<PAGE>
PAGE 1
KEYSTONE GLOBAL OPPORTUNITIES FUND
SEEKS CAPITAL GROWTH BY INVESTING IN SMALL- TO MEDIUM-SIZED COMPANIES AROUND THE
WORLD.
Dear Shareholder:
We are writing to report on the activities of Keystone Global Opportunities Fund
for the six-month period which ended March 31, 1997. Following our letter to you
we have included a discussion with your Fund manager and complete financial
information.
PERFORMANCE
For the periods which ended March 31, 1997, your Fund produced the following
total returns.
Class A shares returned -9.33% for the six-month period and -8.28% for the
twelve-month period.
Class B shares returned -9.67% for the six-month period and -8.99% for the
twelve-month period.
Class C shares returned -9.69% for the six-month period and -8.97% for the
twelve-month period.
This disappointing performance reflected the unfavorable market environment
for small-cap stocks in the United States and Japan-- the Fund's two key
markets.
The benchmark Salomon Brothers Extended Market Index (EMI), representing over
5,500 small-cap stocks in 22 countries including the U.S., returned -0.50% for
the six months and 2.39% for the 12 months.
DIFFICULT MARKET ENVIRONMENT
The six-month period which ended March 31, 1997 was a challenging one for
picking small-cap stocks in the United States and Japan, which together
represented about 50% of the Fund's net assets at the close of the fiscal
period. In the United States, small-cap stocks never fully recovered from the
correction that took place in June and July of 1996. Investors opted for the
relative safety and high liquidity of blue-chip stocks, which also offered an
extra incentive of higher-than-average earnings growth rates after two
consecutive years of a bull market.
The downturn in Japanese small-cap stocks was magnified by the weak yen when
the returns of Japanese holdings were converted into U.S. dollars. Overall,
Japanese stocks in the portfolio declined about 33% in U.S. dollar terms. Your
Fund has trimmed its weighting in Japan, but it still accounts for about 15% of
the portfolio. We have conviction about the stocks your Fund owns in Japan.
There is some evidence of improving economic trends in Japan which should
eventually be reflected in higher equity values. While the timing is unclear,
our selections should fully participate.
LONG TERM VIEW
As we have written in prior reports, investing in small company stocks in the
U.S. and abroad involves special risks, including price volatility, currency
fluctuations and a lack of liquidity. We attempt to limit these risks by
diversifying and carefully selecting the markets and companies in which we
invest. We believe stocks of small companies in the U.S. and foreign markets
offer attractive growth opportunities for long-term investors. Foreign small
company stocks also add much-needed diversification for investors with core
holdings in large American companies. Despite the recent setback, it's important
to remember that over the long term your Fund has been successfully achieving
its investment objectives in the small-cap market. We urge you to keep that
long-term perspective.
DIVERSIFICATION HELPED TO REDUCE RISK
The broad diversification of the portfolio helped to reduce the overall risk. In
contrast to the U.S. and Japan, small-cap stocks performed well in the United
Kingdom, France, and Germany. Latin American stocks also produced strong
results. Generally your Fund buys larger and established companies in South
America and other emerging countries.
-- CONTINUED--
<PAGE>
PAGE 2
KEYSTONE GLOBAL OPPORTUNITIES FUND
KEYSTONE TO MANAGE FOREIGN PORTION OF THE PORTFOLIO EFFECTIVE JUNE 1, 1997
Until now, the European and Asian portions of the portfolio have been managed by
Credit Lyonnais International Asset Management, whose investment operations are
based in Paris. Keystone has been managing assets invested in North America and
South America. Starting on June 1, 1997, the entire foreign portion of the
portfolio will be managed by the International Investment Department at
Keystone, headed by Gilman Gunn, a Keystone Senior Vice President and Chief
Investment Officer, International.
We think having the entire investment team under one roof will benefit our
shareholders. Over the past six years, Keystone has built a strong international
team and acquired broad experience in foreign markets. By managing both the
foreign and domestic components of Global Opportunities Fund, we will have
greater ability to plan and implement asset allocation decisions, and this
should enable us to move quickly to take advantage of investment opportunities.
OUTLOOK
We believe that small-cap stocks are well positioned for a turnaround. They have
been in a downturn for over a year and their valuations are attractive relative
to those of the popular large-company stocks. The possibility exists that
increasing interest rates may stall the recovery but not over the long term. In
the current environment, with the blue-chip stocks producing solid earnings
growth, there has been little incentive for investors to take the extra risk of
small-cap stocks. However, it is likely that the rate of growth of large
companies may slow down, which could trigger greater investor focus on small
company stocks. There is some historic evidence that after multiple interest
rate increases, large caps outperform for a couple of months, but then small
caps start to assume leadership.
With regard to the foreign portion of the portfolio, our overall outlook is
cautious. In Japan, the economy has been picking up, which bodes well for the
small-cap stocks in the coming year, but the yen continues to be weak relative
to the U.S. dollar. In France and Germany, there is a concern regarding the high
rate of unemployment and low consumer confidence.
We appreciate your continued support of Keystone funds. If you have any
questions or comments, please feel free to write to us.
Sincerely,
(Signature of Albert H. Elfner)
Albert H. Elfner, III
CHAIRMAN
KEYSTONE INVESTMENT MANAGEMENT COMPANY
(Signature of George S. Bissell)
George S. Bissell
CHAIRMAN OF THE BOARD
KEYSTONE FUNDS
May 1997 (Photo of Albert H. Elfner, III) (Photo of George S. Bissell)
<PAGE>
PAGE 3
A Discussion With
Your Fund's Manager
(Photo of Margery C. Parker)
MARGERY C. PARKER IS PORTFOLIO MANAGER OF KEYSTONE GLOBAL OPPORTUNITIES
FUND. MS. PARKER HAS MORE THAN 15 YEARS OF INVESTMENT MANAGEMENT
EXPERIENCE. SHE HOLDS A BA FROM WELLESLEY COLLEGE AND AN MBA FROM BABSON
COLLEGE. SHE WORKS TOGETHER WITH KEYSTONE'S INTERNATIONAL INVESTMENT
DEPARTMENT HEADED BY GILMAN GUNN, A KEYSTONE SENIOR VICE PRESIDENT AND
CHIEF INVESTMENT OFFICER, INTERNATIONAL.
(Q) HOW DO YOU ASSESS THE FUND'S PERFORMANCE DURING THE SIX-MONTH PERIOD ENDING
MARCH 31, 1997?
(A) We are disappointed but not surprised. It has been a tough year for
small-cap stocks and our benchmark indexes show it. The Russell 2000 Growth
Index was down more than 10% for the six-month period. On the other hand, we see
good reasons for optimism. Small-cap stocks are very inexpensive now, and we
have acquired some excellent stocks at bottom prices. These holdings have the
potential to significantly boost the Fund's performance when the market turns
around.
(Q) WHAT EVENTS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE?
(A) Japan and the United States were the weakest spots. In Japan, the slow
economic growth and the weak yen led to underperformance of small stocks.
(Q) WHAT TYPES OF STOCKS DO YOU SEEK FOR THE FUND?
(A) We seek to invest in small companies around the world that we believe have
superior growth rates and accelerating earnings. We look for companies with
projected earnings growth rates of 20% or more each year. Generally our U.S.
holdings have market capitalizations (stock price multiplied by total shares
outstanding) of about $1 billion or less when we purchase them. These are
typically companies that have distinctive products or services that will set
them apart in an increasingly competitive global economy.
(Q) HOW ARE THE NON-NORTH AMERICAN PARTS OF THE PORTFOLIO MANAGED?
(A) Keystone has been managing investments in North America and South America.
The European and Asian portions of the portfolio have been managed by Credit
Lyonnais International Asset Management, whose investment operations are based
in Paris. Starting on June 1, 1997, the entire foreign portion of the portfolio
will be managed by the International Investment Department at Keystone, headed
by Gilman Gunn, a Keystone Senior Vice President and Chief Investment Officer,
International. Gilman is a veteran investment professional, with more than 20
years of experience, half of it spent outside the United States.
FUND PROFILE
OBJECTIVE: Seeks capital growth by investing in small company stocks around the
world.
COMMENCEMENT OF INVESTMENT OPERATIONS: March 16, 1988
COUNTRIES: 25
NET ASSETS: $478 million
<PAGE>
PAGE 4
KEYSTONE GLOBAL OPPORTUNITIES FUND
YOUR FUND INVESTS IN...
* small company stocks in the U.S. and abroad
* stocks with market capitalizations of less than $1 billion
* companies with earnings growth rates of 20% or more
(Q) WHY IS KEYSTONE TAKING OVER MANAGEMENT OF THE ENTIRE PORTFOLIO?
(A) There are two basic reasons.
First, we have the expertise. In recognition of the globalization of the
economy, Keystone has been gradually building up its foreign investment
capabilities, adding portfolio managers, analysts and researchers who have broad
experience in the foreign markets. Over the past six years, we have begun to
manage a number of different portfolios investing in foreign markets for both
U.S. retail mutual fund investors and for foreign institutional investors. We
now have the experience and the resources to manage the foreign portfolio, as
well as the domestic portfolio, of Keystone Global Opportunities Fund.
Second, we think having the entire investment team under one roof will give us
an advantage. We will have greater ability to plan and implement asset
allocation decisions, and this should enable us to move quickly to take
advantage of investment opportunities.
(Q) PLEASE DESCRIBE THE MARKET ENVIRONMENT DURING THE PERIOD.
(A) Overall, it was a volatile market, driven by conflicting forces. On the one
hand, the positive backdrop of low interest rates and controlled inflation
attracted huge inflows of investor dollars into the market. On the other hand,
the resulting surge in stock prices stoked fears that the six-year old stock
market would soon run out of fuel. The July correction in the small- and mid-cap
sectors was a wake-up call for many investors to look for safety. Although the
broad stock market, as measured by the S&P 500 stock index, exhibited strong
performance during the six months, most of the gains were achieved by a small
number of stocks, mainly those of the largest companies.
(Q) WHAT ABOUT THE FOREIGN MARKETS?
(A) In contrast, the foreign markets began to show signs of life after several
difficult years. The market environment improved during the period as better
liquidity and strong cash flows into the foreign markets resulted in very good
performance in selected markets. Some of the strongest results year-to-date have
come from the emerging markets of Eastern Europe, Asia and Latin America. We
have seen mixed results in the industrialized countries of the world. In Europe,
the United Kingdom, France and the Netherlands generated strong gains, but the
German market was lackluster.
(Q) WHAT WAS YOUR STRATEGY WITH REGARD TO JAPAN?
(A) We sought to balance our confidence in the long-term potential of small-cap
Japanese stocks with the need to protect the portfolio from a continued slide.
At the start of the period Japanese stocks comprised about 20% of net assets,
representing the majority of our holdings in Asia and the Pacific region. We
reduced that weighting to about 15% of net assets. Moreover, we hedged 50% of
our Japanese stocks to make them currency neutral.
COUNTRY DIVERSIFICATION
AS OF MARCH 31, 1997
North America 37.5%
Europe 34.7%
Latin America 6.5%
Asia/Pacific 21.1%
Miscellaneous currency holdings 0.2%
(Q) WHAT TYPES OF FOREIGN COMPANIES DID YOU EMPHASIZE?
(A) In Japan we focused on finance companies which we believed would offer good
opportunities as the economy rebuilds. In the United Kingdom our focus was on
business services companies that were growing fast. An example is Compass Group,
a food service company and the Fund's top holding. The stock gained 8.2% in
<PAGE>
PAGE 5
local currency terms for the six-month period ended March 31, 1997.
(Q) WHAT WAS THE TOP U.S. HOLDING?
(A) Our largest U.S. position was Action Performance, a successful company that
gained about 60% during the six-month period. The company owns licenses for
NASCAR stock cars and drivers and makes miniature cars as collectibles. We
uncovered the stock's potential in the course of our bottom-up research.
Fortunately for the Fund, the company has not been widely discovered on Wall
Street and we think it still has room to grow.
TOP 10 HOLDINGS
AS OF MARCH 31, 1997
PERCENTAGE OF
STOCK COUNTRY INDUSTRY NET ASSETS
Compass Group UK Business Services 1.5
Brammer UK Automotive 1.4
Action
Performance.
Cos. Inc U.S. Amusements 1.2
Parity PLC UK Software Services 1.2
Sage Group UK Software Services 1.2
Capita Group UK Business Services 1.1
Investors Financial.
Services Corp U.S. Finance 1.1
Nitto Kohki Co. Japan Building Materials 1.1
Shohkoh Fund Japan Finance 1.1
Zodiac France Capital Goods 1.1
(Q) WHAT IS YOUR SELL STRATEGY?
(A)In a bear market, every sell decision is a judgment call. The market punishes
severely small stocks for even relatively insignificant disappointments. If we
feel the reasons for which we had bought the stock are still valid, we won't
sell into a down market. We believe the best strategy is to wait the downturn
out and take advantage of buying opportunities. We are cautious with the latter.
We target only market leaders, making no compromises on quality and valuations.
(Q) WHAT IS YOUR OUTLOOK?
(A) We think small-cap stocks are well positioned for a recovery in the U.S. and
Japan. The Japanese economy has started to pick up and that bodes well for
small-cap stocks. We continue to see significant growth potential in Europe's
developed economies, as well as in the emerging countries of Latin America and
Europe.
(Q) WHAT ADVANTAGES DOES THE FUND OFFER INVESTORS?
(A) Keystone Global Opportunities Fund targets some of the fastest growing
companies around the world. It is a good choice for long-term investors seeking
to diversify their holdings with an international component. The Fund's ability
to allocate its assets among many countries helps increase the potential for
higher returns while reducing the impact of poor market conditions in any one
country.
*
THIS COLUMN IS INTENDED TO ANSWER QUESTIONS ABOUT YOUR FUND.
IF YOU HAVE A QUESTION YOU WOULD LIKE ANSWERED, PLEASE WRITE TO:
EVERGREEN KEYSTONE INVESTMENT SERVICES, INC.
ATTN: SHAREHOLDER COMMUNICATIONS
200 BERKELEY STREET, BOSTON, MASSACHUSETTS 02116-5034.
<PAGE>
PAGE 6
KEYSTONE GLOBAL OPPORTUNITIES FUND
Your Fund's
Performance
Growth of an investment in
Keystone Global Opportunities Fund Class A
IN THOUSANDS
_________________________________________________________
$30 | [ ] Reinvested Distributions Total Value $25,822 |
| |
25 | [ ] Initial Investment |
| |
15 | |
| (picture of graph) |
10 | |
| |
5 | |
| |
0 |_________________________________________________________|
3/89 3/91 3/93 3/95 3/97
A $10,000 INVESTMENT IN KEYSTONE GLOBAL OPPORTUNITIES FUND CLASS A MADE ON
MARCH 16, 1988 WITH ALL DISTRIBUTIONS REINVESTED WAS WORTH $25,822 ON
MARCH 31, 1997. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Class A shares were introduced on March 16, 1988. Performance is reported at the
current maximum front-end sales charge of 4.75%.
Class B shares were introduced on February 1, 1993. Shares purchased after
January 1, 1997 are subject to a contingent deferred sales charge (CDSC) that
declines from 5% to 1% over six years after the month purchased. Performance
assumes that shares were redeemed after the end of a one-year holding period and
reflects the deduction of a 5% CDSC.
SIX-MONTH PERFORMANCE AS OF MARCH 31, 1997
CLASS A CLASS B CLASS C
Total returns* -9.33 % -9.67 % -9.69 %
Net asset value 9/30/96 $24.56 $23.92 $23.97
3/31/97 $21.12 $20.45 $20.49
Dividends None None None
Capital gains $ 1.25 $ 1.25 $ 1.25
* BEFORE DEDUCTING FRONT-END OR CONTINGENT DEFERRED SALES CHARGE (CDSC) IF
APPLICABLE.
HISTORICAL RECORD AS OF MARCH 31, 1997
CUMULATIVE TOTAL RETURNS CLASS A CLASS B CLASS C
1-year w/o sales charge -8.28 % -8.99 % -8.97%
1-year -12.64 % -13.30 % -9.83%
5-year 74.28 % N/A N/A
Life of Class 158.22 % 53.28 % 55.56%
AVERAGE ANNUAL RETURNS
1-year w/o sales charge -8.28 % -8.99 % -8.97%
1-year -12.64 % -13.30 % -9.83%
5-year 11.75 % N/A N/A
Life of Class 11.05 % 10.80 % 11.19%
Class C shares were introduced on February 1, 1993. Performance reflects the
return you would have received after holding shares for one year and reflects
the deduction of a 1% CDSC.
The investment return and principal value will fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost. Performance for
each class will differ.
<PAGE>
PAGE 7
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS (94.1%)
UNITED STATES (35.3%)
ADVERTISING & PUBLISHING (0.7%)
Outdoor Systems, Inc. 110,500 $ 3,252,844
AMUSEMENTS (2.2%)
Action Performance Cos., Inc.(a) 294,700 5,801,906
Family Golf Centers, Inc.(a) 113,900 2,199,694
La Quinta Inns, Inc. 52,500 1,076,250
Vail Resorts Inc.(a) 61,000 1,189,500
10,267,350
AUTOMOTIVE (0.5%)
Gentex Corp.(a) 99,900 1,979,269
Team Rent Group Inc. 18,200 377,650
2,356,919
BUSINESS SERVICES (4.1%)
Barret Business Services Inc.(a) 129,700 1,832,013
Billing Information Concepts Corp.(a) 17,700 427,013
BJ Services Co.(a) 88,400 4,232,150
Donnelley Enterprise Solution(a) 63,500 666,750
Equity Corp., International(a) 228,200 4,849,250
G & K Services, Inc., Class A 157,100 4,771,912
Rental Service Corp. 88,300 1,644,587
U. S. Filter Corp.(a) 32,100 991,088
19,414,763
CONSUMER GOODS (0.6%)
USA Detergents, Inc.(a) 131,700 3,070,256
DIVERSIFIED COMPANIES (0.4%)
RMI Titanium Co.(a) 101,800 2,099,625
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
PAGE 8
KEYSTONE GLOBAL OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DRUGS (2.5%)
Amylin Pharmaceuticals, Inc.(a) 100,500 $ 1,224,844
Gilead Sciences, Inc.(a) 82,500 1,892,343
Health Management Associates, Inc.(a) 146,737 3,485,004
Kos Pharmaceuticals, Inc.(a) 10,500 210,000
Lifecore Biomedical, Inc.(a) 139,900 2,063,525
Neurogen Corp. (a) 111,000 2,067,375
Nitinol Medical Technologies, Inc.(a) 147,300 1,169,194
12,112,285
ELECTRONICS PRODUCTS (3.1%)
Altron, Inc.(a) 136,400 2,327,325
BMC Industries, Inc. 67,200 1,898,400
Credence Systems Corp.(a) 19,300 377,556
Electroglas, Inc.(a) 64,100 1,121,750
ESS Technology, Inc.(a) 110,000 2,674,375
Lattice Semiconductor Corp.(a) 51,200 2,332,800
Microchip Technology, Inc.(a) 140,000 4,200,000
14,932,206
FINANCE (3.0%)
Everen Capital Corp. 127,700 2,585,925
First Alliance Co.(a) 160,700 3,696,100
Investors Financial Services Corp. 171,400 5,281,263
TCF Financial Corp. 68,600 2,718,275
14,281,563
HEALTH CARE SERVICES (2.9%)
CRA Managed Care Inc.(a) 37,400 1,393,150
Emeritus Corp.(a) 133,600 1,619,900
HCIA, Inc.(a) 40,200 670,837
IDEXX Labs, Inc. 47,600 669,375
Norland Medical Systems, Inc.(a) 276,900 1,730,625
Pediatrix Medical Group(a) 78,600 2,583,975
Perclose, Inc.(a) 147,300 3,148,538
Total Renal Care Holdings, Inc.(a) 73,600 2,235,600
14,052,000
INSURANCE (1.2%)
CMAC Investment Corp. 39,300 1,311,638
Capital Re Corp. 66,200 2,821,775
HCC Insurance Holdings, Inc. 61,400 1,504,300
5,637,713
</TABLE>
<PAGE>
PAGE 9
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
METALS & MINING (0.5%)
Oregon Metallurgical Corp.(a) 100,000 $ 1,825,000
Special Metals Corp.(a) 28,000 490,000
2,315,000
NATURAL GAS (0.7%)
Devon Energy Corp. 30,000 900,000
KCS Energy Corp. 70,000 2,301,250
3,201,250
OFFICE & BUSINESS EQUIPMENT (2.3%)
EMC Corp.(a) 77,300 2,744,150
Flextronics International(a) 98,200 1,939,450
Komag, Inc.(a) 35,000 1,065,313
Natural Microsystems Corp.(a) 126,500 2,537,906
Synopsys Inc. 98,200 2,461,137
10,747,956
OIL SERVICES (2.0%)
Basin Exploration Inc.(a) 80,000 565,000
Denbury Resources, Inc.(a) 58,900 780,425
ENSCO International, Inc.(a) 63,300 3,117,525
Falcon Drilling, Inc.(a) 78,600 2,908,200
Flores & Rucks, Inc.(a) 50,000 2,025,000
Stone Energy Corp.(a) 12,500 300,000
9,696,150
RETAIL (1.5%)
Abercrombie & Fitch Co., Class A(a) 144,800 2,208,200
Black Box Corp.(a) 43,600 1,182,650
Gadzooks, Inc.(a) 48,600 1,536,975
Pacific Sunwear of California(a) 33,900 1,101,750
West Marine Inc. 33,000 1,072,500
7,102,075
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
PAGE 10
KEYSTONE GLOBAL OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SOFTWARE SERVICES (4.3%)
Alternative Resources Corp.(a) 150,300 $ 2,282,681
BDM International, Inc.(a) 130,900 2,847,075
Ciber, Inc.(a) 66,500 1,654,187
Clarify, Inc.(a) 43,000 1,023,938
Cognex Corp.(a) 88,400 1,685,125
Geoworks(a) 147,300 966,656
INSO Corp.(a) 56,400 2,122,050
Parametric Technology Corp.(a) 98,200 4,425,138
Project Software & Development, Inc.(a) 111,000 3,517,312
20,524,162
TELECOMMUNICATIONS (2.4%)
Aspect Telecommunications Corp.(a) 131,300 2,576,763
Concord EFS, Inc.(a) 120,000 2,265,000
McLeod, Inc.(a) 112,200 1,970,513
Smartalk Teleservices, Inc.(a) 183,600 2,524,500
Tel Save Holdings, Inc.(a) 160,500 2,367,375
11,704,151
TEXTILES (0.4%)
Nautica Enterprises, Inc.(a) 73,200 1,834,575
TOTAL UNITED STATES (COST-- $166,687,114) 168,602,843
FOREIGN (58.8%)
ARGENTINA (0.4%)
AUTOMOTIVE (0.2%)
Perez Compancia SA 131,000 1,012,731
TELECOMUNICATIONS (0.2%)
Telecom Argentina SA, Class B, ADR 20,800 956,800
TOTAL ARGENTINA 1,969,531
AUSTRALIA (2.4%)
ADVERTISING & PUBLISHING (0.4%)
West Australia Newspaper Holdings Ltd. 400,000 1,709,000
BUSINESS SERVICES (0.5%)
Memtec Ltd., ADR 99,600 2,546,025
BUILDING MATERIALS (0.1%)
Leighton Holdings 150,000 627,940
</TABLE>
<PAGE>
PAGE 11
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MISCELLANEOUS (0.7%)
Burns Philp & Co. 2,100,000 $ 3,506,585
PAPER & PACKAGING (0.7%)
Amcor Ltd. 500,000 3,214,173
TOTAL AUSTRALIA 11,603,723
AUSTRIA (0.2%)
MISCELLANEOUS (0.2%)
Julius Meinl International 35,000 1,068,023
BRAZIL(0.5%)
ELECTRICAL PRODUCTS (0.5%)
Light Servicos de Electricidad SA 5,400,000 2,283,721
TELECOMMUNICATIONS(0.0%)
Telesponsora Telefonos Sao Paulo (a) 582,843 145,807
TOTAL BRAZIL 2,429,528
CHILE (0.3%)
BUSINESS SERVICES (0.3%)
A.F.P. Provida SA, ADR 59,500 1,242,063
FRANCE (6.0%)
ADVERTISING & PUBLISHING (0.0%)
High Co.(a) 3,013 93,376
AUTOMOTIVE (0.4%)
Sylea 20,811 2,001,592
CAPITAL GOODS (2.9%)
GFI Industries 17,000 3,142,933
Norbert Destressangle 17,760 2,752,017
Technip 25,200 2,710,981
Zodiac(a) 20,000 5,254,252
13,860,183
DRUGS (0.1%)
Ile de France Pharmaceutique 3,058 544,661
ELECTRONICS PRODUCTS (0.2%)
Dassault Systems(a) 15,000 908,362
HEALTH CARE SERVICES (0.4%)
LVL Medical Groupe SA 20,202 2,014,983
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
PAGE 12
KEYSTONE GLOBAL OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MISCELLANEOUS (1.5%)
Le Carbone Lorraine 5,537 $ 1,362,924
Dauphin O.T.A. 23,000 1,786,089
Deaveaux SA 4,200 718,141
Grandoptical Photo 19,479 3,032,264
6,899,418
SOFTWARE SERVICES (0.4%)
Axime(a) 15,300 1,814,908
TRANSPORTATION (0.1%)
Faiveley 9,137 503,678
TOTAL FRANCE 28,641,161
GERMANY (1.4%)
AUTOMOTIVE (0.5%)
SAI Automotive AG 43,000 2,240,228
ELECTRONICS (0.2%)
Leica Camera AG (a) 40,000 1,256,595
MISCELLANEOUS (0.7%)
Boewe Systec AG 95,000 3,132,494
TOTAL GERMANY 6,629,317
HONG KONG (1.2%)
AMUSEMENTS (0.3%)
CDL Hotels International (a) 2,500,000 1,234,078
AUTOMOTIVE (0.1%)
Qingling Motors Co., Class H 800,000 425,878
CAPITAL GOODS (0.4%)
Cosco Pacific Ltd. 1,600,000 2,106,160
CONSUMER GOODS (0.0%)
CP Pokphand Co. 900,000 290,371
ELECTRONICS PRODUCTS(0.2%)
HKR International Ltd. 625,680 827,651
FINANCE (0.1%)
Wing Hang Bank Ltd. 100,000 438,783
RETAIL (0.1%)
Dickson Concepts International Ltd. 80,000 289,081
TOTAL HONG KONG 5,612,002
</TABLE>
<PAGE>
PAGE 13
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INDONESIA (0.4%)
FINANCE (0.4%)
PT Bank Dagang Nasional Indonesia 1,895,250 $ 1,894,461
PT Bank Dagang Nasional Indonesia (Warrants expire 2/14/2000) (a) 270,750 90,212
1,984,673
IRELAND (0.4%)
DIVERSIFIED COMPANIES (0.4%)
DCC PLC 400,000 1,936,815
ITALY (1.0%)
AUTOMOTIVE (0.2%)
Brembo SPA 86,000 1,124,486
INSURANCE (0.2%)
Mediolanum (a) 110,000 979,097
MISCELLANEOUS (0.3%)
C.A.L.P. 36,000 120,918
Interpump Group SPA 394,000 1,212,308
1,333,226
UTILITIES (0.3%)
AZ Med Acqua E Gas 1,850,000 1,403,659
TOTAL ITALY 4,840,468
JAPAN (15.1%)
AUTOMOTIVE (0.4%)
Royal Ltd. 135,520 2,027,266
BUILDING MATERIALS (2.2%)
Aronkasei Co. 50,000 279,373
Hibiya Engineering, Ltd. 220,000 1,545,888
Nitto Kohki Co. 190,720 5,443,856
Tadano 500,000 3,396,135
10,665,252
CAPITAL GOODS (1.5%)
Disco Corp. 90,000 1,877,577
Kanamoto Co., Ltd. 220,000 1,814,506
Max Co. 220,000 3,308,806
7,000,889
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
PAGE 14
KEYSTONE GLOBAL OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER GOODS (1.9%)
Daiwa Industries Ltd. 650,000 $ 4,546,373
Itariyard Co. 103,000 782,890
Mandom Corp. 121,000 1,144,740
Maruko Co. 60 582
Matsumotokiyoshi 93,500 2,759,562
9,234,147
ELECTRONICS PRODUCTS (1.2%)
Aucnet, Inc. 116,000 2,720,142
Daiichi Corp. 87,400 1,272,095
Daiichi Kosho Co. 7,500 253,497
Fujimi, Inc. 27,500 1,445,379
5,691,113
FINANCE (2.1%)
Nichiei Co., Ltd. 64,800 5,030,161
Shokoh Fund 25,000 5,276,138
10,306,299
FOODS (0.4%)
Albis Co. 200,000 1,762,756
HEALTH CARE SERVICES (1.0%)
Nichii Gakkan Co. 110,000 4,812,000
MISCELLANEOUS (0.8%)
Fuji Machine Manufacturing 73,000 1,894,801
Misumi Corp. 130,000 1,986,739
3,881,540
OFFICE & BUSINESS EQUIPMENT (1.1%)
Riso Kagaku Corp. 90,800 5,088,089
RESTAURANTS (0.2%)
Ohsho Food Service Corp. 59,000 839,654
RETAIL (1.9%)
Aderans Co. 136,000 2,947,198
Circle K Japan Co. 48,000 2,057,087
Ministop Co., Ltd. 162,800 4,133,517
9,137,802
TELEPHONE UTILITIES (0.4%)
Nippon Denwa Shisetsu 273,000 1,896,232
TOTAL JAPAN 72,343,039
</TABLE>
<PAGE>
PAGE 15
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MALAYSIA (1.7%)
AIR TRANSPORTATION (0.0%)
Malaysian Helicopter Services Bhd 96,000 $ 120,082
AUTOMOTIVE (0.3%)
Edaran Otomobil Nasional Bhd 130,000 1,311,383
BUILDING MATERIALS (0.5%)
Ho Hup Construction Co. Bhd 140,000 423,678
Hume Industries (Malaysia) Bhd 208,000 1,174,999
Leader Universal Holdings Bhd 229,333 513,577
Road Builder (M) Holdings Bhd 60,000 348,626
2,460,880
MISCELLANEOUS (0.9%)
Affin Holdings Bhd 800,000 2,275,754
Nylex (Malaysia) SDN Bhd 870,000 1,913,206
4,188,960
TOTAL MALAYSIA 8,081,305
MEXICO (2.1%)
BUILDING (0.2%)
Corp Geo SA de CV 198,000 948,862
FINANCE (0.2%)
Desc SA, ADR(a) 40,000 1,050,000
FOOD, BEVERAGE & TOBACCO (1.2%)
Fomento Economico Mexicano, Class B 356,000 1,573,592
Grupo Industrial Maseca, Class B 537,000 555,319
Panamerican Beverages, Inc., Class A, ADR 65,000 3,485,625
5,614,536
MISCELLANEOUS (0.5%)
Apasco SA 135,000 914,244
Grupo Casa Autrey 605,000 1,159,720
Tablex SA, Series 2 97,000 342,518
2,416,482
TOTAL MEXICO 10,029,880
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
PAGE 16
KEYSTONE GLOBAL OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS (1.6%)
MISCELLANEOUS (1.2%)
Ahrend NV 45,000 $ 2,876,833
Fugro NV 127,500 2,719,275
5,596,108
RETAIL (0.4%)
Ceteco Holding N.V. (a) 41,962 2,036,013
TOTAL NETHERLANDS 7,632,121
NORWAY (0.3%)
OFFICE & BUSINESS EQUIPMENT (0.1%)
Tandberg ASA (a) 23,500 303,129
TELECOMMUNICATIONS (0.2%)
Tandberg Television ASA (a) 94,000 955,748
TOTAL NORWAY 1,258,877
PERU (0.2%)
FINANCE (0.1%)
Credicorp Ltd., ADR 27,793 649,661
FOODS (0.1%)
La Fabril S.A. (a) 312,857 472,148
TOTAL PERU 1,121,809
PORTUGAL (0.4%)
TELECOMMUNICATIONS (0.4%)
Telecel Comunicacaoes Pessoais SA (a) 20,600 1,690,137
SINGAPORE (0.1%)
DIVERSIFIED COMPANIES (0.1%)
Natsteel Ltd. 100,000 240,914
SPAIN (0.4%)
MISCELLANEOUS (0.4%)
Telepizza (a) 41,650 1,813,113
SWEDEN (1.7%)
HEALTH CARE SERVICES (0.6%)
Gettinge 160,800 2,901,911
CAPITAL GOODS (.05%)
Hoganas AB, Class B 160,800 2,283,439
</TABLE>
<PAGE>
PAGE 17
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (0.6%)
Lindex AB 148,000 $ 2,985,138
TOTAL SWEDEN 8,170,488
SWITZERLAND (2.9%)
ADVERTISING & PUBLISHING (0.3%)
Affichage (Soc Gen) 3,725 1,449,618
CONSUMER GOODS (0.4%)
Phoenix Meccano AG 4,225 1,996,525
FOOD, BEVERAGE & TOBACCO (0.7%)
Lindt & Spruengli 2,150 3,578,353
MISCELLANEOUS (0.4%)
Danzas Holding 850 833,461
Valora Holding AG 4,000 875,608
1,709,069
RETAIL (0.5%)
Tag Heuer Intl SA (a) 18,000 2,379,778
TRANSPORTATION (0.6%)
Kuoni Reisen Holding, Series B (a) 1,000 2,821,404
TOTAL SWITZERLAND 13,934,747
TAIWAN, REPUBLIC OF CHINA (0.2%)
FINANCE (0.2%)
Chronicle 2001 Mutual Fund (a) 1,653,374 1,018,800
UNITED KINGDOM (17.9%)
ADVERTISING & PUBLISHING (1.6%)
Aegis Group (a) 3,130,000 3,244,324
Dorling Kindersley 487,500 2,181,639
HTV Group 430,000 2,065,811
7,491,774
AMUSEMENTS (0.9%)
Millennium & Copthorne Hotels (a) 388,000 2,636,459
Vardon (a) 914,770 1,881,314
4,517,773
AUTOMOTIVE (1.4%)
Brammer 643,918 6,674,372
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
PAGE 18
KEYSTONE GLOBAL OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BUILDING MATERIALS (0.7%)
Berkeley Group (The) PLC 305,555 $ 3,619,605
BUSINESS SERVICES (2.6%)
Capita Group 466,000 5,443,567
Compass Group PLC 647,368 6,997,709
12,441,276
CAPITAL GOODS (0.4%)
Critchley Group PLC 190,500 1,958,909
CONSUMER GOODS (0.2%)
Limelight Group PLC (a) 750,000 802,073
DRUGS (0.4%)
Oxford Molecular (a) 300,000 2,008,884
ELECTRONICS PRODUCTS (2.4%)
Astec (BSR) (a) 1,073,000 2,789,306
Pressac Holdings (a) 750,000 2,801,086
Renishaw 690,000 4,018,756
Vitec Group 172,500 1,773,815
11,382,963
HEALTH CARE SERVICES (0.4%)
Seton Healthcare 42,000 335,143
Westminster Healthcare Hldgs, PLC 360,000 1,468,904
1,804,047
MISCELLANEOUS (2.8%)
Ashtead Group PLC 710,000 3,189,042
Corporate Services Group 963,000 3,168,805
Doncasters PLC, ADR (a) 11,400 220,875
Page (Michael) Group PLC 350,000 3,098,059
Powerscreen International PLC 192,000 1,933,268
Zotefoams 500,000 1,855,051
13,465,100
RETAIL (1.7%)
Games Workshop Group 402,200 4,334,337
Harvey Nichols (a) 380,000 2,100,691
Watson & Philip 265,000 2,001,234
8,436,262
</TABLE>
<PAGE>
PAGE 19
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SOFTWARE SERVICES (2.4%)
Parity PLC 680,000 $ 5,672,262
Sage Group (a) 520,000 5,612,372
11,284,634
TELECOMMUNICATIONS (0.0%)
Capital Radio 17,000 157,470
TOTAL UNITED KINGDOM 86,045,142
TOTAL FOREIGN (COST $264,791,082) 281,337,676
TOTAL COMMON STOCKS (COST $431,478,196) 449,940,519
PREFERRED STOCKS(3.5%)
BRAZIL (3.0%)
ELECTRICAL PRODUCTS (0.1%)
Eletricidad de Sao Paulo 3,200,000 613,235
FINANCE (0.5%)
Banco Itau 4,593,400 2,376,270
TELECOMMUNICATIONS (1.4%)
Compania Riograndense de Telecomunica (a) 1,350,000 1,631,266
Telecomunicacoes de Rio de Janiero SA (a) 10,110,000 1,402,784
Telesponsora Telefonos Sao Paulo 13,600,000 3,453,602
6,487,652
UTILITIES (1.0%)
Cemig CIA Energy MG 120,700,000 4,967,923
TOTAL BRAZIL 14,445,080
GERMANY (0.5%)
DRUGS (0.5%)
Biotest AG 60,000 2,302,156
TOTAL PREFERRED STOCK (COST-- $16,356,509) 16,747,236
TOTAL INVESTMENTS (COST-- $447,834,705) (97.6%) 466,687,755
FOREIGN CURRENCY HOLDINGS (COST-- $840,476) (0.2%) 843,816
OTHER ASSETS AND LIABILITIES-- NET (2.2%) 10,589,505
NET ASSETS (100%) $478,121,076
</TABLE>
(a) Non-income-producing security.
Legend of Portfolio Abbreviations:
ADR-- American Depository Receipt
<PAGE>
PAGE 20
KEYSTONE GLOBAL OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS-- MARCH 31, 1997 (UNAUDITED)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
EXCHANGE U.S. VALUE AT IN EXCHANGE APPRECIATION
DATE MARCH 31, 1997 FOR U.S. $ (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Forward Foreign Currency Exchange Contracts
to Buy:
Contracts to Receive
04/28/97 2,665,960,000 Japanese Yen $ 21,643,373 $22,000,000 $ (356,627)
(356,627)
Forward Foreign Currency Exchange Contracts
to Sell:
Contracts to Deliver
04/01/97 263,613 British Pound 433,717 426,351 (7,366)
04/07/97 176,967 British Pound 291,160 288,738 (2,422)
04/02/97 46,008,424 Spanish Peseta 325,666 320,170 (5,496)
04/03/97 46,219,635 Spanish Peseta 327,161 322,189 (4,972)
04/01/97 32,453,292 Japanese Yen 262,418 261,984 (434)
04/01/97 1,481,674 Japanese Yen 11,981 11,961 (20)
04/28/97 5,205,200,000 Japanese Yen 42,257,980 44,000,000 1,742,020
1,721,310
Unrealized appreciation on forward foreign currency exchange
contracts $1,364,683
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 21
FINANCIAL HIGHLIGHTS-- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1997 1996 1995 1994 1993 1992 1991 1990 1989
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value beginning of year $24.56 $23.43 $19.42 $18.02 $11.69 $12.89 $9.89 $11.17 $9.77
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.06) (0.06) (0.16) (0.04) (0.14) (0.08) 0.17 0.19 0.09
Net realized and unrealized gain
(loss) on investments and foreign
currency related transactions (2.13) 1.19 4.17 1.60 6.47 0.23 3.06 (1.27) 1.66
Total from investment operations (2.19) 1.13 4.01 1.56 6.33 0.15 3.23 (1.08) 1.75
LESS DISTRIBUTIONS FROM
Net investment income 0.00 0.00 0.00 0.00 0.00 0.00 (0.23) (0.12) (0.09)
Net realized gain on investments (1.25) 0.00 0.00 (0.16) 0.00 (1.35) 0.00 (0.08) (0.26)
Total distributions (1.25) 0.00 0.00 (0.16) 0.00 (1.35) (0.23) (0.20) (0.35)
NET ASSET VALUE END OF YEAR $21.12 $24.56 $23.43 $19.42 $18.02 $11.69 $12.89 $9.89 $11.17
TOTAL RETURN(B) (9.33%) 4.82% 20.65% 8.74% 54.15% 1.81% 32.71% (9.65%) 16.94%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Total expenses 1.72%(c)(d) 1.62%(c) 1.83%(c) 2.01% 2.84% 2.50%(a) 2.03%(a) 2.00%(a) 2.00%(a)
Net investment income (loss) (0.94%)(d) (0.53%) (0.83%) (0.86%) (1.72%) (0.69%) 1.49% 1.80% 0.86%
Portfolio turnover rate 32% 67% 35% 32% 64% 75% 134% 51% 13%
Average commissions rate paid $0.0123 $0.0079 N/A N/A N/A N/A N/A N/A N/A
Net assets end of year (thousands) $142,142 $250,427 $94,679 $71,122 $29,942 $10,859 $2,159 $1,519 $1,378
<CAPTION>
MARCH 16, 1988
OF OPERATIONS) TO
SEPTEMBER 30,
1988
<S> <C>
<S> <C>
Net asset value beginning of year $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.05
Net realized and unrealized gain
(loss) on investments and foreign
currency related transactions (0.28)
Total from investment operations (0.23)
LESS DISTRIBUTIONS FROM
Net investment income 0.00
Net realized gain on investments 0.00
Total distributions 0.00
NET ASSET VALUE END OF YEAR $9.77
TOTAL RETURN(B) (1.20%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Total expenses 1.50%(a)(d)
Net investment income (loss) 1.42%(d)
Portfolio turnover rate 19%
Average commissions rate paid N/A
Net assets end of year (thousands) $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 total 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) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.70% (annualized) for the six months ended March 31, 1997 and 1.60%
and 1.81% for the years ended September 30, 1996 and 1995, respectively.
(d) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 22
KEYSTONE GLOBAL OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS-- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
SIX MONTHS (DATE OF INITIAL
ENDED PUBLIC OFFERING)
MARCH 31, YEAR ENDED SEPTEMBER 30, TO
1997 1996 1995 1994 SEPTEMBER 30, 1993
<S> <C> <C> <C> <C> <C>
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value beginning of year $23.92 $23.00 $19.20 $17.95 $14.04
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.25) (0.21) (0.25) (0.15) (0.04)
Net realized and unrealized gain (loss) on investments and
foreign currency related transactions (1.97) 1.13 4.05 1.56 3.95
Total from investment operations (2.22) 0.92 3.80 1.41 3.91
LESS DISTRIBUTIONS FROM
Net realized gain on investments (1.25) 0.00 0.00 (0.16) 0.00
Total distributions (1.25) 0.00 0.00 (0.16) 0.00
NET ASSET VALUE END OF YEAR $20.45 $23.92 $23.00 $19.20 $17.95
TOTAL RETURN(A) (9.67%) 4.00% 19.79% 7.93% 27.85%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Total expenses 2.51%(b)(c) 2.40%(b) 2.58%(b) 2.83% 3.35%(c)
Net investment loss (2.76%)(c) (1.37%) (1.59%) (1.61%) (1.86%)(c)
Portfolio turnover rate 32% 67% 35% 32% 64%
Average commissions rate paid $ 0.0123 $ 0.0079 N/A N/A N/A
Net assets end of year (thousands) $264,845 $385,839 $238,320 $131,695 $ 15,534
</TABLE>
(a) Excluding applicable sales charges.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 2.49% (annualized) for the six months ended March 31, 1997 and 2.38%
and 2.56% for the years ended September 30, 1996 and 1995, respectively.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 23
FINANCIAL HIGHLIGHTS-- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
SIX MONTHS (DATE OF INITIAL
ENDED PUBLIC OFFERING)
MARCH 31, YEAR ENDED SEPTEMBER 30, TO
1997 1996 1995 1994 SEPTEMBER 30, 1993
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value beginning of year $23.97 $23.04 $19.26 $17.99 $14.04
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.31) (0.24) (0.27) (0.15) (0.04)
Net realized and unrealized gain (loss) on investments and
foreign currency related transactions (1.92) 1.17 4.05 1.58 3.99
Total from investment operations (2.23) 0.93 3.78 1.43 3.95
LESS DISTRIBUTIONS FROM
Net realized gain on investments (1.25) 0.00 0.00 (0.16) 0.00
Total distributions (1.25) 0.00 0.00 (0.16) 0.00
NET ASSET VALUE END OF YEAR $20.49 $23.97 $23.04 $19.26 $17.99
TOTAL RETURN(A) (9.69%) 4.04% 19.63% 8.02% 28.13%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Total expenses 2.53%(b)(c) 2.40%(b) 2.58%(b) 2.85% 3.04%(c)
Net investment loss (1.76%)(c) (1.38%) (1.59%) (1.62%) (1.55%)(c)
Portfolio turnover rate 32% 67% 35% 32% 64%
Average commissions rate paid $0.0123 $0.0079 N/A N/A N/A
Net assets end of year (thousands) $71,134 $124,549 $86,339 $50,535 $6,217
</TABLE>
(a) Excluding applicable sales charges.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 2.51% (annualized) for the six months ended March 31, 1997 and 2.38%
and 2.56% for the years ended September 30, 1996 and 1995, respectively.
(c) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 24
KEYSTONE GLOBAL OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS-- CLASS Y SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
JANUARY 13, 1997
(DATE OF INITIAL
PUBLIC OFFERING) TO
MARCH 31, 1997
(UNAUDITED)
<S> <C>
Net asset value beginning of period $ 23.07
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03
Net realized and unrealized gain (loss) on investments and foreign currency related transactions (1.89)
Total from investment operations (1.86)
LESS DISTRIBUTIONS FROM
Net realized gain on investments 0.00
Total distributions 0.00
NET ASSET VALUE END OF PERIOD $ 21.21
TOTAL RETURN (8.06%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Total expenses 0.00%(a)
Net investment income 0.30%(a)
Portfolio turnover rate 32%
AVERAGE COMMISSIONS RATE PAID $0.0123
Net assets end of period (thousands) 0
</TABLE>
(a) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 25
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
(UNAUDITED)
ASSETS
Investments at market value (identified
cost-- $447,834,705) $466,687,755
Foreign currency holdings (identified
cost-- $840,476) 843,816
Receivable for:
Fund shares sold 328,490
Investments sold 18,011,183
Dividends and interest 1,035,079
Foreign tax reclaims 113,444
Prepaid expenses and other assets 70,524
Unrealized appreciation on forward foreign
currency exchange contracts 1,742,020
Total assets 488,832,311
LIABILITIES
Payable for:
Fund shares redeemed 6,043,192
Investments purchased 45,312
Unrealized depreciation of forward foreign
currency exchange contracts 377,337
Payable to custodian 3,810,068
Foreign taxes to be withheld 141,372
Other accrued expenses 293,954
Total liabilities 10,711,235
NET ASSETS $478,121,076
NET ASSETS REPRESENTED BY
Paid-in-capital $454,556,119
Accumulated net investment loss (5,422,799)
Accumulated net realized gain on investment
transactions 8,748,142
Net unrealized appreciation (depreciation)
on:
Investments and foreign currency related
transactions 18,874,931
Foreign currency exchange contracts 1,364,683
Total net assets $478,121,076
NET ASSET VALUE
CLASS A SHARES
Net assets of $142,142,48846,731,722 shares
outstanding $ 21.12
Offering price per share ($21.1240.9525)
(based on sales charge of 4.75% of the
offering price at March 31, 1997) $ 22.17
CLASS B SHARES
Net assets of $264,844,737412,947,708
shares outstanding $ 20.45
CLASS C SHARES
Net assets of $71,133,83043,471,261 shares
outstanding $ 20.49
CLASS Y SHARES
Net assets of $2141 share outstanding $ 21.21
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
INVESTMENT INCOME
Dividends (net of foreign
withholding tax of $314,281) $ 2,160,723
Interest 178,832
Total income 2,339,555
EXPENSES
Management fee $ 2,942,987
Transfer agent fees 1,099,585
Accounting, auditing and legal 31,588
Custodian fees 231,612
Printing 40,566
Trustees' fees and expenses 16,390
Distribution Plan expenses 2,423,730
Registration fees 190,425
Miscellaneous expenses 8,451
Total expenses 6,985,334
Less: Expenses paid indirectly (59,723)
Net expenses 6,925,611
Net investment loss (4,586,056)
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY RELATED TRANSACTIONS
Net realized gain on investments 17,520,469
Net realized loss on foreign
currency related transactions (601,911)
Net realized gain on investments
and foreign currency related
transactions 16,918,558
Net change in unrealized
appreciation (depreciation) on
investments and foreign
currency related transactions (70,425,760)
Net realized and unrealized loss
on investments and foreign
currency related transactions (53,507,202)
Net decrease in net assets
resulting from operations ($58,093,258)
<PAGE>
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KEYSTONE GLOBAL OPPORTUNITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPTEMBER 30, 1996
(UNAUDITED)
<S> <C> <C>
OPERATIONS
Net investment loss ($ 4,586,056) ($ 6,922,836)
Net realized gain on investments and foreign currency related transactions 16,918,558 40,623,123
Net change in unrealized appreciation or depreciation on investments and foreign
currency related transactions (70,425,760) (8,332,501)
Net increase (decrease) in net assets resulting from operations (58,093,258) 25,367,786
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investment transactions
Class A Shares (11,550,733) 0
Class B Shares (19,126,046) 0
Class C Shares (6,053,408) 0
Total distributions to shareholders (36,730,187) 0
CAPITAL SHARE TRANSACTIONS (NOTE 2)
Proceeds from shares sold
Class A Shares 23,728,136 279,189,973
Class B Shares 17,415,939 192,961,888
Class C Shares 6,842,005 57,016,932
Class Y Shares 23 0
Net asset value of shares issued in reinvestment of distributions
Class A Shares 6,669,240 0
Class B Shares 17,651,626 0
Class C Shares 5,539,478 0
Payments for shares redeemed
Class A Shares (109,955,408) (132,731,601)
Class B Shares (105,358,162) (57,472,755)
Class C Shares (50,403,053) (22,855,656)
Net increase (decrease) in net assets resulting from capital share
transactions (187,870,176) 316,108,781
Total increase (decrease) in net assets (282,693,621) 341,476,567
NET ASSETS
Beginning of period 760,814,697 419,338,130
End of period [including accumulated net investment loss as follows: 1997--
($5,422,799) and 1996-- ($836,743)] $478,121,076 $760,814,697
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 27
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFCANT ACCOUNTING POLICIES
Keystone Global Opportunities Fund (the "Fund") is a Massachusetts business
trust for which Keystone Investment Management Company ("Keystone") is the
Investment Adviser and Manager. Keystone was formerly a wholly-owned subsidiary
of Keystone Investments, Inc. ("KII") and is currently a subsidiary of First
Union Keystone, Inc. First Union Keystone, Inc. is a wholly-owned subsidiary of
First Union Corporation ("First Union"). Keystone has retained Credit Lyonnais
International Asset Management, North America, 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. The Fund is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as a
diversified, open-end investment company. The Fund offers several classes of
shares. The Fund's investment objective is capital growth.
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, which
require management to make estimates and assumptions that affect amounts
reported herein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Fund.
A. VALUATION OF SECURITIES
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 the bid and asked prices. Securities for which
valuations are not available from an independent pricing service (including
restricted securities) are valued at fair value as determined in good faith
according to procedures established by the Board of Trustees. 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 with remaining maturities of 60 days or less are
carried at amortized cost, which approximates market value. Short-term
securities with greater than 60 days to maturity are valued at market value.
B. REPURCHASE AGREEMENTS
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 fully collateralized by U.S. Treasury and/or
Federal Agency obligations.
Securities pledged as collateral for repurchase agreements are held by the
custodian on the Fund's behalf. The Fund monitors the adequacy of the collateral
daily and will require the seller to provide additional collateral in the event
the market value of the securities pledged falls below the carrying value of the
repurchase agreement.
C. FOREIGN CURRENCY
The books and records of the Fund are maintained in United States (U.S.)
dollars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, assets and liabilities at the daily rate of
exchange; purchases and sales of investments, income and expenses at the rate of
exchange prevailing on the respective dates of such transactions. Net unrealized
foreign exchange gain (loss) resulting from changes in foreign currency exchange
rates is a component of net unrealized appreciation (depreciation) on
investments and foreign currency transactions. Net realized foreign currency
gains and losses resulting from changes in exchange rates include foreign
currency gains and losses between trade date and settlement date on investment
securities transactions, foreign currency transactions and the difference
between the amounts of interest and dividends recorded on the books of the Fund
and the amount actually received. The portion of foreign
<PAGE>
PAGE 28
KEYSTONE GLOBAL OPPORTUNITIES FUND
currency gains and losses related to fluctuations in exchange rates between the
initial purchase trade date and subsequent sale trade date is included in
realized gain (loss) on foreign currency transactions
D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated in
a foreign currency and to hedge certain foreign currency assets or liabilities.
Forward contracts are recorded at the forward rate 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 bears
the risk of an unfavorable change in the foreign currency exchange rate
underlying the forward contract and is subject to the credit risk that the other
party will not fulfill their obligations under the contract. Forward contracts
involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
E. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes
amortization of discounts and premiums. Dividend income is recorded on the
ex-dividend date.
F. FEDERAL INCOME TAXES
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 (the
"Code"). Thus, the Fund is relieved of any federal income tax liability by
distributing all of its net taxable investment income and net taxable capital
gains, if any, to its shareholders. The Fund also intends to avoid excise tax
liability by making the required distributions under the Code. Accordingly, no
provision for federal income taxes is required.
G. DISTRIBUTIONS
The Fund distributes net investment income and net capital gains, if any, at
least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatment of net operating losses generated by the Fund.
H. CLASS ALLOCATIONS
Effective January 1, 1997 Class A shares are offered at a public offering price
which includes a maximum sales charge of 4.75% payable at the time of purchase.
Class B shares are sold subject to a contingent deferred sales charge that is
payable upon redemption and decreases depending on how long the shares have been
held. Class B shares purchased on or after January 1, 1997 will convert to Class
A shares after seven years. Class B shares purchased prior to January 1, 1997
retain their existing conversion features. Class C shares are sold subject to a
contingent deferred sales charge payable on shares redeemed within one year
after the month of purchase.
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the relative
net assets of each class. Currently, class specific expenses are limited to
expenses incurred under the Distribution Plans for each class.
<PAGE>
PAGE 29
2. CAPITAL SHARE TRANSACTIONS
The Fund's Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest with no par value. Shares of beneficial
interest of the Fund are currently divided into Class A, Class B, Class C, and
Class Y. The classes have identical voting, dividend, liquidation and other
rights, except that Class A, B, and C shares bear distribution expenses (see
Note 4) and have exclusive voting rights with respect to their distribution
plans. Transactions in shares of the Fund were as follows:
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
CLASS A 1997 1996
Shares sold 1,015,356 11,443,628
Shares issued in reinvestment
of distributions 293,025 0
Shares redeemed (4,772,722) (5,288,523)
Net increase (decrease) (3,464,341) 6,155,105
CLASS B
Shares sold 767,378 8,250,300
Shares issued in reinvestment
of distributions 798,355 0
Shares redeemed (4,745,844) (2,485,770)
Net increase (decrease) (3,180,111) 5,764,530
CLASS C
Shares sold 301,999 2,429,734
Shares issued in reinvestment
of distributions 250,089 0
Shares redeemed (2,277,783) (980,684)
Net increase (decrease) (1,725,695) 1,449,050
CLASS Y
Shares sold 1 --
Shares issued in reinvestment
of distributions 0 --
Shares redeemed 0 --
Net increase 1 --
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities and foreign cash) for the six months ended March 31, 1997,
were $201,213,881 and $404,829,623, respectively.
4. DISTRIBUTION PLANS
The Fund bears some of the costs of selling its shares under Distribution Plans
adopted for its Class A, B and C shares pursuant to Rule 12b-1 under the 1940
Act. Under the Distribution Plans, the Fund pays its principal underwriter
amounts which are calculated and paid monthly.
On December 11, 1996, the Fund entered into a principal underwriting agreement
with Evergreen Keystone Distributor, Inc. (formerly, Evergreen Funds
Distributor, Inc.) ("EKD"), a wholly-owned subsidiary of The BISYS Group Inc.
Prior to December 11, 1996, Evergreen Keystone Investment Services, Inc.
(formerly, Keystone Investment Distributors Company) ("EKIS"), a wholly-owned
subsidiary of Keystone, served as the Fund's principal underwriter.
The Class A Distribution Plan provides for expenditures, which are currently
limited to 0.25% annually of the average daily net assets of the Class A shares,
to pay expenses related to the distribution of Class A shares.
Pursuant to the Fund's Class B and Class C Distribution Plans, the Fund pays a
distribution fee which may not exceed 1.00% annually of the average daily net
assets of Class B and Class C shares, respectively. Of that amount, 0.75% is
used to pay distribution expenses and 0.25% is used to pay service fees.
During the six months ended March 31, 1997, amounts paid to EKD or EKIS
pursuant to the Fund's Class A, Class B, Class C Distribution Plans were
$219,105, $1,686,691, and $517,934, respectively.
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
<PAGE>
PAGE 30
KEYSTONE GLOBAL OPPORTUNITIES FUND
Distribution Plan, and subject to the discretion of the Independent Trustees,
payments to EKD or its predecessor may continue as compensation for services
that had been earned while the Distribution Plan was in effect.
EKD intends, but is not obligated, to continue to pay distribution costs that
exceed the current annual payments from the Fund. EKD intends to seek full
payment of such distribution costs from the Fund at such time in the future as,
and to the extent that, payment thereof by the Class B or Class C shares would
be within permitted limits.
At March 31, 1997, total unpaid distribution costs were $18,252,883 for Class
B shares and $8,197,081 for Class C shares.
Contingent deferred sales charges paid by redeeming shareholders are paid to
EKD or its predecessor.
5. INVESTMENT MANAGEMENT AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
Under an investment advisory agreement dated December 11, 1996, Keystone serves
as the Investment Advisor and Manager to the Fund. Keystone provides the Fund
with investment advisory and management services. In return, Keystone is paid a
management fee that is computed and paid daily. The management fee is calculated
by applying percentage rates, which start at 1.00% and decline to 0.75% per
annum as net assets increase, to the average daily net asset value of the Fund.
During the six months ended March 31, 1997, the Fund paid or accrued $13,834
to Keystone for certain accounting services. The Fund paid or accrued $1,099,585
to Evergreen Keystone Service Company (formerly Keystone Investor Resource
Center, Inc.), a wholly-owned subsidiary of Keystone, for services rendered as
the Fund's transfer and dividend disbursing agent.
Officers of the Fund and affiliated Trustees receive no compensation directly
from the Fund.
6. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an expense offset arrangement with its custodian. For
the six months ended March 31, 1997 the Fund incurred total custody fees of
$231,612 and received a credit of $59,723 pursuant to this expense offset
arrangement, resulting in a net custody expense of $171,889. The assets
deposited with the custodian under this expense offset arrangement could have
been invested in income-producing assets.
<PAGE>
PAGE 31
7. ADDITIONAL INFORMATION
Shareholders of the Fund considered and acted upon the proposals listed below at
a special meeting of shareholders held Monday, December 9, 1996. In addition,
below each proposal are the results of that vote.
1. TO ELECT THE FOLLOWING TRUSTEES:
AFFIRMATIVE WITHHELD
Laurence B. Askin 24,875,560 457,436
Frederick Amling 24,873,389 459,607
Charles A. Austin III 24,885,234 447,762
Foster Bam 24,872,796 460,200
George S. Bissell 24,878,234 454,762
Edwin D. Campbell 24,875,409 457,587
Charles F. Chapin 24,879,402 453,594
K. Dun Gifford 24,885,208 447,788
James S. Howell 24,873,422 459,574
Leroy Keith, Jr. 24,884,837 448,160
F. Ray Keyser 24,873,075 459,921
Gerald M. McDonnell 24,880,148 452,849
Thomas L. McVerry 24,880,907 452,089
William Walt Pettit 24,884,376 448,620
David M. Richardson 24,883,314 449,682
Russell A. Salton, III M.D. 24,878,128 454,868
Michael S. Scofield 24,878,825 454,172
Richard J. Shima 24,882,946 450,050
Andrew J. Simons 24,880,493 452,503
2. TO APPROVE AN INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT BETWEEN THE FUND
AND KEYSTONE INVESTMENT MANAGEMENT COMPANY.
Affirmative 24,342,861
Against 343,321
Abstain 646,814
<PAGE>
KEYSTONE AMERICA
FAMILY OF FUNDS
*
Balanced Fund II
California Tax Free Fund
Capital Preservation and Income Fund
Florida Tax Free Fund
Fund for Total Return
Fund of the Americas
Global Opportunities Fund
Global Resources and Development Fund
Government Securities Fund
Hartwell Emerging Growth Fund, Inc.
Intermediate Term Bond Fund
Massachusetts Tax Free Fund
Missouri Tax Free Fund
New York Tax Free Fund
Omega Fund
Pennsylvania Tax Free Fund
Small Company Growth Fund II
Strategic Income Fund
Tax Free Income Fund
World Bond Fund
This report was prepared primarily for the information of the Fund's
shareholders. It is authorized for distribution if preceded or accompanied by
the Fund's current prospectus. The prospectus contains important information
about the Fund including fees and expenses. Read it carefully before you invest
or send money. For a free prospectus on other Keystone funds, contact your
financial adviser or call Keystone.
(Evergreen Keystone FUNDS Logo)
P.O. Box 2121
Boston, Massachusetts 02106-2121
GOF-RREV01 5/97
KEYSTONE
(KEYSTONE LOGO)
GLOBAL
OPPORTUNITIES
FUND
(Evergreen Keystone FUNDS Logo)
SEMI-ANNUAL REPORT
MARCH 31, 1997
