remit to the Principal
Underwriter any difference between the sales charge on the amount specified and
on the amount actually attained. If the Purchaser does not within 20 days after
written request by the Principal Underwriter or his dealer pay such difference
in sales charge, KIRC will redeem an appropriate number of the escrowed shares
in order to realize such difference. Shares remaining after any such redemption
will be released by KIRC. Any redemptions made by the Purchaser during the
thirteen-month period will be subtracted from the amount of the purchases for
purposes of determining whether the Letter of Intent has been completed. In the
event of a total redemption of the account prior to completion of the Letter of
Intent, the additional sales charge due will be deducted from the proceeds of
the redemption and the balance will be forwarded to the Purchaser.
By signing the application, the Purchaser irrevocably constitutes and
appoints KIRC his attorney to surrender for redemption any or all escrowed
shares with full power of substitution.
The Purchaser or his dealer must inform the Principal Underwriter or KIRC
that a Letter of Intent is in effect each time a purchase is made.
<PAGE>
KEYSTONE AMERICA
FUND FAMILY
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
Omega Fund
Fund of the Americas
Strategic Development Fund
[logo]
KEYSTONE
INVESTMENTS
Keystone Investment Distributors Company
200 Berkeley Street
Boston, Massachusetts 02116-5045
GOF-P 1/96 [RECYCLE LOGO]
KEYSTONE
GLOBAL
OPPORTUNITIES FUND
[LOGO]
PROSPECTUS AND
APPLICATION
<PAGE>
KEYSTONE GLOBAL OPPORTUNITIES FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
KEYSTONE GLOBAL OPPORTUNITIES FUND
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 30, 1996
This statement of additional information is not a prospectus, but
relates to, and should be read in conjunction with, the prospectus of Keystone
Global Opportunities Fund (the "Fund") dated January 30, 1996. A copy of the
prospectus may be obtained from Keystone Investment Distributors Company
(formerly named Keystone Distributors, Inc.) (the "Principal Underwriter"), the
Fund's principal underwriter, 200 Berkeley Street, Boston, Massachusetts
02116-5034.
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TABLE OF CONTENTS
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Page
The Fund 2
Investment Objective and Policies 2
Investment Restrictions 3
Distributions and Taxes 6
Valuation of Securities 7
Brokerage 8
Sales Charges 10
Distribution Plans 13
Trustees and Officers 17
Investment Adviser 21
SubAdviser 23
Principal Underwriter 24
Declaration of Trust 25
Standardized Total Return
and Yield Quotations 27
Additional Information 28
Appendix A-1
Financial Statements F-1
Independent Auditors' Report F-17
<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 that is authorized to issue more than one series
of shares (the "Portfolios"), each series investing in different portfolios of
securities. At this time, the Fund issues only shares of its Global
Opportunities Portfolio. The Global Opportunities Portfolio (the "Portfolio")
seeks capital growth.
The Fund was formed as a Massachusetts business trust on June 17, 1987.
The Fund is managed and advised by Keystone Investment Management Company
(formerly named Keystone Custodian Funds, Inc.) ("Keystone") and has as its
subadviser Credit Lyonnais International Asset Management, North America
("CLIAM").
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 OBJECTIVE AND POLICIES
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It is expected that under ordinary circumstances at least 65% of the
Portfolio's assets will be invested in securities of issuers of at least three
different countries, one of which may be the United States ("U.S"). Certain
types of investments, investment techniques and ratings criteria applicable to
the Portfolio are more fully explained in the appendix to this statement of
additional information.
FUNDAMENTAL NATURE OF INVESTMENT OBJECTIVE
The investment objective of the Portfolio is fundamental and may not be
changed without approval of the holders of a majority of the Portfolio'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 with respect to any Portfolio without the vote of a majority (as defined
in the Investment Company Act of 1940 (the "1940 Act")) of the affected
Portfolio's outstanding voting shares. Unless otherwise stated, all references
to the assets of a Portfolio are in terms of current market value. The Portfolio
may not do any of the following:
(1) purchase any security of any issuer (other than any security issued
or guaranteed as to principal or interest by the United States ("U.S."), its
agencies or instrumentalities [U.S. government securities]) 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, except that the Portfolio may borrow money from banks
and/or enter into reverse repurchase agreements for temporary or emergency
purposes in aggregate amounts up to one-third of the value of the Portfolio's
net assets provided that no additional investments shall be made at any time
that outstanding borrowings (including amounts payable under reverse repurchase
agreements) exceed 5% of the Portfolio's assets;
(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 Portfolio may purchase or hold debt
securities, including nonpublicly offered debt securities and convertible 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 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 U.S. government securities; (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 it may engage in
currency and other financial futures contracts and related options transactions;
(12) underwrite securities of other issuers, except that the Portfolio
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 Portfolio would hold
more than 10% of the voting securities of the issuer; and
(14) purchase any security for the purpose of control or
management.
The Fund intends to follow the 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 any
security that may not be sold or disposed of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued the
investment on its books and (2) limiting its holdings of such securities to 15%
of its net assets.
Additional restrictions adopted by the Fund, which may be changed by
the Board of Trustees, provide that the Portfolio may not purchase or retain
securities of an issuer if, to the knowledge of the Fund, any officer, Trustee
or Director of the Fund or Keystone, each owning beneficially more than one-half
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
or, Keystone or Keystone Management, Inc. ("Keystone Management") have a
substantial beneficial interest in the securities of such issuer. Portfolio
securities of the Portfolio may not be purchased from or sold or loaned to
Keystone or any affiliate thereof or any of their Directors, officers or
employees; and the Portfolio may not purchase or sell interests in oil, gas or
other mineral exploration or development programs, except that the Portfolio
may, pursuant to its investment objectives and policies, purchase publicly
traded securities of companies engaging in such activities.
If a percentage limit is satisfied at the time of investment or
borrowing, a later increase or decrease resulting from a change in the value of
a security or a decrease in the Portfolio's assets is not a violation of the
limit.
In order to permit the sale of the Portfolio's 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 the Portfolio's shares in the state involved.
Although not fundamental restrictions or policies requiring a
shareholders' vote to change, the Fund has agreed that, so long as certain state
authorities require and shares of the Portfolio are registered for sale in those
states, the Portfolio will (1) not write puts and calls on securities unless (a)
the option is issued by the Options Clearing Corporation, (b) the security
underlying the put or call is within the investment policies of the Portfolio,
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) 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 Portfolio's net assets; (3) not write put options; (4) limit
its purchases of put and call options written by others to 2% of its net assets
calculated at the time of payment; (5) limit its purchase of warrants to 5% of
net assets, of which 2% may be warrants not listed on the New York or American
Stock Exchange; (6) not invest in real estate limited partnership interests; (7)
not invest in gas, oil or other mineral leases; (8) not invest more than 5% of
its assets in securities of issuers which the Portfolio may not sell to the
public without registration under the federal Securities Act of 1933; and (9)
maintain 300% asset coverage on any leverage or bank borrowings.
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DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
The Fund distributes to the Portfolio's shareholders dividends from net
investment income and net realized capital gains annually in shares or, at the
option of the shareholder, in cash. Shareholders who have not opted to receive
cash prior to the record date for any distribution will have the number of such
shares determined on the basis of the Portfolio'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 Portfolio
pays the distribution. Unless the Portfolio receives instructions to the
contrary from a shareholder before the record date, it will assume that the
shareholder wishes to receive that distribution and future gains and income
distributions in shares. Instructions continue in effect until changed in
writing.
Distributed long-term capital gains are taxable as such to the
shareholder regardless of the period of time Portfolio 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 Portfolio'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 Portfolio, they may
or may not occur. The foregoing comments relating to the taxation of dividends
and distributions paid on the Portfolio's shares relate solely to federal income
taxation. Such dividends and distributions may also be subject to state and
local taxes.
When the Portfolio makes a distribution, it intends to distribute only
the Portfolio'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 Portfolio will be advised annually of the federal income tax status of
distributions.
If more than 50% of the value of the Portfolio's total assets at the
end of a fiscal year is represented by securities of foreign corporations and
the Portfolio elects to make foreign tax credits available to its shareholders,
a shareholder will be required to include in his gross income both actual
dividends and the amount the Portfolio advises him is his pro rata portion of
income taxes withheld by foreign governments from interest and dividends paid on
the Portfolio's investments. The shareholder will be entitled, however, to take
the amount of such foreign taxes withheld as a credit against his U.S. income
tax, or to treat the foreign tax withheld as an itemized deduction from his
gross income, if that should be to his advantage. In substance, this policy
enables the shareholder to benefit from the same foreign tax credit or deduction
that he would have received if he had been the individual owner of foreign
securities and had paid foreign income tax on the income therefrom. As in the
case of individuals receiving income directly from foreign sources, the above
described tax credit and deductions are subject to certain limitations.
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VALUATION OF SECURITIES
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Current values for the Portfolio's 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 investments that 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 when purchased that 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 Board of Trustees;
(4) short-term investments having maturities of more than sixty day for
which market quotations are readily available, are valued at current market
value; where market quotations are not available, such investments are valued at
fair value as determined by the 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.
Foreign securities are valued on the basis of valuations provided by a
pricing service, approved by the Fund's Board of Trustees, which uses
information with respect to transactions in such securities, quotations from
broker-dealers, market transactions in comparable securities and various
relationships between securities and yield to maturity in determining value.
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BROKERAGE
- --------------------------------------------------------------------------------
It is the policy of the Fund, in effecting transactions in portfolio
securities, to seek best execution of orders at the most favorable prices. The
determination of what may constitute best execution and price in the execution
of a securities transaction by a broker involves a number of considerations,
including, without limitation, the overall direct net economic result to the
Fund, involving both price paid or received and any commissions and other costs
paid, the efficiency with which the transaction is effected, the ability to
effect the transaction at all where a large block is involved, the availability
of the broker to stand ready to execute potentially difficult transactions in
the future and the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by management in determining the
overall reasonableness of brokerage commissions paid.
Subject to the foregoing, a factor in the selection of brokers is the
receipt of research services, such as analyses and reports concerning issuers,
industries, securities, economic factors and trends and other statistical and
factual information. Any such research and other statistical and factual
information provided by brokers to the Fund or Keystone is considered to be in
addition to and not in lieu of services required to be performed by Keystone
under its Investment Advisory and Management Agreement with the Fund. The cost,
value and specific application of such information are indeterminable and cannot
practicably allocated among the Fund and other clients of Keystone who may
indirectly benefit from the availability of such information. Similarly, the
Fund may indirectly benefit from information made available as a result of
transactions effected for such other clients. Under the Investment Advisory and
Management Agreement, Keystone is permitted to pay higher brokerage commissions
for brokerage and research services in accordance with Section 28(e) of the
Securities Exchange Act of 1934. In the event Keystone does follow such a
practice, they will do so on a basis which 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 direct purchase from an issuer of certain securities for the Portfolio in
order to take advantage of the lower purchase price available to members of such
a group.
Neither Keystone nor the Fund intend to place securities transactions
with any particular broker-dealer or group thereof. The Fund's Board of
Trustees, however, has determined that the Fund may follow a policy of
considering sales of shares as a factor in the selection of broker-dealers to
execute portfolio transactions, subject to the requirements of best execution,
including best price, described above.
The policy of the Fund with respect to brokerage is and will be
reviewed by the Fund's Board of Trustees from time to time. Because of the
possibility of further regulatory developments affecting the securities
exchanges and brokerage practices generally, the foregoing practices may be
changed, modified or eliminated.
Investment decisions for the Fund are made independently by Keystone
from those of the other funds and investment accounts managed by Keystone. It
may frequently develop that the same investment decision is made for more than
one fund. Simultaneous transactions are inevitable when the same security is
suitable for the investment objective of more than one account. When two or more
funds or accounts are engaged in the purchase or sale of the same security, the
transactions are allocated as to amount in accordance with a formula which is
equitable to each fund or account. 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.
During the fiscal years ended September 30, 1993, 1994 and 1995, the
Portfolio paid approximately $-0-, $668,228, and $454,203, respectively, in
brokerage commissions.
In no instance are portfolio securities purchased from or sold to
Keystone, the Principal Underwriter or any of their affiliated persons, as
defined in the Investment Company Act of 1940 (the "1940 Act") and rules and
regulations issued thereunder.
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SALES CHARGES
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GENERAL
Generally, the Portfolio offers three classes of shares. Class A shares
are offered with a maximum sales charge of 5.75% payable at the time of purchase
("Front End Load Option"). Class B shares purchased on or after June 1, 1995 are
subject to a contingent deferred sales charge payable upon redemption during the
72 month period following the month of purchase. Class B shares purchased prior
to June 1, 1995 are subject to a contingent deferred sales charge payable upon
redemption during the four calendar years following the purchase. ("Back End
Load Option"). Class B shares purchased on or after June 1, 1995 that have been
outstanding eight years from and including the month of purchase will
automatically convert to Class A shares without imposition of a front end sales
charge or exchange fee. Class B shares purchased prior to June 1, 1995 that have
been outstanding during seven calendar years will similarly convert to Class A
shares. (Conversion of Class B shares represented by stock certificates will
require the return of the stock certificates to Keystone Investor Resource
Center, Inc, the Fund's transfer and dividend disbursing agent ("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 the Principal Underwriter. The prospectus contains a general
description of how investors may buy shares of the Funds as well as a table of
applicable sales charges for Class A shares; a discussion of reduced sales
charges that may apply to subsequent purchases; and a description of applicable
contingent deferred sales charges.
CONTINGENT DEFERRED SALES CHARGES
In order to reimburse the Fund for certain expenses relating to the
sale of its shares (see "Distribution Plan"), a contingent deferred sales charge
may be imposed at the time of redemption of certain Fund shares, as follows:
CLASS A SHARES
With certain exceptions, purchases of Class A shares made on or after
April 10, 1995 (1) in an amount equal to or exceeding $1,000,000, and/or (2)
purchased by a corporate qualified retirement plan or a non-qualified deferred
compensation plan sponsored by a corporation having 100 or more eligible
employees (a "Qualifying Plan"), in either case without a front-end sales
charge, will be subject to a contingent deferred sales charge of 1.00% during
the 24 month period following the date of purchase. Certain Class A shares
purchased without a front-end sales charge prior to April 10, 1995 may be
subject to a contingent deferred sales charge of 0.25% upon redemption during
the one year period commencing on the date such shares were originally
purchased. The contingent deferred sales charge will be retained by the
Principal Underwriter. See "Calculation of Contingent Deferred Sales Charge"
below.
CLASS B SHARES
With respect to Class B shares purchased on or after June 1, 1995, the
Fund, with certain exceptions, will impose a deferred sales charge as a
percentage of net asset value or net cost of such Class B shares redeemed during
succeeding twelve-month periods following the month of purchase as follows: 5%
during the first period; 4% during the second period; 3% during the third
period; 3% during the fourth period; 2% during the fifth period, and 1% during
the sixth period. No deferred sales charge is imposed on amounts redeemed
thereafter.
With respect to Class B shares purchased prior to June 1, 1995, the
Fund, with certain exceptions, may impose a deferred sales charge of 3% on
shares redeemed during the calendar year of purchase and the first calendar year
after the year of purchase; 2% on shares redeemed during the second calendar
year after the year of purchase; and 1% 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 the
Principal Underwriter. Amounts received by the Principal Underwriter under the
Class B Distribution Plans are reduced by deferred sales charges retained by the
Principal Underwriter. See "Calculation of Contingent Deferred Sales charges and
Waiver of Sales Charges" below.
CLASS C SHARES
With certain exceptions, the Fund will impose a 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 the Principal Underwriter. 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 due to increases
in the net asset value per share of such shares; (2) certain shares with respect
to which the Fund did not pay a commission on issuance, including shares
acquired through reinvestment of dividend income and capital gains
distributions; (3) certain Class A shares held for more than one or two years,
as the case may be, from the date of purchase; (4) Class B shares held during
more than four consecutive calendar years or more than 72 months after the month
of purchase, as the case may be; or (5) Class C shares held for more than one
year from the date of purchase.
Upon request for redemption, shares not subject to the contingent
deferred sales charge will be redeemed first. Thereafter, shares held the
longest will be the first to be redeemed. There is no contingent deferred sales
charge when the shares of a class are exchanged for the shares of the same class
of another Keystone America Fund. Moreover, when shares of one such class of a
fund have been exchanged for shares of another such class of a fund, the
calendar year of the purchase of the shares of the fund exchanged into is
assumed to be the year shares tendered for exchange were originally purchased.
WAIVER OF SALES CHARGES
Shares of the Portfolio 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 or sales representatives of the Fund,
Keystone, Keystone Investments, Inc. (formerly Keystone Group, Inc.) ("Keystone
Investments"), Keystone Management, certain of their subsidiaries and affiliates
or the Principal Underwriter and who have been such for not less than ninety
days; (2) a pension and profit-sharing plan established by such companies, their
subsidiaries and affiliates, for the benefit of their Directors, Trustees,
officers, full-time employees and sales representatives; or (3) a registered
representative of a firm with a dealer agreement with the Principal Underwriter;
provided, however, that all such sales are made upon the written assurance that
the purchase is made for investment purposes and that the securities will not be
resold except through redemption by the Fund.
No initial sales charge is charged on purchases of shares of the
Portfolio 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
Portfolio or any Fund in the Keystone Investments Family of Funds, purchased
pursuant to this waiver is at least $500,000 and any commission paid at the time
of such purchase is not more than 1% of the amount invested.
With respect to Class A shares purchased by a Qualifying Plan at net
asset value or Class C shares purchased by a Qualifying Plan, no contingent
deferred sales charge will be imposed on any redemptions made specifically by an
individual participant in the Qualifying Plan. This waiver is not available in
the event a Qualifying Plan, as a whole, redeems substantially all of its
assets.
In addition, no contingent deferred sales charge is imposed on a
redemption of shares of the Fund in the event of (1) death or disability of the
shareholder; (2) a lump-sum distribution from a benefit plan qualified under the
Employee Retirement Income Security Act of 1974 ("ERISA"); (3) automatic
withdrawals from ERISA plans if the shareholder is at least 59 1/2 years old;
(4) involuntary redemptions of an account having an aggregate net asset value of
less than $1,000; or (5) automatic withdrawals under an automatic withdrawal
plan of up to 1 1/2% per month of the shareholder's initial account balance; (6)
withdrawals consisting of loan proceeds to a retirement plan participant; (7)
financial hardship withdrawals made by a retirement plan participant; or (8)
withdrawals consisting of returns of excess contributions or excess deferral
amounts made to a retirement plan participant.
REDEMPTION OF SHARES
The Fund has obligated itself under the 1940 Act to redeem for cash all
shares presented for redemption by any one shareholder up to the lesser of
$250,000 or 1% of the Fund's assets in any 90 day period.
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DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
Rule 12b-1 under the 1940 Act permits investment companies, such as the
Fund, to use their assets to bear expenses of distributing their shares if they
comply with various conditions, including adoption of a distribution plan
containing certain provisions set forth in Rule 12b-1.
DISTRIBUTION PLANS IN GENERAL
The NASD limits the amount that the Fund may pay annually in
distribution costs for sale of its shares and shareholder service fees. The NASD
limits annual expenditures to 1% of the aggregate average daily net asset value
of its shares, of which 0.75% may be used to pay such distribution costs and
0.25% may be used to pay shareholder service fees. The NASD also limits the
aggregate amount that the Fund may pay for such distribution costs to 6.25% of
gross share sales since the inception of the 12b-1 Plan, plus interest at the
prime rate plus 1% on such amounts (less any contingent deferred sales charges
paid by shareholders to the Principal Underwriter).
CLASS A DISTRIBUTION PLAN. The Class A Distribution Plan provides that the
Portfolio may expend daily amounts at an annual rate, which is currently limited
to up to 0.25% of the Portfolio's average daily net asset value attributable to
Class A shares, to finance any activity which is primarily intended to result in
the sale of Class A shares, including, without limitation, expenditures
consisting of payments to the principal underwriter of the Fund (currently the
Principal Underwriter) to enable the Principal Underwriter to pay or to have
paid to others (dealers) who sell Class A shares a service or other fee, at such
intervals as the Principal Underwriter may determine, in respect of Class A
shares maintained by any such recipients and outstanding on the books of the
Fund for specified periods.
Amounts paid by the Portfolio 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 maintained by such
others outstanding on the books of the Fund for specified periods.
CLASS B DISTRIBUTION PLANS. The Portfolio has adopted Distribution Plans for its
Class B shares. Each Class B Distribution Plan provides that the Portfolio may
expend daily amounts at an annual rate of up to 1.00% of the Portfolio's average
daily net asset value attributable to Class B shares to finance any activity
which 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 the Principal Underwriter) (1) to enable the
Principal Underwriter to pay to others (dealers) commissions in respect of Class
B shares sold since inception of the Distribution Plans; and (2) to enable the
Principal Underwriter to pay or to have paid to others a service fee, at such
intervals as the Principal Underwriter may determine, in respect of Class B
shares maintained by any such recipients and outstanding on the books of the
Fund for specified periods.
The Principal Underwriter generally reallows to brokers or others a
commission equal to 4.00% of the price paid for each Class B share sold plus the
first year's service fee in advance in the amount of 0.25% of the price paid for
each Class B share sold. Beginning approximately 12 months after the purchase of
a Class B share, the broker or other party receives service fees at an annual
rate of 0.25% of the average daily net asset value of such Class B share
maintained by the recipient outstanding on the books of the Fund for specified
periods.
The Principal Underwriter intends, but its not obligated, to continue
to pay or accrue distribution charges incurred in connection with a Class B
Distribution Plan that exceed current annual payments permitted to be received
by the Principal Underwriter from the Fund. The Principal Underwriter intends to
seek full payment of such charges from the Fund (together with annual interest
thereon at the prime rate plus 1%) at such time in the future as, and to the
extent that, payment thereof by the Fund would be within the permitted limits.
If the Fund's Independent Trustees authorize such payments, the effect
would be to extend the period of time during which the Fund incurs the maximum
amount of costs allowed by a Class B Distribution Plan. If a Class B
Distribution Plan is terminated, the Principal Underwriter will ask the
Independent Trustees to take whatever action they deem appropriate under the
circumstances with respect to payment of such amounts.
In connection with financing its distribution costs, including
commission advances to dealers and others, the Principal Underwriter has sold to
a financial institution substantially all of its 12b-1 fee collection rights and
contingent deferred sales charge collection rights in respect of Class B shares
sold during the two-year period commencing approximately June 1, 1995. The Fund
has agreed not to reduce the rate of payment of 12b-1 fees in respect of such
Class B shares unless it terminates such shares' Distribution Plan completely.
If it terminates such Distribution Plan, the Fund may be subject to possible
adverse distribution consequences.
CLASS C DISTRIBUTION PLAN
The Class C Distribution Plan provides that the Portfolio may expend
daily amounts at an annual rate of up to 1.00% of the Fund's average daily net
asset value attributable to Class C shares to finance any activity that is
primarily intended to result in the sale of Class C shares, including, without
limitation, expenditures consisting of payments to the principal underwriter of
the Fund (currently the Principal Underwriter) (1) to enable the Principal
Underwriter to pay to others (dealers) commissions in respect of Class C shares
sold since inception of the Distribution Plan; and (2) to enable the Principal
Underwriter to pay or to have paid to others a service fee, at such intervals as
the Principal Underwriter may determine, in respect of Class C shares maintained
by any such recipients and outstanding on the books of the Fund for specified
periods.
The Principal Underwriter 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. Beginning approximately fifteen months after
purchase, brokers or others receive a commission at an annual rate of 0.75%
(subject to NASD rules) plus service fees at the annual rate of 0.25% of the
average daily net asset value of each Class C share maintained by the recipients
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. A portion of the Fund's
Distribution Plan expenses may be includable in the Portfolio'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 a vote
of the Rule 12b-1 Trustees, or may be terminated with respect to the Portfolio
by vote of a majority of the outstanding voting shares of the respective class
of the Portfolio.
Any change in a Distribution Plan that would materially increase the
distribution expenses of the Portfolio provided for in a Distribution Plan
requires shareholder approval. Otherwise, a Distribution Plan may be amended by
the Trustees, including the Rule 12b-1 Trustees. Unpaid distribution costs at
fiscal year end September 30, 1995 were: $9,557,717 for Class B shares purchased
prior to June 1, 1995 (4.01% of net class assets of such Class B shares);
$2,611,116 for Class B shares purchased on or after June 1, 1995 (1.10% of net
class assets of such Class B shares); and $5,094,255 for Class C shares (5.90%
of Class C net class assets).
During the year ended September 30, 1995, the Portfolio paid the
Principal Underwriter: $185,409 under its Class A Distribution Plan; $1,606,135
for Class B shares sold prior to June 1, 1995; $64,006 for Class B shares sold
on or after June 1, 1995; and $636,417 under its Class C Distribution Plan.
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 Portfolio under the foregoing
arrangements may not exceed the maximum Distribution Plan limits specified
above. The amounts and purposes of expenditures under a Distribution Plan must
be reported to the 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 Portfolio under a
Distribution Plan be kept within limits lower than the maximum amount permitted
by the Distribution Plan as stated above.
The Independent Trustees of the Fund have determined that the sales of
the Portfolio's shares resulting from payments under the Distribution Plans have
benefited the Portfolio.
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TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
Trustees and officers of the Fund, their principal occupations and some
of their affiliations over the last five years are as follows:
*ALBERT H. ELFNER, III: President, Chief Executive Officer and
Trustee of the Fund; Chairman of the Board, President,
Director and Chief Executive Officer of Keystone Investments,
Inc. ("Keystone Investments"); President, Chief Executive
Officer and Trustee or Director of all 30 Funds in the
Keystone Investments Family of Funds; Director and Chairman of
the Board, Chief Executive Officer and Vice Chairman of
Keystone Investment Management Company ("Keystone"); Chairman
of the Board and Director of Keystone Institutional Company,
Inc. ("Keystone Institutional") (formerly named Keystone
Investment Management Corporation), 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 Keystone Asset
Corporation, Keystone Capital Corporation, and Keystone Trust
Company; Director of Keystone Investment Distributors Company
("the Principal Underwriter"), Keystone Investor Resource
Center, Inc. ("KIRC"), and Fiduciary Investment Company, Inc.
("FICO"); Director of Boston Children's Services Association;
Trustee of Anatolia College, Middlesex School, and Middlebury
College; Member, Board of Governors, New England Medical
Center; former Trustee of Neworld Bank; former Director and
President of Hartwell Keystone Advisers, Inc. ("Hartwell
Keystone"); and former Director and Vice President of Robert
Van Partners, Inc.
FREDERICK AMLING: Trustee of the Fund; Trustee or Director of all other Keystone
Investments 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 Investments 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 Investments; Chairman of the Board and Trustee or Director of
all other Keystone Investments 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 Investments; and former Chief Executive Officer of
the Fund.
EDWIN D. CAMPBELL: Trustee of the Fund; Trustee or Director of
all other Keystone Investments 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 Investments 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 Investments 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 Investments 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
Investments and Keystone.
F. RAY KEYSER, JR.: Trustee of the Fund; Trustee or Director of all other
Keystone Investments 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 Investments 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 Investments 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 Investments Funds; Partner, Farrell, Fritz,
Caemmerer, Cleary, Barnosky & Armentano, P.C.; former Presi-
dent, 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 Investments Funds; Director,
Senior Vice President, Chief Financial Officer and Treasurer
of Keystone Investments, the Principal Underwriter, Keystone
Asset Corporation, Keystone Capital Corporation, Keystone
Trust Company; Treasurer of Keystone Institutional and FICO;
Treasurer and Director of Keystone Management and Keystone
Software; Vice President and Treasurer of KFIA; Director of
KIRC; former Treasurer of Robert Van Partners, Inc.; and former
Treasurer and Director of Hartwell Keystone.
JAMES R. McCALL: Senior Vice President of the Fund; Senior Vice
President of all other Keystone Investments Funds; and
President of Keystone.
KEVIN J. MORRISSEY: Treasurer of the Fund; Treasurer of all other
Keystone Investments Funds; Vice President of Keystone
Investments; 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 Investments Funds;
Senior Vice President, General Counsel and Secretary of Keystone;
Senior Vice President, General Counsel, Secretary and Director of the
Principal Underwriter, Keystone Management and Keystone Software;
Senior Vice President and General Counsel of Keystone Institutional;
Senior Vice President, General Counsel and Director of FICO and KIRC;
Vice President and Secretary of KFIA; Senior Vice President, General
Counsel and Secretary of Keystone Investments, Keystone Asset
Corporation, Keystone Capital Corporation and Keystone Trust Company;
and former Senior Vice President and Secretary of Hartwell Keystone and
Robert Van Partners, Inc.
* 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 Investments and several of
its affiliates including Keystone, the Principal Underwriter and KIRC. Mr.
Elfner and Mr. Bissell own shares of Keystone Investments. Mr. Elfner is
Chairman of the Board, Chief Executive Officer and Director of Keystone
Investments. Mr. Bissell is a Director of Keystone Investments.
During the fiscal year ended September 30, 1995, no Trustee affiliated
with Keystone or any officer received any direct remuneration from the Fund.
During the same period, the unaffiliated Trustees received approximately $24,154
in retainers and fees from the Fund. Annual retainers and meeting fees paid by
all funds in the Keystone Investments Family of Funds (which includes 30 mutual
funds) for the fiscal year ended September 30, 1994, totalled approximately
$463,916. As of October 31, 1995, the Trustees and officers beneficially owned
less than 1.0% the Fund's then outstanding Class A, Class B and Class C shares.
The address of the Fund's Trustees and officers and the address of the
Fund is 200 Berkeley Street, Boston, Massachusetts 02116-5034.
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INVESTMENT ADVISER
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Subject to the general supervision of the Fund's Board of Trustees,
Keystone, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034,
provides investment advice, management and administrative services to the Fund.
Keystone, organized in 1932, is a wholly-owned subsidiary of Keystone
Investments, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034.
Keystone Investments is a corporation privately owned by current and
former members of management and certain employees of Keystone and its
affiliates. The shares of Keystone Investments common stock beneficially owned
by management are held in a number of voting trusts, the trustees of which are
George S. Bissell, Albert H. Elfner, III, Edward F. Godfrey and Ralph J.
Spuehler, Jr. Keystone Investments provides accounting, bookkeeping, legal,
personnel and general corporate services to Keystone, its affiliates and the
Keystone Investments Family of Funds.
Except as otherwise noted below, pursuant to an Investment Advisory and
Management Agreement with the Fund (the "Advisory Agreement"), 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 objective 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 adviser as well as pay all expenses of Keystone
incurred in connection with the provision of its services. All charges and
expenses, other than those specifically referred to as being borne by Keystone,
will be paid by the Fund, including, but not limited to, custodian charges and
expenses; bookkeeping and auditors' charges and expenses; transfer agent charges
and expenses; fees of Independent Trustees; brokerage commissions; brokers' fees
and expenses; issue and transfer taxes; costs and expenses under the
Distribution 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 Securities and Exchange
Commission (sometimes referred 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.
During the fiscal year ended September 30, 1993, the Fund paid or
accrued, investment management and administrative services fees of $179,783,
which represented 1.00% of the Fund's average net assets. Of such amount,
$89,891 was paid or accrued to CLIAM for its services as subadviser.
During the fiscal year ended September 30, 1994, the Fund paid or
accrued investment management and administrative services fees of $1,618,327
which represented 1.00% of the Fund's average net assets. Of such amount,
$809,163 was paid or accrued to CLIAM for its services as subadviser.
During the fiscal year ended September 30, 1995, the Fund paid or
accrued investment management and administrative services fees of $3,009,974,
which represented 0.98% of the Fund's average net assets. Of such amount,
$1,577,883 was paid or accrued to Keystone and $1,432,091 was paid or accrued to
CLIAM for its services as subadviser.
The Fund pays Keystone a fee for its services at the annual rate set
forth below:
Aggregate Net Asset
Management Value of the
Fee Shares of the Fund
- --------------------------------------------------------------------------------
1.00% of the first $ 200,000,000, plus
0.95% of the next $ 200,000,000, plus
0.85% of the next $ 200,000,000, plus
0.75% of amounts over $ 600,000,000;
computed as of the close of business each business day and paid
daily.
As a continuing condition of registration of shares in a state,
Keystone has agreed to reimburse the Fund annually for certain operating
expenses incurred by the Fund in excess of certain percentages of the Fund's
average daily net assets. However, Keystone is not required to make such
reimbursements to an extent which 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 Fund is subject to certain annual state expense limitations imposed
on each of its Portfolios, the most restrictive of which is currently:
2.50% of the first $30 million of a Portfolio's average net assets;
2.00% of the next $70 million of a Portfolio's average net assets; and
1.50% of a Portfolio's average net assets over $100 million.
Under the Advisory Agreement any liability of Keystone in connection
with rendering services thereunder is limited to situations involving its
willful misfeasance, bad faith, gross negligence, or reckless disregard of its
duties.
Since August 7, 1991, Keystone, provided investment management and
advisory services to the Fund and has been paid a management fee computed and
paid daily, calculated by applying percentage rates, starting at 1.00% and
declining as net assets increase, to 0.75%, to the net asset value of the Fund.
The fee charged to the Fund is higher than that charged to most other investment
companies. The fee is comparable, however, to fees charged to other global and
international funds, which, together with the Fund, are subject to the higher
costs involved in managing a portfolio of predominantly international
securities.
The Advisory Agreement continues in effect only if approved at least
annually by the Board of Trustees of the Fund 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 Advisory 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 Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
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SUBADVISER
- --------------------------------------------------------------------------------
Pursuant to the Advisory Agreement, Keystone has delegated certain
investment advisory services to CLIAM and has entered into a SubAdvisory
Agreement with CLIAM (the "SubAdvisory Agreement") under which CLIAM provides
those investment advisory services to the Fund.
CLIAM, located at 1301 Avenue of the Americas, New York, New York
10019, is an international investment management firm, established in April
1991, which is wholly-owned by Credit Lyonnais, Paris, France, a financial
institution with assets of $250 billion and over 500 branches in 70 countries.
Pursuant to the SubAdvisory Agreement, Keystone pays CLIAM at the beginning of
each fiscal quarter a fee for its services that represents 50% of the management
fee paid by the Fund to Keystone for the preceding quarter on Fund assets of up
to $250,000,000 and 30% of the management fee paid by the Fund to Keystone for
the preceding quarter on Fund assets in excess of $250,000,000. The Fund has no
responsibility to pay CLIAM's subadvisory fee.
Pursuant to the SubAdvisory Agreement, CLIAM will, subject to the
supervision of the Fund's Board of Trustees and Keystone, furnish a continuous
investment program for the Fund's non-North American portfolio, will determine
what securities will be purchased for or sold from the non-North American
portfolio of the Fund and will recommend what portion of the Fund's non-North
American assets shall be held uninvested.
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PRINCIPAL UNDERWRITER
- --------------------------------------------------------------------------------
The Fund has entered into a Principal Underwriting Agreement (the
"Underwriting Agreements") with Keystone Investment Distributors Company, a
wholly-owned subsidiary of Keystone.
The Principal Underwriter, located at 200 Berkeley Street, Boston,
Massachusetts, 02116-5034, is a Delaware corporation. The Principal Underwriter,
as agent, currently has the right to obtain subscriptions for and to sell shares
of the Fund to the public. In so doing, the Principal Underwriter may retain and
employ representatives to promote distribution of the shares and may obtain
orders from brokers, dealers and others, acting as principals, for sales of
shares. No such representative, dealer or broker has any authority to act as
agent for the Fund. The Principal Underwriter has not undertaken to buy or to
find purchasers for any specific number of shares. The Principal Underwriter may
receive payments from the Fund pursuant to the Fund's Distribution Plans.
All subscriptions and sales of shares by the Principal Underwriter are
at the offering price of the shares, such price being in accordance with the
provisions of the Fund's Declaration of Trust, By-Laws, current prospectus, and
statement of additional information. All orders are subject to acceptance by the
Fund and the Fund reserves the right, in its sole discretion, to reject any
order received. Under the Underwriting Agreement, the Fund is not liable to
anyone for failure to accept any order.
The Fund has agreed under the Underwriting Agreements to pay all
expenses in connection with registration of its shares with the Commission and
auditing and filing fees in connection with registration of its shares under the
various state "blue-sky" laws.
The Principal Underwriter has agreed to reimburse certain expenses
incurred by Mariner Financial Services, Inc. in connection with its sales of the
Fund's shares.
From time to time, if in the Principal Underwriter's judgment it could
benefit the sales of Fund shares, the Principal Underwriter 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.
The Principal Underwriter has agreed that it will, in all respects,
duly conform with all state and federal laws applicable to the sale of the
shares 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 that arises out
of or is alleged to arise out of any misrepresentation or omission to state a
material act on the part of the Principal Underwriter or any other person for
whose acts the Principal Underwriter is responsible or is alleged to be
responsible, unless such misrepresentation or omission was made in reliance upon
written information furnished by the Fund.
The Underwriting Agreements will remain in effect as long as their
terms and continuance are approved by a majority of the Fund's Independent
Trustees at least annually at a meeting called for that purpose, and if their
continuance is approved annually by vote of a majority of Trustees, or by vote
of a majority of the outstanding shares.
The Underwriting Agreements may be terminated, without penalty, on 60
days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares. The Underwriting Agreements will terminate automatically
upon their "assignment" as that term is defined in the 1940 Act.
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DECLARATION OF TRUST
- --------------------------------------------------------------------------------
MASSACHUSETTS BUSINESS TRUST
The Fund is a Massachusetts business trust established under a
Declaration of Trust dated June 17, 1987. The Fund is similar in most respects
to a business corporation. The principal distinction between the Fund and a
corporation relates to the shareholder liability described below. A copy of the
Declaration of Trust (the "Declaration of Trust") is filed as an exhibit to the
Registration Statement of which this statement of additional information is a
part. This summary is qualified in its entirety by reference to the Declaration
of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of classes of shares. Each share of the Fund
represents an equal proportionate interest with each other share of that class.
Upon liquidation, shares are entitled to a pro rata share of the Fund based on
the relative net assets of each class. Shareholders have no preemptive or
conversion rights. Shares are redeemable and transferable. The Fund is
authorized to issue additional classes or series of shares. Generally, 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) because the Declaration of
Trust provides for indemnification out of the Fund's property for any
shareholder held personally liable for the obligations of the Fund.
VOTING RIGHTS
Under the Declaration of Trust, the Fund does not hold annual meetings.
At meetings called for the initial election of Trustees or to consider other
matters, shares are entitled to one vote per share. Shares generally vote
together as one class on all matters. Classes of shares of the Fund have equal
voting rights except that each class of shares has exclusive voting rights with
respect to its respective Distribution Plan. No amendment may be made to the
Declaration of Trust which adversely affects any class of shares without the
approval of a majority of the shares of that class. Shares have non-cumulative
voting rights, which means that the holders of more than 50% of the shares
voting for the election of Trustees can elect 100% of the Trustees to be elected
at a meeting and, in such event, the holders of the remaining 50% or less of the
shares voting will not be able to elect any Trustees.
After an initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, unless and until such time as less than a majority of the Trustees
holding office have been elected by Shareholders at which time the Trustees then
in office will call a shareholders meeting for election of Trustees.
Except as set forth above, the Trustees shall continue to hold office
indefinitely, unless otherwise required by law, and may appoint successor
Trustees. A Trustee may be removed from or cease to hold office (as the case may
be) (1) at any time by two-thirds vote of the remaining Trustees; (2) when such
Trustee becomes mentally or physically incapacitated; or (3) at a special
meeting of shareholders by a two-thirds vote of the outstanding shares.
Any Trustee may voluntarily resign from office.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful malfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
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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 years periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added and the maximum sales
charge and all recurring fees charged to all shareholder accounts are deducted.
The ending redeemable value assumes a complete redemption at the end of the
relevant periods.
The cumulative total returns of Class A shares for the five year period
ended September 30, 1995 and the period from March 16, 1988 (commencement of
operations) to September 30, 1995 were 157.53% and 168.83%, respectively. The
compounded average annual rates of return for Class A shares for the one and
five year periods ended September 30, 1995 and the period from commencement of
operations to September 30, 1995 were 13.71%, 20.83% and 14.01%, respectively.
The cumulative total returns for Class B and Class C shares for the
period February 1, 1993 (commencement of operations) through fiscal year ended
September 30, 1995 were 62.30% (including applicable contingent deferred sales
charges), and 65.58%, respectively. The compounded average annual rates of
return for Class B and Class C shares for the one year period ended September
30, 1995 were 15.79% (including applicable contingent deferred sales charge) and
19.63%, respectively. The compounded average annual rates of return for Class B
and Class C shares for the period beginning February 1, 1993 (commencement of
operations) through September 30, 1994 were 19.91% (including applicable
contingent deferred sales charges) and 20.82%, 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 Portfolio 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 Portfolio does not
presently intend to advertise current yield.
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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, 99 High Street, Boston, Massachusetts
02110, Certified Public Accountants, are the Independent Auditors
of the Fund.
KIRC, located at 101 Main Street, Cambridge, Massachusetts 02142-1519,
is a wholly-owned subsidiary of Keystone Custodian Funds, Inc. and acts as
transfer agent and dividend disbursing agent for the Fund.
As of October 31, 1995, the following owned of record 5% or more of the
outstanding Class A shares of the Fund: Merrill Lynch Pierce, Fenner & Smith,
Attn: Book Entry, 4800 Deer Lake Dr. E 3rd, FL, Jacksonville, Fl 32246-6484
owned 23.93%.
As of October 31, 1995, the following owned of record 5% or more of the
outstanding Class B shares of the Fund: Merrill Lynch Pierce, Fenner & Smith,
Atten: Book Entry, 4800 Deer Lake Dr E 3rd Fl, Jacksonville, Fl 32246-6484 owned
23.19%.
As of October 31, 1995, the following owned 5% or more of the
outstanding Class C shares of the Fund: Merrill Lynch Pierce, Fenner & Smith,
Atten: Book Entry, 4800 Deer Lake Dr E 3rd Fl, Jacksonville, Fl 32246-6484 owned
47.57%.
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 the Principal Underwriter, and no person is
entitled to rely on any information or representation not contained therein.
The Fund's prospectus and statement of additional information omit
certain information contained in the registration statement filed with the
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 Fund Family, which offers a range of choices to serve shareholder needs.
The Keystone America Fund Family consists of the following Funds having the
various investment objectives described below:
KEYSTONE 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 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 GLOBAL OPPORTUNITIES FUND - Seeks long-term capital growth from foreign
and domestic securities.
KEYSTONE GOVERNMENT SECURITIES FUND - Seeks income and capital
preservation from U.S. government securities.
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC. - Seeks capital
appreciation by investment primarily in small and medium-sized companies in a
relatively early stage of development that are principally traded in the
over-the-counter market.
KEYSTONE HARTWELL GROWTH FUND - Seeks capital appreciation by investment in
securities selected for their long-term growth prospects.
KEYSTONE INTERMEDIATE TERM BOND FUND - Seeks income, capital preservation and
price appreciation potential from investment grade corporate bonds.
KEYSTONE OMEGA FUND - Seeks maximum capital growth from common stocks and
securities convertible into common stocks.
KEYSTONE 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 STATE TAX FREE FUND - SERIES II - A mutual fund consisting of two
separate series of shares investing in different portfolio securities which
seeks the highest possible current income, exempt from federal income taxes and
applicable state taxes.
KEYSTONE STRATEGIC INCOME FUND - Seeks high yield and capital appreciation
potential from corporate bonds, discount bonds, convertible bonds, preferred
stock and foreign bonds (up to 25%).
KEYSTONE TAX FREE INCOME FUND - Seeks income exempt from federal income taxes
and capital preservation from the four highest grades of municipal bonds.
KEYSTONE WORLD BOND FUND - Seeks total return from interest income, capital
gains and losses and currency exchange gains and losses from investment in debt
securities denominated in U.S. and foreign currencies.
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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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 variable rate master demand notes), and obligations
issued or guaranteed by the United States ("U.S.") government, its agencies or
instrumentalities, some of which may be subject to repurchase agreements.
COMMERCIAL PAPER
Commercial paper, including commercial paper of foreign issuers, will
consist of issues rated at the time of purchase A-1 by Standard & Poor's
Corporation (S&P), or PRIME-1 by Moody's Investors Service, Inc., (Moody's); or,
if not rated, will be issued by companies which have an outstanding debt issue
rated at the time of purchase Aaa, Aa or A by Moody's, or AAA, AA or A by S&P,
or will be determined by Keystone to be of comparable quality.
A. S&P RATINGS
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. The top category is as
follows:
1. A: Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.
a. 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.
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.
U.S. CERTIFICATES OF DEPOSIT
U.S. Certificates of deposit are receipts issued by a U.S. 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.
U.S. Certificates of deposit will be limited to U.S. dollar-
denominated certificates of U.S. banks, including their branches abroad, which
are members of the Federal Reserve System or the Federal Deposit Insurance
Corporation, and of U.S. branches of foreign banks, each of which have total
assets at the time of purchase in excess of $1 billion as of the date of their
most recently published financial statements.
TIME DEPOSITS
The Portfolio may acquire time deposits or obligations issued by the
International Bank for Reconstruction and Development, the Asian Development
Bank or the Interamerican Development Bank. Additionally, the Fund may purchase
time deposits certificates of deposit, bankers' acceptances or other similar
obligations issued by non U. S. branches of foreign banks.
BANKERS' ACCEPTANCES
Bankers' acceptances typically arise from short-term credit
arrangements designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by the bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Bankers' acceptances acquired by the Portfolio must have been accepted by
commercial banks, having total deposits at the time of purchase in excess of $1
billion.
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 United States 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. While the Fund may invest in such instruments, United
States government securities do not include international agencies or
instrumentalities in which the United States government, its agencies or
instrumentalities participate, such as the World Bank, Asian Development Bank or
the InterAmerican Development Bank, or issues insured by the Federal Deposit
Insurance Corporation.
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 U.S., 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.
B. 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 invest 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 principle payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security 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.
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 pershare
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.
OPTIONS TRANSACTIONS
WRITING COVERED OPTIONS
The Portfolio writes only covered options. Options written by the
Portfolio 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 Portfolio may close out an
option it has written by effecting a closing purchase transaction, whereby it
purchases an option covering the same underlying security and having the same
exercise price and expiration date ("of the same series") as the one it has
written. If the Portfolio 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 Portfolio is able to enter
into a closing purchase transaction, the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio intends to qualify as a regulated investment
company under the Internal Revenue Code, the extent to which the Portfolio 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 Portfolio can close out a put option it has purchased by effecting
a closing sale transaction; for examle, the Portfolio 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 Portfolio wishes to effect a closing sale transaction,
the Portfolio will have to exercise the option to realize any profit. In
addition, in a transaction in which the Portfolio does not own the security
underlying a put option it has purchased, the Portfolio 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 Portfolio would incur
additional transaction costs.
The Portfolio may also purchase call options for the purpose of
offsetting previously written call options of the same series.
The Portfolio 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 Portfolio'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.
OPTION WRITING AND RELATED RISKS
The Portfolio 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
(Exchanges), to secure the obligation to deliver the underlying security in the
case of a call option, the writer of the option is required to deposit in escrow
the underlying security or other assets in accordance with the rules of the OCC,
an institution created to interpose itself between buyers and sellers of
options. Technically, the OCC assumes the order side of every purchase and sale
transaction on an Exchange and, by doing so, gives its guarantee to the
transaction.
The principal reason for writing options on a securities portfolio is
to attempt to realize, through the receipt of premiums, a greater return than
would be realized on the underlying securities alone. In return for the premium,
the covered call option writer has given up the opportunity for profit from a
price increase in the underlying security above the exercise price plus the
premium 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 less the premium 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 received paid
for the put effectively reduces the cost of the underlying security, thus
increasing the yield otherwise available from such securities.
Because the Portfolio can write only covered options, it may at times
be unable to write additional options unless it sells a portion of its portfolio
holdings to obtain new securities against which it can write options. This may
result in higher portfolio turnover and correspondingly greater brokerage
commissions and other transaction costs.
To the extent that a secondary market is available, the covered option
writer may close out options it has written prior to the assignment of an
exercise notice by purchasing, in a closing purchase transaction, an option of
the same series as the option previously written. If the cost of such a closing
purchase, plus transaction costs, is greater than the premium received upon
writing the original option, the writer will incur a loss in the transaction
OPTIONS TRADING MARKETS
Options which the Portfolio will trade are generally listed on
Exchanges. Exchanges on which such options currently are traded are the Chicago
Board Options Exchange and the New York, American, Pacific and Philadelphia
Stock Exchanges. 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
Portfolio. 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 Portfolio is
subject to the investment restrictions described in the Fund's prospectus and in
the statement of additional information.
The staff of the Commission currently is of the view that the premiums
which the Portfolio pays for the purchase of unlisted options, and the value of
securities used to cover unlisted options written by the Portfolio are
considered to be invested in illiquid securities or assets for the purpose of
calculating whether the Fund is in compliance with its fundamental investment
restriction prohibiting it from investing more than 10% of its total assets
(taken at current value) in any combination of illiquid assets and securities.
The Portfolio intends to request that the Commission staff reconsider its
current view. It is the intention of the Fund to comply with the staff's current
position and the outcome of such reconsideration.
SPECIAL CONSIDERATIONS APPLICABLE TO OPTIONS
ON TREASURY BONDS AND NOTES. Because trading interest in U.S. Treasury
bonds and notes tends to center on the most recently auctioned issues, new
series of options with expirations to replace expiring options on particular
issues will not be introduced indefinitely. Instead, the expirations introduced
at the commencement of options trading on a particular issue will be allowed to
run their course, with the possible addition of a limited number of new
expirations as the original ones expire. Options trading on each series of bonds
or notes will thus be phased out as new options are listed on the more recent
issues, and a full range of expiration dates will not ordinarily be available
for every series on which options are traded.
ON TREASURY BILLS. Because the deliverable U.S. Treasury bill changes
from week to week, writers of U.S. Treasury bill call options cannot provide in
advance for their potential exercise settlement obligations by acquiring and
holding the underlying security. However, if the Portfolio holds a long position
in U.S. Treasury bills with a principal amount corresponding to the option
contract size, the Portfolio may be hedged from a risk standpoint. In addition,
the Portfolio 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 Portfolio 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 Portfolio, as a writer of a
covered GNMA call holding GNMA certificates as "cover" to satisfy its delivery
obligation in the event of assignment of an exercise notice, may find that its
GNMA certificates no longer have a sufficient remaining principal balance for
this purpose. Should this occur, the Portfolio 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 Portfolio 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 Portfolio will no longer be covered, and the Portfolio will
either enter into a closing purchase transaction or replace the GNMA certificate
with a certificate which represents cover. When the Portfolio 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 Portfolio 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 Portfolio would have to exercise its options in order to
realize any profit and may incur transaction costs in connection therewith. If
the Portfolio 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 facilities of an Exchange 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 that had been 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 Portfolio intends to engage in 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 Portfolio or as a hedge against changes in the prices of
securities or currencies held by the Portfolio or to be acquired by the
Portfolio. The Portfolio'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 Portfolio anticipates a significant market or
market sector advance, the Portfolio will purchase a stock index futures
contract as a hedge against not participating in such advance at a time when the
Portfolio 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 Portfolio 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 Portfolio's portfolio. To the extent
that the Portfolio's 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 so doing,
provide an alternative to the liquidation of the Portfolio's securities
positions and the resulting transaction costs.
The Fund intends to engage on behalf of the Portfolio in options
transactions which are related to currency and other financial futures contracts
for the 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 Portfolio'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 Portfolio does not
intend to take delivery of the instruments underlying futures contracts its
Portfolio holds, the Portfolio does not intend to engage in such futures
contracts for speculation.
FUTURES CONTRACTS
Futures contracts are transactions in the commodities markets rather
than in the securities markets. A futures contract creates an obligation by the
seller to deliver to the buyer the commodity 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 Portfolio, 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 Portfolio, 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, 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 Portfolio will sell interest rate index
and other index based futures contracts to hedge against changes which are
expected to affect the Portfolio'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 cotract
amount must be deposited by the Fund on behalf of the Portfolio 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
Portfolio 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
Portfolio 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 Portfolio will receive from the Broker a variation margin payment
equal to that increase in value. Conversely, where the Portfolio 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 Portfolio would be
required to make a variation margin payment to the Broker. At any time prior to
expiration of the futures contract, the Portfolio 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 Portfolio
realizes a loss or gain.
The Fund on behalf of the Portfolio 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 Portfolio 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 Portfolio is paid the difference and thus realizes a
gain. If the offsetting purchase price exceeds the sale price, the Portfolio
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
Portfolio enters into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the Portfolio realizes a gain. If the purchase price
exceeds the offsetting sale price the Fund realizes a loss. The amount of the
Portfolio's gain or loss on any transaction is reduced or increased,
respectively, by the amount of any transaction costs incurred by the Portfolio.
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 Portfolio.
There can be no assurance, however, that the Portfolio will be able to
enter into an offsetting transaction with respect to a particular contract at a
particular time. If the Portfolio is not able to enter into an offsetting
transaction, the Portfolio 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.
OPTIONS ON CURRENCY AND OTHER FINANCIAL FUTURES
The Portfolio 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
contract 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 commodity.
The Portfolio intends to use options on currency and other financial
futures contracts in connection with hedging strategies. In the future the
Portfolio 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 analagous to the purchase of protective puts on individual
stocks, where an absolute level of protection is sought below which no
additional economic loss would be incurred by the Portfolio. 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 currency and other financial futures
contracts may be purchased to hedge against an interest rate increase or a
market advance when the Portfolio is not fully invested.
USE OF NEW INVESTMENT TECHNIQUES INVOLVING CURRENCY AND OTHER
FINANCIAL FUTURES CONTRACTS OR RELATED OPTIONS
The Portfolio may employ new investment techniques involving currency
and other financial futures contracts and related options. The Portfolio intends
to take advantage of new techniques in these areas which may be developed from
time to time and which are consistent with the Portfolio's investment objective.
The Portfolio believes that no additional techniques have been identified for
employment by the Portfolio 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 Portfolio will not enter into a futures contract if, as a result
thereof, more than 5% of the Portfolio'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 Portfolio 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 Portfolio owns, or futures contracts will be purchased to
protect the Portfolio against an increase in the price of securities it intends
to purchase. The Portfolio does not intend to enter into futures contracts for
speculation.
In instances involving the purchase of futures contracts by the
Portfolio, 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 Portfolio 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 Portfolio 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 Portfolio's annual gross income. The Tax Reform Act of 1986
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 Portfolio may be
required to defer the closing out of a contract beyond the time when it would
otherwise be advantageous to do so.
RISKS OF FUTURES CONTRACTS
Currency and other financial futures contracts prices are volatile and
are influenced, among other things, by changes in stock prices, market
conditions, prevailing interest rates and anticipation of future stock prices,
market movements or interest rate changes, all of which in turn are affected by
economic conditions, such as government fiscal and monetary policies and
actions, and national and international political and economic events.
At best, the correlation between changes in prices of futures contracts
and of the securities being hedged can be only approximate. The degree of
imperfection of correlation depends upon circumstances, such as variations in
speculative market demand for futures contracts and for securities, including
technical influences in futures contracts trading; differences between the
securities being hedged and the financial instruments and indexes underlying the
standard futures contracts available for trading, in such respects as interest
rate levels, maturities and creditworthiness of issuers, or identities of
securities comprising the index and those in the Portfolio. In addition futures
contract transactions involve the remote risk that a party would not be able to
fulfill its obligations under the contract 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 judgement, 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 Portfolio 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 Portfolio has
sufficient assets to satisfy its obligations under a futures contract, the
Portfolio 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 Portfolio 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 contacts.
Compared to the use of futures contracts, the purchase of options on such
futures involves less potential risk to the Portfolio 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 Portfolio, 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 Portfolio may invest in securities of foreign issuers. When the
Portfolio invests in foreign securities they usually will be denominated in
foreign currencies and the Portfolio temporarily may hold funds in foreign
currencies. Thus, the value of a Portfolio share will be affected by changes in
exchange rates.
FORWARD CURRENCY EXCHANGE CONTRACTS
As one way of managing exchange rate risk, the Portfolio may engage in
forward currency exchange contracts (agreements to purchase or sell currencies
at a specified price and date). Under the contract, the exchange rate for the
transaction (the amount of currency the Portfolio will deliver or receive when
the contract is completed) is fixed when the Portfolio enters into the contract.
The Portfolio usually will enter into these contracts to stabilize the U.S.
dollar value of a security it has agreed to buy or sell. The Portfolio also may
use these contracts to hedge the U.S. dollar value of a security it already
owns, particularly if the Portfolio expects a decrease in the value of the
currency in which the foreign security is denominated. Although the Portfolio
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
Portfolio's investments denominated in foreign currencies will depend on the
relative strength of those currencies and the U.S. dollar, and the Portfolio may
be affected favorably or unfavorably by changes in the exchange rates or
exchange control regulations between foreign currencies and the dollar. Changes
in foreign currency exchange rates also may affect the value of dividends and
interest earned, gains and losses realized on the sale of securities and net
investment income and gains, if any, to be distributed to shareholders by the
Portfolio.
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 Portfolio intends to only engage in currency futures contracts for
hedging purposes, and not for speculation. 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 Portfolio losing
more than the original investment, as it cannot walk away from the futures
contract as it can an option contract.
The Portfolio 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
future 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 Portfolio intends to use foreign currency option transactions in
connection with hedging strategies.
PURCHASE OF PUT OPTIONS ON FOREIGN CURRENCIES.
The purchase of protective put options on a foreign currency is
analagous to the purchase of protective puts on individual stocks, where an
absolute level of protection is sought below which no additional economic loss
would be incurred by the Portfolio. 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 Portfolio 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 Portfolio is not fully invested.
The Portfolio 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 Portfolio's investment objective. The Portfolio believes that no
additional techniques have been identified for employment by the Portfolio 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 Portfolio 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
Portfolio 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 Portfolio 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 Portfolio'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.
CREDIT RISK
Whenever the Portfolio 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 Portfolio'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 Portfolio relies
on each contract being completed. If the contract is not performed, then the
Portfolio's hedge is eliminated, and the Portfolio 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 Portfolio
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
Portfolio.
Another form of credit risk stems from the time zone differences
between the U.S. and foreign nations. If the Portfolio 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 Portfolio.
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 Portfolio 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 Portfolio.
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 nonresidents. 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
Portfolio 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 Portfolio. This aspect of country risk is a major
element in the Portfolio's credit judgment as to with whom it will deal and in
what amounts.
<PAGE>
EXHIBIT A
CLASS OF OPTIONS. Options covering the same underlying security.
CLEARING CORPORATION. The Options Clearing Corporation, Trans Canada
Options, Inc., The European Options Clearing Corporation B.V., or the London
Options Clearing House.
CLOSING PURCHASE TRANSACTION. A transaction in which an investor who is
obligated as a writer of an option or seller of a futures contract terminates
his obligation by purchasing on an Exchange an option of the same series as the
option previously written or futures contract identical to the futures contract
previously sold, as the case may be. (Such a purchase does not result in the
ownership of an option or futures contract.)
CLOSING SALE TRANSACTION. A transaction in which an investor who is the
holder or buyer of an outstanding option or futures contract liquidates his
position as a holder or seller by selling an option of the same series as the
option previously purchased or futures contract identical to the futures
contract previously purchased. (Such sale does not result in the investor
assuming the obligations of a writer or seller).
COVERED CALL OPTION WRITER. A writer of a call option who, so long as
he remains obligated as a writer, owns the shares of the underlying security or
holds on a share for share basis a call on the same security where the exercise
price of the call held is equal to or less than the exercise price of the call
written, or,if greater than the exercise price of the call written, the
difference is maintained by the writer in cash, U.S. Treasury bills, or other
high grade, short term obligations in a segregated account with the writer's
broker or custodian.
COVERED PUT OPTION WRITER. A writer of a put option who, so long as he
remains obligated as a writer, has deposited Treasury bills with a value equal
to or greater than the exercise price with a securities depository and has
pledged them to the Options Clearing Corporation for the account of the
brokerdealer carrying the writer's position or to a broker-dealer 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 a Clearing Corporation or
broker 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 a broker 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.
An option position may be closed out only in a secondary market for an
option of the same series. Although the Portfolio 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 Portfolio 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.
OPTION PERIOD. The 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.
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>
PAGE 11
- ---------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--September 30, 1995
Number Market
of Shares Value
====================================================================
UNITED STATES (58.4%)
AIR TRANSPORTATION (0.1%)
Midwest Express Holdings, Inc. (a) 20,000 $ 450,000
--------------------------------------------------------------------
AMUSEMENTS (0.5%)
Hollywood Casino Corp. (a) 88,250 601,203
Players International, Inc. (a) 117,500 1,689,063
--------------------------------------------------------------------
2,290,266
--------------------------------------------------------------------
AUTOMOTIVE (1.9%)
Exide Securities Corp. 72,600 3,630,000
Lear Seating Corp. (a) 150,000 4,406,250
--------------------------------------------------------------------
8,036,250
--------------------------------------------------------------------
BUILDING MATERIALS (0.4%)
Centex Construction Products, Inc. (a) 62,000 813,750
Congoleum Corp. (a) 97,700 1,025,850
--------------------------------------------------------------------
1,839,600
--------------------------------------------------------------------
BUSINESS SERVICES (0.5%)
Thermedics, Inc. (a) 100,000 1,987,500
--------------------------------------------------------------------
CAPITAL GOODS (1.7%)
AGCO Corp. 157,500 7,166,250
--------------------------------------------------------------------
CONSUMER GOODS (1.4%)
Blyth Industries, Inc. (a) 71,700 3,351,975
Duracraft (a) 51,000 2,307,750
--------------------------------------------------------------------
5,659,725
--------------------------------------------------------------------
DRUGS (2.2%)
Agouron Pharmaceuticals, Inc. (a) 62,200 1,796,025
Autoimmune, Inc. (a) 40,000 620,000
Bio Vascular, Inc. (a) 100,000 1,812,500
Cephalon, Inc. (a) 50,000 1,368,750
Gilead Sciences, Inc. (a) 108,100 2,378,200
Idexx Labs, Inc. (a) 17,000 626,875
Sequus Pharmaceuticals, Inc. (a) 50,000 578,125
--------------------------------------------------------------------
9,180,475
--------------------------------------------------------------------
ELECTRONICS PRODUCTS (11.2%)
Alliance Semiconductor Corp. (a) 100,000 3,987,500
Electroglas, Inc. (a) 80,000 5,430,000
KLA Instruments Corp. (a) 100,000 8,050,000
Microchip Technology, Inc. (a) 135,000 5,121,563
Solectron Corp. (a) 200,000 7,900,000
Teradyne, Inc. (a) 200,000 7,200,000
Xilinx, Inc. (a) 190,900 9,199,002
--------------------------------------------------------------------
46,888,065
--------------------------------------------------------------------
FINANCE (0.4%)
Independent Bank Corp. 200,000 $ 1,475,000
--------------------------------------------------------------------
HEALTH CARE SERVICES (3.0%)
Chad Therapeutics, Inc. (a) 90,000 1,845,000
Health Management Associates, Inc. (a) 99,750 3,204,469
Mariner Health Group, Inc. (a) 150,000 2,137,500
Ostech, Inc. (a) 100,000 1,812,500
Phamis, Inc. (a) 135,000 3,670,313
--------------------------------------------------------------------
12,669,782
--------------------------------------------------------------------
INSURANCE (0.4%)
HCC Insurance Holdings, Inc. (a) 51,100 1,692,688
--------------------------------------------------------------------
OFFICE & BUSINESS EQUIPMENT (1.3%)
EMC Corp. (a) 300,000 5,437,500
--------------------------------------------------------------------
OIL SERVICES (2.3%)
Dual Drilling Co. (a) 200,000 1,937,500
ENSCO International, Inc. (a) 125,000 2,125,000
Global Marine, Inc. (a) 453,600 3,231,900
Noble Drilling Corp. (a) 300,000 2,306,250
--------------------------------------------------------------------
9,600,650
--------------------------------------------------------------------
RESTAURANTS (1.7%)
Applebee's International, Inc. 153,600 4,166,400
Outback Steakhouse, Inc. (a) 100,000 3,087,500
--------------------------------------------------------------------
7,253,900
--------------------------------------------------------------------
RETAIL (6.2%)
Corporate Express, Inc. (a) 200,000 4,850,000
Discount Auto Parts, Inc. (a) 55,500 1,678,875
Michael's Stores, Inc. (a) 10,700 174,544
Office Max, Inc. (a) 300,000 7,275,000
Petsmart, Inc. (a) 187,500 6,281,250
Sunglass Hut International, Inc. (a) 100,000 5,012,500
Tractor Supply Co. (a) 32,500 633,750
--------------------------------------------------------------------
25,905,919
--------------------------------------------------------------------
SOFTWARE SERVICES (15.6%)
Adobe Systems, Inc. 150,000 7,790,625
Applix, Inc. (a) 155,000 3,410,000
BDM International, Inc. (a) 65,700 1,806,750
Business Objects S.A., ADR (a) 44,000 1,881,000
Dendrite International, Inc. (a) 70,000 1,085,000
Desktop Data, Inc. (a) 100,000 3,500,000
Edmark Corp. (a) 75,000 3,581,250
Inference Corp. (a) 89,000 1,301,625
INSO Corp. (a) 162,200 5,190,400
Integrated Silicon Systems, Inc. (a) 200,000 5,900,000
See Notes to Schedule of Investments. (continued on next page)
<PAGE>
PAGE 12
--------------------------------------------------------------------
Keystone Global Opportunities Fund
SCHEDULE OF INVESTMENTS--September 30, 1995
Number Market
of Shares Value
====================================================================
SOFTWARE SERVICES--continued
MapInfo Corp. (a) 99,500 $ 2,052,188
Maxis, Inc. (a) 100,000 4,387,500
Mercury Interactive Corp. (a) 125,000 3,468,750
Parametric Technology Corp. (a) 120,000 7,410,000
Project Software & Development, Inc.
(a) 150,000 3,871,875
Symantec Corp. (a) 50,000 1,496,875
Synopsys, Inc. (a) 120,200 3,726,200
UUnet Technologies, Inc. (a) 40,000 1,860,000
Vantive Corp. (a) 100,000 1,575,000
--------------------------------------------------------------------
65,295,038
--------------------------------------------------------------------
TELECOMMUNICATIONS (7.5%)
3Com Corp. (a) 162,200 7,390,238
California Amplifier, Inc. (a) 150,000 3,159,375
Cascade Communications Corp. (a) 50,000 2,450,000
Cidco Group, Inc. (a) 100,000 3,512,500
Colonial Data Technologies (a) 150,000 2,775,000
Netcom Online Communications (a) 50,000 2,181,250
Netmanage, Inc. (a) 320,000 7,580,000
Winstar Communications, Inc. (a) 127,600 2,544,025
--------------------------------------------------------------------
31,592,388
--------------------------------------------------------------------
TRANSPORTATION (0.1%)
Trism, Inc. (a) 70,000 490,000
--------------------------------------------------------------------
TOTAL UNITED STATES
(Cost--$158,654,952) 244,910,996
====================================================================
FOREIGN (38.4%)
AUSTRALIA (1.3%)
ADVERTISING & PUBLISHING (0.1%)
West Australia Newspaper Holdings Ltd. 150,000 428,507
--------------------------------------------------------------------
FINANCE (0.5%)
Advance Bank of Australia 300,000 2,208,283
--------------------------------------------------------------------
METALS & MINING (0.6%)
Capral Aluminum 600,000 1,410,217
Delta Gold NL (a) 450,000 993,047
--------------------------------------------------------------------
2,403,264
--------------------------------------------------------------------
OIL (0.1%)
Oil Search Ltd. 300,000 278,869
--------------------------------------------------------------------
TOTAL AUSTRALIA 5,318,923
--------------------------------------------------------------------
CANADA (2.1%)
BUSINESS SERVICES (1.0%)
Loewen Group, Inc. 100,000 $ 4,125,000
--------------------------------------------------------------------
SOFTWARE SERVICES (1.1%)
Fulcrum Technologies, Inc. (a) 200,000 4,700,000
--------------------------------------------------------------------
TOTAL CANADA 8,825,000
--------------------------------------------------------------------
CHILE (0.8%)
BUSINESS SERVICES (0.6%)
A.F.P. Provida S.A. (ADR) 100,000 2,437,500
A.F.P. Provida S.A. 10,582 248,099
--------------------------------------------------------------------
2,685,599
--------------------------------------------------------------------
FINANCE (0.1%)
Banco de Credito 38,393 332,136
--------------------------------------------------------------------
PAPER & PACKAGING (0.1%)
Companhia de Manufactuers de Papeles Y
Cartones 17,201 271,731
--------------------------------------------------------------------
TOTAL CHILE 3,289,466
--------------------------------------------------------------------
FINLAND (0.8%)
CAPITAL GOODS (0.8%)
Benefon Oyvappa S.I. 91,400 3,205,818
--------------------------------------------------------------------
FRANCE (2.0%)
ADVERTISING & PUBLISHING (0.2%)
Filipacchi Medias 7,354 903,476
--------------------------------------------------------------------
AUTOMOTIVE (0.5%)
Sylea 23,974 2,132,320
--------------------------------------------------------------------
CAPITAL GOODS (0.6%)
Norbert Destressangle 24,260 2,596,207
--------------------------------------------------------------------
ELECTRONICS PRODUCTS (0.2%)
Faiveley S.A. (a) 3,199 217,619
Ugc Droits Audiovisuels 10,200 449,467
--------------------------------------------------------------------
667,086
--------------------------------------------------------------------
INSURANCE (0.2%)
Union Assurance Federal 8,213 842,231
--------------------------------------------------------------------
TEXTILES & APPAREL (0.3%)
Chaine et Trame S.A. 18,868 674,336
ICBT Groupe 14,793 600,792
--------------------------------------------------------------------
1,275,128
--------------------------------------------------------------------
TOTAL FRANCE 8,416,448
- ---------------------------------------------------------------------
See Notes to Schedule of Investments.
<PAGE>
PAGE 13
--------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--September 30, 1995
Number Market
of Shares Value
====================================================================
GERMANY (1.8%)
BUILDING MATERIALS (1.2%)
Plettac AG 8,100 $ 2,148,286
Praktikerbau (a) 65,000 2,240,203
Tarkett AG (a) 34,400 819,678
--------------------------------------------------------------------
5,208,167
--------------------------------------------------------------------
INSURANCE (0.2%)
Marschollek, Lautenschlager und Partner
AG 1,500 964,661
--------------------------------------------------------------------
METALS & MINING (0.3%)
SGL Carbon (a) 20,500 1,326,977
--------------------------------------------------------------------
TOTAL GERMANY 7,499,805
--------------------------------------------------------------------
HONG KONG (0.5%)
AMUSEMENTS (0.3%)
Cdl Hotels International 2,500,000 1,131,703
--------------------------------------------------------------------
FINANCE (0.1%)
Wing Hang Bank Ltd. 100,000 338,218
--------------------------------------------------------------------
RETAIL (0.1%)
Dickson Concepts International Ltd. 400,000 289,716
--------------------------------------------------------------------
SERVICES (0.0%)
Pico Far East Hldgs. Ltd. 1,200,000 119,507
Pico Far East Hldgs. Ltd., warrants (a) 240,000 1,242
--------------------------------------------------------------------
120,749
--------------------------------------------------------------------
TOTAL HONG KONG 1,880,386
--------------------------------------------------------------------
HUNGARY (0.1%)
DRUGS (0.1%)
Egis Gyogyszergyar (a) 20,000 520,965
--------------------------------------------------------------------
ITALY (0.4%)
AUTOMOTIVE (0.3%)
Brembo SPA (a) 120,000 1,282,977
--------------------------------------------------------------------
CAPITAL GOODS (0.1%)
Stayer Group SPA (a) 200,000 490,543
--------------------------------------------------------------------
TOTAL ITALY 1,773,520
--------------------------------------------------------------------
JAPAN (11.1%)
BUILDING MATERIALS (0.5%)
Hibiya Engineering, Ltd. 200,000 2,180,607
--------------------------------------------------------------------
CAPITAL GOODS (0.9%)
Kanamoto Co., Ltd. 150,000 $ 2,210,893
Max Co. 80,000 1,647,570
--------------------------------------------------------------------
3,858,463
--------------------------------------------------------------------
CONSUMER GOODS (1.8%)
Daiwa Industries Ltd. 165,000 1,565,797
Maruko Co. 90,000 5,542,375
Sekido Co. 31,000 219,070
--------------------------------------------------------------------
7,327,242
--------------------------------------------------------------------
DIVERSIFIED COMPANIES (0.3%)
Takuma Co., Ltd. 100,000 1,362,879
--------------------------------------------------------------------
ELECTRONICS PRODUCTS (1.1%)
Aucnet, Inc. 80,000 4,765,030
--------------------------------------------------------------------
FINANCE (2.9%)
Nichiei Co., Ltd. 105,000 6,741,709
Shokoh Fund 30,000 5,542,375
--------------------------------------------------------------------
12,284,084
--------------------------------------------------------------------
FOODS (0.6%)
MOS Food Services, Inc. 105,000 2,703,044
--------------------------------------------------------------------
OFFICE & BUSINESS EQUIPMENT (0.7%)
Riso Kagaku Corp. 34,000 2,903,841
--------------------------------------------------------------------
RESTAURANTS (0.5%)
Ohsho Food Service Corp. 99,000 1,998,889
--------------------------------------------------------------------
RETAIL (1.8%)
Ministop Co., Ltd. 140,000 3,250,719
Nissen Co. 150,000 4,149,210
--------------------------------------------------------------------
7,399,929
--------------------------------------------------------------------
TOTAL JAPAN 46,784,008
--------------------------------------------------------------------
MALAYSIA (1.6%)
AIR TRANSPORTATION (0.0%)
Malaysian Helicopter Services Bhd 96,000 148,280
--------------------------------------------------------------------
BUILDING MATERIALS (0.8%)
Ho Hup Construction Co. Bhd 140,000 445,860
Hume Industries (Malaysia) Bhd 288,000 1,616,560
IJM Corp. Bhd 140,000 249,681
Leader Universal Holdings Bhd 273,333 837,844
Road Builder (M) Hldgs. Bhd 60,000 191,083
--------------------------------------------------------------------
3,341,028
- ---------------------------------------------------------------------
See Notes to Schedule of Investments. (continued on next page)
<PAGE>
PAGE 14
--------------------------------------------------------------------
Keystone Global Opportunities Fund
SCHEDULE OF INVESTMENTS--September 30, 1995
Number Market
of Shares Value
====================================================================
CHEMICALS (0.4%)
Nylex (Malaysia) SDN Bhd 580,000 $1,697,054
--------------------------------------------------------------------
FINANCE (0.4%)
Affin Holdings Bhd 240,000 456,688
MBF Capital Bhd 1,000,000 1,074,840
--------------------------------------------------------------------
1,531,528
--------------------------------------------------------------------
TOTAL MALAYSIA 6,717,890
--------------------------------------------------------------------
MEXICO (0.0%)
DRUGS (0.0%)
Far Beneficial S.A. de C.V. (a) 141,000 173,266
--------------------------------------------------------------------
NETHERLANDS (1.7%)
DRUGS (0.2%)
Gist Brocades N.V. 30,000 796,925
--------------------------------------------------------------------
FINANCE (0.2%)
Wegener N.V. 10,000 814,426
--------------------------------------------------------------------
FOODS (0.1%)
Van Melle N.V. 6,130 419,548
--------------------------------------------------------------------
RETAIL (0.7%)
Ceteco Holding N.V. 15,000 487,530
Hagemeyer N.V. 54,000 2,477,405
--------------------------------------------------------------------
2,964,935
--------------------------------------------------------------------
SOFTWARE SERVICES (0.5%)
Baan Co. N.V. (ADR) (a) 50,000 2,250,000
--------------------------------------------------------------------
TOTAL NETHERLANDS 7,245,834
--------------------------------------------------------------------
NORWAY (1.0%)
ADVERTISING & PUBLISHING (0.3%)
Schibsted AS 100,000 1,162,420
--------------------------------------------------------------------
RETAIL (0.7%)
Elkjop Norge AS 110,000 3,152,866
--------------------------------------------------------------------
TOTAL NORWAY 4,315,286
--------------------------------------------------------------------
PERU (1.1%)
FINANCE (0.3%)
Banco de Credito del Peru 741,277 1,388,344
--------------------------------------------------------------------
FOODS (0.3%)
La Fabril S.A. (a) 1,024,201 1,233,458
--------------------------------------------------------------------
TELECOMMUNICATIONS (0.4%)
Compania Peruana de Telefonos 815,487 1,563,698
--------------------------------------------------------------------
TELEPHONE UTILITIES (0.1%)
Tele 2000 (a) 498,181 $ 486,518
--------------------------------------------------------------------
TOTAL PERU 4,672,018
--------------------------------------------------------------------
SINGAPORE (0.1%)
DIVERSIFIED COMPANIES (0.1%)
Natsteel Ltd. 150,000 310,919
--------------------------------------------------------------------
SPAIN (2.1%)
AMUSEMENTS (0.8%)
Azkoyen S.A. 50,650 3,318,759
--------------------------------------------------------------------
BUILDING MATERIALS (0.3%)
Tableros de Fibras S.A. 43,108 549,224
Zardoya-Otis S.A. 6,600 682,851
Zardoya-Otis S.A. (rights) (a) 660 68,285
--------------------------------------------------------------------
1,300,360
--------------------------------------------------------------------
BUSINESS SERVICES (0.2%)
Estacionamientos Subterraneo S.A. 50,078 925,645
--------------------------------------------------------------------
RETAIL (0.3%)
Cortefiel S.A. 48,541 1,401,807
--------------------------------------------------------------------
UTILITIES (0.5%)
Hidroelectrica del Cantabrico S.A. 60,450 1,833,745
--------------------------------------------------------------------
TOTAL SPAIN 8,780,316
--------------------------------------------------------------------
SWEDEN (2.2%)
BUSINESS SERVICES (0.0%)
Securitas Teknik AB 3,000 107,845
--------------------------------------------------------------------
CAPITAL GOODS (0.7%)
Hoganas AB 90,000 2,676,638
--------------------------------------------------------------------
FINANCE (0.4%)
Finnveden Invest AB (a) 143,500 1,501,999
--------------------------------------------------------------------
METALS & MINING (0.1%)
Celsius Industriar AB 23,000 393,483
--------------------------------------------------------------------
MISCELLANEOUS (0.0%)
Assa AB (a) 3,000 19,707
--------------------------------------------------------------------
RETAIL (0.5%)
Lindex AB (a) 148,000 1,955,072
--------------------------------------------------------------------
TRANSPORTATION (0.5%)
ASG AB 103,100 1,994,543
--------------------------------------------------------------------
TOTAL SWEDEN 8,649,287
- ---------------------------------------------------------------------
See Notes to Schedule of Investments.
<PAGE>
PAGE 15
--------------------------------------------------------------------
SCHEDULE OF INVESTMENTS--September 30, 1995
Number Market
of Shares Value
====================================================================
SWITZERLAND (0.6%)
CONSUMER GOODS (0.3%)
Phoenix Meccano AG 2,750 $ 1,355,969
--------------------------------------------------------------------
PAPER & PACKAGING (0.3%)
SIG Schweizerische Industrie HG AG 510 1,072,059
--------------------------------------------------------------------
TOTAL SWITZERLAND 2,428,028
--------------------------------------------------------------------
TAIWAN, PROV. OF CHINA (0.6%)
ELECTRONICS PRODUCTS (0.5%)
Taiwan Semiconductor 284,400 1,035,175
United Microelectronics Corp., Ltd. (a) 339,000 920,736
--------------------------------------------------------------------
1,955,911
--------------------------------------------------------------------
FINANCE (0.1%)
Chronicle 2001 Mutual Fund (a) 1,653,374 658,013
--------------------------------------------------------------------
TOTAL TAIWAN 2,613,924
--------------------------------------------------------------------
THAILAND (0.0%)
FINANCE (0.0%)
Phatra Thanakit Co., Ltd. 9,000 65,272
--------------------------------------------------------------------
UNITED KINGDOM (6.5%)
ADVERTISING & PUBLISHING (0.5%)
Cia Group PLC 945,000 2,015,721
--------------------------------------------------------------------
BUILDING MATERIALS (0.8%)
Berkeley Group (The) PLC 250,000 1,615,579
Halma PLC 578,776 1,572,909
--------------------------------------------------------------------
3,188,488
--------------------------------------------------------------------
BUSINESS SERVICES (2.0%)
Compass Group PLC 647,368 4,321,583
Serco Group PLC 125,000 720,888
Takare PLC 1,004,000 3,553,420
--------------------------------------------------------------------
8,595,891
--------------------------------------------------------------------
CAPITAL GOODS (0.7%)
Critchley Group PLC 305,000 3,060,120
--------------------------------------------------------------------
CONSUMER GOODS (0.6%)
Chamberlain Phipps Hldgs. PLC 1,000,000 2,433,243
--------------------------------------------------------------------
ELECTRICAL PRODUCTS (0.2%)
Blick PLC 108,888 891,199
--------------------------------------------------------------------
FINANCE (0.5%)
3I Group PLC 335,000 2,133,117
--------------------------------------------------------------------
FOODS (0.2%)
Devro International Ltd. 200,000 $ 761,574
--------------------------------------------------------------------
HEALTH CARE SERVICES (0.1%)
Westminster Healthcare Hldgs. PLC 120,000 659,820
--------------------------------------------------------------------
PAPER & PACKAGING (0.1%)
Jarvis Porter Group PLC 100,000 440,038
--------------------------------------------------------------------
RETAIL (0.2%)
Brown N Group PLC 180,000 725,233
--------------------------------------------------------------------
TELECOMMUNICATIONS (0.6%)
NYNEX Cablecommunications 1,085,000 2,524,351
--------------------------------------------------------------------
TOTAL UNITED KINGDOM 27,428,795
--------------------------------------------------------------------
TOTAL FOREIGN (Cost--$148,100,242) 160,915,174
--------------------------------------------------------------------
Maturity
Value
====================================================================
SHORT-TERM INVESTMENTS (3.1%)
Investments in repurchase agreements,
in a joint trading account, purchased
9/29/95, 6.39%, maturing 10/02/95
(Cost--$12,980,000) (b) $12,986,817 $ 12,980,000
--------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost--$319,735,194) (c) 418,806,170
FOREIGN CURRENCY HOLDINGS
(Cost--$2,291,171) (0.5%) 2,214,426
OTHER ASSETS AND LIABILITIES--
NET (-0.4%) (1,682,466)
--------------------------------------------------------------------
NET ASSETS (100%) $419,338,130
====================================================================
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income-producing security.
(b) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at September 30, 1995.
(c) The cost of investments for federal income tax purposes is $319,743,069.
Gross unrealized appreciation and depreciation of investments, based on
identified tax cost, at September 30, 1995 are as follows:
Gross unrealized
appreciation $113,109,370
Gross unrealized
depreciation (14,046,268)
----------
$ 99,063,102
==========
See Notes to Financial Statements.
<PAGE>
PAGE 16
- ------------------------------
Keystone Global Opportunities Fund
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
March 16, 1988
Year Ended September 30, (Commencement of
----------------------------------------------------------------- Operations) to
September 30,
1995 1994 1993 1992 1991 1990 1989 1988
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
beginning of
period $ 19.42 $ 18.02 $ 11.69 $ 12.89 $ 9.89 $11.17 $ 9.77 $10.00
- -----------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment
income (loss) (0.16) (0.04) (0.14) (0.08) 0.17 0.19 0.09 0.05
Net realized and
unrealized
gains (losses)
on investment
and foreign
currency
related
transactions 4.17 1.60 6.47 0.23 3.06 (1.27) 1.66 (0.28)
- -----------------------------------------------------------------------------------------------------------------------
Total from
investment
operations 4.01 1.56 6.33 0.15 3.23 (1.08) 1.75 (0.23)
- -----------------------------------------------------------------------------------------------------------------------
Less
distributions
from:
Net investment
income 0 0 0 0 (0.23) (0.12) (0.09) 0
Net realized
gains (losses)
on investments 0 (0.16) 0 (1.35) 0 (0.08) (0.26) 0
- -----------------------------------------------------------------------------------------------------------------------
Total
distributions 0 (0.16) 0 (1.35) (0.23) (0.20) (0.35) 0
- -----------------------------------------------------------------------------------------------------------------------
Net asset value
end of period $ 23.43 $ 19.42 $ 18.02 $ 11.69 $12.89 $ 9.89 $11.17 $ 9.77
=======================================================================================================================
Total return (b) 20.65% 8.74% 54.15% 1.81% 32.71% (9.65%) 16.94% (1.20%)(c)
Ratios/supplemental
data
Ratios to
average net
assets:
Total expenses 1.83%(d) 2.01% 2.84% 2.50%(a) 2.03%(a) 2.00%(a) 2.00%(a) 1.50%(a)(e)
Net investment
income (loss) (0.83%) (0.86%) (1.72%) (0.69%) 1.49% 1.80% 0.86% 1.42%(a)(e)
Portfolio
turnover rate 35% 32% 64% 75% 134% 51% 13% 19%
- -----------------------------------------------------------------------------------------------------------------------
Net assets end
of period
(thousands) $94,679 $71,122 $29,942 $10,859 $2,159 $1,519 $1,378 $1,082
=======================================================================================================================
</TABLE>
(a) 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 3.67%, 7.77%, 10.39%, 13.06%, and 5.54% for the years ended September
30, 1992, 1991, 1990, 1989 and the period March 16, 1988 (Commencement of
Operations) to September 30, 1988, respectively.
(b) Excluding applicable sales charges.
(c) Annualized total return from March 16, 1988 (Commencement of Operations) to
September 30, 1988 is (2.20%)
(d) The expense ratio includes indirectly paid expenses for the year ended
September 30, 1995. Excluding indirectly paid expenses, the expense ratio
would have been 1.81% for the year then ended.
(e) Annualized.
See Notes to Financial Statements.
<PAGE>
PAGE 17
- ------------------------------
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
February 1, 1993
(Date of Initial
Year Ended Public Offering)
September 30, to
------------------ September 30,
1995 1994 1993
====================================================================================================
<S> <C> <C> <C>
Net asset value beginning of period $ 19.20 $ 17.95 $ 14.04
----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.25) (0.15) (0.04)
Net realized and unrealized gains (losses) on investment
and foreign currency related transactions 4.05 1.56 3.95
----------------------------------------------------------------------------------------------------
Total from investment operations 3.80 1.41 3.91
----------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income 0 0 0
Net realized gains (losses) on investments 0 (0.16) 0
----------------------------------------------------------------------------------------------------
Total distributions 0 (0.16) 0
----------------------------------------------------------------------------------------------------
Net asset value end of period $ 23.00 $ 19.20 $ 17.95
====================================================================================================
Total return (b) 19.79% 7.93% 27.85%(a)
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.58%(c) 2.83% 3.35%(a)
Net investment income (loss) (1.59%) (1.61%) (1.86%)(a)
Portfolio turnover rate 35% 32% 64%
----------------------------------------------------------------------------------------------------
Net assets end of period (thousands) $238,320 $131,695 $15,534
====================================================================================================
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The expense ratio includes indirectly paid expenses for the year ended
September 30, 1995. Excluding indirectly paid expenses, the expense ratio
would have been 2.56% for the year then ended.
See Notes to Financial Statements.
<PAGE>
PAGE 18
- ------------------------------
Keystone Global Opportunities Fund
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
February 1, 1993
Year Ended (Date of Initial
September 30, Public Offering)
----------------- to
September 30,
1995 1994 1993
=====================================================================================================
<S> <C> <C> <C>
Net asset value beginning of period $ 19.26 $ 17.99 $14.04
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.27) (0.15) (0.04)
Net realized and unrealized gains (losses) on investment
and foreign currency related transactions 4.05 1.58 3.99
- -----------------------------------------------------------------------------------------------------
Total from investment operations 3.78 1.43 3.95
- -----------------------------------------------------------------------------------------------------
Less distributions from:
Investment income--net 0 0 0
Net realized gains (losses) on investments 0 (0.16) 0
- -----------------------------------------------------------------------------------------------------
Total distributions 0 (0.16) 0
- -----------------------------------------------------------------------------------------------------
Net asset value end of period $ 23.04 $ 19.26 $17.99
=====================================================================================================
Total return (b) 19.63% 8.02% 28.13%(a)
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.58%(c) 2.85% 3.04%(a)
Net investment income (loss) (1.59%) (1.62%) (1.55%)(a)
Portfolio turnover rate 35% 32% 64%
- -----------------------------------------------------------------------------------------------------
Net assets end of period (thousands) $86,339 $50,535 $6,217
=====================================================================================================
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The expense ratio includes indirectly paid expenses for the year ended
September 30, 1995. Excluding indirectly paid expenses, the expense ratio
would have been 2.56% for the year then ended. See Notes to Financial
Statements.
See Notes to Financial Statements.
<PAGE>
PAGE 19
- ------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
========================================================================
Assets:
Investments at market value
(identified cost--$319,735,194) (Note 1) $418,806,170
Foreign currency holdings
(identified cost--$2,291,171) (Note 1) 2,214,426
-----------------------------------------------------------------------
Total investments and foreign currency holdings 421,020,596
-----------------------------------------------------------------------
Cash 814
Receivable for:
Investments sold 490,660
Fund shares sold 3,979,008
Foreign currency related contracts (Note 5) 5,947
Dividends and interest 267,366
Foreign tax reclaim 138,865
Prepaid expenses 3,526
-----------------------------------------------------------------------
Total assets 425,906,782
-----------------------------------------------------------------------
Liabilities:
Payable for:
Investments purchased 6,083,985
Fund shares redeemed 324,763
Foreign taxes to be withheld 57,304
Accrued reimbursable expenses 6,369
Other accrued expenses (Note 4) 96,231
-----------------------------------------------------------------------
Total liabilities 6,568,652
-----------------------------------------------------------------------
Net assets $419,338,130
========================================================================
Net assets represented by: (Note 1)
Paid-in capital $330,622,811
Accumulated distributions in excess of investment
income--net (2,960,939)
Accumulated realized gains (losses) on investment and
foreign currency related transactions--net (7,321,617)
Net unrealized appreciation on investments and other
assets and liabilities 98,991,928
Net unrealized appreciation on foreign currency
exchange contracts 5,947
-----------------------------------------------------------------------
Total net assets $419,338,130
========================================================================
Net asset value and redemption price per share: (Note 2)
Class A Shares ($23.43 on 4,040,958 shares outstanding) $ 94,679,332
Class B Shares ($23.00 on 10,363,289 shares
outstanding) 238,320,238
Class C Shares ($23.04 on 3,747,906 shares outstanding) 86,338,560
-----------------------------------------------------------------------
$419,338,130
========================================================================
Offering price per share:
Class A Shares (including sales charge of 5.75%)
(Note 2) $24.86
========================================================================
Class B Shares $23.00
========================================================================
Class C Shares $23.04
========================================================================
STATEMENT OF OPERATIONS
Year Ended September 30, 1995
========================================================================
Investment income (Note 1):
Dividends (net of foreign taxes
of $444,914) $ 2,294,588
Interest 681,463
-----------------------------------------------------------------------
Total income 2,976,051
-----------------------------------------------------------------------
Expenses: (Notes 2 and 4)
Management fee $ 3,009,974
Transfer agent fees 1,214,494
Accounting 22,704
Auditing and legal 27,468
Custodian fees 315,314
Printing 36,402
Trustees' fees and expenses 24,154
Distribution Plan expenses 2,491,967
Registration fees 158,510
Miscellaneous expenses 32,499
-----------------------------------------------------------------------
Total expenses 7,333,486
-----------------------------------------------------------------------
Less: Expenses paid indirectly (Note 4) (71,147)
-----------------------------------------------------------------------
Net expenses 7,262,339
-----------------------------------------------------------------------
Net loss from operations (Note 1) (4,286,288)
-----------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment and foreign
currency related transactions:
(Notes 1 and 3)
Net realized gain (loss) on:
Investments (4,090,326)
Foreign currency related transactions (2,909,685)
-----------------------------------------------------------------------
Net realized loss on investment and
foreign currency related
transactions (7,000,011)
-----------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency related
transactions 73,894,167
-----------------------------------------------------------------------
Net gain on investment and foreign
currency related transactions 66,894,156
-----------------------------------------------------------------------
Net increase in net assets resulting
from operations $62,607,868
========================================================================
See Notes to Financial Statements.
<PAGE>
PAGE 20
- ------------------------------
Keystone Global Opportunities Fund
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended September 30,
1995 1994
======================================================================================================
<S> <C> <C>
Operations:
Net investment loss from operations (Note 1) ($ 4,286,288) ($ 2,191,168)
Net realized loss on investment and foreign currency related
transactions (Note 3) (7,000,011) (3,409,703)
Net change in unrealized appreciation (depreciation) on investments and
foreign currency related transactions 73,894,167 17,263,860
------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 62,607,868 11,662,989
------------------------------------------------------------------------------------------------------
Distributions to shareholders from: (Notes 1 and 5)
Net investment income:
Class A Shares 0 (326,668)
Class B Shares 0 (244,277)
Class C Shares 0 (83,063)
------------------------------------------------------------------------------------------------------
Total distributions to shareholders 0 (654,008)
------------------------------------------------------------------------------------------------------
Capital share transactions: (Note 2)
Proceeds from shares sold:
Class A Shares 35,039,374 51,373,426
Class B Shares 105,034,904 121,266,409
Class C Shares 38,024,895 49,422,917
Payments for shares redeemed:
Class A Shares (26,560,885) (14,654,789)
Class B Shares (33,012,757) (10,376,196)
Class C Shares (15,147,033) (6,924,492)
Net asset value of shares issued in reinvestment of dividends and
distributions:
Class A Shares 0 274,341
Class B Shares 0 200,189
Class C Shares 0 68,432
------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from capital share transactions 103,378,498 190,650,237
------------------------------------------------------------------------------------------------------
Total increase in net assets 165,986,366 201,659,218
------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 253,351,764 51,692,546
------------------------------------------------------------------------------------------------------
End of period [including accumulated distributions in excess of net
investment income as follows: September, 1995--($2,960,939) and
September, 1994--($180,181)] (Note 1) $419,338,130 $253,351,764
======================================================================================================
</TABLE>
See Notes to Financial Statements.
<PAGE>
PAGE 21
- ------------------------------
NOTES TO FINANCIAL STATEMENTS
(1.) Significant Accounting Policies
Keystone Global Opportunities Fund (formerly Keystone America Global
Opportunities Fund) (the "Fund") is a Massachusetts Business Trust. The Fund
was organized on June 17, 1987 and had no operations prior to March 16, 1988.
It is registered under the Investment Company Act of 1940 as a diversified
open-end investment company. Keystone Investment Management Company (formerly
Keystone Custodian Funds, Inc.) ("Keystone") provides investment advisory
services to the Fund pursuant to an Investment Advisory and Management
Agreement.
The Fund currently issues three classes of shares. Class A shares are
offered at a public offering price which includes 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 which varies
depending on when shares were purchased and how long they have been held.
Class C shares are sold subject to a contingent deferred sales charge payable
upon redemption within one year of purchase. Class C shares are available
only through dealers who have entered into special distribution agreements
with Keystone Investment Distributors Company, (formerly Keystone
Distributors, Inc.) ("KIDC") the Fund's principal underwriter.
Keystone is a wholly-owned subsidiary of Keystone Investments, Inc.
(formerly Keystone Group, Inc.) ("KII") a Delaware corporation. KII is
privately owned by an investor group consisting of current and former members
of management of Keystone and its affiliates. Keystone has retained Credit
Lyonnais International Asset Management North America ("CLIAM"), an
international portfolio management firm, to provide the Fund with
sub-advisory services, subject to the supervision of the Fund's Board of
Trustees and 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, including American Depository Receipts ("ADRs") 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 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. ADRs, which are certificates representing shares of
foreign securities deposited in domestic and foreign banks, are traded and
valued in United States dollars.
Short-term investments purchased with maturities of sixty days or less,
are valued at amortized cost (original purchase price 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.
Investments denominated in foreign currencies are adjusted daily to
reflect changes in exchange rates.
<PAGE>
PAGE 22
- ------------------------------
Keystone Global Opportunities Fund
Those securities traded in foreign currency amounts are translated into
United States dollars as follows; market value of investments, assets, and
liabilities at the daily rate of exchange; and purchases and sales of
investments, income, and expenses at the rate of exchange prevailing on the
respective dates of such transactions. 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 Board of Trustees, which determines
valuations for normal, institutional-size trading units of such securities
using methods based on market transactions for comparable securities and
various relationships between securities which 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 fluctuates, and are recorded for book purposes as
unrealized gains or losses by the Fund. For federal 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 day after 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 any excise tax liability by making the required
distributions under the Internal Revenue Code.
D. When the Fund enters into a repurchase agreement (a purchase of securities
whereby the seller agrees to repurchase the securities at a mutually agreed
upon date and price), the repurchase price of the securities will generally
equal the amount paid by the Fund plus a negotiated interest amount. The
seller under the repurchase agreement will be required to provide securities
("collateral") to the Fund whose value will be maintained at an amount not
less than the repurchase price, and which generally will be maintained at
101% of the repurchase price. The Fund monitors the value of collateral on a
daily basis, and if the value of the collateral falls below required levels,
the Fund intends to seek additional collateral from the seller or terminate
the repurchase agreement. If the seller defaults, the Fund would suffer a
loss to the extent that the proceeds from the sale of the underlying
securities were less than the repurchase price. Any 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
<PAGE>
PAGE 23
- ------------------------------
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.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with certain other Keystone funds, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury and/or Federal Agency obligations.
E. In connection with portfolio purchases and sales of securities denominated
in a foreign currency, the Fund may enter into forward foreign currency
exchange contracts ("contracts"). Additionally, from time to time the Fund
may enter into contracts to hedge certain foreign currency assets. Contracts
are recorded at market value and marked-to-market daily. Realized gains and
losses arising from such transactions are included in net realized gain
(loss) on foreign currency related transactions. The Fund is subject to the
credit risk that the other party will not complete the obligations of the
contract.
F. The Fund distributes net income and net capital gains, if any, annually.
Distributions from net investment income are determined in accordance with
income tax regulations. Distributions from taxable net investment income and
net capital gains can exceed book basis net investment income and net capital
gains.
The significant differences between financial statement amounts available
for distribution and distributions made in accordance with income tax
regulations are due to the treatment of foreign currency gains and losses and
net operating losses generated by the Fund.
(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 September 30,
1995 1994
------------------------------------------
Shares sold 1,705,057 2,770,072
Shares redeemed (1,325,323) (785,508)
Shares issued
in reinvestment
of dividends
and distributions 0 15,404
------------------------------------------
Net increase 379,684 1,999,968
==========================================
Class B Shares
------------------------
Year Ended September 30,
1995 1994
------------------------------------------
Shares sold 5,208,875 6,542,500
Shares redeemed (1,702,740) (562,130)
Shares issued
in reinvestment
of dividends
and distributions 0 11,292
------------------------------------------
Net increase 3,506,135 5,991,662
==========================================
Class C Shares
----------------------
Year Ended September 30,
1995 1994
----------------------------------------
Shares sold 1,900,476 2,647,913
Shares redeemed (775,826) (373,983)
Shares issued
in reinvestment
of dividends
and distributions 0 3,846
----------------------------------------
Net increase 1,124,650 2,277,776
========================================
<PAGE>
PAGE 24
- ------------------------------
Keystone Global Opportunities Fund
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 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 to pay expenses of the distribution of Class A shares. Amounts paid by
the Fund to KIDC 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 shares sold by such others and remaining
outstanding on the books of the Fund for specific periods.
The Class B Distribution Plan 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. 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 4.00% of
the value of each Class B share sold plus the first year's service fee in
advance in the amount of 0.25% of the price paid for each Class B share sold.
Beginning approximately 12 months after the purchase of a Class B share, the
broker or other party will receive service fees at an annual rate of 0.25% of
the average net asset value of such Class B shares maintained by the
recipient outstanding on the Fund's books for specified periods. A contingent
deferred sales charge will be imposed, if applicable, on Class B shares
purchased after June 1, 1995 at rates ranging from a maximum of 5.00% of
amounts redeemed during the first 12 months following the date of purchase to
1.00% of amounts redeemed during the sixth twelve month period following the
date of purchase. Class B shares purchased on or after June 1, 1995 that have
been outstanding for eight years following the month of purchase will
automatically convert to Class A shares without a front end sales charge or
exchange fee. Class B shares purchased prior to June 1, 1995 will retain
their existing conversion rights.
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 for the distribution of Class C shares. Amounts paid by the Fund
under the Class C Distribution Plan are currently used to pay others
(dealers) a commission at the time of purchase of 0.75% of the price of each
Class C share sold, plus the first year's service fee in advance in the
amount of 0.25% of the price paid of each Class C share, and, beginning
approximately 15 months after purchase, a commission at an annual rate of
0.75% (subject to applicable limitations imposed by the rules of the National
Association of Securities Dealers, Inc.) ("NASD Rule") and service fees at an
annual rate of 0.25%, respectively, of the average net asset value of each
Class C maintained by the recipient outstanding on the Fund's books 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 any
Distribution Plan payments to KIDC may, at the discretion of the Board of
Trustees, continue as compensation for its services which had been earned
while the Distribution Plan was in effect.
For the year ended September 30, 1995, the Fund paid KIDC $185,409 under its
Class A Distribution Plan. The Fund paid KIDC $1,606,135 for Class B shares
sold prior to June 1, 1995, and $64,006 for Class B shares sold on or after
June 1, 1995. The Fund paid KIDC $636,417 under its Class C Distribution
Plan.
<PAGE>
PAGE 25
- ------------------------------
Under the NASD Rule, the maximum uncollected amounts for which KIDC may seek
payment from the Fund under its Distribution Plans were $9,557,717 for Class
B shares purchased prior to June 1, 1995, and $2,611,116 for Class B shares
purchased on or after June 1, 1995. The maximum uncollected amount for which
KIDC may seek payment from the Fund under its Class C Distribution Plan was
$5,094,255 as of September 30, 1995.
Presently, the Fund's class-specific expenses are limited to Distribution
Plan expenses incurred by a class of shares.
(3.) Securities Transactions
As of September 30, 1995, the Fund had a capital loss carryforward for
federal income tax purposes of approximately $4,525,000 which expires as
follows: 2003--$4,525,000. Purchases and sales of investment securities
(including proceeds received at maturity) for the year ended September 30,
1995 were as follows:
Cost of Proceeds
Purchases from Sales
-----------------------------------------------------
Portfolio securities $ 204,464,496 $ 103,189,294
Short-term
investments 2,808,986,612 2,811,699,000
-----------------------------------------------------
$3,013,451,108 $2,914,888,294
=====================================================
(4.) Investment Management Agreement and Other Transactions
Under the terms of the Investment Advisory and Management Agreement between
Keystone and the Fund dated August 7, 1991, Keystone receives a management
fee calculated by applying percentage rates starting at 1.00% and declining,
as net assets increase, to 0.75% of the net assets of the Fund. For the year
ended September 30, 1995, the Fund paid or accrued investment management and
administrative services fees of $3,009,974 which represented 0.98% of the
Fund's average net assets. Of such amount, $1,577,883 was paid or accrued to
Keystone and $1,432,091 was paid or accrued to CLIAM for its services as
subadviser.
During the year ended September 30, 1995, the Fund paid or accrued to KIRC
$22,704 as reimbursement for certain accounting and printing services, and
$1,214,494 for transfer agent fees.
The Fund is subject to certain state annual expense limits, the most
restrictive of which is as follows: 2.5% of the first $30 million of Fund
assets, 2.0% of the next $70 million of Fund assets, and 1.5% of Fund assets
over $100 million.
The Fund has entered into an expense offset arrangement with its
custodian. For the year ended September 30, 1995, the Fund paid custody fees
in the amount of $244,167 and received a credit of $71,147 pursuant to the
expense offset arrangement, resulting in a total expense of $315,314. The
assets deposited with the custodian under the expense offset arrangement
could have been invested in an income-producing asset.
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.
<PAGE>
PAGE 26
- ------------------------------
Keystone Global Opportunities Fund
(5.) Foreign Currency Exchange Contracts
At September 30, 1995, the Fund had entered into the following currency
exchange contracts that obligate the Fund to deliver currencies at specified
future dates. The unrealized appreciation of $5,947 on these contracts is
included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
U.S. $ value
Exchange Currency to as of Currency to U.S. $ value
date be delivered 9/30/95 be received as of 9/30/95
=====================================================================================
<S> <C> <C> <C> <C>
10/03/95 387,285 $ 78,644 78,859 $ 78,859
French Franc U.S. $
10/03/95 307,279 307,279 30,829,278 311,234
U.S. $ Japanese Yen
10/03/95 89,136 89,136 56,702 89,591
U.S. $ Pound Sterling
10/04/95 46,060 72,777 72,479 72,479
Pound Sterling U.S. $
10/06/95 224,367 224,367 297,924 225,154
U.S. $ Australian Dollar
10/06/95 393,082 393,082 989,783 394,022
U.S. $ Malaysian Ringitt
10/10/95 76,775 76,775 192,590 76,668
U.S. $ Malaysian Ringitt
--------- ---------
$1,242,060 $1,248,007
========= =========
</TABLE>
(6.) Distributions to Shareholders
The Fund intends to distribute to its shareholders dividends from net
investment income annually and all net realized long-term capital gains, if
any, annually. Any taxable distribution which is declared in December and
paid before the next February 1 will be taxable to shareholders in the year
declared.
<PAGE>
PAGE 27
- ------------------------------
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders
Keystone Global Opportunities Fund
We have audited the accompanying statement of assets and liabilities of
Keystone Global Opportunities Fund (formerly Keystone America Global
Opportunities Fund), including the schedule of investments, as of September
30, 1995, and the related statement of operations for the year then ended,
the statements of changes in net asset 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 then ended and the period from March 16, 1988 (Commencement
of Operations) to September 30, 1988 for Class A shares, and for each of the
years in the two-year period ended September 30, 1995 and for the period from
February 1, 1993 (Date of Initial Public Offering) to September 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 September 30, 1995 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 Global Opportunities Fund as of September 30, 1995, 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 periods specified in the first paragraph above in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
October 27, 1995
<PAGE>
KEYSTONE GLOBAL OPPORTUNITIES FUND
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24 (a). Financial Statements
All financial statements listed below are included in Registrant's Statement of
Additional Information.
Schedule of Investments September 30, 1995
Financial Highlights For fiscal years ended
September 30, 1986
through September 30,
1995
Statement of Assets and September 30, 1995
Liabilities
Statement of Operations Year ended
September 30, 1995
Statements of Changes in Two Years ended
Net Assets September 30, 1995
Notes to Financial Statements
Independent Auditors' Report
dated October 27, 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 is filed herewith as
Exhibit 24(b)(1). Copies of the First and Second Amendments to the
Registrant's Declaration of Trust are filed herewith as Exhibit
24(b)(1).
(2) A copy of Registrant's By-Laws is filed herewith as Exhibit 24(b)(2).
Copies of the First and Second Amendments to Registrant's By-laws were
filed with Pre-Effective Amendment No. 2 to the Registration Statement
No. 33-18774/811-5404 and are incorporated by reference herein.
(3) Not applicable.
(4) A copy of the form of Registrant's Share Certificate was filed with
Pre-Effective Amendment No. 2 to Registration Statement No.
33-18774/811-5404 as Exhibit 24(b)(4) and is incorporated by reference
herein.
(5) (A) A copy of the Investment Advisory Agreement between Registrant and
Keystone Investment Management Company (formerly named Keystone
Custodian Funds, Inc.) is filed herewith as Exhibit 24(b)(5)(A).
(B) A copy of the Subadvisory Agreement between Keystone Investment
Management Company (formerly named Keystone Custodian Funds, Inc.) and
Credit Lyonnais International Asset Management N.A. is filed herewith
as Exhibit 24(b)(5)(B). A copy of the First Amendment to Subadvisory
Agreement is filed herewith as Exhibit 24(b)(5)(B).
(6) (A) Copies of the forms of Principal Underwriting Agreements between
Registrant and Keystone Investment Distributors Company (formerly named
Keystone Distributors, Inc.) are filed herewith as Exhibit 24(b)(6)(A).
A copy of the First Amendment to the Class A and Class C Principal
Underwriting Agreement is filed herewith as Exhibit 24(b)(6)(A).
(B) Copies of the forms of Dealer Agreements used by Keystone
Investment Distributors Company (formerly named Keystone Distributors,
Inc.) are filed herewith as Exhibit 24(b)(6)(B).
(7) Not applicable.
(8) A copy of the form of Registrant's Custodian, Fund Accounting and
Recordkeeping Agreement with State Street Bank & Trust Company is filed
herewith as Exhibit 24(b)(8). First through Third Amendments to said
Agreement are filed herewith as Exhibit 24(b)(8).
(9) Not applicable.
(10) An opinion and consent of counsel as to the legality of the securities
registered by the Fund was filed by 24f-2 Notice on November 7, 1995
and is incorporated by reference herein.
(11) A consent as to use of opinion of Independent Auditors' is filed
herewith as Exhibit 24(b)(11).
(12) Not applicable.
(13) Copies of the Subscription Agreements were filed with Registrant's
Registration Statement No. 33-18774/811-5404 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. 2 to Registration Statement No.
33-18774/811-5404 as Exhibit 24 (b)(13)(a) and (b) and are incorporated
by reference herein.
(14) Copies of forms of model plans used in the establishment of retirement
plans in connection with which Registrant offer its securities were
filed with Post-Effective Amendment No. 66 to the Registration
Statement of Keystone Balanced Fund (K-1) (formerly Keystone Custodian
Fund, Series K-1) (File No. 2-10527/811-93 as Exhibit 24(b)(14)) and
are incorporated by reference herein.
(15) Copies of the forms of Registrant's Distribution Plans are filed
herewith as Exhibit 24(b)(15).
(16) Schedules for computation of total return are filed herewith as Exhibit
24(b)(16).
(17) A financial data schedule is filed herewith as Exhibit 27.
(18) A copy of the form of Registrant's Multiple Class Plan was filed with
Post Effective Amendment No. 10 and is incorporated by reference
herein.
(19) Powers of Attorney are filed herewith as Exhibit 24(b)(19).
Item 25. Persons Controlled by or Under Common Control With Registrant
Not applicable.
Item 26. Number of Holders of Securities
Number of Record
Title of Class Holders as of October 31, 1995
-------------- ------------------------------
Shares of Beneficial Class A - 6,468
Interest, without par Class B - 16,946
value Class C - 3,687
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 Investment Distributors
Company (formerly named Keystone Distributors, Inc.), Registrant's Principal
Underwriter, are contained in Section 9 of the Principal Underwriting Agreement
between Registrant and Keystone Investment Distributors Company, a copy of which
is filed herewith as Exhibit 24(b)(6).
Provisions for the indemnification of Keystone Investment Management
Company and Credit Lyonnais International Asset Management, N.A. Registrant's
investment adviser and subadviser, respectively, are contained in Section 6 of
the Investment Advisory and Management Agreement between Registrant and Keystone
Investment Management Company and Section 6 of the Subadvisory Agreement between
Keystone Investment Management Company and Credit Lyonnais International
Management, N.A., copies of which are filed herewith as Exhibits 24(b)(5)(A) and
24(b)(5)(B), respectively.
Item 28. Businesses and Other Connections of Investment Advisers
The following tables list the names of the various officers and
directors of Keystone Investment Management Company (formerly named
Keystone Custodian Funds, Inc.) and Credit Lyonnais Asset Management
(North America) ("CLIAM"), Registrant's investment adviser and
subadviser, respectively, and their respective positions. For each
named individual, the tables list, for at least the past two years,
(i) any other organizations with which the officer and/or director has
had or has substantial involvement; and (ii) positions held with such
organizations.
<PAGE>
LIST OF OFFICERS AND DIRECTORS OF
KEYSTONE INVESTMENT MANAGEMENT COMPANY
Position with
Keystone
Investment
Name Management Company Other Business Affiliations
Albert H. Chairman of Chairman of the Board,
Elfner, III the Board, Chief Executive Officer,
Chief Executive President and Director:
Officer,and Keystone Investments, Inc.
Director Keystone Management, Inc.
Keystone Software, Inc.
Keystone Asset Corporation
Keystone Capital
Corporation
Chairman of the Board and
Director:
Keystone Fixed Income
Advisers, Inc.
Keystone Institutional
Company, Inc.
President and Director:
Keystone Trust Company
Director or Trustee:
Fiduciary Investment
Company, Inc.
Keystone Investment
Distributors Company
Keystone Investor
Resource Center, Inc.
Boston Children's
Services Associates
Middlesex School
Middlebury College
Former Trustee or Director:
Neworld Bank
Robert Van Partners, Inc.
Philip M. Byrne Director President and Director:
Keystone Institutional
Company, Inc.
Senior Vice President:
Keystone Investments, Inc.
Herbert L. Bishop, Jr. Senior Vice None
President
Donald C. Dates Senior Vice None
President
Gilman Gunn Senior Vice None
President
Edward F. Godfrey Director, Director, Senior Vice
Senior Vice President
President, Chief Financial Officer and
Treasurer and Treasurer:
Chief Financial Keystone Investments, Inc.
Officer Keystone Investment
Distributors Company
Treasurer:
Keystone Institutional
Company, Inc.
Keystone Management, Inc.
Keystone Software, Inc.
Fiduciary Investment
Company, Inc.
Former Treasurer and
Director:
Hartwell Keystone
Advisers, Inc.
James R. McCall Director and None
President
Ralph J. Spuehler, Jr. Director President and Director:
Keystone Investment
Distributors Company
Senior Vice President and
Director:
Keystone Investments, Inc.
Chairman and Director:
Keystone Investor
Resource Center, Inc.
Keystone Management, Inc.
Formerly President:
Keystone Management, Inc.
Formerly Treasurer:
The Kent Funds
Keystone Investments, Inc.
Keystone Investment
Management Company
Rosemary D. Van Antwerp Senior Vice General Counsel, Senior
President, Vice President and
General Counsel Secretary:
and Secretary Keystone Investments, Inc.
Senior Vice President and
General Counsel:
Keystone Institutional
Company, Inc.
Senior Vice President,
General Counsel and
Director:
Keystone Investor
Resource Center, Inc.
Fiduciary Investment
Company, Inc.
Keystone Investment
Distributors Company
Senior Vice President,
General Counsel, Director
and Secretary:
Keystone Management, Inc.
Keystone Software, Inc.
Former Senior Vice
President and Secretary:
Hartwell Keystone
Advisers, Inc.
Vice President and
Secretary:
Keystone Fixed Income
Advisers, Inc.
Harry Barr Vice President None
Robert K. Baumback Vice President None
Betsy A. Blacher Senior Vice None
President
Francis X. Claro Vice President None
Kristine R. Cloyes Vice President None
Christopher P. Conkey Senior Vice None
President
Richard Cryan Senior Vice None
President
Maureen E. Cullinane Senior Vice None
President
George E. Dlugos Vice President None
Antonio T. Docal Vice President None
Christopher R. Ely Senior Vice None
President
Robert L. Hockett Vice President None
Sami J. Karam Vice President None
Donald M. Keller Senior Vice None
President
George J. Kimball Vice President None
JoAnn L. Lyndon 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 Senior Vice None
President
Barbara McCue Vice President None
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
J. Kevin Kenely Vice President None
and Controller
Joseph J. Decristofaro Asst. Vice President None
<PAGE>
LIST OF OFFICERS AND DIRECTORS OF
CREDIT LYONNAIS ASSET MANAGEMENT (NORTH AMERICA)
Position with
Credit Lyonnais
Asset Management
Name (North America) Other Business Affiliations
- ---- ---------------- ---------------------------
Klaus Zuger Chief Investment None
Officer - US
Dennis Bastin Managing Director None
Roy Blessing Managing Director None
Joan Baume Director None
Maurice Monbaron Director None
<PAGE>
Item 29. Principal Underwriter
(a) Keystone Investment Distributors Company, (formerly named Keystone
Distributors, Inc.) which acts as Registrant's principal underwriter,
also acts as principal underwriter for the following entities:
Keystone America Hartwell Emerging Growth Fund, Inc.
Keystone Hartwell Growth Fund
Keystone Quality Fund (B-1)
Keystone Diversified Bond Fund (B-2)
Keystone High Income Bond Fund (B-4)
Keystone Balanced Fund (K-1)
Keystone Strategic Growth Fund (K-2)
Keystone Growth and Income Fund (S-1)
Keystone Mid-Cap Growth Fund (S-3)
Keystone Small Company Growth Fund (S-4)
Keystone Capital Preservation and Income Fund
Keystone Fund for Total Return
Keystone Government Securities Fund
Keystone Intermediate Term Bond Fund
Keystone America Omega Fund, Inc.
Keystone State Tax Free Fund
Keystone State Tax Free Fund - Series II
Keystone Strategic Income Fund
Keystone Tax Free Income Fund
Keystone World Bond Fund
Keystone Fund of the Americas
Keystone International Fund Inc.
Keystone Liquid Trust
Keystone Precious Metals Holdings, Inc.
Keystone Strategic Development Fund
Keystone Tax Exempt Trust
Keystone Tax Free Fund
Master Reserves Trust
(b) For information with respect to each director and officer of
Registrant's acting principal underwriter see the following pages.
Item 29(c). - Not applicable
Position and Offices with Position and
Name and Principal Keystone Investment Offices with
Business Address Distributors Company 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
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
<PAGE>
Item 29(b) continued
Position and
Name and Principal Position and Offices with Offices with
Business Address Keystone Distributors, Inc. the Fund
- ------------------ --------------------------- -------------
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
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 30. Location of Accounts and Records
200 Berkeley Street
Boston, Massachusetts 02116-5034
Credit Lyonnais Asset Management (North America)
99 Wall Street
New York, New York 10005
Keystone Investor Resource Center, Inc.
101 Main Street
Cambridge, MA 02142-1519
Data Vault, Inc.
3431 Sharp Slot Road
Swansea, MA 02277
State Street Bank and Trust Company
1776 Heritage Drive
Quincy, Massachusetts 02171
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Upon request and without charge, Registrant hereby undertakes to
furnish a copy of its latest annual report to shareholders to each
person to whom a copy of the Registrant's prospectus is delivered.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for the effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to 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 29 day of November, 1995.
KEYSTONE GLOBAL OPPORTUNITIES FUND
By: /s/ George S. Bissell
--------------------------
George S. Bissell*
Chairman of the Board
*By:/s/ Melina M. T. Murphy
--------------------------
Melina M. T. Murphy**
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registrant's Registration Statement has been signed below by the following
persons in the capacities indicated on the 29 day of November, 1995.
SIGNATURES TITLE
/s/ George S. Bissell Chairman of the Board and Trustee
- ---------------------------
George S. Bissell*
President, Chief Executive Officer
/s/ Albert H. Elfner, III and Trustee
- ---------------------------
Albert H. Elfner, III*
Treasurer (Principal Financial
/s/ Kevin J. Morrissey and Accounting Officer)
- ---------------------------
Kevin J. Morrissey*
*By:/s/ Melina M. T. Murphy
--------------------------
Melina M. T. Murphy**
Attorney-in-Fact
<PAGE>
SIGNATURES TITLE
/s/ Frederick Amling Trustee
- ---------------------------
Frederick Amling*
/s/ Charles A. Austin, III Trustee
- ---------------------------
Charles A. Austin, III*
/s/ 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)(19).
<PAGE>
INDEX TO EXHIBITS
Page Number
In Sequential
Exhibit Number Exhibit Numbering System
- -------------- ------- ----------------
1 Declaration of Trust
Amendments to Declaration of Trust
2 By-Laws
Amendments to By-Laws\2
4 Specimen Share Certificate\2
5 (A) Investment Advisory and Management Agreement
(B) Subadvisory Agreement
Amendment to Subadvisory Agreement
6 (A) Principal Underwriting Agreements
Amendment to Underwriting Agreement
(B) Dealers Agreement
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
Additional Subscription Agreements\2
14 Model Retirement Plans\3
15 Distribution Plans (Class A & C)
Distribution Plans (Class B-1 and B-2)
16 Performance Data Schedules
17 Financial Data Schedules (filed as Exhibit 27)
18 Form of 18f-3 Plan\4
19 Powers of Attorney
- --------------------
\1 Incorporated herein by reference to Registration Statement No.
33-18774/811-5404.
\2 Incorporated herein by reference to Pre-Effective Amendment No. 2
to Registration Statement No. 33-11050/811-4797.
\3 Incorporated herein by reference to Post-Effective Amendment No. 66
to Registration Statement for Keystone Balanced Fund (K-1) (File No.
2-10527/811-96).
\4 Incorporated herein by reference to Post-Effective Amendment No. 10
to Registration Statement No. 33-18774/811-5404.
\5 Incorporated herein by reference to Registrant's Rule 24f-2 Notice
filed November 7, 1995.
<PAGE>
Exhibit 99.1
KEYSTONE AMERICA GLOBAL
OPPORTUNITIES FUND
SECOND SUPPLEMENTAL
DECLARATION OF TRUST
EFFECTIVE MAY 1, 1995
SECOND SUPPLEMENTAL DECLARATION OF TRUST dated March 15, 1995 made by George
S. Bissell, Albert H. Elfner, III, Frederick Amling, Charles A. Austin, III,
Edwin D. Campbell, Charles F. Chapin, K. Dun Gifford, Leroy Keith, Jr., 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 June 17, 1987.
WHEREAS, the Trustees have determined to change the name of the Trust and to
change the designation of its principal office to 200 Berkeley Street, Boston,
Massachusetts 02116.
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 Global Opportunities 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."
This Amendment shall become effective as of May 1, 1995.
All other provisions of the Declaration of Trust shall continue as
originally stated.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have caused this Second Supplemental Declaration of Trust to be executed
on the 15th day of March, 1995.
<PAGE>
/s/ George S. Bissell
- ---------------------------------------
George S. Bissell, Trustee
/s/ Albert H. Elfner, III
- ---------------------------------------
Albert H. Elfner, III, Trustee
/s/ Frederick Amling
- ---------------------------------------
Frederick Amling, Trustee
/s/ Charles A. Austin, III
- ---------------------------------------
Charles A. Austin, III, Trustee
/s/ Edwin D. Campbell
- ---------------------------------------
Edwin D. Campbell, Trustee
/s/ Charles F. Chapin
- ---------------------------------------
Charles F. Chapin, Trustee
/s/ K. Dun Gifford
- ---------------------------------------
K. Dun Gifford, Trustee
/s/ Leroy Keith, Jr.
- ---------------------------------------
Leroy Keith, Jr., Trustee
/s/ F. Ray Keyser, Jr.
- ---------------------------------------
F. Ray Keyser, Jr., Trustee
/s/ David M. Richardson
- ---------------------------------------
David M. Richardson, Trustee
/s/ Richard J. Shima
- ---------------------------------------
Richard J. Shima, Trustee
/s/ Andrew J. Simons
- ---------------------------------------
Andrew J. Simons, Trustee
<PAGE>
KEYSTONE AMERICA OVERSEAS EQUITIES FUND
FIRST SUPPLEMENTAL
DECLARATION OF TRUST
Dated September 16, 1987
FIRST SUPPLEMENTAL DECLARATION OF TRUST dated September 16, 1987 made by George
S. Bissell, James A. Reed, John W. Sharp, Spencer R. Stuart, and Charles M.
Williams (hereinafter with their successors referred to as the "Trustees") to
DECLARATION OF TRUST, dated June 17, 1987.
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 Global Opportunities
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."
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 16th
day of September 1987.
/s/ George S. Bissell
- ---------------------------------------
George S. Bissell, Trustee
/s/ James A Reed
- ---------------------------------------
James A Reed, Trustee
/s/ John W. Sharp
- ---------------------------------------
John W. Sharp, Trustee
/s/ Spencer R. Stuart
- ---------------------------------------
Spencer R. Stuart, Trustee
/s/ Charles M. Williams
- ---------------------------------------
Charles M. Williams, Trustee
<PAGE>
KEYSTONE AMERICA OVERSEAS EQUITIES FUND
DECLARATION OF TRUST
Dated June 17, 1987
DECLARATION OF TRUST, made at Boston, Massachusetts on June 17, 1987 by
George S. Bissell, James A. Reed, John W. Sharp, Spencer Stuart 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 OVERSEAS
EQUITIES 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 Investment Company Act of 1940 ("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 a majority of Shares
of a Series entitled to vote on a matter at a meeting or a special meeting
of Shareholders but not less than the "vote of a majority" as defined in the
1940 Act;
(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 4;
(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 class of Shares is authorized by the Trustees, the equal
proportionate units into which each class of Shares shall be divided from
time to time, and includes where appropriate such fractions of a Share as
the Trustees may from time to time authorize as well as a whole Share;
(h) "Trustees" refers to the Trustee or Trustees of the Trust named or
elected 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 transferable Shares, without par
value, each of which shall represent an equal proportionate interest in the
Trust with each other Share outstanding, none having priority or preference over
another, except to the extent modified by the Trustees under the provisions of
this Section. The number of Shares which may be issued is unlimited. The
Trustees may from time to time divide or combine the outstanding Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interest in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or fractions.
From time to time as they deem appropriate, the Trustees may create
additional classes ("Classes") and/or series ("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 to
each such Series of Shares and (to the extent not inconsistent with the rights
and restrictions of a Class) to each such Class of Shares, except to the extent
modified by the Trustees under the provisions of this Section.
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 the 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 redemption rights, dividend rights, conversion rights,
liquidation rights, voting rights, and such other rights and restrictions as the
Trustees deem appropriate).
Section 2. Ownership of Shares. The ownership of Shares shall be recorded 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.
After the initial investment in the Trust, Shares (including Shares which
may have been redeemed or repurchased by the Trust) may be issued or sold at a
price which will net the Trust, before paying any taxes in connection with such
issue or sale, not less than the Net Asset Value per Share thereof; provided,
however, that the Trustees may in their discretion impose a sales charge upon
investments in the Trust.
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 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, without differentiation among votes from the
separate Series; provided, however, that (i) as to any matter with respect
to which a separate vote of any Series is required by the 1940 Act or would
be required under the Massachusetts Business Corporation Law if the Trust
were a Massachusetts business corporation, such requirement as to a separate
vote by the Series shall apply in lieu of the voting described above herein;
(ii) in the event that the separate vote requirements referred to in (i)
above apply with respect to one or more Series, then, subject to (iii)
below, the Shares of all other Series shall vote without differentiation
among their votes; and (iii) as to any matter which does not affect the
interest of a particular Series, only the holders of Shares of the one or
more affected Series 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. Election of Trustees. Within one year from the initial public
offering of Shares, the Shareholders shall elect the Trustees at a meeting
called by the initial Trustees of the Trust. If reelected, a Trustee may succeed
himself.
Section 2. Term of Office of Trustees. The Trustees first named above (or
their successors appointed hereunder) shall serve until the election of Trustees
at the first meeting of Shareholders of the Trust. Thereafter, the Trustees
shall hold office during the lifetime of this Trust, or until the election of
his or her successor at a meeting of Shareholders; except (a) that any Trustee
may resign his or her trust by written instrument signed by him or her and
delivered to the other Trustees which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed at any time by written instrument signed by at least two-thirds of the
number of Trustees prior to such removal specifying the date when such removal
shall become effective; (c) that no Trustee may stand for reelection after he or
she has passed his or her seventieth birthday; (d) that any Trustee who requests
in writing to be retired or who has become mentally or physically incapacitated
may be retired by written instrument signed by a majority of the other Trustees,
specifying the date of his or her retirement; and (e) a Trustee may be removed
at any special meeting of Shareholders of the Trust by a vote of a majority of
the outstanding Shares entitled to vote.
Section 3. Termination of Service and Appointment of Trustees. In case of
the death, resignation, retirement, removal or mental or physical incapacity of
any of the Trustees, or in case a vacancy shall, by reason of an increase in
number, or for any other reason, exist, the remaining Trustees shall fill such
vacancy by appointing for the remaining term of the predecessor Trustee such
other person as they in their discretion shall see fit. Such appointment shall
be effected by the signing of a written instrument by a majority of the Trustees
in office. An appointment of a Trustee may be made by the Trustees then in
office in anticipation of a vacancy to occur by reason of retirement,
resignation or increase in the number of Trustees effective at a later date,
provided that such appointment shall become effective only at or after the
effective date of such retirement, resignation or increase in the number of
Trustees. As soon as any Trustee so appointed shall have accepted this Trust,
the Trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he or she shall
be deemed a Trustee hereunder. Any appointment authorized by this Section 3 is
subject to the provisions of Section 16(a) of the 1940 Act.
Section 4. Number of Trustees. The number of Trustees serving hereunder at
any time shall be determined by the Trustees themselves, but shall not be less
than three (3) nor more than fifteen (15).
Whenever a vacancy in the Board of Trustees shall occur, until such vacancy
is filled or while any Trustee is absent from the Commonwealth of Massachusetts
or, if not a domiciliary of Massachusetts, is absent from his state of domicile,
or is physically or mentally incapacitated, the other Trustees shall have all
the powers hereunder, and the certificate signed by a majority of the other
Trustees of such vacancy, absence or incapacity shall be conclusive, provided,
however, that no vacancy which reduces the number of Trustees below three (3)
shall remain unfilled for a period longer than six calendar months.
Section 5. Effect of Death, Resignation, etc. of a Trustee. The death,
resignation, retirement, removal, or mental or physical incapacity of the
Trustees, or any one of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Declaration of Trust.
Section 6. 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.
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 the Shareholders; they may fill vacancies in or add to
their own number and 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 record
dates, and in general delegate such authority as they consider desirable to any
officers of the Trust and committees of the Trustees and to any agent or
employee, custodian or underwriter.
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 security held in the Trust;
(g) To join with other security holders in acting through a committee,
depository, voting Trustee or otherwise, and in that connection to deposit
any security with, or transfer any security to, any such committee,
depository or Trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of
the expenses and compensation of such committee, depository or Trustee as
the Trustees shall deem proper;
(h) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust for any matter in controversy, including but not limited
to claims for taxes; and
(i) To borrow funds.
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 be considered as vested in the
Trustees. No Shareholder shall be deemed to have a severable ownership in any
individual asset of the Trust or any right of partition or possession thereof,
but each Shareholder shall have a proportionate undivided beneficial interest in
the assets of the Class 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. Subject to a favorable
Majority Shareholder Vote, 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.
Subject to a favorable Majority Shareholder Vote, 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.
The Trustees may enter into a contract with any person or persons, including
any firm, corporation, trust or association in which any Trustee, Shareholder or
officer of the Trust may be interested, to act as principal underwriter for the
Shares.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote (i) for
the election or removal of Trustees as provided in Article IV, Section 1, (ii)
with respect to any Adviser or person whom the Adviser may retain to provide the
Trust investment advice and/or management as provided in Article IV, Section 9,
(iii) with respect to any amendment of this Declaration of Trust as provided in
Article IX, Section 7, (iv) to the same extent as the stockholders of a
Massachusetts business corporation, as to whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a class
action on behalf of the Trust or the Shareholders, and (v) with respect to such
additional matters relating to the Trust as may be required by law, by this
Declaration of Trust, or the By-Laws of the Trust or any registration of the
Trust with the Commission or any state, or as the Trustees may consider
desirable. 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 as specified in
Article IV, Section 1 and in the By-Laws at the principal office of the Trust or
such other place as the Trustees may designate. Special 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 one fourth 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 entitled to vote on a
question shall decide such question and a plurality of the Shares entitled to
vote thereon shall elect a Trustee, 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. 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 all the Shareholders entitled to vote on
the subject matter thereof and such consent is filed with the records of the
Trust.
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 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, 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
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 as of a record date
or dates determined by 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 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 the Trustees may determine. 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 the Trustees may from
time to time determine, the Trustees shall redeem the Shares so offered by
distributing to the Shareholder the Net Asset Value per Share thereof next
determined. 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 the Trustees may from time to time prescribe. With
respect to all Shares or any Series 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 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. The Net Asset Value
per Share of each Series shall be computed as of the close of trading on the New
York Stock Exchange on each day on which such Exchange is open by determining
the value of all the investments of such Series, adding any other assets of such
Series, subtracting all liabilities of such Series and dividing the result by
the number of Shares of such Series outstanding.
Current value for portfolio securities shall be determined as follows.
Securities that are traded on an established exchange shall be valued on the
basis of the last sales price on the exchange where primarily traded prior to
the time of the valuation. Securities traded in the over-the-counter market and
for which complete quotations are readily available shall be valued at the mean
of the bid and asked prices at the time of valuation. Subject to instructions of
the Board of Trustees, the Trust shall value the following at prices deemed in
good faith to be fair: (1) securities (including restricted securities) for
which complete quotations are not readily available; (2) listed securities if in
the Trustees' opinion the last sales price does not reflect a current market
value or if no sale occurred; and (3) other assets. The fair value for listed
securities normally will be the mean between the closing bid and asked prices on
the exchange or primary market, where available.
Money market or short-term tax-free securities for which market quotations
are readily available shall be valued at prices which, in the opinion of the
person making the determination, most nearly represent the market value of such
securities which may, but need not, be the most recent bid price obtained from
one or more of the market makers for such securities. Other securities and
assets shall be valued at fair value as determined by or pursuant to the
direction of the Trustees, which in the case of short term debt obligations,
commercial paper and repurchase agreements may, but need not, be on the basis of
quoted yields for securities of comparable maturity, quality and type, or on the
basis of amortized cost.
Expenses and liabilities of the Trust shall be accrued each day. The manner
of determining the Net Asset Value per Share may from time to time be altered if
necessary or desirable in the Trustees' judgment to conform to any other method
prescribed or permitted by any applicable law or regulation.
The Net Asset Value per Share of any Series may be computed as of such other
times as the Trustees may determine and in such event the Net Asset Value per
Share of such Series may, but need not, be determined by adjusting the Net Asset
Value per Share of such Series last determined pursuant to this Section in such
manner (based upon changes in selected security prices determined by the
Trustees to be relevant to the Series or in averages or in other standard and
readily ascertainable market data since the last determination) as is deemed
adequate to reflect a fair approximate estimate of the probable change in Net
Asset Value per Share of such Series which has occurred since such last
determination.
In determination of Net Asset Value per Share and Net Income of any Series,
liabilities may include such reserves for taxes, estimated accrued expenses and
contingencies as the Trustees or their designates may in their sole discretion
deem fair and reasonable and attributable to such Series under the
circumstances. No accruals shall be made in respect of taxes on unrealized
appreciation of securities owned unless the Trustees shall otherwise determine.
Dividends payable by the Trust shall be deducted as at the time of but
immediately prior to the determination of Net Asset Value per Share on the
record date therefor or as the Trustees shall otherwise determine.
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. 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 determining the Net Asset
Value per Share of each Series of the Trust's Shares or Net Income or 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, or any rule or regulation thereunder, including any rule or regulation
adopted pursuant to Section 22 of the 1940 Act by the Commission or any
securities association registered under the Securities Exchange Act of 1934, or
any order of exemption issued by said 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.
ARTICLE VIII
Indemnification
Section 1. Trustees, Officers, etc. The Trust shall indemnify each of its
Trustees and officers and any persons who serve at the Trust's request as
Directors, officers or Trustees 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 interests of the Trust and except
that no person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person shall otherwise be subject by reason
of wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of office. Expenses, including counsel fees so
incurred by any Covered Person (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may 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, secured by an appropriate deposit or a surety bond approved by
independent legal counsel for the Trust, 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 proceeding
on the same or similar grounds is then or has been pending, and a "disinterested
person" is a person against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article shall
affect any rights to indemnification to which personnel of the Trust other than
Trustees and officers or other persons may be entitled by contract or otherwise
under law.
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 indemnnified 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. Termination of Trust.
(a) This Trust shall continue without limitation of time but subject to the
provisions of paragraphs (b), (c) and (d) of this Section 4.
(b) Subject to a Majority Shareholder Vote, the Trustees may merge,
consolidate or sell and convey the assets of the Trust, including its goodwill,
to another trust or corporation organized under the laws of any state of the
United States, which is a diversified open-end management investment company as
defined in the 1940 Act, for an adequate consideration which may include the
assumption of all outstanding obligations, taxes and other liabilities, accrued
or contingent, of the Trust and which may include shares of beneficial interest
or stock of such trust or corporation. Upon making provision for the payment of
all such liabilities, by such assumption or otherwise, the Trustees shall
distribute the net proceeds of the transaction ratably among the holders of the
Shares of the Trust then outstanding.
(c) Subject to a Majority Shareholder Vote, the Trustees may at any time
sell and convert into money all the assets of the Trust. Either the Trustees, or
the Shareholders of a Series acting by a Majority Shareholder Vote, may at any
time sell and convert into money all the assets of a Series. Upon making
provision for the payment of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust or Series, as the case may be,
the Trustees shall distribute the remaining assets of the Trust or Series
ratably among the holders of the outstanding Shares or Series, the assets
allocated to Series of Shares to be distributed ratably among the holders of
such Series.
(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 from 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. This Declaration of Trust may be altered or amended at
any time by an instrument in writing signed by a majority of the Trustees when
authorized so to do by vote of Shareholders holding a majority of the Shares
entitled to vote or by any larger vote which may be required applicable law in
any particular case, except that Amendments having the purpose of changing the
name of the Trust or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision contained
herein shall not require authorization by Shareholder vote. Copies of the
Supplemental Declaration of Trust shall be filed as specified in Section 5 of
this Article IX.
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.
/s/ George S. Bissell
--------------------------
George S. Bissell
/s/ James A. Reed
--------------------------
James A. Reed
/s/ John W. Sharp
--------------------------
John W. Sharp
/s/ Spencer R. Stuart
--------------------------
Spencer R. Stuart
/s/ Charles M. Williams
--------------------------
Charles M. Williams
<PAGE>
Exhibit 99.2
KEYSTONE AMERICA GLOBAL OPPORTUNITIES 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 Global Opportunities 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 Meetinqs. 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 Votinq. 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 Meetinqs. 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 Meetinqs. 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 Writinq. 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 Resiqnation 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; Votinq. 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
September 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>
Exhibit 99.5(A)
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 19th day of August, 1993, by and between KEYSTONE
AMERICA GLOBAL OPPORTUNITIES FUND, a Massachusetts business trust (the "Fund"),
and KEYSTONE CUSTODIAN FUNDS, INC., a Delaware corporation (the "Adviser").
WHEREAS, the Fund and the Adviser wish to enter into an agreement setting
forth the terms on which the Adviser will perform certain services for the Fund.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter contained, the Fund and the Adviser agree as follows:
1. The Fund hereby employs the Adviser 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 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 Fund in any way or otherwise be deemed an
agent of 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 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 Fund for:
(1) the compensation (if any) of the Trustees of the Fund who are affiliated
with the Adviser or with its affiliates, or with any adviser retained by the
Adviser, and of all officers of the Fund as such, and (2) all expenses of the
Adviser 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 Adviser or any of its
affiliates, or with any adviser retained by the Adviser; (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 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 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 Fund will pay to the Adviser a fee at the annual rate of:
AGGREGATE NET ASSET VALUE
MANAGEMENT OF THE SHARES
FEE OF THE FUND
- ------------------------------------------------------------------------------
1.00% of the first $200,000,000, plus
0.95% of the next $200,000,000, plus
0.85% of the next $200,000,000, plus
0.75% of amounts over $600,000,000
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 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 Adviser may enter into an agreement to retain, at its own expense,
any other firm or firms ("Subadviser") to provide the Fund all of the services
to be provided by the Adviser hereunder relating to the investment and
reinvestment of the non-North American assets of the Fund, if such agreement is
approved as required by law. Such agreement may delegate to such Subadviser all
of the Adviser's rights, obligations and duties hereunder.
6. The Adviser 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 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, 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 Adviser'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 Adviser
even though paid by it. The Fund 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.
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 Certificate of Incorporation of the Adviser 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 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 any Adviser as
Trustees, Directors, officers, shareholders or otherwise; that the Adviser (or
any such successor) is or may be interested in the Fund or any such 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, Certificate of
Incorporation of the Adviser 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 Adviser 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 Adviser, 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 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.
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 Adviser, any predecessor of the Adviser, 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 Adviser 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
KEYSTONE AMERICA GLOBAL
OPPORTUNITIES FUND
By: /s/ Roger Wickers
---------------------------
Title: Vice President
KEYSTONE CUSTODIAN FUNDS, INC.
By: /s/ Edward Godfrey
---------------------------
Title: Sr. Vice President
<PAGE>
Exhibit 99.5(B)
SUBADVISORY AGREEMENT
AGREEMENT made as of the 19th day of August, 1993 by and between KEYSTONE
CUSTODIAN FUNDS, INC. ("KCF"), a Delaware corporation, and CREDIT LYONNAIS
INTERNATIONAL ASSET MANAGEMENT (North America) ("CLIAM"), an unlimited Irish
corporation.
WITNESSETH: WHEREAS, KCF provides investment and management services to
Keystone America Global Opportunities Fund ("Fund"), a Massachusetts business
trust, under an investment advisory and management agreement dated August 19,
1993 ("IA Contract") pursuant to which KCF has agreed to manage the investment
and reinvestment of the assets of the Fund, subject to the supervision of the
Board of Trustees of the Fund, for the period and on the terms set forth in the
IA Contract;
WHEREAS, KCF and CLIAM wish to enter into an agreement for CLIAM's
investment advisory services to the Fund with respect to the Fund's non-
American portfolio.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, CLIAM and KCF agrees as follows:
1. Consistent with the investment objectives and policies of the Fund from
time to time and subject to the supervision of the Board of Trustees of the Fund
and KCF, CLIAM will regularly provide the Fund with investment research, advice
and supervision by furnishing continuously an investment program for the Fund's
non-North American portfolio. CLIAM will determine securities to be purchased
for, or sold from, the non-North American portfolio of the Fund, the price(s)
and size of each transaction, and will recommend what portion of the Fund's
non-North American assets shall be held uninvested. CLIAM shall advice and
assist the officers of the Fund and KCF in taking such steps as are necessary or
appropriate to carry out the decisions of the Fund's Board of Trustees and the
appropriate committees of such Board regarding the foregoing matters. CLIAM will
direct the trading of all non-North American securities and all other non-North
American transactions of the Fund.
2. CLIAM shall place all orders for the purchase and sale of non-North
American portfolio securities for the account of the Fund with broker-dealers
selected by CLIAM. In executing non-North American portfolio transactions and
selecting broker-dealers, CLIAM will use its best efforts to seek best execution
on behalf of the Fund. In assessing the best execution available for any
transaction, CLIAM 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 an continuing
basis). In evaluating the best execution available, and in selecting the
broker-dealer to execute a particular transaction, CLIAM may also consider the
brokerage and research services (as those terms are used in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Fund and/or other accounts over
which CLIAM or an affiliate of CLIAM exercises investment discretion. CLIAM 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, CLIAM 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.
The services of CLIAM to KCF and the Fund hereunder are not to be deemed
exclusive, and CLIAM shall be free to render similar services to others.
3. For its services as described in paragraph 1 above, for the preceding
fiscal quarter, CLIAM will receive from KCF on the first business day of each
fiscal quarter a fee which is 50% of the management fee paid by the Fund to KCF
for the preceding quarter.
4. This Agreement shall continue in effect until July 1, 1994 and shall be
automatically renewed for successive one-year periods unless CLIAM or KCF has
given the other at least sixty days' written notice of its intention to
terminate this Agreement at the end of the contract period then in effect;
provided, however, that the continuation of this Agreement for more than two
years shall be subject to the receipt of annual approvals of the Fund's Trustees
or shareholders in accordance with the Investment Company Act of 1940 ("Act")
and the rules thereunder. Notwithstanding the foregoing, the Agreement may be
terminated at any time, without a payment of any penalty, by vote of the Fund's
Board of Trustees or a majority of the Fund's outstanding voting securities
(within the meaning of the Act on not more than sixty days' written notice to
CLIAM. In addition, this Agreement shall terminate automatically if it is
assigned (within the meaning of the Act) by either party.
5. CLIAM acknowledges that it has copies of the Fund's Declaration of Trust,
by-laws, Prospectus and Statement of Additional Information in effect as of the
date hereof. So long as this Agreement remains in effect, KCF shall promptly
furnish to CLIAM any amendments or supplements to these documents which may
hereafter be adopted.
6. CLIAM 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 CLIAM'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 CLIAM, 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 CLIAM'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 CLIAM even though paid by it.
KCF agrees to indemnify and hold CLIAM harmless from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Act of 1933, the Securities Exchange
Act of 1934, the 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 CLIAM takes or does or omits to take or do hereunder, but
only to the extent that KCF itself is entitled to indemnify from the Fund in
respect of such act or thing taken or done or omitted to be taken or done by
CLIAM which indemnity is in excess of all costs and liabilities paid or incurred
by KCF in respect of such act or thing taken or done or omitted to be taken or
done by CLIAM and/or in respect of any act or thing taken or done or omitted to
be taken or done by KCF in connection therewith, and provided that CLIAM shall
not be indemnified against any cost, expense or liability (or any expenses
incident thereto) 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 CLIAM in the performance of its duties, or from
reckless disregard by it of its obligations and duties under this Agreement.
7. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if personally served on the party to whom notice is to be given,
or on the second day after mailing if mailed to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows:
If to CLIAM: Managing Director
Credit Lyonnais International Asset
Management (North America)
95 Wall Street
New York, NY 10005
If to KCF: President
Keystone Custodian Funds, Inc.
99 High Street
Boston, MA 02110
Attention: President
8. This Agreement constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations and understandings of the parties
hereto relating to the subject matter hereof. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provisions, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date and year first above written.
KEYSTONE CUSTODIAN FUNDS, INC.
By: /s/ Edward Godfrey
-----------------------------
Sr. Vice President
CREDIT LYONNAIS INTERNATIONAL
ASSET MANAGEMENT (North America)
By: /s/ Dennis Bastin
-----------------------------
<PAGE>
SUBADVISORY AGREEMENT
AGREEMENT made the 19th of August, 1993, as amended May 31, 1995, by and
between KEYSTONE INVESTMENT MANAGEMENT COMPANY ("Keystone"), a Delaware
corporation, and CREDIT LYONNAIS INTERNATIONAL ASSET MANAGEMENT (NORTH AMERICA)
("CLIAM"), an unlimited Irish corporation.
WITNESSETH:
WHEREAS, Keystone provides investment and management services to Keystone
Global Opportunities Fund ("Fund"), a Massachusetts business trust, under an
investment advisory and management agreement dated August 19, 1993 ("IA
Contract") pursuant to which Keystone has agreed to manage the investment and
reinvestment of the assets of the Fund, subject to the supervision of the Board
of Trustees of the Fund, for the period and on the terms set forth in the IA
Contract;
WHEREAS, Keystone and CLIAM wish to enter into an agreement for CLIAM's
investment advisory services to the Fund with respect to the Fund's non-North
American portfolio.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, CLIAM and Keystone agree as follows:
1. Consistent with the investment objectives and policies of the Fund from
time to time and subject to the supervision of the Board of Trustees of the Fund
and Keystone, CLIAM will regularly provide the Fund with investment research,
advice and supervision by furnishing continuously an investment program for the
Fund's non-North American portfolio. CLIAM will determine securities to be
purchased for, or sold from, the non-North American portfolio of the Fund, the
price(s) and size of each transaction, and will recommend what portion of the
Fund's non-North American assets shall be held uninvested. CLIAM shall advise
and assist the officers of the Fund and Keystone in taking such steps as are
necessary or appropriate to carry out the decisions of the Fund's Board of
Trustees and the appropriate committees of such Board regarding the foregoing
matters. CLIAM will direct the trading of all non-North American securities and
all other non-North American transactions of the Fund.
2. CLIAM shall place all orders for the purchase and sale of non-North
American portfolio securities for the account of the Fund with broker-dealers
selected by CLIAM. In executing non-North American portfolio transactions and
selecting broker-dealers, CLIAM will use its best efforts to seek best execution
on behalf of the Fund. In assessing the best execution available for any
transaction, CLIAM 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, CLIAM may also consider the
brokerage and research services (as those terms are used in Section 28(e) of the
Securities Exchange Act of 1934) provided to the Fund and/or other accounts over
which CLIAM or an affiliate of CLIAM exercises investment discretion. CLIAM 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, CLIAM 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.
The services of CLIAM to Keystone and the Fund hereunder are not to be
deemed exclusive, and CLIAM shall be free to render similar services to others.
3. For its services as described in paragraph 1 above, for the preceding
fiscal quarter, CLIAM will receive from Keystone on the first business day of
each fiscal quarter a fee which is 50% of the management fee paid by the Fund to
Keystone for the preceding quarter on Fund assets of up to $250,000,000 and 30%
of the management fee paid by the Fund to Keystone for the preceding quarter on
Fund assets in excess of $250,000,000.
4. This Agreement shall continue in effect until July 1, 1996 and shall be
automatically renewed for successive one-year periods unless CLIAM or Keystone
has given the other at least sixty days' written notice of its intention to
terminate this Agreement at the end of the contract period then in effect;
provided, however, that the continuation of this Agreement for more than two
years shall be subject to the receipt of annual approvals of the Fund's Trustees
or shareholders in accordance with the Investment Company Act of 1940 ("Act")
and the rules thereunder. Notwithstanding the foregoing, the Agreement may be
terminated at any time, without a payment of any penalty, by vote of the Fund's
Board of Trustees or a majority of the Fund's outstanding voting securities
(within the meaning of the Act) on not more than sixty days' written notice to
CLIAM. In addition, this Agreement shall terminate automatically if it is
assigned (within the meaning of the Act) by either party.
5. CLIAM acknowledges that it has copies of the Fund's Declaration of Trust,
bylaws, Prospectus and Statement of Additional Information in effect as of the
date hereof. So long as this Agreement remains in effect, Keystone shall
promptly furnish to CLIAM any amendments or supplements to these documents which
may hereafter be adopted.
6. CLIAM 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 CLIAM'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 CLIAM, 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 CLIAM'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 CLIAM even though paid by it.
Keystone agrees to indemnify and hold CLIAM harmless from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Act of 1933, the Securities Exchange
Act of 1934, the 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 CLIAM takes or does or omits to take or do hereunder, but
only to the extent that Keystone itself is entitled to indemnification from the
Fund in respect of such act or thing taken or done or omitted to be taken or
done by CLIAM which indemnification is in excess of all costs and liabilities
paid or incurred by Keystone in respect of such act or thing taken or done or
omitted to be taken or done by CLIAM and/or in respect of any act or thing taken
or done or omitted to be taken or done by Keystone in connection therewith, and
provided that CLIAM shall not be indemnified against any cost, expense or
liability (or any expenses incident thereto) 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 CLIAM in the
performance of its duties, or from reckless disregard by it of its obligations
and duties under this Agreement.
If to CLIAM: Managing Director
Credit Lyonnais International Asset
Management (North America)
1301 Avenue of the Americas
New York, NY 10019
If to Keystone: Keystone Investment Management Company
200 Berkeley Street
Boston, MA 02116
Attention: President
8. This Agreement constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations and undertakings of the parties
hereto relating to the subject matter hereof. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provisions, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the thirty-first day of May, 1995.
KEYSTONE INVESTMENT MANAGEMENT COMPANY
By: /s/ Rosemary D. Van Antwerp
-----------------------------------
CREDIT LYONNAIS INTERNATIONAL
ASSET MANAGEMENT (North America)
By: /s/ Dennis Bastin
-----------------------------------
<PAGE>
Exhibit 99.6(A)
FIRST AMENDMENT
TO
PRINCIPAL UNDERWRITING AGREEMENT
OF
KEYSTONE GLOBAL OPPORTUNITIES FUND
FIRST AMENDMENT (the "Amendment") made as of the 31st day of May 1995 to
AGREEMENT (the "Agreement") made the l9th day of August 1993 by and between
Keystone Global Opportunities Fund, a Massachusetts business trust, ("Fund"),
and Keystone Investment Distributors Company, a Delaware corporation (the
"Principal Underwriter").
1. This Amendment is made by the Fund, individually and/or on behalf of its
series if any, referred to above in the title of this Amendment, to which
series, if any, this Amendment shall relate, as applicable (the "Fund"). The
Fund and the Principal Underwriter mutually agree that Section 1 of the
Agreement is amended as follows:
"1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class A and Class C 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, the Principal Underwriter will act as agent for the Fund
and not as principal."
2. In all other respects the Agreement is unchanged.
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 GLOBAL OPPORTUNITIES FUND
By: /s/ Albert H. Elfner III
---------------------------------
Title: President
KEYSTONE INVESTMENT DISTRIBUTORS COMPANY
By: /s/ Ralph J. Spuehler, Jr.
---------------------------------
Title: President
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND
AGREEMENT made this 19th day of August, 1993 by and between Keystone America
Global Opportunities Fund, a Massachusetts business trust, ("Fund"), and
Keystone Distributors, Inc., a Delaware corporation ("Principal Underwriter").
It is hereby mutually agreed as follows:
1. The Fund hereby appoints Principal Underwriter a principal underwriter of
the shares of beneficial interest of the Fund ("Shares") as an independent
contractor upon the terms and conditions hereinafter set forth. Except as the
Fund may from time to time agree, Principal Underwriter will act as agent for
the Fund and not as principal.
2. Principal Underwriter will use its best efforts to find purchasers for
the Shares, to promote distribution of the Shares and may obtain orders from
brokers, dealers or other persons for sales of Shares to them. No such dealer,
broker or other person shall have any authority to act as agent for the Fund;
such dealer, broker or other person 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 and as set forth in the then current prospectus
and/or statement of additional information of the Fund and to receive the sales
charges, including 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 and the
sales charges 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 issue 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 and 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 issue of Shares.
12. To the extent required by the 12b-1 Plan, 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 purpose 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 the 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 GLOBAL OPPORTUNITIES FUND
By: /s/ George S. Bissell
--------------------------------------
Title: Chairman
KEYSTONE DISTRIBUTORS, INC.
By: /s/ Edward Godfrey
--------------------------------------
Title: Sr. Vice President
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-1 SHARES
OF
KEYSTONE GLOBAL OPPORTUNITIES FUND
AGREEMENT made this 31st day of May 1995 by and between Keystone Global
Opportunities Fund, a Massachusetts business trust, ("Fund"), and Keystone
Investment Distributors Company, a Delaware corporation (the "Principal
Underwriter").
The Fund, individually and/or on behalf of its series, if any, referred to
above in the title of this Agreement, to which series, if any, this Agreement
shall relate, as applicable (the Fund ), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the 1940 Act ). Accordingly, it is hereby mutually agreed
as follows:
1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class B-1 shares of beneficial interest of the Fund ("B-1
Shares") as an independent contractor upon the terms and conditions hereinafter
set forth. The general term "Shares" as used herein has the same meaning as is
provided therefor in Schedule I hereto. Except as the Fund may from time to time
agree, the Principal Underwriter will act as agent for the Fund and not as
principal.
2. The Principal Underwriter will use its best efforts to find purchasers
for the B-1 Shares and to promote distribution of the B-1 Shares and may obtain
orders from brokers, dealers or other persons for sales of B-1 Shares to them.
No such dealer, broker or other person shall have any authority to act as agent
for the Fund; such dealer, broker or other person shall act only as principal in
the sale of B-1 Shares.
3. Sales of B-1 Shares by Principal Underwriter shall be at the 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 B-2 Shares. 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 B-1 Shares the Fund shall receive the current net asset
value. The Fund shall pay the Principal Underwriter Distribution Fees (as
defined in Section 14 hereof), as commissions for the sale of B-1 Shares and
other Shares, which shall be paid in conjunction with distribution fees paid to
the Principal Underwriter by other classes of Shares of the Fund to the extent
required in order to comply with Section 14 hereof, and shall pay over to the
Principal Underwriter CDSCs (as defined in Section 14 hereof) as set forth in
the Fund's current prospectus and statement of additional information, and as
required by Section 14 hereof. The Principal Underwriter shall also receive
payments consisting of shareholder service fees ("Service Fees") at the rate of
.25% per annum of the average daily net asset value of the Class B-1 Shares. The
Principal Underwriter may allow all or a part of said Distribution Fees and
CDSCs received by it (not paid to others as hereinafter provided) to such
brokers, dealers or other persons as Principal Underwriter may determine.
5. Payment to the Fund for B-1 Shares shall be in New York or Boston
Clearing House funds received by the Principal Underwriter within three 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 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
issue of the B-1 Shares.
6. The Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the B-1 Shares any representations concerning the B-1
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 the Principal Underwriter in reasonable quantities upon
request.
7. The Principal Underwriter agrees to comply with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (as defined in
the Purchase and Sale Agreement, dated as of May 31, 1995 (the Purchase
Agreement ), between the Principal Underwriter, Citibank, N.A. and Citicorp
North America, Inc., as agent (the "Rules of Fair Practice")).
8. The Fund appoints the Principal Underwriter as its agent to accept
orders for redemptions and repurchases of B-1 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 and 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, Directors or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
(a) may be based upon any wrongful act by the Principal Underwriter or any
of its employees or representatives, or
(b) may be based upon any untrue statement or alleged untrue statement of
a material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
or confirmed in writing to the Fund by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and things
as shall from time to time be reasonably requested by the Principal Underwriter
for the purpose of qualifying the B-1 Shares for sale under the so-called "blue
sky" laws of any state or for registering B-1 Shares under the 1933 Act or the
Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal
Underwriter shall bear the expenses of preparing, printing and distributing
advertising, sales literature, prospectuses, and statements of additional
information. The Fund shall bear the expense of registering B-1 Shares under the
1933 Act and the Fund under the 1940 Act, qualifying B-1 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 holders of B-1 Shares, and the direct expenses of the issue of
B-1 Shares.
12. The Principal Underwriter shall, at the request of the Fund, provide to
the Board of Trustees or Directors (together herein called the Directors ) of
the Fund in connection with sales of B-1 Shares not less than quarterly a
written report of the amounts received from the Fund therefor and the purpose
for which such expenditures by the Fund 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 one year.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the outstanding voting securities of
Class B-1 of the Fund or by a majority of the Directors of the Fund and a
majority of the Directors who are not parties to this Agreement or "interested
persons", as defined in the Investment Company Act of 1940 (the 1940 Act ), of
any such party and who have no direct or indirect financial interest in the
operation of the Fund's Rule 12b-1 plan for Class B-1 Shares or in any
agreements related to the plan 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 Directors of the Fund, or a majority of
such Directors who are not parties to this Agreement or "interested persons", as
defined in the 1940 Act, of any such party and who have no direct or indirect
financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-1
Shares or in any agreement related to the plan or by a vote of a majority of the
outstanding voting securities of Class B-1 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), which shall not
include assignment of the Principal Underwriter's (as hereinafter defined)
provided for hereunder and/or rights related to such Allocable Portions.
14. The provisions of this Section 14 shall be applicable to the extent
necessary to enable the Fund to comply with the obligation of the Fund to pay
the Principal Underwriter its Allocable Portion of Distribution Fees paid in
respect of Shares while the Fund is required to do so pursuant the Principal
Underwriting Agreement, of even date herewith, in respect of Class B-2 Shares,
and shall remain in effect so long as any payments are required to be made by
the Fund pursuant to the irrevocable payment instruction (as defined in the
Purchase Agreement (the Irrevocable Payment Instruction )).
14.1 The Fund shall pay to the Principal Underwriter the Principal
Underwriter's Allocable Portion (as hereinafter defined) of a fee (the
"Distribution Fee") at the rate of .75% per annum of the average daily net asset
value of the Shares, subject to the limitation on the maximum aggregate amount
of such fees under the Rules of Fair Practice as applicable to such Distribution
Fee on the date hereof.
14.2 The Principal Underwriter's Allocable Portion of Distribution Fees
paid by the Fund in respect of Shares shall be equal to the portion of the Asset
Based Sales Charge allocable to Distributor Shares (as defined in Schedule I
hereto to this Agreement) in accordance with Schedule I hereto. The Fund agrees
to cause its transfer agent to maintain the records and arrange for the payments
on behalf of the Fund at the times and in the amounts and to the accounts
required by Schedule I hereto, as the same may be amended from time to time. It
is acknowledged and agreed that by virtue of the operation of Schedule I hereto
the Principal Underwriter's Allocable Portion of Distribution Fees paid by the
Fund in respect of Shares, may, to the extent provided in Schedule I hereto,
take into account Distribution Fees payable by the Fund in respect of other
existing and future classes and/or sub-classes of shares of the Fund which would
be treated as "Shares" under Schedule I hereto. The Fund will limit amounts paid
to any subsequent principal underwriters of Shares to the portion of the Asset
Based Sales Charge paid in respect of Shares which is allocable to
Post-distributor Shares (as defined in Schedule I hereto) in accordance with
Schedule I hereto. The Fund's payments to the Principal Underwriter in
consideration of its services in connection with the sale of B-1 Shares shall be
the Distribution Fees attributable to B-1 Shares which are Distributor Shares
(as defined in Schedule I hereto) and all other amounts constituting the
Principal Underwriter's Allocable Portion of Distribution Fees shall be the
Distribution Fees related to the sale of other Shares which are Distributor
Shares (as defined in Schedule I hereto).
The Fund shall cause its transfer agent and sub-transfer agents to withhold
from redemption proceeds payable to holders of Shares on redemption thereof the
contingent deferred sales charges payable upon redemption thereof as set forth
in the then current prospectus and/or statement of additional information of the
Fund ("CDSCs") and to pay over to the Principal Underwriter The Principal
Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which
shall be equal to the portion thereof allocable to Distributor Shares (as
defined in Schedule I hereto) in accordance with Schedule I hereto.
14.3 The Principal Underwriter shall be considered to have completely
earned the right to the payment of its Allocable Portion of the Distribution Fee
and the right to payment over to it of its' Allocable Portion of the CDSC in
respect of Shares as provided for hereby upon the completion of the sale of each
Commission Share (as defined in Schedule I hereto) taken into account as a
Distributor Share in computing the Principal Underwriter's Allocable Portion in
accordance with Schedule I hereto.
14.4 Except as provided in Section 14.5 hereof in respect of Distribution
Fees only, the Fund's obligation to pay the Principal Underwriter the
Distribution Fees and to pay over to the Principal Underwriter CDSCs provided
for hereby shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Principal Underwriter
and enforce such claims against any assets (other than the Principal
Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs
(the "Collection Rights") of the Principal Underwriter).
14.5 Notwithstanding anything in this Agreement to the contrary, the Fund
shall pay to the Principal Underwriter its Allocable Portion of Distribution
Fees provided for hereby notwithstanding its termination as Principal
Underwriter for the Shares or any termination of this Agreement and such payment
of such Distribution Fees, and that obligation and the method of computing such
payment, shall not be changed or terminated except to the extent required by any
change in applicable law, including, without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the Rules
of Fair Practice, in each case enacted or promulgated after June 1, 1995, or in
connection with a Complete Termination (as hereinafter defined). For the
purposes of this Section 14.5, "Complete Termination" means a termination of the
Fund's Rule 12b-1 plan for B-2 Shares involving the cessation of payments of the
Distribution Fees, and the cessation of payments of distribution fees pursuant
to every other Rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the
offering of every existing or future B-Class-of-Shares, which conditions shall
be deemed satisfied when they are first complied with hereafter and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-2 Shares which are Distributor Shares pursuant to Schedule I
hereto shall have been redeemed or converted or (ii) June 1, 2005. For purposes
of this Section 14.5, the term B-Class-of-Shares means each of the B-1 Class of
Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of
shares of the Fund hereafter issued which would be treated as Shares under
Schedule I hereto or which has substantially similar economic characteristics to
the B-1 or B-2 Classes of Shares taking into account the total sales charge,
CDSC or other similar charges borne directly or indirectly by the holder of the
shares of such class. The parties agree that the existing C Class of Shares of
the Fund does not have substantially similar economic characteristics to the B-1
or B-2 Classes of Shares taking into account the total sales charge, CDSC or
other similar charges borne directly or indirectly by the holder of such shares.
For purposes of clarity the parties to this agreement hereby state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing B-1 or B-2 Classes of Shares taking
into account the total sale charge, CDSC or other similar charges borne directly
or indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares.
14.6 The Principal Underwriter may assign any part of its Allocable
Portions and obligations of the Fund related thereto (but not the Principal
Underwriter's obligations to the Fund provided for in this Agreement) to any
person (an "Assignee") and any such assignment shall be effective as to the Fund
upon written notice to the Fund by the Principal Underwriter. In connection
therewith the Fund shall pay all or any amounts in respect of its Allocable
Portions directly to the Assignee thereof as directed in a writing by the
Principal Underwriter in the Irrevocable Payment Instruction, as the same may be
amended from time to time with the consent of the Fund, and the Fund shall be
without liability to any person if it pays such amounts when and as so directed,
except for underpayments of amounts actually due, without any amount payable as
consequential or other damages due to such underpayment and without interest
except to the extent that delay in payment of Distribution Fees and CDSCs
results in an increase in the maximum Sales Charge allowable under the Rules of
Fair Practice, which increases daily at a rate of prime plus one percent per
annum.
14.7 The Fund will not, to the extent it may otherwise be empowered to do
so, change or waive any CDSC with respect to B-1 Shares, except as provided in
the Fund's prospectus or statement of additional information without the
Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding
anything to the contrary in this Agreement or any termination of this Agreement
or the Principal Underwriter as principal underwriter for the Shares of the
Fund, the Principal Underwriter shall be entitled to be paid its Allocable
Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-1 Shares is
terminated and whether or not any such termination is a Complete Termination, as
defined above.
15. 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.
16. 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 GLOBAL OPPORTUNITIES FUND
By: /s/ Rosemary D. Van Antwerp
--------------------------------
Title: Senior Vice President
KEYSTONE INVESTMENT DISTRIBUTORS, INC.
By: /s/ Ralph J. Spuehler
--------------------------------
Title: President
<PAGE>
SCHEDULE I
TO
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-1 SHARES
OF
KEYSTONE GLOBAL OPPORTUNITIES FUND
TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING
AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES
Amounts (in respect of Asset Based Sales Charges (as hereinafter defined)
and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined)
of each Fund (as hereinafter defined) shall be allocated between Distributor
Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter
defined) of such Fund in accordance with the rules set forth in clauses (B) and
(C). Clause (B) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account (as hereinafter defined)
in maintaining records relating to Distributor Shares and Post-distributor
Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account in determining what
portion of the Asset Based Sales Charge (as hereinafter defined) payable in
respect of each class of Shares of such Fund and what portion of the CDSC (as
hereinafter defined) payable by the holders of Shares of such Fund is
attributable to Distributor Shares and Post-distributor Shares, respectively.
(A) DEFINITIONS:
Generally, for purposes of this Schedule I, defined terms shall be used
with the meaning assigned to them in the Agreement, except that for purposes of
the following rules the following definitions are also applicable:
"Agreement" shall mean the Principal Underwriting Agreement for Class B-1
Shares of the Instant Fund dated as of June 1, 1995 between the Instant Fund and
the Distributor.
"Asset Based Sales Charge" shall have the meaning set forth in Section
26(b)(8)(C) of the Rules of Fair Practice it being understood that for purposes
of this Exhibit I such term does not include the Service Fee.
"Business Day" shall mean any day on which the banks and the New York Stock
Exchange are not authorized or required to close in New York City.
"Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a
Dividend in respect of such Share which is designated by such Fund as being a
"capital gain dividend" as such term is defined in Section 852 of the Internal
Revenue Code of 1986, as amended.
"CDSC" shall mean with respect to any Fund, the contingent deferred sales
charge payable, either directly or by withholding from the proceeds of the
redemption of the Shares of such Fund, by the shareholders of such Fund on any
redemption of Shares of such Fund in accordance with the Prospectus relating to
such Fund.
"Commission Share" shall mean, in respect of any Fund, a Share of such Fund
issued under circumstances where a CDSC would be payable upon the redemption of
such Share if such CDSC is not waived or shall have not otherwise expired.
"Date of Original Purchase" shall mean, in respect of any Commission Share
of any Fund, the date on which such Commission Share was first issued by such
Fund; provided, that if such Share is a Commission Share and such Fund issued
the Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Date
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the date on which the Commission Share (or portion thereof) of the
other Fund was first issued by such other Fund (unless such Commission Share (or
portion thereof) was also issued by such other Fund in a Free Exchange, in which
case this proviso shall apply to that Free Exchange and this application shall
be repeated until one reaches a Commission Share (or portion thereof) which was
issued by a Fund other than in a Free Exchange).
"Distributor" shall mean Keystone Investment Distributors Company, its
successors and assigns.
"Distributor's Account" shall mean the account of the Distributor, account
no. 9903-584-2, ABA No. 011 0000 28, entitled "General Account" maintained with
State Street Bank & Trust Company or such other account as the Distributor may
designate in a notice to the Transfer Agent.
"Distributor Inception Date" shall mean, in respect of any Fund, the date
identified as the date Shares of such Fund are first sold by the Distributor.
"Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund,
the date identified as the last sale of a Commission Share during the period the
Distributor served as principal underwriter under the Agreement.
"Distributor Shares" shall mean, in respect of any Fund, all Shares of such
Fund the Month of Original Purchase of which occurs on or after the Inception
Date for such Fund and on or prior to the Distributor Last Sale Cut-off Date in
respect of such Fund.
"Dividend" shall mean, in respect of any Share of any Fund, any dividend or
other distribution by such Fund in respect of such Share.
"Free Exchange" shall mean any exchange of a Commission Share (or portion
thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of
another Fund (the "Issuing Fund"), under any arrangement which defers the
exchanging Shareholder's obligation to pay the CDSC in respect of the Commission
Share (or portion thereof) of the Redeeming Fund so exchanged until the later
redemption of the Share (or portion thereof) of the Issuing Fund received in
such exchange.
"Free Share" shall mean, in respect of any Fund, each Share of such Fund
other than a Commission Share, including, without limitation: (i) Shares issued
in connection with the automatic reinvestment of Capital Gain Dividends or Other
Dividends by such Fund, (ii) Special Free Shares issued by such Fund and (iii)
Shares (or portion thereof) issued by such Fund in connection with an exchange
whereby a Free Share (or portion thereof) of another Fund is redeemed and the
Net Asset Value of such redeemed Free Share (or portion thereof) is invested in
such Shares (or portion thereof) of such Fund.
"Fund" shall mean each of the regulated investment companies or series or
portfolios of regulated investment companies identified in Schedule II to the
Irrevocable Payment Instruction, as the same may be amended from time to time in
accordance with the terms thereof.
"Instant Fund" shall mean [Keystone Equity Fund].
"ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus
Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer
agent.
"Month of Original Purchase" shall mean, in respect of any Share of any
Fund, the calendar month in which such Share was first issued by such Fund;
provided, that if such Share is a Commission Share and such Fund issued the
Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Month
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the calendar month in which the Commission Share (or portion thereof)
of the other Fund was first issued by such other Fund (unless such Commission
Share (or portion thereof) was also issued by such other Fund in a Free
Exchange, in which case this proviso shall apply to that Free Exchange and this
application shall be repeated until one reaches a Commission Share (or portion
thereof) which was issued by a Fund other than in a Free Exchange); provided,
further, that if such Share is a Free Share and such Fund issued such Free Share
in connection with the automatic reinvestment of dividends in respect of other
Shares of such Fund, the Month of Original Purchase of such Free Share shall be
deemed to be the Month of Original Purchase of the Share in respect of which
such dividend was paid; provided, further, that if such Share is a Free Share
and such Fund issued such Free Share in connection with an exchange whereby a
Free Share (or portion thereof) of another Fund is redeemed and the Net Asset
Value of such redeemed Free Share (or portion thereof) is invested in a Free
Share (or portion thereof) of such Fund, the Month of Original Issue of such
Free Share shall be the Month of Original Issue of the Free Share of such other
Fund so redeemed (unless such Free Share of such other Fund was also issued by
such other Fund in such an exchange, in which case this proviso shall apply to
that exchange and this application shall be repeated until one reaches a Free
Share which was issued by a Fund other than in such an exchange); and provided,
finally, that for purposes of this Schedule I each of the following periods
shall be treated as one calendar month for purposes of applying the rules of
this Schedule I to any Fund: (i) the period of time from and including the
Distributor Inception Date for such Fund to and including the last day of the
calendar month in which such Distributor Inception Date occurs; (ii) the period
of time commencing with the first day of the calendar month in which the
Distributor Last Sale Cutoff Date in respect of such Fund occurs to and
including such Distributor Last Sale Cutoff Date; and (iii) the period of time
commencing on the day immediately following the Distributor Last Sale Cutoff
Date in respect of such Fund to and including the last day of the calendar month
in which such Distributor Last Sale Cut-off Date occurs.
"Omnibus Account" shall mean any Shareholder Account the record owner of
which is a registered broker-dealer which has agreed with the Transfer Agent to
provide sub-transfer agent functions relating to each Sub-shareholder Account
within such Shareholder Account as contemplated by this Schedule I in respect of
each of the Funds.
"Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect
of each Omnibus Account, the Business Day next following the twentieth day of
each calendar month for the calendar month immediately preceding such date so
long as the record owner is able to allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund as contemplated by this Schedule I no
more frequently than monthly; provided, that at such time as the record owner of
such Omnibus Account is able to provide information sufficient to allocate the
Asset Based Sales Charge accruing in respect of such Shares of such Fund owned
of record by such Omnibus Account as contemplated by this Schedule I on a weekly
or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a
weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date
as in the case of Asset Based Sales Charges accruing in respect of Shareholder
Accounts other than Omnibus Accounts, as the case may be.
"Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus
Account, the third Business Day of each calendar week for the calendar week
immediately preceding such date so long as the record owner of such Omnibus
Account is able to allocate the CDSCs accruing in respect of any Shares of any
Fund as contemplated by this Schedule I for no more frequently than weekly;
provided, that at such time as the record owner of such Shares of such Fund
owned of record by such Omnibus Account is able to provide information
sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as
contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement
Date for such Omnibus Account shall be a daily date as in the case of CDSCs
accruing in respect of Shareholder Accounts other than Omnibus Accounts.
"Original Purchase Amount" shall mean, in respect of any Commission Share
of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date),
on the Date of Original Purchase in respect of such Commission Share, by such
Shareholder Account or Sub-shareholder Account for such Commission Share;
provided, that if such Fund issued the Commission Share (or portion thereof) in
question in connection with a Free Exchange for a Commission Share (or portion
thereof) of another Fund, the Original Purchase Amount for the Commission Share
(or portion thereof) in question shall be the Original Purchase Amount in
respect of such Commission Share (or portion thereof) of such other Fund (unless
such Commission Share (or portion thereof) was also issued by such other Fund in
a Free Exchange, in which case this proviso shall apply to that Free Exchange
and this application shall be repeated until one reaches a Commission Share (or
portion thereof) which was issued by a Fund other than in a Free Exchange).
"Other Dividend" shall mean in respect of any Share, any Dividend paid in
respect of such Share other than a Capital Gain Dividend.
"Post-distributor Shares" shall mean, in respect of any Fund, all Shares of
such Fund the Month of Original Purchase of which occurs after the Distributor
Last Sale Cut-off Date for such Fund.
"Program Agent" shall mean Citicorp North America, Inc., as Program Agent
under the Purchase Agreement, and its successors and assigns in such capacity.
"Purchase Agreement" shall mean that certain Purchase and Sale Agreement
dated as of May 31, 1995, among Keystone Investment Distributors Company, as
Seller, Citibank, N.A., as Purchaser, and Citicorp North America, Inc., as
Program Agent.
"Share" shall mean in respect of any Fund any share of the classes of
shares specified in Schedule II to the Irrevocable Payment Instruction opposite
the name of such Fund, as the same may be amended from time to time by notice
from the Distributor and the Program Agent to the Fund and the Transfer Agent;
provided, that such term shall include, after the Distributor Last Sale Cut-off
Date, a share of a new class of shares of such Fund: (i) with respect to each
record owner of Shares which is not treated in the records of each Transfer
Agent and Sub-transfer Agent for such Fund as an entirely separate and distinct
class of shares from the classes of shares specified Schedule II to the
Irrevocable Payment Instruction or (ii) the shares of which class may be
exchanged for shares of another Fund of the classes of shares specified on
Schedule II to the Irrevocable Payment Instruction of any class existing on or
prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on which can
be reinvested in shares of the classes specified on Schedule II to the
Irrevocable Payment Instruction under the automatic dividend reinvestment
options; or (iv) which is otherwise treated as though it were of the same class
as the class of shares specified on Schedule II to the Irrevocable Payment
Instruction.
"Shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Special Free Share" shall mean, in respect of any Fund, a Share (other
than a Commission Share) issued by such Fund other than in connection with the
automatic reinvestment of Dividends and other than in connection with an
exchange whereby a Free Share (or portion thereof) of another Fund is redeemed
and the Net Asset Value of such redeemed Share (or portion thereof) is invested
in a Share (or portion thereof) of such Fund.
"Sub-shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the
record owner thereof.
(B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND AND THE
RECORD OWNER OF EACH OMNIBUS ACCOUNT:
The Transfer Agent shall maintain Shareholder Accounts, and shall cause
each record owner of each Omnibus Account to maintain Sub-shareholder Accounts,
each in accordance with the following rules:
(1) SHAREHOLDER ACCOUNTS AND SUB-SHAREHOLDER ACCOUNTS. The Transfer Agent
shall maintain a separate account (a "Shareholder Account") for each record
owner of Shares of each Fund. Each Shareholder Account (other than Omnibus
Accounts) will represent a record owner of Shares of such Fund, the records of
which will be kept in accordance with this Schedule I. In the case of an Omnibus
Account, the Transfer Agent shall require that the record owner of the Omnibus
Account maintain a separate account (a "Sub-shareholder Account") for each
record owner of Shares which are reflected in the Omnibus Account, the records
of which will be kept in accordance with this Schedule I. Each such Shareholder
Account and Sub-shareholder Account shall relate solely to Shares of such Fund
and shall not relate to any other class of shares of such Fund.
(2) COMMISSION SHARES. For each Shareholder Account (other than an Omnibus
Account), the Transfer Agent shall maintain daily records of each Commission
Share of such Fund which records shall identify each Commission Share of such
Fund reflected in such Shareholder Account by the Month of Original Purchase of
such Commission Share.
For each Omnibus Account, the Transfer Agent shall require that the
Sub-transfer Agent in respect thereof maintain daily records of such
Sub-shareholder Account which records shall identify each Commission Share of
such Fund reflected in such Sub-shareholder Account by the Month of Original
Purchase; provided, that until the Sub-transfer Agent in respect of the ML
Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain daily records of
Sub-shareholder Accounts which identify each Commission Share of such Fund
reflected in such Sub-shareholder Account by the Date of Original Purchase. Each
such Commission Share shall be identified as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such
Commission Share (or in the case of a Sub-shareholder Account within the ML
Omnibus Account, based upon the Date of Original Purchase).
(3) FREE SHARES. The Transfer Agent shall maintain daily records of each
Shareholder Account (other than an Omnibus Account) in respect of any Fund so as
to identify each Free Share (including each Special Free Share) reflected in
such Shareholder Account by the Month of Original Purchase of such Free Share.
In addition, the Transfer Agent shall require that each Shareholder Account
(other than an Omnibus Account) have in effect separate elections relating to
reinvestment of Capital Gain Dividends and relating to reinvestment of Other
Dividends in respect of any Fund. Either such Shareholder Account shall have
elected to reinvest all Capital Gain Dividends or such Shareholder Account shall
have elected to have all Capital Gain Dividends distributed. Similarly, either
such Shareholder Account shall have elected to reinvest all Other Dividends or
such Shareholder Account shall have elected to have all Other Dividends
distributed.
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain daily records for each Sub-shareholder Account in
the manner described in the immediately preceding paragraph for Shareholder
Accounts (other than Omnibus Accounts); provided, that until the Sub-transfer
Agent in respect of the ML Omnibus Account develops the data processing
capability to conform to the foregoing requirements, such Sub-transfer Agent
shall not be obligated to conform to the foregoing requirements. Each
Sub-shareholder Account shall also have in effect Dividend reinvestment
elections as described in the immediately preceding paragraph.
The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus
Account shall identify each Free Share as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such Free
Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, the Transfer Agent shall require such Sub-transfer Agent to
identify each Free Share of a given Fund in the ML Omnibus Account as a
Distributor Share, or Post-distributor Share, as follows:
(a) Free Shares of such Fund which are outstanding on the Distributor Last
Sale Cut-off Date for such Fund shall be identified as Distributor
Shares.
(b) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a Free Share of another Fund) to the
ML Omnibus Account during any calendar month (or portion thereof)
after the Distributor Last Sale Cut-off Date for such Fund shall be
identified as Distributor Shares in a number computed as follows:
A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus Account during
such calendar month (or portion thereof)
B = Number of Commission Shares and Free Shares of such Fund in the
ML Omnibus Account identified as Distributor Shares and
outstanding as of the close of business in the last day of the
immediately preceding calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares of such Fund
in the ML Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof).
(c) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a free share of another Fund) to the
ML Omnibus Account during any calendar month (or portion thereof)
after the Distributor Last Sale Cut-off Date for such Fund shall be
identified as Post-distributor Shares in a number computed as follows:
(A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus Account during
such calendar month (or portion thereof)
B = Number of Commission Shares and Free Shares of such Fund in the
ML Omnibus Account identified as Post-distributor Shares and
outstanding as of the close of business in the last day of the
immediately preceding calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares of such Fund
in the ML Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof).
(d) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a Class A Share of
such Fund) from the ML Omnibus Account in any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date for such
Fund shall be identified as Distributor Shares in a number computed as
follows:
A X (B/C)
Where:
A = Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A share
of such Fund) from the ML Omnibus Account during such calendar
month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account identified as
Distributor Shares and outstanding as of the close of business on
the last day of the immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on the last
day of the immediately preceding calendar month.
(e) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account in any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date for such
Fund shall be identified as Post-distributor Shares in a number
computed as follows:
A X (B/C)
where:
A = Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A share
of such Fund) from the ML Omnibus Account during such calendar
month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account identified as
Post-distributor Shares and outstanding as of the close of
business on the last day of the immediately preceding calendar
month.
C = Total number of Free Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on the last
day of the immediately preceding calendar month.
(4) APPRECIATION AMOUNT AND COST ACCUMULATION AMOUNT. The Transfer Agent
shall maintain on a daily basis in respect of each Shareholder Account (other
than Omnibus Accounts) a Cost Accumulation Amount representing the total of the
Original Purchase Amounts paid by such Shareholder Account for all Commission
Shares reflected in such Shareholder Account as of the close of business on each
day. In addition, the Transfer Agent shall maintain on a daily basis in respect
of each Shareholder Account (other than Omnibus Accounts) sufficient records to
enable it to compute, as of the date of any actual or deemed redemption or Free
Exchange of a Commission Share reflected in such Shareholder Account an amount
(such amount an "Appreciation Amount") equal to the excess, if any, of the Net
Asset Value as of the close of business on such day of the Commission Shares
reflected in such Shareholder Account minus the Cost Accumulation Amount as of
the close of business on such day. In the event that a Commission Share (or
portion thereof) reflected in a Shareholder Account is redeemed or under these
rules is deemed to have been redeemed (whether in a Free Exchange or otherwise),
the Appreciation Amount for such Shareholder Account shall be reduced, to the
extent thereof, by the Net Asset Value of the Commission Share (or portion
thereof) redeemed, and if the Net Asset Value of the Commission Share (or
portion thereof) being redeemed equals or exceeds the Appreciation Amount, the
Cost Accumulation Amount will be reduced to the extent thereof, by such excess.
If the Appreciation Amount for such Shareholder Account immediately prior to any
redemption of a Commission Share (or portion thereof) is equal to or greater
than the Net Asset Value of such Commission Share (or portion thereof) deemed to
have been tendered for redemption, no CDSCs will be payable in respect of such
Commission Share (or portion thereof).
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain on a daily basis in respect of each
Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation
Amount and sufficient records to enable it to compute, as of the date of any
actual or deemed redemption or Free Exchange of a Commission Share reflected in
such Sub-shareholder Account an Appreciation Amount in accordance with the
preceding paragraph and to apply the same to determine whether a CDSC is payable
(as though such Sub-shareholder Account were a Shareholder Account other than an
Omnibus Account; provided, that until the Sub-transfer Agent in respect of the
ML Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain for each
Sub-shareholder Account a separate Cost Accumulation Amount and a separate
Appreciation Amount for each Date of Original Purchase of any Commission Share
which shall be applied as set forth in the preceding paragraph as if each Date
of Original Purchase were a separate Month of Original Purchase.
(5) NASD CAP. On the date the distribution fees paid in respect of any
class of Shares equals the maximum amount thereon under the Rules of Fair
Practice, in respect of such class, all outstanding Shares of such class of such
Fund shall be converted into Class A shares of such Fund and will be deemed to
have been redeemed for their Net Asset Value for purposes of this Schedule I.
(6) IDENTIFICATION OF REDEEMED SHARES. If a Shareholder Account (other than
an Omnibus Account) tenders a Share of a Fund for redemption (other than in
connection with an exchange of such Share for a Share of another Fund or in
connection with the conversion of such Share pursuant to a Conversion Feature),
such tendered Share will be deemed to be a Free Share if there are any Free
Shares reflected in such Shareholder Account immediately prior to such tender.
If there is more than one Free Share reflected in such Shareholder Account
immediately prior to such tender, such tendered Share will be deemed to be the
Free Share with the earliest Month of Original Purchase. If there are no Free
Shares reflected in such Shareholder Account immediately prior to such tender,
such tendered Share will be deemed to be the Commission Share with the earliest
Month of Original Purchase reflected in such Shareholder Account.
If a Sub-shareholder Account reflected in an Omnibus Account tenders a
Share for redemption (other than in connection with an Exchange of such Share
for a Share of another Fund or in connection with the conversion of such Share
pursuant to a Conversion Feature), the Transfer Agent shall require that the
record owner of each Omnibus Account supply the Transfer Agent sufficient
records to enable the Transfer Agent to apply the rules of the preceding
paragraph to such Sub-shareholder Account (as though such Sub-shareholder
Account were a Shareholder Account other than an Omnibus Account); provided,
that until the Sub-transfer Agent in respect of the ML Omnibus Account develops
the data processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
regarding Free Shares (and the Transfer Agent shall account for such Free Shares
as provided in (3) above) but shall apply the foregoing rules to each Commission
Share with respect to the Date of Original Purchase of any Commission Share as
though each such Date were a separate Month of Original Purchase.
(7) IDENTIFICATION OF EXCHANGED SHARES. When a Shareholder Account (other
than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for
redemption where the proceeds of such redemption are to be automatically
reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange
(whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund:
(1) such Shareholder Account will be deemed to have tendered Shares (or portions
thereof) of the Redeeming Fund with each Month of Original Purchase represented
by Shares of the Redeeming Fund reflected in such Shareholder Account
immediately prior to such tender in the same proportion that the number of
Shares of the redeeming Fund with such Month of Original Purchase reflected in
such Shareholder immediately prior to such tender bore to the total number of
Shares of the Redeeming Fund reflected in such Shareholder Account immediately
prior to such tender, and on that basis the tendered Shares of the Redeeming
Fund will be identified as Distributor Shares or Post-distributor Shares; (2)
such Shareholder Account will be deemed to have tendered Commission Shares (or
portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of
each category (i.e., Distributor Shares or Post-distributor Shares) in the same
proportion that the number of Commission Shares or Free Shares (as the case may
be) of the Redeeming Fund in such category reflected in such Shareholder Account
bore to the total number of Shares of the Redeeming Fund in such category
reflected in such Shareholder Account immediately prior to such tender, (3) the
Shares (or portions thereof) of the Issuing Fund issued in connection with such
exchange will be deemed to have the same Months of Original Purchase as the
Shares (or portions thereof) of the Redeeming Fund so tendered and will be
categorized as Distributor Shares and Post-distributor Shares accordingly, and
(4) the Shares (or portions thereof) of each Category of the Issuing Fund issued
in connection with such exchange will be deemed to be Commission Shares and Free
Shares in the same proportion that the Shares of such Category of the Redeeming
Fund were Commission Shares and Free Shares.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account); provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
relating to Free Shares (and the Sub-transfer Agent shall account for such Free
Shares as provided in (3) above) and shall apply a first-in-first-out procedure
(based upon the Date of Original Purchase) to determine which Commission Shares
(or portions thereof) of a Redeeming Fund were redeemed in connection with an
exchange.
(8) IDENTIFICATION OF CONVERTED SHARES. The Transfer Agent records
maintained for each Shareholder Account (other than an Omnibus Account) will
treat each Commission Share of a Fund as though it were redeemed at its Net
Asset Value on the date such Commission Share converts into a class A share of
such Fund in accordance with an applicable Conversion Feature applied with
reference to its Month of Original Purchase and will treat each Free Share of
such Fund with a given Month of Original Purchase as though it were redeemed at
its Net Asset Value when it is simultaneously converted to a class A share at
the time the Commission Shares of such Fund with such Month of Original Purchase
are so converted.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account) ; provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall apply the foregoing rules to Commission Shares with
reference to the Date of Original Issue of each Commission Share (as though each
such date were a separate Month of Original Issue) and shall not be required to
apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall
account for such Free Shares as provided in (3) above).
(C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCS AMONG DISTRIBUTOR
SHARES AND POST-DISTRIBUTOR SHARES:
The Transfer Agent shall use the following rules to allocate the amounts of
Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares
between Distributor Shares and Post-distributor Shares:
(1) RECEIVABLES CONSTITUTING CDSCS: CDSCs will be treated as relating to
Distributor Shares or Post-distributor Shares depending upon the Month of
Original Purchase of the Commission Share the redemption of which gives rise to
the payment of a CDSC by a Shareholder Account.
The Transfer Agent shall cause each Sub-transfer Agent to apply the
foregoing rule to each Sub-shareholder Account based on the records maintained
by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in
respect of the ML Omnibus Account develops the data processing capability to
conform to the foregoing requirements, such Sub-transfer Agent shall apply the
foregoing rules to each Sub-shareholder Account with respect to the Date of
Original Purchase of any Commission Share as though each such date were a
separate Month of Original Purchase.
(2) RECEIVABLES CONSTITUTING ASSET BASED SALES CHARGES:
The Asset Based Sales Charges accruing in respect of each Shareholder
Account (other than an Omnibus Account) shall be allocated to each Share
reflected in such Shareholder Account as of the close of business on such day on
an equal per share basis. For example, the Asset Based Sales Charges
attributable to Distributor Shares on any day shall be computed and allocated as
follows:
A X (B/C)
where:
A. = Total amount of Asset Based Sales Charge accrued in respect of such
Shareholder Account (other than an Omnibus Account) on such day.
B. = Number of Distributor Shares reflected in such Shareholder Account
(other than an Omnibus Account) on the close of business on such day
C. = Total number of Distributor Shares and Post-Distributor Shares
reflected in such Shareholder Account (other than an Omnibus Account)
and outstanding as of the close of business on such day.
The Portion of the Asset Based Sales Charges of such Fund accruing in respect of
such Shareholder Account for such day allocated to Post-distributor Shares will
be obtained using the same formula but substituting for "B" the number of
Post-distributor Shares, as the case may be, reflected in such Shareholder
Account and outstanding on the close of business on such day. The foregoing
allocation formula may be adjusted from time to time by notice to the Fund and
the transfer agent for the Fund from the Seller and the Program Agent pursuant
to Section 8.18 of the Purchase Agreement.
The Transfer Agent shall, based on the records maintained by the record
owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in
respect of each Omnibus Account on each day among all Sub-shareholder Accounts
reflected in such Omnibus Account on an equal per share basis based upon the
total number of Distributor Shares and Post-distributor Shares reflected in each
such Sub-shareholder Account as of the close of business on such day. In
addition, the Transfer Agent shall apply the foregoing rules to each
Sub-shareholder Account (as though it were a Shareholder Account other than an
Omnibus Account), based on the records maintained by the record owner, to
allocate the Asset Based Sales Charge so allocated to any Sub-shareholder
Account among the Distributor Shares and Post-distributor Shares reflected in
each such Sub-shareholder Account in accordance with the rules set forth in the
preceding paragraph; provided, that until the Sub-transfer Agent in respect of
the ML Omnibus Account develops the data processing capacity to apply the rules
of this Schedule I as applicable to Sub-shareholder Accounts other than ML
Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund in the ML Omnibus Account during any
calendar month (or portion thereof) among Distributor Shares and
Post-distributor Shares as follows:
(a) The portion of such Asset Based Sales Charge allocable to Distributor
Shares shall be computed as follows:
A X ((B + C)/2)
-----------
((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued during such
calendar month (or portion thereof) in respect of Shares of such
Fund in the ML Omnibus Account
B = Shares of such Fund in the ML Omnibus Account and identified as
Distributor Shares and outstanding as of the close of business on
the last day of the immediately preceding calendar month (or
portion thereof), times Net Asset Value per Share as of such time
C = Shares of such Fund in the ML Omnibus Account and identified as
Distributor Shares and outstanding as of the close of business on
the last day of such calendar month (or portion thereof), times
Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
the immediately preceding calendar month (or portion thereof),
times Net Asset Value per Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
such calendar month (or portion thereof), times Net Asset Value
per Share as of such time.
(b) The portion of such Asset Based Sales Charge allocable to
Post-distributor Shares shall be computed s follows:
A X ((B + C)/2)
-----------
((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued during such
calendar month (or portion thereof) in respect of Shares of such
Fund in the ML Omnibus Account
B = Shares of such Fund in the ML Omnibus Account and identified as
Post-distributor Shares and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof), times Net Asset Value per Share as of
such time
C = Shares of such Fund in the ML Omnibus Account and identified as
Post-distributor Shares and outstanding as of the close of
business on the last day of such calendar month (or portion
thereof), times Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
the immediately preceding calendar month (or portion thereof),
times Net Asset Value per Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus Account
outstanding as of the close of business on the last day of such
calendar month, times Net Asset Value per Share as of such time.
(3) PAYMENTS ON BEHALF OF EACH FUND.
On the close of business on each day the Transfer Agent shall cause payment to
be made of the amount of the Asset Based Sales Charge and CDSCs accruing on such
day in respect of the Shares of such Fund owned of record by Shareholder
Accounts (other than Omnibus Accounts) by two separate wire transfers, directly
from accounts of such Fund as follows:
1. The Asset Based Sales Charge and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to
the Distributor's Account, unless the Distributor otherwise instructs the
Fund in any irrevocable payment instruction; and
2. The Asset Based Sales Charges and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Post-distributor Shares in accordance with the preceding rules shall be
paid in accordance with direction received from any future distributor of
Shares of the Instant Fund.
On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund
shall cause the applicable Sub-transfer Agent to cause payment to be made of the
amount of the CDSCs accruing during the period to which such Omnibus CDSC
Settlement Date relates in respect of the Shares of such Fund owned of record by
each Omnibus Account by two separate wire transfers directly from the account of
such Fund maintained by such Transfer Agent, as follows:
1. The CDSCs accruing in respect of such Omnibus Account and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to
the Distributor's Account, unless the Distributor otherwise instructs the
Fund in any irrevocable payment instruction; and
2. The CDSCs accruing in respect of such Omnibus Account and allocable to
Post-distributor Shares in accordance with the preceding rules shall be
paid in accordance with direction received from any future distributor of
Shares of the Instant Fund.
On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent
for each Fund shall cause payment to be made of the amount of the Asset Based
Sales Charge accruing for the period to which such Omnibus Asset Based Sales
Charge Settlement Date relates in respect of the Shares of such Fund owned of
record by each Omnibus Account by two separate wire transfers directly from
accounts of such Fund as follows:
1. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Distributor Shares shall be paid to the Distributor's
Collection Account, unless the Distributor otherwise instructs the Fund in
any irrevocable payment instruction; and
2. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Post-Distributor Shares shall be paid in accordance with
direction received from any future distributor of Shares of the Instant
Fund.
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-2 SHARES
OF
KEYSTONE GLOBAL OPPORTUNITIES FUND
AGREEMENT made this 31st day of May 1995 by and between Keystone Global
Opportunities Fund, a Massachusetts business trust, ("Fund"), and Keystone
Investment Distributors Company, a Delaware corporation (the "Principal
Underwriter").
The Fund, individually and/or on behalf of its series, if any, referred to
above in the title of this Agreement, to which series, if any, this Agreement
shall relate, as applicable (the Fund ), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the 1940 Act ). Accordingly, it is hereby mutually agreed
as follows:
1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class B-2 shares of beneficial interest of the Fund ("B-2
Shares") as an independent contractor upon the terms and conditions hereinafter
set forth. The general term "Shares" as used herein has the same meaning as is
provided therefor in Schedule I hereto. Except as the Fund may from time to time
agree, the Principal Underwriter will act as agent for the Fund and not as
principal.
2. The Principal Underwriter will use its best efforts to find purchasers
for the B-2 Shares and to promote distribution of the B-2 Shares and may obtain
orders from brokers, dealers or other persons for sales of B-2 Shares to them.
No such dealer, broker or other person shall have any authority to act as agent
for the Fund; such dealer, broker or other person shall act only as principal in
the sale of B-2 Shares.
3. Sales of B-2 Shares by Principal Underwriter shall be at the 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 B-2 Shares. 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 B-2 Shares the Fund shall receive the current net asset
value. The Fund shall pay the Principal Underwriter Distribution Fees (as
defined in Section 14 hereof), as commissions for the sale of B-2 Shares and
other Shares, which shall be paid in conjunction with distribution fees paid to
the Principal Underwriter by other classes of Shares of the Fund to the extent
required in order to comply with Section 14 hereof, and shall pay over to the
Principal Underwriter CDSCs (as defined in Section 14 hereof) as set forth in
the Fund's current prospectus and statement of additional information, and as
required by Section 14 hereof. The Principal Underwriter shall also receive
payments consisting of shareholder service fees ("Service Fees") at the rate of
.25% per annum of the average daily net asset value of the Class B-2 Shares. The
Principal Underwriter may allow all or a part of said Distribution Fees and
CDSCs received by it (not paid to others as hereinafter provided) to such
brokers, dealers or other persons as Principal Underwriter may determine.
5. Payment to the Fund for B-2 Shares shall be in New York or Boston
Clearing House funds received by the Principal Underwriter within three 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 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
issue of the B-2 Shares.
6. The Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the B-2 Shares any representations concerning the B-2
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 the Principal Underwriter in reasonable quantities upon
request.
7. The Principal Underwriter agrees to comply with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (as defined in
the Purchase and Sale Agreement, dated as of May 31, 1995 (the Purchase
Agreement ), between the Principal Underwriter, Citibank, N.A. and Citicorp
North America, Inc., as agent (the "Rules of Fair Practice")).
8. The Fund appoints the Principal Underwriter as its agent to accept
orders for redemptions and repurchases of B-2 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 and 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, Directors or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
(a) may be based upon any wrongful act by the Principal Underwriter or any
of its employees or representatives, or
(b) may be based upon any untrue statement or alleged untrue statement of
a material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
or confirmed in writing to the Fund by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and things
as shall from time to time be reasonably requested by the Principal Underwriter
for the purpose of qualifying the B-2 Shares for sale under the so-called "blue
sky" laws of any state or for registering B-2 Shares under the 1933 Act or the
Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal
Underwriter shall bear the expenses of preparing, printing and distributing
advertising, sales literature, prospectuses, and statements of additional
information. The Fund shall bear the expense of registering B-2 Shares under the
1933 Act and the Fund under the 1940 Act, qualifying B-2 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 holders of B-2 Shares, and the direct expenses of the issue of
B-2 Shares.
12. The Principal Underwriter shall, at the request of the Fund, provide to
the Board of Trustees or Directors (together herein called the Directors ) of
the Fund in connection with sales of B-2 Shares not less than quarterly a
written report of the amounts received from the Fund therefor and the purpose
for which such expenditures by the Fund 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 one year.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the outstanding voting securities of
Class B-2 of the Fund or by a majority of the Directors of the Fund and a
majority of the Directors who are not parties to this Agreement or "interested
persons", as defined in the Investment Company Act of 1940 (the 1940 Act ), of
any such party and who have no direct or indirect financial interest in the
operation of the Fund's Rule 12b-1 plan for Class B-2 Shares or in any
agreements related to the plan 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 Directors of the Fund, or a majority of
such Directors who are not parties to this Agreement or "interested persons", as
defined in the 1940 Act, of any such party and who have no direct or indirect
financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-2
Shares or in any agreement related to the plan or by a vote of a majority of the
outstanding voting securities of Class B-2 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), which shall not
include assignment of the Principal Underwriter's (as hereinafter defined)
provided for hereunder and/or rights related to such Allocable Portions.
14. The provisions of this Section 14 shall be applicable to the extent
necessary to enable the Fund to comply with the obligation of the Fund to pay
the Principal Underwriter its Allocable Portion of Distribution Fees paid in
respect of Shares while the Fund is required to do so pursuant the Principal
Underwriting Agreement, of even date herewith, in respect of Class B-2 Shares,
and shall remain in effect so long as any payments are required to be made by
the Fund pursuant to the irrevocable payment instruction (as defined in the
Purchase Agreement (the Irrevocable Payment Instruction )).
14.1 The Fund shall pay to the Principal Underwriter the Principal
Underwriter's Allocable Portion (as hereinafter defined) of a fee (the
"Distribution Fee") at the rate of .75% per annum of the average daily net asset
value of the Shares, subject to the limitation on the maximum aggregate amount
of such fees under the Rules of Fair Practice as applicable to such Distribution
Fee on the date hereof.
14.2 The Principal Underwriter's Allocable Portion of Distribution Fees
paid by the Fund in respect of Shares shall be equal to the portion of the Asset
Based Sales Charge allocable to Distributor Shares (as defined in Schedule I
hereto to this Agreement) in accordance with Schedule I hereto. The Fund agrees
to cause its transfer agent to maintain the records and arrange for the payments
on behalf of the Fund at the times and in the amounts and to the accounts
required by Schedule I hereto, as the same may be amended from time to time. It
is acknowledged and agreed that by virtue of the operation of Schedule I hereto
the Principal Underwriter's Allocable Portion of Distribution Fees paid by the
Fund in respect of Shares, may, to the extent provided in Schedule I hereto,
take into account Distribution Fees payable by the Fund in respect of other
existing and future classes and/or sub-classes of shares of the Fund which would
be treated as "Shares" under Schedule I hereto. The Fund will limit amounts paid
to any subsequent principal underwriters of Shares to the portion of the Asset
Based Sales Charge paid in respect of Shares which is allocable to
Post-distributor Shares (as defined in Schedule I hereto) in accordance with
Schedule I hereto. The Fund's payments to the Principal Underwriter in
consideration of its services in connection with the sale of B-2 Shares shall be
the Distribution Fees attributable to B-2 Shares which are Distributor Shares
(as defined in Schedule I hereto) and all other amounts constituting the
Principal Underwriter's Allocable Portion of Distribution Fees shall be the
Distribution Fees related to the sale of other Shares which are Distributor
Shares (as defined in Schedule I hereto).
The Fund shall cause its transfer agent and sub-transfer agents to withhold
from redemption proceeds payable to holders of Shares on redemption thereof the
contingent deferred sales charges payable upon redemption thereof as set forth
in the then current prospectus and/or statement of additional information of the
Fund ("CDSCs") and to pay over to the Principal Underwriter The Principal
Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which
shall be equal to the portion thereof allocable to Distributor Shares (as
defined in Schedule I hereto) in accordance with Schedule I hereto.
14.3 The Principal Underwriter shall be considered to have completely
earned the right to the payment of its Allocable Portion of the Distribution Fee
and the right to payment over to it of its' Allocable Portion of the CDSC in
respect of Shares as provided for hereby upon the completion of the sale of each
Commission Share (as defined in Schedule I hereto) taken into account as a
Distributor Share in computing the Principal Underwriter's Allocable Portion in
accordance with Schedule I hereto.
14.4 Except as provided in Section 14.5 hereof in respect of Distribution
Fees only, the Fund's obligation to pay the Principal Underwriter the
Distribution Fees and to pay over to the Principal Underwriter CDSCs provided
for hereby shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Principal Underwriter
and enforce such claims against any assets (other than the Principal
Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs
(the "Collection Rights") of the Principal Underwriter).
14.5 Notwithstanding anything in this Agreement to the contrary, the Fund
shall pay to the Principal Underwriter its Allocable Portion of Distribution
Fees provided for hereby notwithstanding its termination as Principal
Underwriter for the Shares or any termination of this Agreement and such payment
of such Distribution Fees, and that obligation and the method of computing such
payment, shall not be changed or terminated except to the extent required by any
change in applicable law, including, without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the Rules
of Fair Practice, in each case enacted or promulgated after May 31, 1995, or in
connection with a Complete Termination (as hereinafter defined). For the
purposes of this Section 14.5, "Complete Termination" means a termination of the
Fund's Rule 12b-1 plan for B-2 Shares involving the cessation of payments of the
Distribution Fees, and the cessation of payments of distribution fees pursuant
to every other Rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the
offering of every existing or future B-Class-of-Shares, which conditions shall
be deemed satisfied when they are first complied with hereafter and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-2 Shares which are Distributor Shares pursuant to Schedule I
hereto shall have been redeemed or converted or (ii) May 31, 2005. For purposes
of this Section 14.5, the term B-Class-of-Shares means each of the B-1 Class of
Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of
shares of the Fund hereafter issued which would be treated as Shares under
Schedule I hereto or which has substantially similar economic characteristics to
the B-1 or B-2 Classes of Shares taking into account the total sales charge,
CDSC or other similar charges borne directly or indirectly by the holder of the
shares of such class. The parties agree that the existing C Class of Shares of
the Fund does not have substantially similar economic characteristics to the B-1
or B-2 Classes of Shares taking into account the total sales charge, CDSC or
other similar charges borne directly or indirectly by the holder of such shares.
For purposes of clarity the parties to this agreement hereby state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing B-1 or B-2 Classes of Shares taking
into account the total sale charge, CDSC or other similar charges borne directly
or indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares.
14.6 The Principal Underwriter may assign any part of its Allocable
Portions and obligations of the Fund related thereto (but not the Principal
Underwriter's obligations to the Fund provided for in this Agreement) to any
person (an "Assignee") and any such assignment shall be effective as to the Fund
upon written notice to the Fund by the Principal Underwriter. In connection
therewith the Fund shall pay all or any amounts in respect of its Allocable
Portions directly to the Assignee thereof as directed in a writing by the
Principal Underwriter in the Irrevocable Payment Instruction, as the same may be
amended from time to time with the consent of the Fund, and the Fund shall be
without liability to any person if it pays such amounts when and as so directed,
except for underpayments of amounts actually due, without any amount payable as
consequential or other damages due to such underpayment and without interest
except to the extent that delay in payment of Distribution Fees and CDSCs
results in an increase in the maximum Sales Charge allowable under the Rules of
Fair Practice, which increases daily at a rate of prime plus one percent per
annum.
14.7 The Fund will not, to the extent it may otherwise be empowered to do
so, change or waive any CDSC with respect to B-2 Shares, except as provided in
the Fund's prospectus or statement of additional information without the
Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding
anything to the contrary in this Agreement or any termination of this Agreement
or the Principal Underwriter as principal underwriter for the Shares of the
Fund, the Principal Underwriter shall be entitled to be paid its Allocable
Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-2 Shares is
terminated and whether or not any such termination is a Complete Termination, as
defined above.
15. 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.
16. 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 GLOBAL OPPORTUNITIES FUND
By: /s/ Rosemary D. Van Antwerp
--------------------------------
Title: Senior Vice President
KEYSTONE INVESTMENT DISTRIBUTORS, INC.
By: /s/ Ralph J. Spuehler
--------------------------------
Title: President
<PAGE>
SCHEDULE I
TO
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-2SHARES
OF
KEYSTONE GLOBAL OPPORTUNITIES FUND
TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING
AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES
Amounts (in respect of Asset Based Sales Charges (as hereinafter defined)
and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined)
of each Fund (as hereinafter defined) shall be allocated between Distributor
Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter
defined) of such Fund in accordance with the rules set forth in clauses (B) and
(C). Clause (B) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account (as hereinafter defined)
in maintaining records relating to Distributor Shares and Post-distributor
Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account in determining what
portion of the Asset Based Sales Charge (as hereinafter defined) payable in
respect of each class of Shares of such Fund and what portion of the CDSC (as
hereinafter defined) payable by the holders of Shares of such Fund is
attributable to Distributor Shares and Post-distributor Shares, respectively.
(A) DEFINITIONS:
Generally, for purposes of this Schedule I, defined terms shall be used
with the meaning assigned to them in the Agreement, except that for purposes of
the following rules the following definitions are also applicable:
"Agreement" shall mean the Principal Underwriting Agreement for Class B-2
Shares of the Instant Fund dated as of June 1, 1995 between the Instant Fund and
the Distributor.
"Asset Based Sales Charge" shall have the meaning set forth in Section
26(b)(8)(C) of the Rules of Fair Practice it being understood that for purposes
of this Exhibit I such term does not include the Service Fee.
"Business Day" shall mean any day on which the banks and the New York Stock
Exchange are not authorized or required to close in New York City.
"Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a
Dividend in respect of such Share which is designated by such Fund as being a
"capital gain dividend" as such term is defined in Section 852 of the Internal
Revenue Code of 1986, as amended.
"CDSC" shall mean with respect to any Fund, the contingent deferred sales
charge payable, either directly or by withholding from the proceeds of the
redemption of the Shares of such Fund, by the shareholders of such Fund on any
redemption of Shares of such Fund in accordance with the Prospectus relating to
such Fund.
"Commission Share" shall mean, in respect of any Fund, a Share of such Fund
issued under circumstances where a CDSC would be payable upon the redemption of
such Share if such CDSC is not waived or shall have not otherwise expired.
"Date of Original Purchase" shall mean, in respect of any Commission Share
of any Fund, the date on which such Commission Share was first issued by such
Fund; provided, that if such Share is a Commission Share and such Fund issued
the Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Date
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the date on which the Commission Share (or portion thereof) of the
other Fund was first issued by such other Fund (unless such Commission Share (or
portion thereof) was also issued by such other Fund in a Free Exchange, in which
case this proviso shall apply to that Free Exchange and this application shall
be repeated until one reaches a Commission Share (or portion thereof) which was
issued by a Fund other than in a Free Exchange).
"Distributor" shall mean Keystone Investment Distributors Company, its
successors and assigns.
"Distributor's Account" shall mean the account of the Distributor, account
no. 9903-584-2, ABA No. 011 0000 28, entitled "General Account" maintained with
State Street Bank & Trust Company or such other account as the Distributor may
designate in a notice to the Transfer Agent.
"Distributor Inception Date" shall mean, in respect of any Fund, the date
identified as the date Shares of such Fund are first sold by the Distributor.
"Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund,
the date identified as the last sale of a Commission Share during the period the
Distributor served as principal underwriter under the Agreement.
"Distributor Shares" shall mean, in respect of any Fund, all Shares of such
Fund the Month of Original Purchase of which occurs on or after the Inception
Date for such Fund and on or prior to the Distributor Last Sale Cut-off Date in
respect of such Fund.
"Dividend" shall mean, in respect of any Share of any Fund, any dividend or
other distribution by such Fund in respect of such Share.
"Free Exchange" shall mean any exchange of a Commission Share (or portion
thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of
another Fund (the "Issuing Fund"), under any arrangement which defers the
exchanging Shareholder's obligation to pay the CDSC in respect of the Commission
Share (or portion thereof) of the Redeeming Fund so exchanged until the later
redemption of the Share (or portion thereof) of the Issuing Fund received in
such exchange.
"Free Share" shall mean, in respect of any Fund, each Share of such Fund
other than a Commission Share, including, without limitation: (i) Shares issued
in connection with the automatic reinvestment of Capital Gain Dividends or Other
Dividends by such Fund, (ii) Special Free Shares issued by such Fund and (iii)
Shares (or portion thereof) issued by such Fund in connection with an exchange
whereby a Free Share (or portion thereof) of another Fund is redeemed and the
Net Asset Value of such redeemed Free Share (or portion thereof) is invested in
such Shares (or portion thereof) of such Fund.
"Fund" shall mean each of the regulated investment companies or series or
portfolios of regulated investment companies identified in Schedule II to the
Irrevocable Payment Instruction, as the same may be amended from time to time in
accordance with the terms thereof.
"Instant Fund" shall mean [Keystone Equity Fund].
"ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus
Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer
agent.
"Month of Original Purchase" shall mean, in respect of any Share of any
Fund, the calendar month in which such Share was first issued by such Fund;
provided, that if such Share is a Commission Share and such Fund issued the
Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Month
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the calendar month in which the Commission Share (or portion thereof)
of the other Fund was first issued by such other Fund (unless such Commission
Share (or portion thereof) was also issued by such other Fund in a Free
Exchange, in which case this proviso shall apply to that Free Exchange and this
application shall be repeated until one reaches a Commission Share (or portion
thereof) which was issued by a Fund other than in a Free Exchange); provided,
further, that if such Share is a Free Share and such Fund issued such Free Share
in connection with the automatic reinvestment of dividends in respect of other
Shares of such Fund, the Month of Original Purchase of such Free Share shall be
deemed to be the Month of Original Purchase of the Share in respect of which
such dividend was paid; provided, further, that if such Share is a Free Share
and such Fund issued such Free Share in connection with an exchange whereby a
Free Share (or portion thereof) of another Fund is redeemed and the Net Asset
Value of such redeemed Free Share (or portion thereof) is invested in a Free
Share (or portion thereof) of such Fund, the Month of Original Issue of such
Free Share shall be the Month of Original Issue of the Free Share of such other
Fund so redeemed (unless such Free Share of such other Fund was also issued by
such other Fund in such an exchange, in which case this proviso shall apply to
that exchange and this application shall be repeated until one reaches a Free
Share which was issued by a Fund other than in such an exchange); and provided,
finally, that for purposes of this Schedule I each of the following periods
shall be treated as one calendar month for purposes of applying the rules of
this Schedule I to any Fund: (i) the period of time from and including the
Distributor Inception Date for such Fund to and including the last day of the
calendar month in which such Distributor Inception Date occurs; (ii) the period
of time commencing with the first day of the calendar month in which the
Distributor Last Sale Cutoff Date in respect of such Fund occurs to and
including such Distributor Last Sale Cutoff Date; and (iii) the period of time
commencing on the day immediately following the Distributor Last Sale Cutoff
Date in respect of such Fund to and including the last day of the calendar month
in which such Distributor Last Sale Cut-off Date occurs.
"Omnibus Account" shall mean any Shareholder Account the record owner of
which is a registered broker-dealer which has agreed with the Transfer Agent to
provide sub-transfer agent functions relating to each Sub-shareholder Account
within such Shareholder Account as contemplated by this Schedule I in respect of
each of the Funds.
"Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect
of each Omnibus Account, the Business Day next following the twentieth day of
each calendar month for the calendar month immediately preceding such date so
long as the record owner is able to allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund as contemplated by this Schedule I no
more frequently than monthly; provided, that at such time as the record owner of
such Omnibus Account is able to provide information sufficient to allocate the
Asset Based Sales Charge accruing in respect of such Shares of such Fund owned
of record by such Omnibus Account as contemplated by this Schedule I on a weekly
or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a
weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date
as in the case of Asset Based Sales Charges accruing in respect of Shareholder
Accounts other than Omnibus Accounts, as the case may be.
"Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus
Account, the third Business Day of each calendar week for the calendar week
immediately preceding such date so long as the record owner of such Omnibus
Account is able to allocate the CDSCs accruing in respect of any Shares of any
Fund as contemplated by this Schedule I for no more frequently than weekly;
provided, that at such time as the record owner of such Shares of such Fund
owned of record by such Omnibus Account is able to provide information
sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as
contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement
Date for such Omnibus Account shall be a daily date as in the case of CDSCs
accruing in respect of Shareholder Accounts other than Omnibus Accounts.
"Original Purchase Amount" shall mean, in respect of any Commission Share
of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date),
on the Date of Original Purchase in respect of such Commission Share, by such
Shareholder Account or Sub-shareholder Account for such Commission Share;
provided, that if such Fund issued the Commission Share (or portion thereof) in
question in connection with a Free Exchange for a Commission Share (or portion
thereof) of another Fund, the Original Purchase Amount for the Commission Share
(or portion thereof) in question shall be the Original Purchase Amount in
respect of such Commission Share (or portion thereof) of such other Fund (unless
such Commission Share (or portion thereof) was also issued by such other Fund in
a Free Exchange, in which case this proviso shall apply to that Free Exchange
and this application shall be repeated until one reaches a Commission Share (or
portion thereof) which was issued by a Fund other than in a Free Exchange).
"Other Dividend" shall mean in respect of any Share, any Dividend paid in
respect of such Share other than a Capital Gain Dividend.
"Post-distributor Shares" shall mean, in respect of any Fund, all Shares of
such Fund the Month of Original Purchase of which occurs after the Distributor
Last Sale Cut-off Date for such Fund.
"Program Agent" shall mean Citicorp North America, Inc., as Program Agent
under the Purchase Agreement, and its successors and assigns in such capacity.
"Purchase Agreement" shall mean that certain Purchase and Sale Agreement
dated as of May 31, 1995, among Keystone Investment Distributors Company, as
Seller, Citibank, N.A., as Purchaser, and Citicorp North America, Inc., as
Program Agent.
"Share" shall mean in respect of any Fund any share of the classes of
shares specified in Schedule II to the Irrevocable Payment Instruction opposite
the name of such Fund, as the same may be amended from time to time by notice
from the Distributor and the Program Agent to the Fund and the Transfer Agent;
provided, that such term shall include, after the Distributor Last Sale Cut-off
Date, a share of a new class of shares of such Fund: (i) with respect to each
record owner of Shares which is not treated in the records of each Transfer
Agent and Sub-transfer Agent for such Fund as an entirely separate and distinct
class of shares from the classes of shares specified Schedule II to the
Irrevocable Payment Instruction or (ii) the shares of which class may be
exchanged for shares of another Fund of the classes of shares specified on
Schedule II to the Irrevocable Payment Instruction of any class existing on or
prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on which can
be reinvested in shares of the classes specified on Schedule II to the
Irrevocable Payment Instruction under the automatic dividend reinvestment
options; or (iv) which is otherwise treated as though it were of the same class
as the class of shares specified on Schedule II to the Irrevocable Payment
Instruction.
"Shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Special Free Share" shall mean, in respect of any Fund, a Share (other
than a Commission Share) issued by such Fund other than in connection with the
automatic reinvestment of Dividends and other than in connection with an
exchange whereby a Free Share (or portion thereof) of another Fund is redeemed
and the Net Asset Value of such redeemed Share (or portion thereof) is invested
in a Share (or portion thereof) of such Fund.
"Sub-shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the
record owner thereof.
(B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND AND THE
RECORD OWNER OF EACH OMNIBUS ACCOUNT:
The Transfer Agent shall maintain Shareholder Accounts, and shall cause
each record owner of each Omnibus Account to maintain Sub-shareholder Accounts,
each in accordance with the following rules:
(1) SHAREHOLDER ACCOUNTS AND SUB-SHAREHOLDER ACCOUNTS. The Transfer Agent
shall maintain a separate account (a "Shareholder Account") for each record
owner of Shares of each Fund. Each Shareholder Account (other than Omnibus
Accounts) will represent a record owner of Shares of such Fund, the records of
which will be kept in accordance with this Schedule I. In the case of an Omnibus
Account, the Transfer Agent shall require that the record owner of the Omnibus
Account maintain a separate account (a "Sub-shareholder Account") for each
record owner of Shares which are reflected in the Omnibus Account, the records
of which will be kept in accordance with this Schedule I. Each such Shareholder
Account and Sub-shareholder Account shall relate solely to Shares of such Fund
and shall not relate to any other class of shares of such Fund.
(2) COMMISSION SHARES. For each Shareholder Account (other than an Omnibus
Account), the Transfer Agent shall maintain daily records of each Commission
Share of such Fund which records shall identify each Commission Share of such
Fund reflected in such Shareholder Account by the Month of Original Purchase of
such Commission Share.
For each Omnibus Account, the Transfer Agent shall require that the
Sub-transfer Agent in respect thereof maintain daily records of such
Sub-shareholder Account which records shall identify each Commission Share of
such Fund reflected in such Sub-shareholder Account by the Month of Original
Purchase; provided, that until the Sub-transfer Agent in respect of the ML
Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain daily records of
Sub-shareholder Accounts which identify each Commission Share of such Fund
reflected in such Sub-shareholder Account by the Date of Original Purchase. Each
such Commission Share shall be identified as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such
Commission Share (or in the case of a Sub-shareholder Account within the ML
Omnibus Account, based upon the Date of Original Purchase).
(3) FREE SHARES. The Transfer Agent shall maintain daily records of each
Shareholder Account (other than an Omnibus Account) in respect of any Fund so as
to identify each Free Share (including each Special Free Share) reflected in
such Shareholder Account by the Month of Original Purchase of such Free Share.
In addition, the Transfer Agent shall require that each Shareholder Account
(other than an Omnibus Account) have in effect separate elections relating to
reinvestment of Capital Gain Dividends and relating to reinvestment of Other
Dividends in respect of any Fund. Either such Shareholder Account shall have
elected to reinvest all Capital Gain Dividends or such Shareholder Account shall
have elected to have all Capital Gain Dividends distributed. Similarly, either
such Shareholder Account shall have elected to reinvest all Other Dividends or
such Shareholder Account shall have elected to have all Other Dividends
distributed.
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain daily records for each Sub-shareholder Account in
the manner described in the immediately preceding paragraph for Shareholder
Accounts (other than Omnibus Accounts); provided, that until the Sub-transfer
Agent in respect of the ML Omnibus Account develops the data processing
capability to conform to the foregoing requirements, such Sub-transfer Agent
shall not be obligated to conform to the foregoing requirements. Each
Sub-shareholder Account shall also have in effect Dividend reinvestment
elections as described in the immediately preceding paragraph.
The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus
Account shall identify each Free Share as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such Free
Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, the Transfer Agent shall require such Sub-transfer Agent to
identify each Free Share of a given Fund in the ML Omnibus Account as a
Distributor Share, or Post-distributor Share, as follows:
(a) Free Shares of such Fund which are outstanding on the Distributor Last
Sale Cut-off Date for such Fund shall be identified as Distributor
Shares.
(b) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a Free Share of another Fund) to the
ML Omnibus Account during any calendar month (or portion thereof)
after the Distributor Last Sale Cut-off Date for such Fund shall be
identified as Distributor Shares in a number computed as follows:
A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus Account
during such calendar month (or portion thereof)
B = Number of Commission Shares and Free Shares of such Fund in the
ML Omnibus Account identified as Distributor Shares and
outstanding as of the close of business in the last day of the
immediately preceding calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares of such Fund
in the ML Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof).
(c) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a free share of another Fund) to the
ML Omnibus Account during any calendar month (or portion thereof)
after the Distributor Last Sale Cut-off Date for such Fund shall be
identified as Post-distributor Shares in a number computed as follows:
(A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus Account
during such calendar month (or portion thereof)
B = Number of Commission Shares and Free Shares of such Fund in the
ML Omnibus Account identified as Post-distributor Shares and
outstanding as of the close of business in the last day of the
immediately preceding calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares of such Fund
in the ML Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof).
(d) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a Class A Share of
such Fund) from the ML Omnibus Account in any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date for such
Fund shall be identified as Distributor Shares in a number computed as
follows:
A X (B/C)
Where:
A = Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A
share of such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account identified
as Distributor Shares and outstanding as of the close of business
on the last day of the immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on the last
day of the immediately preceding calendar month.
(e) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account in any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date for such
Fund shall be identified as Post-distributor Shares in a number
computed as follows:
A X (B/C)
where:
A = Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or in
connection with the conversion of such Shares into a class A
share of such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account identified
as Post-distributor Shares and outstanding as of the close of
business on the last day of the immediately preceding calendar
month.
C = Total number of Free Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on the last
day of the immediately preceding calendar month.
(4) APPRECIATION AMOUNT AND COST ACCUMULATION AMOUNT. The Transfer Agent
shall maintain on a daily basis in respect of each Shareholder Account (other
than Omnibus Accounts) a Cost Accumulation Amount representing the total of the
Original Purchase Amounts paid by such Shareholder Account for all Commission
Shares reflected in such Shareholder Account as of the close of business on each
day. In addition, the Transfer Agent shall maintain on a daily basis in respect
of each Shareholder Account (other than Omnibus Accounts) sufficient records to
enable it to compute, as of the date of any actual or deemed redemption or Free
Exchange of a Commission Share reflected in such Shareholder Account an amount
(such amount an "Appreciation Amount") equal to the excess, if any, of the Net
Asset Value as of the close of business on such day of the Commission Shares
reflected in such Shareholder Account minus the Cost Accumulation Amount as of
the close of business on such day. In the event that a Commission Share (or
portion thereof) reflected in a Shareholder Account is redeemed or under these
rules is deemed to have been redeemed (whether in a Free Exchange or otherwise),
the Appreciation Amount for such Shareholder Account shall be reduced, to the
extent thereof, by the Net Asset Value of the Commission Share (or portion
thereof) redeemed, and if the Net Asset Value of the Commission Share (or
portion thereof) being redeemed equals or exceeds the Appreciation Amount, the
Cost Accumulation Amount will be reduced to the extent thereof, by such excess.
If the Appreciation Amount for such Shareholder Account immediately prior to any
redemption of a Commission Share (or portion thereof) is equal to or greater
than the Net Asset Value of such Commission Share (or portion thereof) deemed to
have been tendered for redemption, no CDSCs will be payable in respect of such
Commission Share (or portion thereof).
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain on a daily basis in respect of each
Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation
Amount and sufficient records to enable it to compute, as of the date of any
actual or deemed redemption or Free Exchange of a Commission Share reflected in
such Sub-shareholder Account an Appreciation Amount in accordance with the
preceding paragraph and to apply the same to determine whether a CDSC is payable
(as though such Sub-shareholder Account were a Shareholder Account other than an
Omnibus Account; provided, that until the Sub-transfer Agent in respect of the
ML Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain for each
Sub-shareholder Account a separate Cost Accumulation Amount and a separate
Appreciation Amount for each Date of Original Purchase of any Commission Share
which shall be applied as set forth in the preceding paragraph as if each Date
of Original Purchase were a separate Month of Original Purchase.
(5) NASD CAP. On the date the distribution fees paid in respect of any
class of Shares equals the maximum amount thereon under the Rules of Fair
Practice, in respect of such class, all outstanding Shares of such class of such
Fund shall be converted into Class A shares of such Fund and will be deemed to
have been redeemed for their Net Asset Value for purposes of this Schedule I.
(6) IDENTIFICATION OF REDEEMED SHARES. If a Shareholder Account (other than
an Omnibus Account) tenders a Share of a Fund for redemption (other than in
connection with an exchange of such Share for a Share of another Fund or in
connection with the conversion of such Share pursuant to a Conversion Feature),
such tendered Share will be deemed to be a Free Share if there are any Free
Shares reflected in such Shareholder Account immediately prior to such tender.
If there is more than one Free Share reflected in such Shareholder Account
immediately prior to such tender, such tendered Share will be deemed to be the
Free Share with the earliest Month of Original Purchase. If there are no Free
Shares reflected in such Shareholder Account immediately prior to such tender,
such tendered Share will be deemed to be the Commission Share with the earliest
Month of Original Purchase reflected in such Shareholder Account.
If a Sub-shareholder Account reflected in an Omnibus Account tenders a
Share for redemption (other than in connection with an Exchange of such Share
for a Share of another Fund or in connection with the conversion of such Share
pursuant to a Conversion Feature), the Transfer Agent shall require that the
record owner of each Omnibus Account supply the Transfer Agent sufficient
records to enable the Transfer Agent to apply the rules of the preceding
paragraph to such Sub-shareholder Account (as though such Sub-shareholder
Account were a Shareholder Account other than an Omnibus Account); provided,
that until the Sub-transfer Agent in respect of the ML Omnibus Account develops
the data processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
regarding Free Shares (and the Transfer Agent shall account for such Free Shares
as provided in (3) above) but shall apply the foregoing rules to each Commission
Share with respect to the Date of Original Purchase of any Commission Share as
though each such Date were a separate Month of Original Purchase.
(7) IDENTIFICATION OF EXCHANGED SHARES. When a Shareholder Account (other
than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for
redemption where the proceeds of such redemption are to be automatically
reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange
(whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund:
(1) such Shareholder Account will be deemed to have tendered Shares (or portions
thereof) of the Redeeming Fund with each Month of Original Purchase represented
by Shares of the Redeeming Fund reflected in such Shareholder Account
immediately prior to such tender in the same proportion that the number of
Shares of the redeeming Fund with such Month of Original Purchase reflected in
such Shareholder immediately prior to such tender bore to the total number of
Shares of the Redeeming Fund reflected in such Shareholder Account immediately
prior to such tender, and on that basis the tendered Shares of the Redeeming
Fund will be identified as Distributor Shares or Post-distributor Shares; (2)
such Shareholder Account will be deemed to have tendered Commission Shares (or
portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of
each category (i.e., Distributor Shares or Post-distributor Shares) in the same
proportion that the number of Commission Shares or Free Shares (as the case may
be) of the Redeeming Fund in such category reflected in such Shareholder Account
bore to the total number of Shares of the Redeeming Fund in such category
reflected in such Shareholder Account immediately prior to such tender, (3) the
Shares (or portions thereof) of the Issuing Fund issued in connection with such
exchange will be deemed to have the same Months of Original Purchase as the
Shares (or portions thereof) of the Redeeming Fund so tendered and will be
categorized as Distributor Shares and Post-distributor Shares accordingly, and
(4) the Shares (or portions thereof) of each Category of the Issuing Fund issued
in connection with such exchange will be deemed to be Commission Shares and Free
Shares in the same proportion that the Shares of such Category of the Redeeming
Fund were Commission Shares and Free Shares.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account); provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
relating to Free Shares (and the Sub-transfer Agent shall account for such Free
Shares as provided in (3) above) and shall apply a first-in-first-out procedure
(based upon the Date of Original Purchase) to determine which Commission Shares
(or portions thereof) of a Redeeming Fund were redeemed in connection with an
exchange.
(8) IDENTIFICATION OF CONVERTED SHARES. The Transfer Agent records
maintained for each Shareholder Account (other than an Omnibus Account) will
treat each Commission Share of a Fund as though it were redeemed at its Net
Asset Value on the date such Commission Share converts into a class A share of
such Fund in accordance with an applicable Conversion Feature applied with
reference to its Month of Original Purchase and will treat each Free Share of
such Fund with a given Month of Original Purchase as though it were redeemed at
its Net Asset Value when it is simultaneously converted to a class A share at
the time the Commission Shares of such Fund with such Month of Original Purchase
are so converted.
The Transfer Agent shall require that each record owner of an
Omnibus Account maintain records relating to each Sub-shareholder Account in
such Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account) ; provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall apply the foregoing rules to Commission Shares with
reference to the Date of Original Issue of each Commission Share (as though each
such date were a separate Month of Original Issue) and shall not be required to
apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall
account for such Free Shares as provided in (3) above).
(C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCS AMONG DISTRIBUTOR
SHARES AND POST-DISTRIBUTOR SHARES:
The Transfer Agent shall use the following rules to allocate the amounts of
Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares
between Distributor Shares and Post-distributor Shares:
(1) RECEIVABLES CONSTITUTING CDSCS: CDSCs will be treated as relating to
Distributor Shares or Post-distributor Shares depending upon the Month of
Original Purchase of the Commission Share the redemption of which gives rise to
the payment of a CDSC by a Shareholder Account.
The Transfer Agent shall cause each Sub-transfer Agent to apply the
foregoing rule to each Sub-shareholder Account based on the records maintained
by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in
respect of the ML Omnibus Account develops the data processing capability to
conform to the foregoing requirements, such Sub-transfer Agent shall apply the
foregoing rules to each Sub-shareholder Account with respect to the Date of
Original Purchase of any Commission Share as though each such date were a
separate Month of Original Purchase.
(2) RECEIVABLES CONSTITUTING ASSET BASED SALES CHARGES:
The Asset Based Sales Charges accruing in respect of each Shareholder
Account (other than an Omnibus Account) shall be allocated to each Share
reflected in such Shareholder Account as of the close of business on such day on
an equal per share basis. For example, the Asset Based Sales Charges
attributable to Distributor Shares on any day shall be computed and allocated as
follows:
A X (B/C)
where:
A. = Total amount of Asset Based Sales Charge accrued in respect of such
Shareholder Account (other than an Omnibus Account) on such day.
B. = Number of Distributor Shares reflected in such Shareholder Account
(other than an Omnibus Account) on the close of business on such day
C. = Total number of Distributor Shares and Post-Distributor Shares
reflected in such Shareholder Account (other than an Omnibus Account)
and outstanding as of the close of business on such day.
The Portion of the Asset Based Sales Charges of such Fund accruing in respect of
such Shareholder Account for such day allocated to Post-distributor Shares will
be obtained using the same formula but substituting for "B" the number of
Post-distributor Shares, as the case may be, reflected in such Shareholder
Account and outstanding on the close of business on such day. The foregoing
allocation formula may be adjusted from time to time by notice to the Fund and
the transfer agent for the Fund from the Seller and the Program Agent pursuant
to Section 8.18 of the Purchase Agreement.
The Transfer Agent shall, based on the records maintained by the record
owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in
respect of each Omnibus Account on each day among all Sub-shareholder Accounts
reflected in such Omnibus Account on an equal per share basis based upon the
total number of Distributor Shares and Post-distributor Shares reflected in each
such Sub-shareholder Account as of the close of business on such day. In
addition, the Transfer Agent shall apply the foregoing rules to each
Sub-shareholder Account (as though it were a Shareholder Account other than an
Omnibus Account), based on the records maintained by the record owner, to
allocate the Asset Based Sales Charge so allocated to any Sub-shareholder
Account among the Distributor Shares and Post-distributor Shares reflected in
each such Sub-shareholder Account in accordance with the rules set forth in the
preceding paragraph; provided, that until the Sub-transfer Agent in respect of
the ML Omnibus Account develops the data processing capacity to apply the rules
of this Schedule I as applicable to Sub-shareholder Accounts other than ML
Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund in the ML Omnibus Account during any
calendar month (or portion thereof) among Distributor Shares and
Post-distributor Shares as follows:
(a) The portion of such Asset Based Sales Charge allocable to Distributor
Shares shall be computed as follows:
A X ((B + C)/2)
((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued during such
calendar month (or portion thereof) in respect of Shares of such
Fund in the ML Omnibus Account
B = Shares of such Fund in the ML Omnibus Account and identified as
Distributor Shares and outstanding as of the close of business on
the last day of the immediately preceding calendar month (or
portion thereof), times Net Asset Value per Share as of such time
C = Shares of such Fund in the ML Omnibus Account and identified as
Distributor Shares and outstanding as of the close of business on
the last day of such calendar month (or portion thereof), times
Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
the immediately preceding calendar month (or portion thereof),
times Net Asset Value per Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
such calendar month (or portion thereof), times Net Asset Value
per Share as of such time.
(b) The portion of such Asset Based Sales Charge allocable to
Post-distributor Shares shall be computed s follows:
A X ((B + C)/2)
-----------
((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued during such
calendar month (or portion thereof) in respect of Shares of such
Fund in the ML Omnibus Account
B = Shares of such Fund in the ML Omnibus Account and identified as
Post-distributor Shares and outstanding as of the close of
business on the last day of the immediately preceding calendar
month (or portion thereof), times Net Asset Value per Share as of
such time
C = Shares of such Fund in the ML Omnibus Account and identified as
Post-distributor Shares and outstanding as of the close of
business on the last day of such calendar month (or portion
thereof), times Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus Account
and outstanding as of the close of business on the last day of
the immediately preceding calendar month (or portion thereof),
times Net Asset Value per Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus Account
outstanding as of the close of business on the last day of such
calendar month, times Net Asset Value per Share as of such time.
(3) PAYMENTS ON BEHALF OF EACH FUND.
On the close of business on each day the Transfer Agent shall cause payment to
be made of the amount of the Asset Based Sales Charge and CDSCs accruing on such
day in respect of the Shares of such Fund owned of record by Shareholder
Accounts (other than Omnibus Accounts) by two separate wire transfers, directly
from accounts of such Fund as follows:
1. The Asset Based Sales Charge and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to
the Distributor's Account, unless the Distributor otherwise instructs the
Fund in any irrevocable payment instruction; and
2. The Asset Based Sales Charges and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Post-distributor Shares in accordance with the preceding rules shall be
paid in accordance with direction received from any future distributor of
Shares of the Instant Fund.
On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund
shall cause the applicable Sub-transfer Agent to cause payment to be made of the
amount of the CDSCs accruing during the period to which such Omnibus CDSC
Settlement Date relates in respect of the Shares of such Fund owned of record by
each Omnibus Account by two separate wire transfers directly from the account of
such Fund maintained by such Transfer Agent, as follows:
1. The CDSCs accruing in respect of such Omnibus Account and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to
the Distributor's Account, unless the Distributor otherwise instructs the
Fund in any irrevocable payment instruction; and
2. The CDSCs accruing in respect of such Omnibus Account and allocable to
Post-distributor Shares in accordance with the preceding rules shall be
paid in accordance with direction received from any future distributor of
Shares of the Instant Fund.
On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent
for each Fund shall cause payment to be made of the amount of the Asset Based
Sales Charge accruing for the period to which such Omnibus Asset Based Sales
Charge Settlement Date relates in respect of the Shares of such Fund owned of
record by each Omnibus Account by two separate wire transfers directly from
accounts of such Fund as follows:
1. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Distributor Shares shall be paid to the Distributor's
Collection Account, unless the Distributor otherwise instructs the Fund in
any irrevocable payment instruction; and
2. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Post-Distributor Shares shall be paid in accordance with
direction received from any future distributor of Shares of the Instant
Fund.
<PAGE>
Exhibit 99.6(B)
[LOGO] KEYSTONE
INVESTMENTS
200 Berkeley Street
Boston, Massachusetts 02116-5034
Dealer No._________________________________________________________
(Please indicate Exchange Membership(s), if any.)__________________
-------------------------------------------------------------------
Effective Date_____________________________________________________
CLASS A AND B SHARES
To Whom It May Concern:
Keystone Investment Distributors Company ("the Company"), principal
underwriter, invites you to participate in the distribution of shares of the
Keystone Fund Family, Classes A and B shares of the Keystone America Fund Family
and other Funds ("Funds") designated by us which are currently or hereafter
underwritten by the Company, subject to the following terms:
1. In the distribution and sale of shares, you shall not have authority to act
as agent for the issuer, the Company or any other dealer in any respect in such
transactions. All orders are subject to acceptance by us and become effective
only upon confirmation by us. The Company reserves the unqualified right not to
accept any specific order for the purchase or exchange of shares.
2. You will offer and sell shares of the Funds other than Class A shares of the
Keystone America Funds only at their respective net asset values in accordance
with the terms and conditions of a current prospectus of the Fund whose shares
you offer. With respect to Class A shares of the Keystone America Funds and
other Funds designated by us, you will offer and sell such shares at the public
offering price described in a current prospectus of the Fund whose shares you
offer. You will offer shares only on a forward pricing basis, i.e. orders for
the purchase or repurchase of shares accepted by you prior to the close of the
New York Stock Exchange and placed with us the same day prior to the close of
our business day, 5:00 p.m. Eastern Time, and orders to exchange shares of one
Fund for shares of another Fund eligible for exchange placed with us prior to
3:00 p.m. Eastern Time, shall be confirmed at the closing price for that
business day. You agree to place orders for shares only with us and at such
closing price. You further agree to confirm the transaction with your customer
at the price confirmed in writing by us. In the event of a difference between
verbal and written price confirmations, the written confirmations shall be
considered final. Prices of the Funds' shares are computed by and are subject to
withdrawal by the Funds in accordance with their current respective
prospectuses. You agree to place orders with us only through your central order
department unless we accept your written Power of Attorney authorizing others to
place orders on your behalf.
3. So long as this agreement remains in effect, we will pay you commissions on
sales of shares of the Funds and service fees, all in accordance with the
Schedule of Commissions and Service Fees ("Schedule") attached hereto and made a
part hereof, effective June 1, 1995, which Schedule may be modified from time to
time or rescinded by us, in either case without prior notice. You shall have no
vested right to receive any continuing service fees, other fees, or other
commissions which we may elect to pay to you from time to time on shares
previously sold by you. You agree not to share or rebate any portion of such
commissions or to otherwise grant any concessions, discounts or other allowances
to any person who is not a broker or dealer actually engaged in the investment
banking or securities business. You will receive commissions in accordance with
the attached Schedule on all purchase transactions in shareholder accounts
(excluding reinvestment of income dividends and capital gains distributions) for
which you are designated as Dealer of Record except where we determine that any
such purchase was made with the proceeds of a redemption or repurchase of shares
of the same Fund or another Fund whether or not the transaction constitutes the
exercise of the exchange privilege. Commissions will be paid to you twice a
month.
You hereby authorize us to act as your agent in connection with all
transactions in shareholder accounts in which you are designated as Dealer of
Record. All designations of Dealer of Record and all authorizations of the
Company to act as your Agent shall cease upon the termination of this Agreement,
or upon the shareholder's instruction to transfer his or her account to another
Dealer of Record.
4. Payment for all shares purchased from us shall be made to the Company and
shall be received by the Company within ten business days after the acceptance
of your order or such shorter time as may be required by law. If such payment is
not received by us, we reserve the right, without prior notice, forthwith to
cancel the sale, or, at our option, to sell the shares ordered by you back to
the Fund concerned in which latter case we may hold you responsible for any
loss, including loss of profit, suffered by us or by the Fund resulting from
your failure to make payment as aforesaid.
5. You agree to purchase shares of the Funds only from us or from your
customers. If you purchase shares from us, you agree that all such purchases
shall be made only to cover orders already received by you from your customers,
or for your own bonafide investment without a view to resale. If you purchase
shares from your customers, you agree to pay such customers the applicable net
asset value per share less any contingent deferred sales charge that would be
applicable if such shares were then tendered for redemption in accordance with
the then current applicable prospectus ("repurchase price").
6. You will sell shares only --
(a) to your clients at the prices described in paragraph 2 above; or
(b) to us as agent for the Funds at the repurchase price. In such a
sale to us, you may act either as principal for your own account or as
agent for your customer. If you act as principal for your own account
in purchasing shares for resale to us, you agree to pay your customer
not less than nor more than the repurchase price which you receive
from us. If you act as agent for your customer in selling shares to
us, you agree not to charge your customer more than a fair commission
for handling the transaction.
7. You shall not withhold placing with us orders received from your customers so
as to profit yourself as a result of such withholding.
8. We will not accept from you any conditional orders for shares.
9. If any shares sold to you under the terms of this agreement are repurchased
by a Fund, or are tendered for redemption, within seven business days after the
date of our confirmation of the original purchase by you, it is agreed that you
shall forfeit your right to any commissions on such sales even though the
shareholder may be charged a contingent deferred sales charge by the Fund.
We will notify you of any such repurchase or redemption within the next ten
business days after the date on which the certificate or written request for
redemption is delivered to us or to the Fund, and you shall forthwith refund to
us the full amount of any commission you received on such sale. We agree, in the
event of any such repurchase or redemption, to refund to the Fund any commission
we retained on such sale and, upon receipt from you of the commissions paid to
you, to pay such commissions forthwith to the Fund.
10. Shares sold to you hereunder shall not be issued in certificate form or
otherwise until payment has been received by the Fund concerned. If transfer
instructions are not received from you within 15 days after our acceptance of
your order, the Company reserves the right to instruct the transfer agent for
the Fund concerned to register a certificate for the shares sold to you in your
name and forward such certificate to you. You agree to hold harmless and
indemnify the Company, the Fund and its transfer agent for any loss or expense
resulting from such registration.
11. No person is authorized to make any representations concerning shares of the
Funds except those contained in the current applicable prospectuses and in sales
literature issued by us supplemental to such prospectuses. In purchasing shares
from us you shall rely solely on the representations contained in the
appropriate prospectus and in such sales literature. We will furnish additional
copies of the current prospectuses and such sales literature and other releases
and information issued by us in reasonable quantities upon request. You agree
that you will in all respects duly conform with all laws and regulations
applicable to the sale of shares of the Funds and will indemnify and hold
harmless the Funds, their directors and trustees and the Company from any damage
or expenses on account of any wrongful act by you, your representatives, agents
or sub-agents in connection with any orders or solicitation of orders of shares
of the Funds by you, your representatives, agents or sub-agents.
12. Each party hereto represents that it is a member of the National Association
of Securities Dealers, Inc., and agrees to notify the other should it cease to
be a member of such Association and agrees to the automatic termination of this
agreement at that time. It is further agreed that all rules or regulations of
said Association now in effect or hereafter adopted, which are binding upon
underwriters and dealers in the distribution of the securities of open-end
investment companies, shall be deemed to be a part of this agreement to the same
extent as if set forth in full herein.
13. You will not offer the Funds for sale in any State where they are not
qualified for sale under the Blue Sky Laws and regulations of such State or
where you are not qualified to act as a dealer, except for States in which they
are exempt from qualification.
14. This agreement supersedes and cancels any prior agreement with respect to
the sales of shares of any of the Funds underwritten by the Company and the
Company reserves the right to amend this agreement at any time and from time to
time.
15. This agreement shall be effective upon acceptance by us in Boston,
Massachusetts and all sales hereunder are to be made, and title to shares of the
Funds shall pass, in Boston. This agreement is made in the Commonwealth of
Massachusetts and shall be interpreted in accordance with the laws of
Massachusetts.
16. All communications to the Company should be sent to the above address. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
17. Either party may terminate this agreement at any time by written notice to
the other party.
Signed: Accepted:
- ---------------------------------- Boston, MA (USA) as of June 1, 1995
Dealer or Broker Name
- ---------------------------------- KEYSTONE INVESTMENT DISTRIBUTORS COMPANY
Address 200 Berkeley Street, Boston, MA 02116-5034
- ---------------------------------- -----------------------------------------
Authorized Signature Authorized Signature
<PAGE>
[LOGO] KEYSTONE
INVESTMENTS
200 Berkeley Street
Boston, Massachusetts 02116-5034
Dealer No._________________________________________________________
(Please indicate Exchange Membership(s), if any.)__________________
-------------------------------------------------------------------
Effective Date_____________________________________________________
CLASS C SHARES
To Whom It May Concern:
Keystone Investment Distributors Company ("the Company"), principal
underwriter, invites you to participate in the distribution of Class C shares of
the Keystone America Fund Family, Keystone Liquid Trust and other Funds
("Funds") designated by us which are currently or hereafter underwritten by the
Company, subject to the following terms:
1. In the distribution and sale of shares, you shall not have authority to act
as agent for the issuer, the Company or any other dealer in any respect in such
transactions. All orders are subject to acceptance by us and become effective
only upon confirmation by us. The Company reserves the unqualified right not to
accept any specific order for the purchase or exchange of shares.
2. You will offer and sell Class C shares of the Funds only at their respective
net asset values in accordance with the terms and conditions of a current
prospectus of the Fund whose shares you offer. You will offer shares only on a
forward pricing basis i.e. orders for the purchase or repurchase of shares
accepted by you prior to the close of the New York Stock Exchange and placed
with us the same day prior to the close of our business day, 5:00 p.m. Eastern
Time, and orders to exchange shares of one Fund for shares of another Fund
eligible for exchange placed with us prior to 3:00 p.m. Eastern Time, shall be
confirmed at the closing price for that business day. You agree to place orders
for shares only with us and at such closing price. You further agree to confirm
the transaction with your customer at the price confirmed in writing by us. In
the event of a difference between verbal and written price confirmations shall
be considered final. Prices of the Funds' shares are computed by and are subject
to withdrawal by the Funds in accordance with their current respective
prospectuses. You agree to place orders with us only through your central order
department unless we accept your written Power of Attorney authorizing others to
place orders on your behalf.
3. So long as this agreement remains in effect, we will pay you commissions on
sales of shares of the Funds and service fees, all in accordance with the
Schedule of Commissions and Service Fees ("Schedule") attached hereto and made a
part hereof, effective June 1, 1995, which Schedule may be modified from time to
time or rescinded by us, in either case without prior notice. You shall have no
vested right to receive any continuing service fees, other fees, or other
commissions which we may elect to pay to you from time to time on shares
previously sold by you. You agree not to share or rebate any portion of such
commissions or to otherwise grant any concessions, discounts or other allowances
to any person who is not a broker or dealer actually engaged in the investment
banking or securities business. You will receive commissions in accordance with
the attached Schedule on all purchase transactions in shareholder accounts
(excluding reinvestment of income dividends and capital gains distributions) for
which you are designated as Dealer of Record except where we determine that any
such purchase was made with the proceeds of a redemption or repurchase of shares
of the same Fund or another Fund whether or not the transaction constitutes the
exercise of the exchange privilege. Commissions will be paid to you twice a
month.
You hereby authorize us to act as your agent in connection with all
transaction in shareholder accounts in which you are designated as Dealer of
Record. All designations of Dealer of Record and all authorizations of the
Company to act as your Agent shall cease upon the termination of this Agreement,
or upon the shareholder's instruction to transfer his or her account to another
Dealer of Record.
4. Payment for all shares purchased from us shall be made to the Company and
shall be received by the Company within ten business days after the acceptance
of your order or such shorter time as may be required by law. If such payment is
not received by us, we reserve the right, without prior notice, forthwith to
cancel the sale, or, at our option, to sell the shares ordered by you back to
the Fund concerned in which latter case we may hold you responsible for any
loss, including loss of profit, suffered by us or by the Fund resulting from
your failure to make payment as aforesaid.
5. You agree to purchase shares of the Funds only from us or from your
customers. If you purchase shares from us, you agree that all such purchases
shall be made only to cover orders already received by you from your customers,
or for your own bonafide investment without a view to resale. If you purchase
shares from your customers, you agree to pay such customers the applicable net
asset value per share less any contingent deferred sales charge that would be
applicable if such shares were then tendered for redemption in accordance with
the then current applicable prospectus ("repurchase price").
6. You will sell share only --
(a) to your clients at the prices described in paragraph 2 above; or
(b) to us as agent for the Funds at the repurchase price. In such a
sale to us, you may act either as principal for your own account or as
agent for your customer. If you act as principal for your own account
in purchasing shares for resale to us, you agree to pay your customer
not less than nor more than the repurchase price which you receive
from us. If you act as agent for your customer in selling shares to
us, you agree not to charge your customer more than a fair commission
for handling the transaction.
7. You shall not withhold placing with us orders received from your customers so
as to profit yourself as a result of such withholding.
8. We will not accept from you any conditional orders for shares.
9. If any shares sold to you under the terms of this agreement are repurchased
by a Fund, or are tendered for redemption, within seven business days after the
date of our confirmation of the original purchase by you, it is agreed that you
shall forfeit your right to any commissions on such sales even though the
shareholder may be charged a contingent deferred sales charge by the Fund.
We will notify you of any such repurchase or redemption within the next ten
business days after the date on which the certificate or written request for
redemption is delivered to us or to the Fund, and you shall forthwith refund to
us the full amount of any commission you received on such sale. We agree, in the
event of any such repurchase or redemption, to refund to the Fund any commission
we retained on such sale and, upon receipt from you of the commissions paid to
you, to pay such commissions forthwith to the Fund.
10. Shares sold to you hereunder shall not be issued in certificate form or
otherwise until payment has been received by the Fund concerned. If transfer
instructions are not received from you within 15 days after our acceptance of
your order, the Company reserves the right to instruct the transfer agent for
the Fund concerned to register a certificate for the shares sold to you in your
name and forward such certificate to you. You agree to hold harmless and
indemnify the Company, the Fund and its transfer agent for any loss or expense
resulting from such registration.
11. No person is authorized to make any representations concerning shares of the
Funds except those contained in the current applicable prospectuses and in sales
literature issued by us supplemental to such prospectuses. In purchasing shares
from us you shall rely solely on the representations contained in the
appropriate prospectus and in such sales literature. We will furnish additional
copies of the current prospectuses and such sales literature and other releases
and information issued by us in reasonable quantities upon request. You agree
that you will in all respects duly conform with all laws and regulations
applicable to the sale of shares of the Funds and will indemnify and hold
harmless the Funds, their directors and trustees and the Company from any damage
or expenses on account of any wrongful act by you, your representatives, agents
or sub-agents in connection with any orders or solicitation of orders of shares
of the Funds by you, your representatives, agents or sub-agents.
12. Each party hereto represents that it is a member of the National Association
of Securities Dealers, Inc., and agrees to notify the other should it cease to
be a member of such Association and agrees to the automatic termination of this
agreement at that time. It is further agreed that all rules or regulations of
said Association now in effect or hereafter adopted, which are binding upon
underwriters and dealers in the distribution of the securities of open-end
investment companies, shall be deemed to be a part of this agreement to the same
extent as if set forth in full herein.
13. You will not offer the Funds for sale in any State where they are not
qualified for sale under the Blue Sky Laws and regulations of such State or
where you are not qualified to act as a dealer, except for States in which they
are exempt from qualification.
14. This agreement supersedes and cancels any prior agreement with respect to
the sales of shares of any of the Funds underwritten by the Company and the
Company reserves the right to amend this agreement at any time and from time to
time.
15. This agreement shall be effective upon acceptance by us in Boston,
Massachusetts and all sales hereunder are to be made, and title to shares of the
Funds shall pass, in Boston. This agreement is made in the Commonwealth of
Massachusetts and shall be interpreted in accordance with the laws of
Massachusetts.
16. All communications to the Company should be sent to the above address. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
17. Either party may terminate this agreement at any time by written notice to
the other party.
Signed: Accepted:
- ---------------------------------- Boston, MA (USA) as of June 1, 1995
Dealer or Broker Name
- ---------------------------------- KEYSTONE INVESTMENT DISTRIBUTORS COMPANY
Address 200 Berkeley Street, Boston, MA 02116-5034
- ---------------------------------- -----------------------------------------
Authorized Signature Authorized Signature
<PAGE>
Exhibit 99.8
THIRD
AMENDMENT
TO
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND
AND
STATE STREET BANK AND TRUST COMPANY
This Third Amendment to the Custodian, Fund Accounting and Recordkeeping
Agreement by and between KEYSTONE AMERICA OPPORTUNITIES 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 March 1, 1988, 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.
<PAGE>
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 8th day of
February, 1990.
ATTEST: KEYSTONE AMERICA GLOBAL
OPPORTUNITIES FUND
By: /s/ Mary E. Couillard By: /s/ James McCall
--------------------------- ---------------------------------
ATTEST: STATE STREET BANK AND TRUST COMPANY
By: /s/ Illegible By: /s/ Kate Donelin
--------------------------- ---------------------------------
Assistant Secretary Vice President
<PAGE>
SECOND
AMENDMENT
TO
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND
AND
STATE STREET BANK AND TRUST COMPANY
This Second Amendment to the Custodian, Fund Accounting and Recordkeeping
Agreement by and between KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND ("Fund") and
STATE STREET BANK AND TRUST COMPANY ("State Street"), dated March 1, 1988 and
amended through January 1, 1989 ("Agreement") is made by and between the Fund
and State Street as of February 8, 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
GLOBAL OPPORTUNITIES FUND
/s/ Mary E. Couillard By: /s/ James McCall
- --------------------------------- ---------------------------------
Mary E. Couillard James McCall
ATTEST: STATE STREET BANK AND
TRUST COMPANY
/s/ Illegible By: /s/ Kate Donelin
- --------------------------------- --------------------------------
Kate Donelin
Vice President
<PAGE>
SECOND
AMENDMENT
TO
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND
AND
STATE STREET BANK AND TRUST COMPANY
This Second Amendment to the Custodian, Fund Accounting and Recordkeeping
Agreement by and between KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND ("Fund") and
STATE STREET BANK AND TRUST COMPANY ("State Street"), dated March 1, 1988 and
amended through January 1, 1989 ("Agreement") is made by and between the Fund
and State Street as of February 8, 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
GLOBAL OPPORTUNITIES FUND
/s/ Mary E. Couillard By: /s/ James McCall
- --------------------------------- ------------------------------------
Mary E. Couillard James McCall
ATTEST: STATE STREET BANK AND
TRUST COMPANY
/s/ Illegible By: /s/ Kate Donelin
- --------------------------------- --------------------------------
Kate Donelin
Vice President
<PAGE>
FIRST
AMENDMENT
TO
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND
AND
STATE STREET BANK AND TRUST COMPANY
This First Amendment to the Custodian, Fund Accounting and Recordkeeping
Agreement by and between KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND ("Fund")
and STATE STREET BANK AND TRUST COMPANY ("State Street"), dated March 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-E 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. Line 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
GLOBAL OPPORTUNITIES FUND
/s/ Illegible By: /s/ Albert H. Elfner
- --------------------------------- --------------------------------
Illegible Albert H. Elfner
President
ATTEST: STATE STREET BANK AND
TRUST COMPANY
/s/ Illegible By: /s/ Kate Donelin
- --------------------------------- --------------------------------
Illegible Kate Donelin
Vice President
<PAGE>
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
by and between
KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND
and
STATE STREET BANK AND TRUST COMPANY
Agreement made as of this 18th day of March 1988 by and between Keystone
America Global Opportunities Fund, a Massachusetts business trust, ("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 reasonably 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 enclosed 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 aqreed 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 paragraphs 6-C or 3-P 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:
l) 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 advises
from the Securities System of transfers of securities for the account of the
Fund shall identify the Funds 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.
C. 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.
D. 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 paragraphs 6-C or 3-P of Section II hereof.
E. 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 State Street's agent
or Subcustodian for this purpose or any Foreign Subcustodian appointed pursuant
to paragraph 3-P of Section II hereof as State Street's Subcustodian for this
purpose) registered as provided in paragraph 3-D 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.
F. 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 paragraphs 6-C or 3-P 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 paragraphs 6-C or 3-P 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
or 3-P 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.
G. 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.
H. 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.
I. 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.
J. 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 Directors of the Fund prior to any use of such
modified "street delivery" custom.
K. Compliance with Applicable Rules and Requlations of The Options
Clearing Corporation and National Securities or Commodities Exchanges or
Commissions. Upon receipt of proper instructions, for delivery 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 Funds; or, upon receipt of proper
instructions for delivery 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.
L. 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 pledger
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.
M. 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-F, 3-G, 3-H, 3-I, 3-J, 3-L and 3-M of Section II hereof) which the
Fund declares is a proper corporate purpose pursuant to proper instructions.
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 3B 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.
O. 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 or 3-P of Section II hereof to forward any such announcements and
notices to State Street upon receipt.
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)(l) of Rule 17f-5 under the Investment
Company Act of 1940, 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 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) Aqreements with Foreign Bankinq 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, 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 advises 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) Transaction 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 sub-custodian
shall require the institution to exercise reasonable care in the performance of
its duties as determined under Massachusetts law 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
institutions 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 is notified by a foreign banking institution
employed as a foreign sub-custodian 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 Investment Company Act of 1940 which meets
the qualifications set forth in Section 26(a) of the Act. The appointment of any
such branch as a sub-custodian shall be governed by paragraph 6-C of Section II
of this Agreement.
Q. Miscellaneous. In genera], 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. Additional]y, 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 amount 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 he 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 aceounts 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 collections in the name of the Fund,
checks, drafts or other negotiable instruments on the same day as
received.
In any ease 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 sha11 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 and
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,
interests 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-E , 3-F, 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 r
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 writng.
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 the trust of the Fund, as amended; provided, however, that
except as otherwise expressly provided herein, State Street may assume unless
ar,d 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 initate 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 Aqents 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 reasonable 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 Custodian such
compensation as shall be specificied 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 Street and the Fund agree that they, their officers, employees and
agents shall maintain all information disclosed to them by the other in
connection with this Agreement in confidence and will not disclose any such
information to any other person, nor use such information for their own benefit
or for the benefit of third parties without the consent in writing of the other;
provided, however, that each party shall have the right to use any such
information for its own necessary internal purposes while this Agreement is in
effect. The provisions of the paragraph shall not apply to information which (i)
is in or becomes part of the public domain, or (ii) is demonstrably known
previously to the party to whom it is disclosed, or (iii) is independently
developed outside this Agreement by the party to whom it is disclosed or (iv) is
rightfully obtained from third parties by the party to whom it is disclosed.
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 helo 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. 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.
12. 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.
13. Notices and other writings delivered or mailed postage prepaid to
Keystone America Global Opportunities 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.
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 GLOBAL
OPPORTUNITIES FUND
By:
- ------------------------------------------------ --------------------------
President
ATTEST: STATE STREET BANK AND TRUST
COMPANY
By:
- ------------------------------------------------- --------------------------
Vice President
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 GLOBAL
OPPORTUNITIES FUND
/s/ Rosemary D. VanAntwerp By: /s/ Albert H. Elfner III
- ----------------------------------- -------------------------------------
President
ATTEST: STATE STREET BANK AND TRUST COMPANY
/s/ J. Medoff, A.S. /s/ Kate Donelin
- ----------------------------------- -------------------------------------
Vice President
<PAGE>
Schedule A
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
KEYSTONE AMERICA GLOBAL OPPORTUNITIES 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
GLOBAL CUSTODY FEE
Annual Fee
----------
Non-domestic 1/8 of 1% (0.12%)
net assets
(no minimums are in place on
either of the custody charges)
<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
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 Keystone Group 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 Keystone Investor Resource Center, Inc.
6) (31) Report to be supplied by Keystone Investor Resource Cenner, Inc.
B. Keystone Reports
1) (3) Information to be supplied by Open Order System.
2) (16) Will be prepared manually by State Street. Cancellations 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 $.35 per check - charged only for Keystone
Liquid Trust at this time. Other Fund agreements to be amended to
include this charge if such privilege is ever offered to shareholders
of other Funds.
b) Page 3 (6)
Individuals responsible for Fund services may change as long as the
quality of the personnel is maintained.
c) Page 6 (11)
State Street is liable for the acts of its subcustodians to the same
extent that it is liable for the acts of its agents.
II. Exhibits
1. Exhibit 1-2
a) (6)
Notices of corporate actions shall include, without limitation,
notices of class actions and bankruptcy actions in connection with
issues held by the Funds.
<PAGE>
SCHEDULE C
STATE STREET BANK AND TRUST COMPANY
GLOBAL CUSTODY NETWORK
FISCAL SHAREHOLDERS
COUNTRY BANK YEAR END EQUITY US$
- ------- ---- -------- ------------
AUSTRALIA ANZ BANKING GROUP LTD. 09/30 $3.303 Billion
AUSTRIA GIROZENTRALE UND BANK 12/31 $379 Million
DER OSTERREICHISCHEN
BELGIUM BANQUE BRUXELLES LAMBERT 09/30 $689 Million
CANADA CANADA TRUST COMPANY 12/31 $743 Million
DENMARK DEN DANSKE BANK 12/31 $1.075 Billion
FINLAND KANSALLIS-OSAKE PANKKI 12/31 $802 Million
FRANCE CREDIT COMMERCIAL DE FRANCE 12/31 $564 Million
GERMANY BERLINER HANDELS UND 12/31 $510.9 Million
FRANKFURTER BANK
HONG KONG STANDARD CHARTERED BANK 12/31 $1.909 Billion
JAPAN SUMITOMO TRUST & BANKING 03/31 $1.280 Billion
COMPANY LIMITED
MEXICO CITIBANK MEXICO 12/31 $9.060 Billion
NETHERLANDS BANK MEES & HOPE, N.V. 12/31 $279.1 Million
NEW ZEALAND WESTPAC BANKING CORP. 09/30 $4.083 Billion
NORWAY CHRISTIANIA BANK OG 12/31 $285 Million
KREDITKASSE
SINGAPORE DBS BANK LTD. 12/31 $648.3 Million
SPAIN BANCO HISPANO AMERICANO 12/31 $855 Million
SWEDEN SKANDINAVISKA ENSKILDA BANKEN 12/31 $408 Million
SWITZERLAND UNION BANK OF SWITZERLAND 12/31 $4.965 Billion
UNITED KINGDOM STATE STREET LONDON LIMITED 12/31 $392 Million
STATE STREET BOSTON CORP.
<PAGE>
DEPOSITORIES
Austria: Oesterreichischen Kontrollbank AG
Wertpapiersammelbank beider
(OeKB-WSB)
Belgium: Caisse Interprofessionelle de Depots et de
Virements de Titres S.A.
(C.I.K.)
Canada: The Canadian Depository for Securities Ltd.
(CDS)
Denmark: Vaerdipapircentralen
(VP-Centralen)
France: SICOVAM
Germany: Kassenverein
Mexico: Instituto Nacionel de Valares
Netherlands: Netherlands Clearing Institute for
Giro Securities Deliveries
(NECIGEF)
New Zealand: The Reserve Bank of New Zealand
Spain: Legal depository system (through the
Junita Sindical in force in Spain)
Switzerland: Schweizerische Effekten Giro A.G.
(SEGA)
EuroClear (Brussels, Belgium)
Cedel (Luxembourg)
<PAGE>
CUSTODIAN AGREEMENT
To:
Gentlemen:
The undersigned ("State Street") hereby requests that you (the Bank)
establish a custody account and a cash account for each custodian/employee
benefit plan identified in the Schedule attached to this Agreement and each
additional account which is identified to this Agreement. Each such custody or
cash account as applicable will be referred to herein as the "Account" and
will be subject to the following terms and conditions:
1. The Bank shall hold as agent for State Street and shall physically
segregate in the Account such cash, bullion, coin, stocks, shares,
bonds, debentures, notes and other securities and other property which
is delivered to the Bank for that State Street Account (the
"Property").
2. a. Without the prior approval of State Street it will not deposit
securities in any securities depository or utilize a clearing
agency, incorporated or organized under the laws of a country other
than the United States, unless such depository or clearing house
operates the central system for handling of securities or equivalent
book-entries in that country or operates a transnational system for
the central handling of securities or equivalent book-entries:
b. When securities held for an Account are deposited in a securities
depository or clearing agency by the Bank, the Bank shall identify
on its books as belonging to State Street as agent for such Account,
the securities so deposited.
3. The Bank represents that either:
a. It currently has stockholders' equity in excess of $200 million
(U.S. dollars or the equivalent of U.S. dollars computed in
accordance with generaly accepted U.S. accounting principles) and
will promptly inform State Street in the event that there appears to
be a substantial likelihood that its stockholders' equity will
decline below $200 million, or in an event, at such time as its
stockholders' equity in fact decline below $200 million: or
b. It is the subject of an exemptive order issued by the United States
Securities and Exchange Commission, which such order permits State
Street to employ the Bank as a subcustodian, notwithstanding the
fact that the Bank's stockholders' equity currently below $200
million or may in the future decline below $200 million due to
currency fluctuation.
4. Upon the written instructions of State Street, as permitted by
Paragraph 8, the Bank is authorized to pay cash from the Account and
to sell, assign, transfer, deliver or exchange, or to purchase for
the Account, any and all stocks, shares, bonds, debentures, notes and
other securities ("Securities"), bullion, coin and any other
property, but only as provided in such written instructions. The bank
shall not be held liable for any act or omission to act on
instructions given on purported to be given should there by any or in
such instructions.
5. Unless the Bank receives written instructions of State Street to the
contrary, the Bank is authorized:
a. To promptly receive and collect all income and principal with
respect to the Property and to credit cash receipts to the Account;
b. To promptly exchange securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the exchange
of warrants, or other documents of entitlement to securities, for
the securities themselves);
c. To promptly surrender securities at maturity or when called for
redemption upon receiving payment therefor;
d. Whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or stock
split is received for the Account and such rights entitlement or
fractional interest bears an expiration date, the Bank will
endeavor to obtain State Street Bank's instructions, but should
these not be received in time for the Bank to take timely action,
the Bank is authorized to sell such rights entitlment of fractional
interest and to credit the Account;
e. To hold registered in the name of the nominee of the Bank or its
agents such Securities as are ordinarily held in registered form;
f. To execute in State Street's name for the Account, whenever the
Bank deems it appropriate, such ownership and other certificates as
may be required to obtain the payment of income from the Property;
and
g. To pay or cause to be paid, from the Account any and all taxes and
levies in the nature of taxes imposed on such assets by any
governmental authority and shall use reasonable efforts, to
promptly reclaim any foreign withholding tax relating to the
Account.
6. If the Bank shall receive any proxies, notices, reports or other
communications relative to any of the Securities of the Account in
connection with tender offers, reorganization, mergers,
consolidations, or similar events which may have an impact upon the
issuer thereof, the Bank shall promptly transmit any such
communication to State Street Bank by means as will permit State
Street Bank to take timely action with respect thereto.
7. The Bank is authorized in its discretion to appoint brokers and
agents in connection with the Bank's handling of transactions
relating to the Property provided that any such appointment shall not
relieve the Bank of any of its responsibilities or liabilities
hereunder.
8. Written instructions shall include (i) instructions in writing signed
by such persons as are designated in writing by State Street; (ii)
telex or tested telex instructions of State Street; (iii) other forms
of instruction in computer readable form as shall be customarily
utilized for the transmission of like information; and (iv) such
other forms of communication as from time to time shall be agreed
upon by State Street and the Bank.
9. The Bank shall supply periodic reports with respect to the
safe-keeping of assets held by it under this agreement. The content
of such reports shall include but not be limited to any transfer to
or from any account held by the Bank hereunder and such other
information as State Street may reasonably request.
10. In addition to its obligations under Section 2B hereof, the Bank
shall maintain such other records as may be necessary to identify the
assets hereunder as belonging to each custodian/employee benefit plan
identified in our Schedule attached to this agreement and each
additional account which is identified to this agreement.
11. The Bank agrees that its books and records relating to its actions
under this Agreement shall be opened to the physical, on-premises
inspection and audit at reasonable times by officers of, auditors
employed by or other representatives of State Street (including to
the extent permitted under law the independent public accountants for
any entity whose Property is being held hereunder) and shall be
retained for such period as shall be agreed by State Street and the
Bank.
12. The Bank shall be entitled to reasonable compensation for its
services and expenses as custodian under this Agreement, as agreed
upon from time to time by the Bank and State Street.
13. The Bank shall exercise reasonable care in the performance of its
duties, as are set forth or contemplated herein or contained in
instructions given to the Bank which are not contrary to this
Agreement, shall maintain adequate insurance and agrees to indemnify
and hold harmless, State Street and each Account from and against
loss, damage, cost, expense, liability or claim arising out of or
connection with the Bank's performance of its obligations hereunder.
14. The bank agrees (i) the property held hereunder is not subject to any
right, charge, security interest, lien or claim of any kind in favor
of the Bank or any of its agents or its creditors except a claim of
payment for their safe custody and administration and (ii) the
beneficial ownership of the property shall be freely transferable
without the payment of money or other value other than for safe
custody or administration.
15. The bank agrees to meet State Street Operating Requirements (See
Exhibit A).
16. This Agreement may be terminated by the Bank or State Street by 60
days' written notice to the other, sent by registered mail or express
courier. The Bank, upon the date this Agreement terminates pursuant
to notice which has been given in a timely fashion, shall deliver the
Property to the beneficial owner unless the Bank has received from
the beneficial owner 60 days' prior to the date on which this
Agreement is to be terminated written instructions of State Street
specifying the name(s) of the person(s) to whom the Property shall be
delivered.
17. The Bank and State Street shall each use its best efforts to maintain
the confidentiality of the Property in each Account, subject,
however, to the provisions of any laws requiring the disclosure of
the Property.
18. Unless otherwise specified in this Agreement, all notices with
respect to matters contemplated by this Agreement shall be deemed
duly given when received in writing or by confirmed telex by the Bank
or State Street at their respective addresses set forth below or at
such other address as be specified in each case in a notice similarly
given:
To State Street Master Trust Division, Global Custody
STATE STREET BANK AND TRUST COMPANY
P.O. Box 1713
Boston, Massachusetts 02105
U.S.A.
To the Bank
19. This Agreement shall be governed by and construed in accordance with
the laws of ____________________ except to the extent that such
laws are preempted by the laws of the United States of America.
Please acknowledge your agreement to the foregoing by executing a copy of
thie letter.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By:________________________________
Vice President
Date:______________________________
Agreed to by:
By:
_____________________________
Date:________________________
<PAGE>
Exhibit 99.11
CONSENT OF INDEPENDENT AUDITORS
The Trustees
Keystone Global Opportunities Fund
(formerly Keystone America Global Opportunities Fund)
We consent to the use of our report dated October 27, 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
November 29, 1995
<PAGE>
Exhibit 99.15
KEYSTONE AMERICA GLOBAL OPPORTUNITIES FUND
CLASS A DISTRIBUTION PLAN
SECTION 1. Keystone America Global Opportunities Fund (Fund) may act as the
distributor of securities of which it is the issuer, pursuant to Rule 12b-1
under the Investment Company Act of 1940 (1940 Act) according to the terms of
this Distribution Plan (Plan).
SECTION 2. The Fund may expend daily amounts at an annual rate of 0.75% of
the average daily net asset value of Class A shares of the Fund to finance any
activity which is principally intended to result in the sale of Class A shares
of 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 to have paid to others who sell Class A shares a
maintenance or other fee, at such intervals as the Principal Underwriter may
determine, in respect of Class A shares previously sold by any such others and
remaining outstanding during the period in respect of which such fee is or has
been paid; and/or (iii) to compensate the Principal Underwriter for its efforts
in respect of sales of Class A shares of the Fund since inception of the Plan.
SECTION 3. This Plan shall not take effect until it has been approved by a
vote of at least a majority (as defined in the 1940 Act) of the outstanding
Class A shares of the Fund.
SECTION 4. This Plan shall not take effect until it has been approved
together with any related agreements of the Fund by votes of a majority of both
(a) the Board of 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 (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 a majority of the Fund's outstanding Class A shares on not
more than sixty days written notice to any other party to the
agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
SECTION 9. This Plan may not be amended to increase 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 for in Section
4 hereof.
<PAGE>
DISTRIBUTION PLAN
FOR
CLASS B-1 SHARES
OF
KEYSTONE GLOBAL OPPORTUNITIES FUND
Section 1. Keystone Global Opportunities Fund, individually and/or on
behalf of its series, if any, referred to above in the title of this 12b-1 Plan
(the "Plan"), to which series this Plan shall then relate, as applicable (the
"Fund"), may act as the distributor of certain 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.
Section 2. The Fund may expend daily amounts at an annual rate of up to
1.00% of the average daily net asset value of the Fund attributable to the
Fund's Class B-1 shares (the "Shares"). Such amounts may be expended to finance
any activity that is principally intended to result in the sale of Shares,
including, without limitation, expenditures consisting of payments to a
principal underwriter of the Fund or others as sales commissions or other
compensation for services provided or to be provided ("Distribution Fees") or as
reimbursement for expenses that are incurred or accrued at any time during which
this Plan is in effect, together with interest on any such amounts, at rates
approved by the Rule 12b-1 Directors (as defined below) in the manner referred
to below, all whether or not this Plan has been otherwise terminated, if such
payment of such expenditures is for services theretofore provided or for
reimbursement of expenses theretofore incurred or accrued prior to termination
of this Plan in other respects and if such payment is or has been so approved by
such Rule 12b-1 Directors, or agreed to by the Fund with such approval, all
subject to such specific implementation as such 12b-1 Directors may approve;
provided that, at the time any such payment is made, whether or not this Plan
has been otherwise terminated, the making of such payment will not cause the
limitation upon such payments set forth in the preceding sentence to be
exceeded. Without limiting the generality of the foregoing, the Fund may pay to,
or on the order of, any person who has served from time to time as principal
underwriter (a "Principal Underwriter") amounts for distribution services
pursuant to a principal underwriting agreement or otherwise. No principal
underwriting agreement or other agreement shall be an agreement related to this
Plan, as referred to in Rule 12b-1 of the Securities and Exchange Commission,
unless it specifically states that it is such a related agreement. Any such
principal underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B-1 Shares
and/or other specified classes of shares of the Fund (together the
"B-Class-of-Shares"), a fee which may be designated a Distribution Fee and may
be paid at a rate per annum up to .75% of the average daily net asset value of
such B-Class-of-Shares of the Fund and may, but need not, also provide: (I) that
a Principal Underwriter will be deemed to have fully earned its "Allocable
Portion" of the Distribution Fee upon the sale of the Commission Shares (as
defined in the Allocation Schedule) taken into account in determining its
Allocable Portion; (II) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall be absolute and
unconditional and shall not be subject to dispute, offset, counterclaim or any
defense whatsoever (it being understood that such provision is not a waiver of
the Fund's right to pursue such Principal Underwriter and enforce such claims
against the assets of such Principal Underwriter other than its right to its
Allocable Portion of the Distribution Fees and CDSCs (as defined below) (III)
that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fees shall not be changed or terminated except to
the extent required by any change in applicable law, including without
limitation, the Investment Company Act of 1940, the Rules promulgated thereunder
by the Securities and Exchange Commission and the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., in each case enacted or
promulgated after June 1, 1995, or in connection with a "Complete Termination"
(as hereinafter defined); (IV) that the Fund will not waive or change any
contingent deferred sales charge ("CDSC") in respect of the Distributor's
Allocable Portion thereof, except as provided in the Fund's prospectus or
statement of additional information without the consent of the Principal
Underwriter or any assignee of such Principal Underwriter's rights to its
Allocable Portion; (V) that the termination of the Principal Underwriter, the
principal underwriting agreement or this Plan will not terminate such Principal
Underwriter's rights to its Allocable Portion of the CDSCs; and (VI) that any
Principal Underwriter may assign its rights to its Allocable Portion of the
Distribution Fees and CDSCs (but not such Principal Underwriter's obligations to
the Fund under its principal underwriting agreement) to raise funds to make
expenditures described in Section 2 above and in connection therewith, and upon
receipt of notice of such assignment, the Fund shall pay to the assignee such
portion of the Principal Underwriter's Allocable Portion of the Distribution
Fees and CDSCs so assigned. For purposes of such principal underwriting
agreement, the term Allocable Portion of Distribution Fees as applied to any
Principal Underwriter may mean the portion of the Distribution Fee allocable to
Distributor Shares in accordance with the "Allocation Schedule" attached to such
Principal Underwriter's principal underwriting agreement. For purposes of such
principal underwriting agreement, the term Allocable Portion of CDSCs as applied
to any Principal Underwriter may mean the portion of the CDSCs allocable to
Distributor Shares in accordance with the Allocation Schedule attached to such
Principal Underwriter's principal underwriting agreement. For purposes of such
principal underwriting agreement, the term "Complete Termination" may mean a
termination of this Plan involving the cessation of payments of the Distribution
Fees thereunder, the cessation of payments of distribution fees pursuant to
every other rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares and the cessation of the offering by the Fund of existing or
future B-Class-of-Shares, which conditions shall be deemed to be satisfied when
they are first complied with and so long thereafter as they are complied with
prior to the earlier of (i) the date upon which all of the B-2 Shares which are
Distributor Shares pursuant to the Allocation Schedule shall have been redeemed
or converted or (ii) a specified date, after either of which times such
conditions need no longer be complied with. For purposes of such principal
underwriting agreement, the term "B-Class-of-Shares" may mean each of the B-1
Class of Shares of the Fund, the B-2 Class of Shares of the Fund and each other
class of shares of the Fund hereafter issued which would be treated as "Shares"
under such Allocation Schedule or which has economic characteristics
substantially similar to those of the B-1 or B-2 Classes of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of the shares of such classes. The parties may agree
that the existing C Class of Shares of the Fund does not have substantially
similar economic characteristics to the B-1 or B-2 Classes of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares. For purposes of clarity the parties to
such principal underwriting agreement may state that they intend that a new
installment load class of shares which may be authorized by amendments to Rule
6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it
has economic characteristics substantially similar to the economic
characteristics of the existing B-1 or B-2 Classes of Shares taking into account
the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares. For purposes of such
principal underwriting agreement, "Allocation Schedule" may mean a schedule
which shall be approved by Directors (as defined below) in connection with their
required approval of such principal underwriting agreement as assigning to each
Principal Underwriter of Shares the portion of the total Distribution Fees
payable by the Fund under such principal underwriting agreement which has been
earned by such Principal Underwriter to the extent necessary so that the
continued payments thereof if such Principal Underwriter ceases to serve in that
capacity does not penalize the Fund by requiring it to pay for services that
have not been earned.
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
Shares.
Section 4. This Plan, and the specific implementation of expenditures
provided for under this Plan, shall not take effect until this Plan, and such
implementation, have been approved, together with any related agreements of the
Fund, by votes of both (a) a majority of the Board of Trustees or Directors
(together the "Directors") of the Fund and (b) a majority of those Directors of
the Fund who are not "interested persons" of the Fund (as said term is defined
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan or any agreements of the Fund or any other person related
to this Plan (the "Rule 12b-1 Directors"), cast in person at a meeting called
for the purpose of voting on this Plan or such agreements.
Section 5. Unless sooner terminated pursuant to Section 7 hereof, this Plan
shall continue in effect for a period of one year from the date it takes effect
and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4 hereof, except that, if terminated except for payments
provided to be made after termination of other aspects of this Plan, such
payments may be made pursuant to approvals made, and or agreements approved, as
provided above.
Section 6. Any person authorized to direct the disposition of monies paid
or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board of Directors, and the Board shall review, at least
quarterly a written report of the amounts so expended and the purposes for which
such expenditures were made.
Section 7. This Plan may be terminated, in whole or in part, at any time by
vote of a majority of the Rule 12b-1 Directors or by vote of a majority of the
outstanding Shares, with the effects provided for in Section 2, as applicable.
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 Directors or by a
vote of a majority of the outstanding 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 for
in Section 4 hereof.
<PAGE>
DISTRIBUTION PLAN
FOR
CLASS B-2 SHARES
OF
KEYSTONE GLOBAL OPPORTUNITIES FUND
Section 1. Keystone Global Opportunities Fund, individually and/or on
behalf of its series, if any, referred to above in the title of this 12b-1 Plan
(the "Plan"), to which series this Plan shall then relate, as applicable (the
"Fund"), may act as the distributor of certain 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.
Section 2. The Fund may expend daily amounts at an annual rate of up to
1.00% of the average daily net asset value of the Fund attributable to the
Fund's Class B-2 shares (the "Shares"). Such amounts may be expended to finance
any activity that is principally intended to result in the sale of Shares,
including, without limitation, expenditures consisting of payments to a
principal underwriter of the Fund or others as sales commissions or other
compensation for services provided or to be provided ("Distribution Fees") or as
reimbursement for expenses that are incurred or accrued at any time during which
this Plan is in effect, together with interest on any such amounts, at rates
approved by the Rule 12b-1 Directors (as defined below) in the manner referred
to below, all whether or not this Plan has been otherwise terminated, if such
payment of such expenditures is for services theretofore provided or for
reimbursement of expenses theretofore incurred or accrued prior to termination
of this Plan in other respects and if such payment is or has been so approved by
such Rule 12b-1 Directors, or agreed to by the Fund with such approval, all
subject to such specific implementation as such 12b-1 Directors may approve;
provided that, at the time any such payment is made, whether or not this Plan
has been otherwise terminated, the making of such payment will not cause the
limitation upon such payments set forth in the preceding sentence to be
exceeded. Without limiting the generality of the foregoing, the Fund may pay to,
or on the order of, any person who has served from time to time as principal
underwriter (a "Principal Underwriter") amounts for distribution services
pursuant to a principal underwriting agreement or otherwise. No principal
underwriting agreement or other agreement shall be an agreement related to this
Plan, as referred to in Rule 12b-1 of the Securities and Exchange Commission,
unless it specifically states that it is such a related agreement. Any such
principal underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B-2 Shares
and/or other specified classes of shares of the Fund (together the
"B-Class-of-Shares"), a fee which may be designated a Distribution Fee and may
be paid at a rate per annum up to .75% of the average daily net asset value of
such B-Class-of-Shares of the Fund and may, but need not, also provide: (I) that
a Principal Underwriter will be deemed to have fully earned its "Allocable
Portion" of the Distribution Fee upon the sale of the Commission Shares (as
defined in the Allocation Schedule) taken into account in determining its
Allocable Portion; (II) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall be absolute and
unconditional and shall not be subject to dispute, offset, counterclaim or any
defense whatsoever (it being understood that such provision is not a waiver of
the Fund's right to pursue such Principal Underwriter and enforce such claims
against the assets of such Principal Underwriter other than its right to its
Allocable Portion of the Distribution Fees and CDSCs (as defined below); (III)
that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fees shall not be changed or terminated except to
the extent required by any change in applicable law, including without
limitation, the Investment Company Act of 1940, the Rules promulgated thereunder
by the Securities and Exchange Commission and the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., in each case enacted or
promulgated after June 1, 1995, or in connection with a "Complete Termination"
(as hereinafter defined); (IV) that the Fund will not waive or change any
contingent deferred sales charge ("CDSC") in respect of the Distributor's
Allocable Portion thereof, except as provided in the Fund's prospectus or
statement of additional information without the consent of the Principal
Underwriter or any assignee of such Principal Underwriter's rights to its
Allocable Portion; (V) that the termination of the Principal Underwriter, the
principal underwriting agreement or this Plan will not terminate such Principal
Underwriter's rights to its Allocable Portion of the CDSCs; and (VI) that any
Principal Underwriter may assign its rights to its Allocable Portion of the
Distribution Fees and CDSCs (but not such Principal Underwriter's obligations to
the Fund under its principal underwriting agreement) to raise funds to make
expenditures described in Section 2 above and in connection therewith, and upon
receipt of notice of such assignment, the Fund shall pay to the assignee such
portion of the Principal Underwriter's Allocable Portion of the Distribution
Fees and CDSCs so assigned. For purposes of such principal underwriting
agreement, the term Allocable Portion of Distribution Fees as applied to any
Principal Underwriter may mean the portion of the Distribution Fee allocable to
Distributor Shares in accordance with the "Allocation Schedule" attached to such
Principal Underwriter's principal underwriting agreement. For purposes of such
principal underwriting agreement, the term Allocable Portion of CDSCs as applied
to any Principal Underwriter may mean the portion of the CDSCs allocable to
Distributor Shares in accordance with the Allocation Schedule attached to such
Principal Underwriter's principal underwriting agreement. For purposes of such
principal underwriting agreement, the term "Complete Termination" may mean a
termination of this Plan involving the cessation of payments of the Distribution
Fees thereunder, the cessation of payments of distribution fees pursuant to
every other rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares and the cessation of the offering by the Fund of existing or
future B-Class-of-Shares, which conditions shall be deemed to be satisfied when
they are first complied with and so long thereafter as they are complied with
prior to the earlier of (i) the date upon which all of the B-2 Shares which are
Distributor Shares pursuant to the Allocation Schedule shall have been redeemed
or converted or (ii) a specified date, after either of which times such
conditions need no longer be complied with. For purposes of such principal
underwriting agreement, the term "B-Class-of-Shares" may mean each of the B-1
Class of Shares of the Fund, the B-2 Class of Shares of the Fund and each other
class of shares of the Fund hereafter issued which would be treated as "Shares"
under such Allocation Schedule or which has economic characteristics
substantially similar to those of the B-1 or B-2 Classes of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of the shares of such classes. The parties may agree
that the existing C Class of Shares of the Fund does not have substantially
similar economic characteristics to the B-1 or B-2 Classes of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares. For purposes of clarity the parties to
such principal underwriting agreement may state that they intend that a new
installment load class of shares which may be authorized by amendments to Rule
6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it
has economic characteristics substantially similar to the economic
characteristics of the existing B-1 or B-2 Classes of Shares taking into account
the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares. For purposes of such
principal underwriting agreement, "Allocation Schedule" may mean a schedule
which shall be approved by Directors (as defined below) in connection with their
required approval of such principal underwriting agreement as assigning to each
Principal Underwriter of Shares the portion of the total Distribution Fees
payable by the Fund under such principal underwriting agreement which has been
earned by such Principal Underwriter to the extent necessary so that the
continued payments thereof if such Principal Underwriter ceases to serve in that
capacity does not penalize the Fund by requiring it to pay for services that
have not been earned.
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
Shares.
Section 4. This Plan, and the specific implementation of expenditures
provided for under this Plan, shall not take effect until this Plan, and such
implementation, have been approved, together with any related agreements of the
Fund, by votes of both (a) a majority of the Board of Trustees or Directors
(together the "Directors") of the Fund and (b) a majority of those Directors of
the Fund who are not "interested persons" of the Fund (as said term is defined
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan or any agreements of the Fund or any other person related
to this Plan (the "Rule 12b-1 Directors"), cast in person at a meeting called
for the purpose of voting on this Plan or such agreements.
Section 5. Unless sooner terminated pursuant to Section 7 hereof, this Plan
shall continue in effect for a period of one year from the date it takes effect
and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4 hereof, except that, if terminated except for payments
provided to be made after termination of other aspects of this Plan, such
payments may be made pursuant to approvals made, and or agreements approved, as
provided above.
Section 6. Any person authorized to direct the disposition of monies paid
or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board of Directors, and the Board shall review, at least
quarterly a written report of the amounts so expended and the purposes for which
such expenditures were made.
Section 7. This Plan may be terminated, in whole or in part, at any time by
vote of a majority of the Rule 12b-1 Directors or by vote of a majority of the
outstanding Shares, with the effects provided for in Section 2, as applicable.
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 Directors or by a
vote of a majority of the outstanding 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 for
in Section 4 hereof.
<PAGE>
KEYSTONE GLOBAL OPPORTUNITIES FUND
CLASS C DISTRIBUTION PLAN
SECTION 1. Keystone Global Opportunities 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 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/Directors (as
defined below) on any such amounts.
SECTION 3. This Plan shall not take effect until it has been approved by a
vote of at least a majority (as defined in the 1940 Act) of the outstanding
Class C shares.
SECTION 4. This Plan shall not take effect until it has been approved
together with any related agreements of the Fund by votes of a majority of both
(a) the Board of Trustees/Directors of the Fund and (b) those Trustees/Directors
of the Fund who are not "interested persons" of the Fund (as said term is
defined in the 1940 Act) and who have no direct or indirect financial interest
in the operation of this Plan or any agreements of the Fund or any other person
related to this Plan (the "Rule 12b-1 Trustees/Directors"), cast in person at a
meeting called for the purpose of voting on this Plan or such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 7 hereof, this Plan
shall continue in effect for a period of one year from the date it takes effect
and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 4 hereof.
SECTION 6. Any person authorized to direct the disposition of monies paid
or payable by the Fund pursuant to this Plan or any related agreement shall
provide to the Fund's Board of Trustees/Directors and the Board shall review at
least quarterly a written report of the amounts so expended and the purposes for
which such expenditures were made.
SECTION 7. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees/Directors or by vote of a majority of the outstanding
Class C shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Rule 12b-1 Trustees/Directors
or by a vote of a majority of the outstanding Class C shares on not
more than sixty days written notice to any other party to the
agreement; and
(b) That such agreement shall terminate automatically in the event of its
assignment.
SECTION 9. This Plan may not be amended to increase 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 for in Section
4 hereof.
<PAGE>
Exhibit 99.16
<TABLE>
<CAPTION>
THREE FIVE TEN
ONE YEAR THREE YEAR FIVE YEAR TEN
KAGOF CLASS A MTD YTD YEAR TOTAL YEAR TOTAL YEAR TOTAL YEAR
29-Sep-95 RETURN COMPOUNDED RETURN COMPOUNDED RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.75% LOAD 16.35% 13.71% 90.60% 23.99% 157.53% 20.83% 168.83% 14.01%
no load 3.40% 23.45% 20.65% 102.23% 26.46% 173.24% 22.27% 185.23% 14.91%
Beg dates 31-Aug-95 30-Dec-94 30-Sep-94 30-Sep-92 30-Sep-92 28-Sep-90 28-Sep-90 16-Mar-88 16-Mar-88
Beg Value (LOAD) 29,268 24,515 25,083 14,965 14,965 11,076 11,076 10,610 10,610
Beg Value (no load) 27,585 23,105 23,641 14,104 14,104 10,439 10,439 10,000 10,000
End Value 28,523 28,523 28,523 28,523 28,523 28,523 28,523 28,523 28,523
TIME 3 5 7.5416666667
INCEPTION DATE 16-Mar-88
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THREE FIVE TEN
ONE YEAR THREE YEAR FIVE YEAR TEN
KAGOF-B MTD YTD YEAR TOTAL YEAR TOTAL YEAR TOTAL YEAR
29-Sep-95 RETURN COMPOUNDED RETURN COMPOUNDED RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
with cdsc N/A 17.80% 15.79% 62.30% 19.91% NA NA NA NA
W/O CDSC 3.37% 22.80% 19.79% 65.30% 20.74% NA NA NA NA
Beg dates 31-Aug-95 30-Dec-94 30-Sep-94 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93
Beg Value (no load) 15,991 13,461 13,799 10,000 10,000 10,000 10,000 10,000 10,000
End Value (W/O CDSC) 16,530 16,530 16,530 16,530 16,530 16,530 16,530 16,530 16,530
End Value (with cdsc) 15,857 15,978 16,230 16,230 16,430 16429.599581 16,530 16529.599581
beg nav 22.25 18.73 19.20 14.04 14.04 14.04 14.04 14.04 14.04
end nav 23.00 23.00 23 23 23 23 23 23 23
shares originally
purchased 718.68 718.68 718.68 712.25 712.25 712.25 712.25 712.25 712.25
5% cdsc thru date=> 31-Jan-94
TIME 4% cdsc thru date=> 31-Jan-95 2.6666666667 2.6666666667 2.6666666667
INCEPTION DATE 01-Feb-93 3% cdsc effect. date=> 31-Jan-97 31-Dec-96
2% cdsc effect. date=> 31-Jan-98
1% cdsc effect. date=> 31-Jan-99
1% cdsc thru date^
Compound Return Time Period: BEGINNING Dec-94
Through Sep-95
# Months # Years
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THREE FIVE TEN
ONE YEAR THREE YEAR FIVE YEAR TEN
KAGOF-C MTD YTD YEAR TOTAL YEAR TOTAL YEAR TOTAL YEAR
29-Sep-95 RETURN COMPOUNDED RETURN COMPOUNDED RETURN COMPOUNDED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
with cdsc N/A 21.62% 19.63% 65.58% 20.82% NA NA NA NA
W/O CDSC 3.36% 22.62% 19.63% 65.58% 20.82% NA NA NA NA
Beg dates 31-Aug-95 30-Dec-94 30-Sep-94 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93 01-Feb-93
Beg Value (no load) 16,019 13,504 13,841 10,000 10,000 10,000 10,000 10,000 10,000
End Value (W/O CDSC) 16,558 16,558 16,558 16,558 16,558 16,558 16,558 16,558 16,558
End Value (with cdsc) 16,423 16,558 16,558 16,558 16,558 16,558 16,558 16,558
beg nav 22.29 18.79 19.26 14.04 14.04 14.04 14.04 14.04 14.04
end nav 23.04 23.04 23.04 23.04 23.04 23.04 23.04 23.04 23.04
shares originally
purchased 718.66 718.66 718.66 712.25 712.25 712.25 712.25 712.25 712.25
TIME 2.6666666667 2.6666666667 2.6666666667
INCEPTION DATE 01-Feb-93 1% cdsc effect. 01-Jan-96 31-Dec-96
1% cdsc thru date^
Compound Return Time Period: BEGINNING 12/30/94
Through 09/29/95
# Months # Years
</TABLE>
<PAGE>
Exhibit 99.19
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and/or Chairman of the Board and Chief
Executive Officer and for which Keystone Custodian Funds, Inc. serves as Adviser
or Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and in my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
/s/ George S. Bissell
George S. Bissell
Director/Trustee,
Chairman of the Board
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and/or Chief Executive Officer and for
which Keystone Custodian Funds, Inc. serves as Adviser or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and in my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
/s/ Albert H. Elfner, III
Albert H. Elfner, III
Director/Trustee,
President and Chief
Executive Officer
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director, Trustee or officer and for which Keystone
Custodian Funds, Inc. serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and in my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Kevin J. Morrissey
Kevin J. Morrissey
Treasurer
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Frederick Amling
Frederick Amling
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Charles A. Austin III
Charles A. Austin III
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Edwin D. Campbell
Edwin D. Campbell
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Charles F. Chapin
Charles F. Chapin
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ K. Dun Gifford
K. Dun Gifford
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Leroy Keith, Jr.
Leroy Keith, Jr.
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ F. Ray Keyser,Jr.
F. Ray Keyser, Jr.
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ David M. Richardson
David M. Richardson
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Richard J. Shima
Richard J. Shima
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Andrew J. Simons
Andrew J. Simons
Director/Trustee
Dated: December 14, 1994
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> KEYSTONE GLOBAL OPPORTUNITIES FUND CLASS A
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEPT-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEPT-30-1995
<INVESTMENTS-AT-COST> 322,026,365
<INVESTMENTS-AT-VALUE> 421,020,596
<RECEIVABLES> 4,881,846
<ASSETS-OTHER> 4,340
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 425,906,782
<PAYABLE-FOR-SECURITIES> 6,083,985
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 484,667
<TOTAL-LIABILITIES> 6,568,652
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,739,435
<SHARES-COMMON-STOCK> 4,040,958
<SHARES-COMMON-PRIOR> 3,661,273
<ACCUMULATED-NII-CURRENT> (262,412)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,827,771)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 30,030,080
<NET-ASSETS> 94,679,332
<DIVIDEND-INCOME> 564,355
<INTEREST-INCOME> 169,593
<OTHER-INCOME> 0
<EXPENSES-NET> (1,366,689)
<NET-INVESTMENT-INCOME> (632,741)
<REALIZED-GAINS-CURRENT> (1,837,628)
<APPREC-INCREASE-CURRENT> 17,549,573
<NET-CHANGE-FROM-OPS> 15,079,205
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,705,057
<NUMBER-OF-SHARES-REDEEMED> (1,325,373)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 23,557,694
<ACCUMULATED-NII-PRIOR> (3,043)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (746,194)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,384,336)
<AVERAGE-NET-ASSETS> 75,869,114
<PER-SHARE-NAV-BEGIN> 19.42
<PER-SHARE-NII> (0.16)
<PER-SHARE-GAIN-APPREC> 4.17
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 23.43
<EXPENSE-RATIO> 1.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> KEYSTONE GLOBAL OPPORTUNITIES FUND CLASS B
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEPT-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEPT-30-1995
<INVESTMENTS-AT-COST> 322,026,365
<INVESTMENTS-AT-VALUE> 421,020,596
<RECEIVABLES> 4,881,846
<ASSETS-OTHER> 4,340
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 425,906,782
<PAYABLE-FOR-SECURITIES> 6,083,985
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 484,667
<TOTAL-LIABILITIES> 6,568,652
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 194,007,220
<SHARES-COMMON-STOCK> 10,363,289
<SHARES-COMMON-PRIOR> 6,857,155
<ACCUMULATED-NII-CURRENT> (1,966,862)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,964,127)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 50,244,007
<NET-ASSETS> 238,320,238
<DIVIDEND-INCOME> 1,253,671
<INTEREST-INCOME> 370,507
<OTHER-INCOME> 0
<EXPENSES-NET> (4,269,178)
<NET-INVESTMENT-INCOME> (2,645,000)
<REALIZED-GAINS-CURRENT> (3,709,310)
<APPREC-INCREASE-CURRENT> 40,957,168
<NET-CHANGE-FROM-OPS> 34,602,858
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,208,875
<NUMBER-OF-SHARES-REDEEMED> (1,702,740)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 106,625,005
<ACCUMULATED-NII-PRIOR> (142,375)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (1,639,238)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (4,307,917)
<AVERAGE-NET-ASSETS> 166,547,790
<PER-SHARE-NAV-BEGIN> 19.20
<PER-SHARE-NII> (0.25)
<PER-SHARE-GAIN-APPREC> 4.05
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 23.00
<EXPENSE-RATIO> 2.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> KEYSTONE GLOBAL OPPORTUNITIES FUND CLASS C
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEPT-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEPT-30-1995
<INVESTMENTS-AT-COST> 322,026,365
<INVESTMENTS-AT-VALUE> 421,020,596
<RECEIVABLES> 4,881,846
<ASSETS-OTHER> 4,340
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 425,906,782
<PAYABLE-FOR-SECURITIES> 6,083,985
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 484,667
<TOTAL-LIABILITIES> 6,568,652
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,876,156
<SHARES-COMMON-STOCK> 3,747,906
<SHARES-COMMON-PRIOR> 2,623,256
<ACCUMULATED-NII-CURRENT> (731,666)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,529,717)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 18,723,787
<NET-ASSETS> 86,338,560
<DIVIDEND-INCOME> 476,562
<INTEREST-INCOME> 141,363
<OTHER-INCOME> 0
<EXPENSES-NET> (1,626,472)
<NET-INVESTMENT-INCOME> (1,008,547)
<REALIZED-GAINS-CURRENT> (1,453,073)
<APPREC-INCREASE-CURRENT> 15,387,425
<NET-CHANGE-FROM-OPS> 12,925,806
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,900,476
<NUMBER-OF-SHARES-REDEEMED> (775,826)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 35,803,668
<ACCUMULATED-NII-PRIOR> (34,764)
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (624,542)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,641,235)
<AVERAGE-NET-ASSETS> 63,467,802
<PER-SHARE-NAV-BEGIN> 19.26
<PER-SHARE-NII> (0.27)
<PER-SHARE-GAIN-APPREC> 4.05
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 23.04
<EXPENSE-RATIO> 2.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
