Keystone Fund of the Americas
Seeks long-term growth of capital by investing in equity and debt securities
in Latin America, the United States and Canada.
Dear Shareholder:
We are writing to update you on activities of Keystone Fund of the Americas
for the twelve-month period which ended October 31, 1995.
Performance
For the periods which ended October 31, 1995, your Fund produced the
following total returns.
Class A shares returned 6.59% for the six-month period and -3.35% for the
twelve-month period.
Class B shares returned 6.08% for the six-month period and -4.00% for the
twelve-month period.
Class C shares returned 6.18% for the six-month period and -4.00% for the
twelve-month period.
We believe these returns represent satisfactory performance for your Fund
considering the severity of market events in Latin America. The IFC Latin
American 50 Stock Index, representing the performance of the 50 largest Latin
American stocks returned -41.00% for one-year period which ended October 31,
1995. In contrast, the Standard & Poor's 500 Stock Index returned 26.44%
during the same period. In our opinion, Keystone Fund of the Americas
performed as it was designed, providing exposure to the fast growing markets
of Latin America but with significantly lower volatility than a pure Latin
American fund.
Market environment
The devaluation of the Mexican peso at the end of 1994 continued to dampen
investment performance in Latin America. Toward the end of the period, some
signs of recovery were visible. The rebound in the U.S. dollar had a positive
effect, economic conditions showed modest improvement and investors began to
return to selected markets. In sharp contrast, investment markets in the U.S.
experienced an excellent year. Declining interest rates, low inflation and
slow but steady economic growth created a favorable environment for both
stocks and bonds. Your Fund's ability to invest in U.S. and Canadian
securities helped offset weak performance in the Latin American markets.
The Benefits of Diversification
As the past twelve months have shown, your Fund's diversified approach to
investing in the Americas helped protect it from extreme price fluctuations
during difficult market conditions. In addition to diversifying
geographically, Keystone Fund of the Americas invests in a combination of
stocks and bonds, which often respond differently to market events. As of
October 31, 1995, Keystone Fund of the Americas' portfolio included stocks
from ten countries, with the largest positions in the U.S., Brazil, Peru and
Canada. One-third of your Fund's holdings were in fixed income securities.
(continued on next page)
1
<PAGE>
Keystone Fund of the Americas
Looking ahead
We believe that selected markets of the Americas offer good investment
opportunities over the long term. We expect conditions in the U.S. to remain
attractive. Even though Canadian stocks did not participate fully in the U.S.
bull market, our long-term outlook there is favorable. While we think it may
take time for Mexico and Argentina to turn around economically, we believe
there are some excellent values in those countries. We are concentrating on
companies that we believe are well run and protected from economic
uncertainties.
We believe your Fund's diversified strategy continues to offer investors the
opportunity to participate in fast-growing markets of Latin America with
lower risk than a purely Latin American fund. We appreciate your continued
support of Keystone Fund of the Americas. If you have any questions or
comments, please feel free to write to us.
[Photo of Albert H. Elfner, III] [Photo of George S. Bissell]
Sincerely,
[signature of Albert H. Elfner, III]
Albert H. Elfner, III
Chairman and President
[signature of George S. Bissell]
Keystone Investments, Inc.
George S. Bissell
Chairman of the Board
Keystone Funds
December 1995
2
<PAGE>
A Discussion With
Your Fund Manager
[picture of Gilman C. Gunn]
Gilman C. Gunn is portfolio manager of Keystone Fund of the Americas and
leads Keystone's international investment team. An investment professional
with 23 years of experience, Mr. Gunn has spent more than ten years in
investment management positions in London, Kuwait and Thailand.
Your Fund's investment team is comprised of several professionals who have
expertise on the economic, political and business environments in specific
areas. The team includes Maureen Cullinane (U.S. equities), Richard
Wisentomer (Latin American fixed-income), and Francis X. Claro and Antonio
Docal (Latin American equities).
Q How would you describe the investment climate in the Americas over the past
year?
A It's been a year of contrasts and unusual volatility. Rising interest rates
in the U.S. at the end of 1994 had a negative impact on stock and bond
markets throughout the Americas. But by early 1995, declining rates, low
inflation and strong corporate earnings created an excellent environment for
U.S. stocks and bonds. Both the stock and bond markets experienced
significant rallies during the year. Your Fund benefited from this rally,
with 16% of Fund holdings in U.S. stocks.
In Latin America we saw the flip side of the story. The December 1994
devaluation of the Mexican peso added uncertainty to an already turbulent
Latin American market. Prices have rebounded significantly from their low
point on March 9, 1995, but have yet to return to pre-December levels.
Perhaps the most important sign of a turnaround in this region is the
increase in liquidity spurred by the decline in U.S. interest rates. Despite
these positive indications, Mexico remained a difficult economic and
political environment for investors--real economic growth decreased by 10.5%
in Mexico during the first half of 1995.
Q Did the Fund perform as you expected under these unusual conditions?
A Yes, we were pleased with the Fund's performance. The geographic and
investment diversification of the portfolio limited its exposure to the
volatility of the Latin American markets, and the U.S. stock portion of the
portfolio contributed strong performance during the second half of the
period. Our minimal exposure to Mexican markets (less than 3% of the
portfolio) and our emphasis on North American securities throughout the
period helped counteract the weak performance in Latin America. We believe
that our diversified approach to investing in the Americas has demonstrated
its success during the unusual market of the past year.
Fund Profile
Objective: Seeks long-term growth of capital by investing in equity and debt
securities in Latin America, the United States and Canada.
Commencement of investment operations: November 1, 1993
Number of countries: 11
Net assets: $123 million
Newspaper listing: FndAm
3
<PAGE>
Keystone Fund of the Americas
[Geographic Diversification graphic]
Geographic Diversification
as of October 31, 1995
Common and
Preferred Stocks
CANADA
4.7%
UNITED STATES
16.2%
LATIN AMERICA
32.6%
Fixed Income
CANADA
0%
UNITED STATES
0%
LATIN AMERICA
35.0%
(percentage of net assets)
Q How were the Fund's assets allocated during the year?
A The percentage of the portfolio invested in equities remained fairly stable
during the year, ending at 54% of net assets on October 31, 1995. We
decreased our bond holdings slightly and increased our cash position to about
8% to enhance the stability of the portfolio. Our geographic diversification
was broad to reduce risk in selected Latin American markets. With the
exception of Brazil (15% of net assets), the largest equity position in any
other single Latin American country was in Peru (6% of net assets). As of
October 31, 1995, 83% of the portfolio (including our cash position) was
denominated or hedged into U.S. dollars to reduce the risks associated with
fluctuations in foreign currencies.
Q What types of companies did you emphasize?
A We continued to concentrate on companies we believed will benefit from the
industrial and infrastructure development that is taking place in the
Americas and around the world. In the U.S., the Fund's investments in stocks
of large, multinational and technology companies provided some of the best
returns. We continued to focus on U.S. companies with significant ties to the
Americas such as Johnson & Johnson. Lower interest rates and a consolidation
in the banking industry had a positive effect on Bank of Boston, which is an
important lender in the Americas.
Top Fund Holdings
as of October 31, 1995
Percentage of
Stock Industry net assets
- -----------------------------------------------------------------------------
Brahma (Brazil) Beverages 3.2
- -----------------------------------------------------------------------------
Vale do Rio Doce Navegacao
(CVRD) (Brazil) Conglomerate 2.8
- -----------------------------------------------------------------------------
Bradesco (Brazil) Financial Services 2.4
- -----------------------------------------------------------------------------
Guidant Corp. (U.S.) Chemicals 2.3
- -----------------------------------------------------------------------------
Bank of Boston (U.S.) Banking 2.2
- -----------------------------------------------------------------------------
Bond
- -----------------------------------------------------------------------------
CVRD Cenibra (U.S.$), 9.375%, 12/23/03 8.1
- -----------------------------------------------------------------------------
Republic of Argentina (U.S.$), 8.375%, 12/20/03 4.0
- -----------------------------------------------------------------------------
Klabin Fabricadora Papel (U.S.$), 10.000%, 12/20/01 3.9
- -----------------------------------------------------------------------------
Telefonica de Argentina (U.S.$), 11.875%, 11/01/04 3.8
- -----------------------------------------------------------------------------
Yacimientos Petroliferos Fiscales (YPF)
(U.S.$), 8.000%, 2/15/04 3.3
- -----------------------------------------------------------------------------
In Brazil, we believe that privatizations will reduce costs and help
companies operate more efficiently. We own Petrobras, Telebras and
Electrobras, privatizations of the national oil, telephone and electric
companies. Going forward, we believe Brazil's growth will depend on the
growth of these companies. We view the generally depressed environment in
Latin America as an opportunity for selecting undervalued stocks. In
Argentina, we have focused on companies with solid revenues denominated in
U.S. dollars, such as Penoles, a metals and mining
4
<PAGE>
Your Fund's Performance
[mountain chart]
Growth of an investment in
Keystone Fund of the Americas Class A
In Thousands
Total Value: $9,766
Initial Reinvested
Investment Distributions
9680 9680
10104 10104
10575 10575
10452 10452
9934 9934
4/94 9425 9425
9472 9472
8860 8860
9076 9152
9774 9856
10123 10207
10/94 9943 10105
9595 9750
9001 9224
8445 8654
8351 8558
8209 8489
4/95 8860 9162
9255 9571
9274 9670
9435 9837
9538 9945
9614 10103
10/95 9293 9766
A $10,000 investment in Keystone Fund of the Americas Class A made on
November 1, 1993 with all distributions reinvested was worth $9,766 on
October 31, 1995. Past performance is no guarantee of future results.
company and Yacimientos Petroliferos Fiscales, S.A., the largest oil company
in Argentina.
Q What is your outlook?
A We believe that the long-term prospects for selected Latin American, U.S.
and Canadian investments are very good. We believe that low U.S. interest
rates and the possibility of improved U.S. fiscal responsibility should be
positive for the Americas. We anticipate excellent opportunities for rapid
growth in many Latin American countries, and are cautiously optimistic that
efforts to bolster the Mexican economy will take hold. Economic growth and
trade continue to fuel these markets.
[diamond]
Twelve-Month Performance as of October 31, 1995
===============================================================
Class A Class B Class C
Total returns* -3.35% -4.00% -4.00%
Net asset value 10/31/94 $10.55 $10.49 $10.50
10/31/95 $ 9.86 $ 9.76 $ 9.77
Dividends $ 0.32 $ 0.30 $ 0.30
Capital gains None None None
* Before deducting sales charge.
Historical Record as of October 31, 1995
===============================================================
Average annual returns Class A Class B Class C
1-year w/o sales charge -3.35% -4.00% -4.00%
1-year -8.91% -7.72% -4.00%
Life of Class -1.18% -0.85% +1.15%
Class A, Class B, and Class C shares were introduced on November 1, 1993.
Class A performance is reported at the current maximum front-end sales
charge of 5.75%.
Class B shares purchased after June 1, 1995 are subject to a contingent
deferred sales charge (CDSC) that declines from 5% to 1% over six years from
the month purchased. Performance assumes that shares were redeemed after the
end of a one-year holding period and reflects the deduction of a 4% CDSC.
Class C share performance reflects the return you would have received
after holding shares for one year or more and redeeming after the end of that
period.
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.
You may exchange your shares for another Keystone fund by phone or in
writing for a $10 fee. The exchange fee is waived for individual investors
who make an exchange using Keystone's Automated Response Line (KARL). The
Fund reserves the right to change or terminate the exchange offer.
5
<PAGE>
Keystone Fund of the Americas
Growth of an Investment
[line chart]
Comparison of change in value of a $10,000 investment in Keystone Fund of the
Americas, the Standard & Poor's 500 Index and the IFC Latin America 50 Stock
Index
In Thousands November 1, 1993 through October 1995
Standard & IFC Latin America
Poor's 500 50 Stock Index
Class A Class B Class C Index (S&P 500) (IFC 50)
9425 10000 10000 10000 10000
9680 10270 10270 9905 10851
10104 10710 10720 10024 12657
1/94 10575 11210 11220 10365 14267
10452 11070 11080 10084 13300
9934 10510 10520 9645 12086
4/94 9425 9970 9980 9768 11241
9472 10020 10030 9928 11902
8860 9360 9370 9685 10774
7/94 9152 9665 9675 10003 12204
9856 10400 10410 10413 13906
10207 10763 10773 10159 14337
1094 10105 10648 10658 10387 13025
9750 10262 10272 10009 12784
9224 9709 9719 10157 9908
1/95 8654 9126 9126 10420 7953
8558 9013 9013 10826 6579
8489 8935 8935 11146 9538
4/95 9162 9636 9636 11474 7790
9571 10059 10059 11933 9644
9670 10158 10157 12210 7794
7/95 9837 10324 10334 12615 8349
9945 10438 10438 12647 9610
10103 10588 10588 13810 9607
10/95 9766 9831 10232 13133 7673
S&P 500
$13,133
Class C
$10,232
Class B
$9,831
Class A
$9,766
IFC 50
$7,673
Average Annual Total Return
1 Year Life of Class
Class A -8.91% -1.18%
Class B -7.72% -0.85%
Class C -4.00% 1.15%
Past performance is no guarantee of future results. The performance of each
Class may be greater or less than the line shown based on differences in
loads and fees paid by the shareholder investing in the different classes.
The Standard & Poor's 500 Index and the IFC Latin America 50 Stock Index are
from October 31, 1993.
This chart graphically compares your Fund's total return performance to
certain investment indexes. It is the result of fund performance guidelines
issued by the Securities and Exchange Commission. The intent is to provide
investors with more information about their investment.
Components of the Chart
The chart is composed of several lines that represent the accumulated value
of an initial $10,000 investment for the period indicated. The lines
illustrate a hypothetical investment in:
1. Keystone Fund of the Americas
The Fund seeks long-term growth of capital by investing in equity and debt
securities in Latin America, the United States, and Canada. The return is
quoted after deducting sales charges (if applicable), fund expenses and
transaction costs and assumes reinvestment of all distributions.
2. Standard & Poor's 500 Index (S&P 500)
The S&P 500 is a broad-based unmanaged index of common stock prices. It is
comprised of stocks of the largest U.S. companies. These stocks are selected
and compiled by Standard & Poor's Corporation according to criteria that may
be unrelated to your Fund's investment objective.
3. IFC Latin America 50 Stock Index (IFC 50)
This index is an unmanaged index of common stock prices of Latin American
companies. These stocks are selected and compiled by International Financial
Corporation (IFC) according to criteria that may be unrelated to your Fund's
investment objective.
4. Consumer Price Index (CPI)
This index is a widely recognized measure of the cost of goods and services
produced in the U.S. The index contains factors such as prices of services,
housing, food, transportation and electricity which are compiled by the U.S.
Bureau of Labor Statistics. The CPI is generally considered a valuable
benchmark for investors who seek to outperform increases in the cost of
living.
These indexes do not include transaction costs associated with buying and
selling securities, and do not hold cash to meet redemptions. It would be
difficult for most individual investors to duplicate these indexes.
Understanding What the Chart Means
The chart demonstrates your Fund's total return performance in relation to a
well known investment index and to increases in the cost of living. It is
important to understand what the chart shows and does not show.
This illustration is useful because it charts Fund and index performance
over the same time frame and over a long period. Long-term performance is a
more
6
<PAGE>
reliable and useful measure of performance than measurements of short-term
returns or temporary swings in the market. Your financial adviser can help
you evaluate fund performance in conjunction with the other important
financial considerations such as safety, stability and consistency.
Limitations of the Chart
The chart, however, limits the evaluation of Fund performance in several
ways. Because the measurement is based on total returns over an extended
period of time, the comparison often favors those funds which emphasize
capital appreciation when the market is rising. Likewise, when the market is
declining, the comparison usually favors those funds which take less risk.
Performance Can Be Distorted
Funds which are more conservative in their orientation and which place an
emphasis on capital preservation will tend to compare less favorably when the
market is rising. In addition, funds which have income as one of their
objectives also will tend to compare less favorably to relevant indexes.
Indexes may also reflect the performance of some securities which a fund
may be prohibited from buying. A bond fund, for example, may be limited to
investments in only high quality bonds, or a stock fund may only be able to
buy stocks that have been traded on a stock exchange for a minimum number of
years or stocks that have a certain market capitalization. Indexes usually do
not have the same investment restrictions as your Fund.
Indexes Do Not Include Costs of Investing
The comparison is further limited in its utility because the indexes do not
take into account any deductions for sales charges, transaction costs or
other fund expenses. Your Fund's performance figures do reflect such
deductions. Sales charges--whether up-front or deferred--pay for the cost of
the investment advice of your financial adviser. Transaction costs pay for
the costs of buying and selling securities for your Fund's portfolio. Fund
expenses pay for the costs of investment management and various shareholder
services. None of these costs are reflected in index total returns. The
comparison is not completely realistic because an index cannot be duplicated
by an investor--even an unmanaged index--without incurring some charges and
expenses.
One of Several Measures
The chart is one of several tools you can use to understand your investment.
It should be read in conjunction with the Fund's prospectus, and annual and
semiannual reports. Also, your financial adviser, who understands your
personal financial situation, can best explain the features of your Keystone
fund and how it applies to your financial needs.
Future Returns May Be Different
Shareholders also should be mindful that the long-run performance of either
the Fund or the indexes is not representative of what shareholders should
expect to receive from their Fund investment in the future; it is presented
to illustrate only past performance and is not a guarantee of future returns.
7
<PAGE>
Keystone Fund of the Americas
Glossary of
Mutual Fund Terms
MUTUAL FUND--A company which combines the investment money of many people
whose financial goals are similar, and invests that money in a variety of
securities. A mutual fund allows the smaller investor the benefits of
diversification, professional management and constant supervision usually
available only to large investors.
PORTFOLIO MANAGER--An investment professional who is responsible for
managing a portfolio's assets prudently and making appropriate investment
decisions, such as which securities to buy, hold and sell, based on the
investment objectives of the portfolio.
STOCK--Equity or ownership interest in a corporation, which represents a
claim on the corporation's assets and earnings.
BOND--Security issued by a government or corporation to those from whom it
has borrowed money. A bond usually promises to pay interest income to the
bondholder at regular intervals and to repay the entire amount borrowed at
maturity date.
CONVERTIBLE SECURITY--A corporate security (usually preferred stock or
bonds) that is exchangeable for a set number of another security type
(usually common stocks) at a pre-stated price.
MONEY MARKET FUND--A mutual fund whose assets are invested in a
diversified portfolio of short-term securities, including commercial paper,
bankers' acceptances, certificates of deposit and other short-term
instruments. The fund pays income which can fluctuate daily. Liquidity and
safety of principal are primary objectives.
NET ASSET VALUE (NAV) PER SHARE--The value of one share of a mutual fund.
The NAV per share is determined by subtracting a fund's total liabilities
from its total assets, and dividing that amount by the number of fund shares
outstanding.
DIVIDEND--A per share distribution of the income earned from the fund's
portfolio holdings. When a dividend distribution is made, the fund's net
asset value drops by the amount of the distribution because the distribution
is no longer considered part of the fund's assets.
CAPITAL GAIN--The profit from the sale of securities, less any losses.
Capital gains are paid to fund shareholders on a per share basis. When a
capital gain distribution is made, the fund's net asset value drops by the
amount of the distribution because the distribution is no longer considered
part of the fund's assets.
YIELD--The annualized rate of income as measured against the current net
asset value of fund shares.
TOTAL RETURN--The change in value of a fund investment over a specified
period of time, taking into account the change in a fund's market price and
the reinvestment of all fund distributions.
SHORT-TERM--An investment with a maturity of one year or less.
LONG-TERM--An investment with a maturity of greater than one year.
AVERAGE MATURITY--The average number of days until the notes, drafts,
acceptances, bonds or other debt instruments in a portfolio become due and
payable.
OFFERING PRICE--The offering price of a share of a mutual fund is the
price at which the share is sold to the public.
8
<PAGE>
SCHEDULE OF INVESTMENTS--October 31, 1995
Market
Shares Value
===============================================================================
COMMON STOCKS (40.8%)
[bullet] ARGENTINA (2.7%)
Beverages & Tobacco (1.0%)
Embotelladora Baesa 145 $ 165,284
Quilmes (ADR) 11,000 193,600
Nobleza Piccardo 209,143 805,120
- -------------------------------------------------------------------------------
1,164,004
- -------------------------------------------------------------------------------
Energy Sources (1.0%)
Perez Companc 105,000 463,004
CAPSA 95,000 140,586
Yacimientos Petroliferos Fiscales S.A. (YPF)
(ADR) 38,900 666,163
- -------------------------------------------------------------------------------
1,269,753
- -------------------------------------------------------------------------------
Utilities (0.7%)
Capex S.A. 18,100 116,733
Central Costanera 91,800 254,261
Transportadora de Gas (ADR) 46,000 471,500
- -------------------------------------------------------------------------------
842,494
- -------------------------------------------------------------------------------
[bullet] TOTAL ARGENTINA 3,276,251
===============================================================================
[bullet] BOLIVIA (0.1%)
Utilities (0.1%)
Compania Bolivia de Energia (ADR) 5,600 163,100
- -------------------------------------------------------------------------------
[bullet] BRAZIL (2.3%)
Automotive (0.2%)
CAPCO Automotive Parts Co. (ADR) 25,200 192,150
- -------------------------------------------------------------------------------
Chemicals (0.1%)
White Martins 110,000,000 106,363
- -------------------------------------------------------------------------------
Food, Beverages & Tobacco (0.2%)
Souza Cruz 33,000 236,057
- -------------------------------------------------------------------------------
Telecommunications (1.3%)
Telecommunicacaos Brasilieras (ADR) 38,400 1,536,000
- -------------------------------------------------------------------------------
Utilities (0.5%)
Eletrobras 2,260,000 641,485
- -------------------------------------------------------------------------------
[bullet] TOTAL BRAZIL 2,712,055
===============================================================================
[bullet] CANADA (4.7%)
Advertising & Publishing (0.9%)
Quebecor, Inc. 71,500 $1,087,336
- -------------------------------------------------------------------------------
Beverages & Tobacco (0.5%)
Canada Malting Ltd. 38,300 578,874
- -------------------------------------------------------------------------------
Conglomerates (0.7%)
Canadian Pacific Ltd. 44,100 703,566
Imasco Ltd. 10,500 188,088
Power Corp. of Canada 12,500 190,094
- -------------------------------------------------------------------------------
1,081,748
- -------------------------------------------------------------------------------
Energy Sources (0.1%)
Canadian Occidental Petroleum Ltd. 3,000 88,446
- -------------------------------------------------------------------------------
Fertilizer (1.8%)
Potash Corp. of Saskatchewan, Inc. 30,650 2,150,396
- -------------------------------------------------------------------------------
Merchandising (0.7%)
Canadian Tire Corp. Ltd. 19,000 214,491
Hudson's Bay Co. 32,000 600,090
- -------------------------------------------------------------------------------
814,581
- -------------------------------------------------------------------------------
[bullet] TOTAL CANADA 5,801,381
===============================================================================
[bullet] CHILE (3.3%)
Banking (0.5%)
Banco de Credito Invers 73,690 599,662
- -------------------------------------------------------------------------------
Conglomerates (0.1%)
Empresa Electra de Antofagasta 245,750 124,767
- -------------------------------------------------------------------------------
Financial Services (0.3%)
A.F.P. Habitat S.A. 1,900 347,427
- -------------------------------------------------------------------------------
Forest Products (1.1%)
Compania Manufacturera de Papeles y Cartones S.A. 91,254 1,328,409
- -------------------------------------------------------------------------------
Metals (0.2%)
Madeco 118,600 292,505
- -------------------------------------------------------------------------------
Paper & Packaging (0.3%)
Maderas Y Sinteticos S.A. (ADR) 20,200 361,075
- -------------------------------------------------------------------------------
Utilities (0.8%)
Enersis S.A. (ADR) 37,350 938,419
- -------------------------------------------------------------------------------
[bullet] TOTAL CHILE 3,992,264
===============================================================================
See Notes to Schedule of Investments. (continued on next page)
9
<PAGE>
Keystone Fund of the Americas
SCHEDULE OF INVESTMENTS--October 31, 1995
Market
Shares Value
===============================================================================
[bullet] COLOMBIA (0.4%)
Banking (0.1%)
Banco de Bogota 35,130 $ 162,760
- -------------------------------------------------------------------------------
Financial Services (0.2%)
Suramericana de Seguros S.A. 10,550 186,206
- -------------------------------------------------------------------------------
Textiles & Apparel (0.1%)
Coltejer S.A. (a) 1,963,276 110,255
Fabricato S.A. (a) 1,422 114
- -------------------------------------------------------------------------------
110,369
- -------------------------------------------------------------------------------
[bullet] TOTAL COLOMBIA 459,335
===============================================================================
[bullet] MEXICO (1.8%)
Building Materials (0.8%)
Apasco 116,000 424,926
Grupo Cementos Chihuahua 860,000 603,509
- -------------------------------------------------------------------------------
1,028,435
- -------------------------------------------------------------------------------
Beverages & Tobacco (0.1%)
Empresas La Moderna 25,000 87,719
FEMSA B 40,000 82,863
- -------------------------------------------------------------------------------
170,582
- -------------------------------------------------------------------------------
Conglomerate (0.2%)
Grupo Carso (a) 46,000 240,814
- -------------------------------------------------------------------------------
Metals & Mining (0.7%)
Hylsamex (ADR) (a) 13,000 219,375
Hylsamex (a) 31,000 87,887
Industrias Penoles S.A. de C.V. 145,000 545,404
- -------------------------------------------------------------------------------
852,666
- -------------------------------------------------------------------------------
[bullet] TOTAL MEXICO 2,292,497
===============================================================================
[bullet] PERU (6.0%)
Banking (1.6%)
Credicorp (ADR) (a) 122,600 2,022,900
- -------------------------------------------------------------------------------
Beverages & Tobacco (1.3%)
Backus & Johnston Corp. 916,192 1,640,097
- -------------------------------------------------------------------------------
Metals & Mining (1.0%)
Minas Buenaventura 69,730 382,777
Southern Peru Copper Corp. (a) 230,006 810,620
- -------------------------------------------------------------------------------
1,193,397
- -------------------------------------------------------------------------------
Telecommunications (2.1%)
Compania Telefonica Del Peru 1,459,369 2,606,016
- -------------------------------------------------------------------------------
[bullet] TOTAL PERU $ 7,462,410
===============================================================================
[bullet] UNITED STATES (16.1%)
Banking (2.2%)
Bank of Boston 60,000 2,670,000
- -------------------------------------------------------------------------------
Chemicals (2.9%)
Dow Chemical Co. 28,500 1,955,813
Eli Lilly & Co. 16,596 1,603,589
- -------------------------------------------------------------------------------
3,559,402
- -------------------------------------------------------------------------------
Conglomerate (1.8%)
General Electric Co. 35,000 2,213,750
- -------------------------------------------------------------------------------
Electronics Products (2.1%)
Motorola, Inc. 40,000 2,625,000
- -------------------------------------------------------------------------------
Health & Personal Care (4.2%)
Gillette Co. 48,000 2,322,000
Guidant Corp. 89,329 2,858,528
- -------------------------------------------------------------------------------
5,180,528
- -------------------------------------------------------------------------------
Industrials (1.4%)
Eaton Corp. 33,000 1,691,250
- -------------------------------------------------------------------------------
Machinery (1.5%)
Caterpillar, Inc. 32,000 1,796,000
- -------------------------------------------------------------------------------
[bullet] TOTAL UNITED STATES 19,735,930
===============================================================================
[bullet] VENEZUELA (3.4%)
Building Materials (0.2%)
VENCEMOS 104,000 198,463
- -------------------------------------------------------------------------------
Conglomerate (0.0%)
H L Boulton & Co. 2,087,763 50,416
- -------------------------------------------------------------------------------
Forest Products (0.5%)
VENEPAL 714,437 610,355
- -------------------------------------------------------------------------------
Metals & Mining (0.9%)
Venprecar (GDS) 2,146 11,588
Sider Venezolana 1,961,174 1,126,215
- -------------------------------------------------------------------------------
1,137,803
- -------------------------------------------------------------------------------
Utilities (1.8%)
Electricidad de Caracas 1,898,049 2,168,752
- -------------------------------------------------------------------------------
[bullet] TOTAL VENEZUELA (b) 4,165,789
===============================================================================
TOTAL COMMON STOCKS
(Cost--$44,799,553) 50,061,012
===============================================================================
See Notes to Schedule of Investments.
10
<PAGE>
SCHEDULE OF INVESTMENTS--October 31, 1995
Market
Shares Value
===============================================================================
PREFERRED STOCKS (12.7%)
[bullet] BRAZIL (12.7%)
Beverages & Tobacco (3.2%)
Companhia Cervejaria Brahma S.A. 10,235,235 $ 3,905,522
- -------------------------------------------------------------------------------
Chemicals (0.6%)
Companhia Petroleo Brasiliero S.A. 7,907,800 682,498
- -------------------------------------------------------------------------------
Consumer Goods (0.2%)
Multibras Eletrodo 253,000 223,591
- -------------------------------------------------------------------------------
Electrical/Electronics (2.4%)
Banco Bradesco S.A. 320,705,510 2,934,299
- -------------------------------------------------------------------------------
Food/Household Products (1.6%)
Ceval Alimentos S.A. 103,200,000 1,341,235
Sadia Concordia S.A. Industrial de Comercio 721,500 570,119
- -------------------------------------------------------------------------------
1,911,354
- -------------------------------------------------------------------------------
Forest Products (0.5%)
Klabin Fab Papel S.A. 385,918 361,121
Votorantim Papel Simao (New) 1,199,702 38,044
Votorantim Papel Simao 6,975,000 210,309
- -------------------------------------------------------------------------------
609,474
- -------------------------------------------------------------------------------
Metals & Mining (3.0%)
Acesita 4,361,500 $ 36,278
Mangels Industrial S.A. 101,950,000 244,858
Vale do Rio Doce Navegacao S.A. (CVRD) 21,312,500 3,434,635
- -------------------------------------------------------------------------------
3,715,771
- -------------------------------------------------------------------------------
Telecommunications (0.1%)
Telemig S.A. 3,100,000 172,437
- -------------------------------------------------------------------------------
Textiles & Apparel (0.4%)
Coteminas S.A. 1,512,000 471,616
- -------------------------------------------------------------------------------
Transportation (0.3%)
Marco Polo S.A. 1,200,000 209,744
Varig S.A. (a) 54,000 184,155
- -------------------------------------------------------------------------------
393,899
- -------------------------------------------------------------------------------
Utilities (0.4%)
Cemig Cia Energ MG 23,800,000 509,753
- -------------------------------------------------------------------------------
[bullet] TOTAL BRAZIL 15,530,214
===============================================================================
TOTAL PREFERRED STOCKS (Cost--$15,157,069) $15,530,214
===============================================================================
<TABLE>
<CAPTION>
Interest Maturity Par Market
Rate Date Value Value
===================================================================================================
<S> <C> <C> <C> <C>
FIXED INCOME (35.0%)
U.S. DOLLAR DENOMINATED FIXED INCOME (34.8%)
[bullet] ARGENTINA (16.7%)
Foreign Government (4.0%)
Republic of Argentina 8.375% 12/20/2003 $ 6,850,000 $ 4,957,688
- ---------------------------------------------------------------------------------------------------
Oil (3.3%)
Yacimientos Petroliferos Fiscales S.A. (YPF) 8.000 02/15/2004 4,700,000 4,012,625
- ---------------------------------------------------------------------------------------------------
Telecommunications (9.4%)
Telecom Argentina 8.375 10/18/2000 3,000,000 2,602,500
Telecom Argentina Stet France 8.375 10/18/2000 2,000,000 1,740,000
Telefonica de Argentina 8.375 10/01/2000 2,950,000 2,573,875
Telefonica de Argentina 11.875 11/01/2000 44,750,000 4,631,250
- ---------------------------------------------------------------------------------------------------
11,547,625
- ---------------------------------------------------------------------------------------------------
[bullet] TOTAL ARGENTINA $20,517,938
===================================================================================================
</TABLE>
(continued on next page)
11
<PAGE>
Keystone Fund of the Americas
SCHEDULE OF INVESTMENTS--October 31, 1995
<TABLE>
<CAPTION>
Interest Maturity Par Market
Rate Date Value Value
===================================================================================================
<S> <C> <C> <C> <C>
[bullet] BRAZIL (16.8%)
Chemicals (1.6%)
Companhia Brasiliera de Petroleo Ipiranga 8.625% 02/25/2002 $ 2,000,000 $ 1,930,000
- ---------------------------------------------------------------------------------------------------
Conglomerate (8.1%)
CVRD Cenibra 9.375 12/23/2003 10,370,000 9,955,200
- ---------------------------------------------------------------------------------------------------
Foreign Government (1.7%)
Republic of Brazil 4.250 04/15/2024 4,400,000 2,128,500
- ---------------------------------------------------------------------------------------------------
Forest Products (3.9%)
Klabin Fabricadora Papel 10.000 12/20/2001 5,000,000 4,756,250
- ---------------------------------------------------------------------------------------------------
Metals (1.5%)
Metalurgica Gerdau, S.A. 10.250 11/23/2001 2,000,000 1,892,500
- ---------------------------------------------------------------------------------------------------
[bullet] TOTAL BRAZIL 20,662,450
===================================================================================================
[bullet] GUATEMALA (0.8%)
Beverages & Tobacco (0.8%)
Asociacion Nacional Del Cafe 11.000 08/31/1998 1,000,000 1,007,500
- ---------------------------------------------------------------------------------------------------
[bullet] VENEZUELA (0.5%)
Building Materials (0.5%)
Vencemos 9.250 11/22/1996 650,000 627,250
- ---------------------------------------------------------------------------------------------------
TOTAL U.S. DOLLAR DENOMINATED FIXED INCOME 42,815,138
===================================================================================================
FOREIGN DENOMINATED FIXED INCOME (0.2%)
BRAZILIAN REAL
Merchandising (0.2%)
Mesbla S.A. 13.250 11/01/1996 200,000 287,191
- ---------------------------------------------------------------------------------------------------
TOTAL FOREIGN DENOMINATED FIXED INCOME 287,191
- ---------------------------------------------------------------------------------------------------
TOTAL FIXED INCOME (Cost--$45,237,048) 43,102,329
===================================================================================================
SHORT-TERM INVESTMENTS (8.3%) Maturity
Keystone Joint Repurchase Agreement Value
(Investments in repurchase agreements, in a
joint trading account, purchased 10/31/95)
(Cost--$10,166,000) (d) 5.870 11/01/1995 $10,169,270 10,166,000
- ---------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost--$10,166,000) 10,166,000
===================================================================================================
TOTAL INVESTMENTS (Cost $115,359,670) (c) 118,859,555
FOREIGN CURRENCY HOLDINGS (Cost $69,789) (0.1%) (b) 69,000
OTHER ASSETS AND LIABILITIES--NET (3.1%) 3,811,434
- ---------------------------------------------------------------------------------------------------
NET ASSETS (100%) $122,739,989
===================================================================================================
</TABLE>
See Notes to Schedule of Investments.
12
<PAGE>
SCHEDULE OF INVESTMENTS--October 31, 1995
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income-producing securities.
(b) Investments denominated in the local currency and/or foreign currency
holdings of certain countries are considered illiquid due to foreign
exchange restrictions of these markets.
(c) The cost of investments for federal income tax purposes is $115,819,131.
Gross unrealized appreciation and depreciation of investments based on
identified tax cost, at October 31, 1995 are as follows:
Gross unrealized appreciation $ 9,362,820
Gross unrealized depreciation (6,323,396)
----------
$ 3,039,424
==========
(d) The repurchase agreements are fully collateralized by U.S. Government
and/or agency obligations based on market prices at October 31, 1995
See Notes to Financial Statements.
13
<PAGE>
Keystone Fund of the Americas
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(For a share outstanding throughout the year)
Year Ended October 31,
------------------------
1995 1994
==========================================================================
Net asset value beginning of year $10.550 $10.000
- --------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.443 0.212
Net realized and unrealized gains (losses) on
investment and foreign currency related
transactions (0.813) 0.498
- --------------------------------------------------------------------------
Total income from investment operations (0.370) 0.710
- --------------------------------------------------------------------------
Less distributions:
Net investment income (0.299) (0.102)
In excess of net investment income 0.000 (0.009)
Tax basis return of capital (0.021) (0.049)
- --------------------------------------------------------------------------
Total distributions (0.320) (0.160)
- --------------------------------------------------------------------------
Net asset value end of year $9.860 $10.550
==========================================================================
Total return (a) (3.35%) 7.21%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.86%(b) 1.79%
Net investment income 4.02% 2.45%
Portfolio turnover rate 57% 104%
- --------------------------------------------------------------------------
Net assets end of year (thousands) $14,333 $23,880
==========================================================================
(a) Excluding applicable sales charges.
(b) The expense ratio includes indirectly paid expenses for the year ended
October 31, 1995. Excluding indirectly paid expenses, the expense ratio
would have been 1.84% for the year then ended.
See Notes to Financial Statements.
14
<PAGE>
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(For a share outstanding throughout the year)
Year Ended October 31,
------------------------
1995 1994
==========================================================================
Net asset value beginning of year $10.490 $ 10.000
- --------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.319 0.144
Net realized and unrealized gains (losses) on
investment and foreign currency related
transactions (0.753) 0.494
- --------------------------------------------------------------------------
Total income from investment operations (0.434) 0.638
- --------------------------------------------------------------------------
Less distributions:
Net investment income (0.275) (0.090)
In excess of net investment income 0.000 (0.009)
Tax basis return of capital (0.021) (0.049)
- --------------------------------------------------------------------------
Total distributions (0.296) (0.148)
- --------------------------------------------------------------------------
Net asset value end of year $ 9.760 $ 10.490
==========================================================================
Total return (a) (4.00%) 6.48%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.61%(b) 2.54%
Net investment income 3.27% 1.70%
Portfolio turnover rate 57% 104%
- --------------------------------------------------------------------------
Net assets end of year (thousands) $97,165 $148,769
==========================================================================
(a) Excluding applicable sales charges.
(b) The expense ratio includes indirectly paid expenses for the year ended
October 31, 1995. Excluding indirectly paid expenses, the expense ratio
would have been 2.59% for the year then ended.
See Notes to Financial Statements.
15
<PAGE>
Keystone Fund of the Americas
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(For a share outstanding throughout the year)
Year Ended October 31,
------------------------
1995 1994
==========================================================================
Net asset value beginning of year $10.500 $10.000
- --------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.316 0.142
Net realized and unrealized gains (losses) on
investment and foreign currency related
transactions (0.750) 0.506
- --------------------------------------------------------------------------
Total income from investment operations (0.434) 0.648
- --------------------------------------------------------------------------
Less distributions:
Net investment income (0.275) (0.090)
In excess of net investment income 0.000 (0.009)
Tax basis return of capital (0.021) (0.049)
- --------------------------------------------------------------------------
Total distributions (0.296) (0.148)
- --------------------------------------------------------------------------
Net asset value end of year $9.770 $10.500
==========================================================================
Total return (a) (4.00%) 6.58%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.61%(b) 2.54%
Net investment income 3.27% 1.74%
Portfolio turnover rate 57% 104%
- --------------------------------------------------------------------------
Net assets end of year (thousands) $11,242 $17,740
==========================================================================
(a) Excluding applicable sales charges.
(b) The expense ratio includes indirectly paid expenses for the year ended
October 31, 1995. Excluding indirectly paid expenses, the expense ratio
would have been 2.59% for the year then ended.
See Notes to Financial Statements.
16
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
==========================================================================
Assets:
Investments at market value
(identified cost--$115,359,670) (Note 1) $118,859,555
Foreign currency holdings
(identified cost--$69,789) (Note 1) 69,000
- --------------------------------------------------------------------------
Total investments and foreign currency holdings 118,928,555
- --------------------------------------------------------------------------
Cash 294
Receivable for:
Investments sold 7,078,605
Dividends and interest 1,414,829
Fund shares sold 20,571
Unrealized appreciation on open currency contracts 4,204
Deferred organization expense (Note 1) 30,291
Prepaid expenses 1,673
- --------------------------------------------------------------------------
Total assets 127,479,022
- --------------------------------------------------------------------------
Liabilities:
Payable for:
Investments purchased 3,826,711
Fund shares redeemed 627,162
Unrealized depreciation on open currency contracts 127,346
Foreign taxes withheld 36,982
Other accrued expenses 120,832
- --------------------------------------------------------------------------
Total liabilities 4,739,033
- --------------------------------------------------------------------------
Net assets $122,739,989
==========================================================================
Net assets represented by:
Paid-in-capital $139,176,995
Undistributed net investment income 127,346
Accumulated net realized losses on investment and
foreign currency related transactions (19,933,262)
Net unrealized appreciation on investment holdings and
other assets and liabilities 3,492,052
Net unrealized depreciation on open currency contacts (123,142)
- --------------------------------------------------------------------------
Total net assets $122,739,989
==========================================================================
Net asset value per share and redemption price per share: (Note 2)
Class A Shares ($9.86 on 1,454,089 shares outstanding) $ 14,332,877
Class B Shares ($9.76 on 9,951,630 shares outstanding) 97,165,268
Class C Shares ($9.77 on 1,150,891 shares outstanding) 11,241,844
- --------------------------------------------------------------------------
$122,739,989
==========================================================================
Offering price per share:
Class A Shares (including sales shares of 5.75%)
(Note 2) $10.46
==========================================================================
Class B Shares $9.76
==========================================================================
Class C Shares $9.77
==========================================================================
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year Ended October 31, 1995
==========================================================================
Investment income: (Note 1)
Interest (net of foreign withholding
taxes of $175,411) $ 6,894,586
Dividends (net of foreign withholding
taxes of $142,069) 1,723,356
- --------------------------------------------------------------------------
Total income 8,617,942
- --------------------------------------------------------------------------
Expenses: (Notes 1, 2 and 4)
Management fee $1,099,920
Shareholder services 656,071
Accounting 19,207
Auditing and legal 39,013
Custodian fees 341,342
Printing 48,759
Trustees' fees and expenses 12,419
Distribution Plan and Service fee
expenses 1,332,507
Registration fees 116,775
Amortization of organization expense 8,760
Miscellaneous expenses 10,923
- --------------------------------------------------------------------------
Total expenses 3,685,696
- --------------------------------------------------------------------------
Less: Expenses paid indirectly (Note 4) (23,240)
- --------------------------------------------------------------------------
Net expenses 3,662,456
- --------------------------------------------------------------------------
Net investment income 4,955,486
- --------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment and foreign currency
related transactions: (Notes 1 and 3)
Net realized loss on investment and
foreign currency related transactions (12,645,021)
- --------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation on investments and
foreign currency related
transactions: (2,699,055)
- --------------------------------------------------------------------------
Net loss on investment and foreign
currency related transactions (15,344,076)
- --------------------------------------------------------------------------
Net decrease in net assets resulting
from operations ($ 10,388,590)
==========================================================================
17
<PAGE>
Keystone Fund of the Americas
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended October 31,
1995 1994
==============================================================================================================
<S> <C> <C>
Operations:
Net investment income: (Note 1) $ 4,955,486 $ 2,739,109
Net realized loss on investment and foreign currency related transactions:
(Notes 1 and 3) (12,645,021) (8,866,937)
Net change in unrealized appreciation or depreciation on investment and
foreign currency related transactions (2,699,055) 6,067,965
- --------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (10,388,590) (59,863)
- --------------------------------------------------------------------------------------------------------------
Distributions to shareholders: (Notes 1 and 5)
Net investment income:
Class A Shares (539,452) (204,016)
Class B Shares (3,268,145) (1,278,193)
Class C Shares (389,267) (152,307)
In excess of net investment income:
Class A Shares 0 (19,556)
Class B Shares 0 (122,519)
Class C Shares 0 (14,599)
Tax basis return of capital:
Class A Shares (36,708) (111,783)
Class B Shares (225,106) (700,337)
Class C Shares (26,989) (83,451)
Total distributions to shareholders (4,485,667) (2,686,761)
- --------------------------------------------------------------------------------------------------------------
Capital share transactions: (Note 2)
Proceeds from shares sold:
Class A Shares 2,223,085 30,689,628
Class B Shares 6,934,330 174,008,374
Class C Shares 1,057,154 22,336,759
Payments for shares redeemed:
Class A Shares (10,485,266) (6,875,181)
Class B Shares (49,897,788) (24,959,994)
Class C Shares (6,568,724) (4,440,296)
Net asset value of shares issued in reinvestment of dividends and
distributions:
Class A Shares 522,497 324,833
Class B Shares 3,066,527 1,830,031
Class C Shares 372,904 221,997
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from capital share
transactions (52,775,281) 193,136,151
- --------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (67,649,538) 190,389,527
- --------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of year 190,389,527 0
- --------------------------------------------------------------------------------------------------------------
End of year [including undistributed net investment income of $127,346 at
October 31, 1995 and accumulated distributions in excess of net investment
income of ($156,674) at October 31, 1994] (Note 1) $122,739,989 $190,389,527
==============================================================================================================
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Keystone Fund of the Americas
NOTES TO FINANCIAL STATEMENTS
(1.) Significant Accounting Policies
Keystone Fund of the Americas (the "Fund") is a Massachusetts business trust
for which Keystone Investment Management Company (formerly Keystone Custodian
Funds, Inc.) ("Keystone") is the investment adviser. The Fund was formed on
June 16, 1993 and had no operations prior to November 1, 1993 other than
those relating to the initial registration of its shares. It is registered
under the Investment Company Act of 1940 as a diversified, open-end
investment company.
The Fund currently offers 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 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") and Global
Depository Receipts ("GDRs") are usually valued at the closing sales price,
or, in the absence of sales and for over-the-counter securities, the mean of
bid and asked quotations. Management values the following securities at
prices it deems in good faith, by or under the direction of the Board of
Trustees, to be fair: (a) securities (including restricted securities) for
which complete quotations are not readily available and (b) listed securities
if, in the opinion of management, the last sales price does not reflect a
current value, or if no sale occurred. ADRs, which are certificates
representing shares of foreign securities deposited in domestic and foreign
banks, are traded and valued in United States dollars. Foreign currency
amounts are translated into United States 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 dates of such transactions. Net unrealized foreign exchange
gains/losses are a component of unrealized appreciation/depreciation on
investment holdings and other assets and liabilities.
Short-term investments, if purchased with maturities of sixty days or less,
are valued at amortized cost (original purchase price as adjusted for
amortization of premium or accretion of discount) which, when combined with
accrued interest, approximates market. Short-term investments maturing in
more than sixty days for which market quotations are readily available are
valued at current market value. Short-term investments maturing in more than
sixty days, which are held on the sixtieth day prior to maturity, are valued
at amortized cost (market value on the sixtieth day adjusted for amortization
of premium or accretion of discount) which, when combined with accrued
interest, approximates market. All other securities and other assets and
liabilities are valued at fair value
19
<PAGE>
Keystone Fund of the Americas
as determined in good faith using methods prescribed by the Board of
Trustees.
Investments denominated in foreign currencies are adjusted daily to reflect
changes in exchange rates. Market quotations are not considered to be readily
available for long-term corporate bonds and notes; such investments are
stated at fair value on the basis of valuations furnished by a pricing
service, approved by the 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 the 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 no later than the day after
trade date. Realized gains and losses are computed on the identified cost
basis. Gains and losses on foreign currency related transactions are treated
as ordinary income for federal income tax purposes. 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 will be 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
dealers or domestic banks believed to present minimal
20
<PAGE>
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 foreign currency, the Fund may from time to time enter into forward
foreign currency exchange contracts ("contracts"). Contracts are recorded at
market value. 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. Organization expenses are being amortized to operations over a five-year
period on a straight-line basis. In the event any of the initial shares are
redeemed by any holder thereof during the five-year amortization period,
redemption proceeds will be reduced by any unamortized organization expenses
in the same proportion as the number of initial shares being redeemed bears
to the number of initial shares outstanding at the time of redemption.
G. The Fund distributes net investment income quarterly and net capital
gains, if any, annually. Distributions 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 difference between financial statement amounts
available for distribution and distributions made in accordance with income
tax regulations is due to the treatment of foreign currency gains and losses.
(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 October 31,
1995 1994
- --------------------------------------------------------------
Shares sold 228,352 2,887,081
Shares redeemed (1,093,787) (655,592)
Shares issued in reinvestment of
dividends and distributions 55,264 32,771
- --------------------------------------------------------------
Net increase (decrease) (810,171) 2,264,260
==============================================================
Class B Shares
--------------------------
Year Ended October 31,
1995 1994
- --------------------------------------------------------------
Shares sold 722,537 16,411,620
Shares redeemed (5,283,163) (2,411,035)
Shares issued in reinvestment of
dividends and distributions 326,301 185,370
- --------------------------------------------------------------
Net increase (decrease) (4,234,325) 14,185,955
==============================================================
Class C Shares
----------------------
Year Ended October 31,
1995 1994
- --------------------------------------------------------------
Shares sold 108,457 2,093,070
Shares redeemed (687,611) (425,174)
Shares issued in reinvestment of
dividends and distributions 39,672 22,477
- --------------------------------------------------------------
Net increase (decrease) (539,482) 1,690,373
==============================================================
21
<PAGE>
Keystone Fund of the Americas
The Fund bears some of the costs of selling its shares under a
Distribution Plan adopted with respect to its Class A, Class B and Class C
shares pursuant to Rule 12(b)-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 Class A shares maintained by the recipient
outstanding on the Fund's books for specified 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); a commission at the time of purchase normally 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 shares
maintained by such others and remaining 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
decreasing 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 of the distribution of Class C shares. Amounts paid by the Fund
under the Class C Distribution Plan are currently used to pay others
(dealers) a commission at the time of purchase 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.
Beginning approximately 15 months after purchase, the other party will
receive 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 the annual rate of 0.25%,
respectively, of the average net asset value of each Class C share maintained
by such others and remaining 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 at
any time the Distribution Plan was in effect.
For the year ended October 31, 1995, the Fund paid KIDC $44,881 pursuant
to the Fund's Class A Distribution Plan. The Fund paid KIDC $1,147,012 for
Class B shares sold prior to June 1, 1995, and
22
<PAGE>
$4,137 for Class B shares sold on or after June 1, 1995 under the Class B
Distribution Plan. The Fund paid KIDC $136,477 under its Class C Distribution
Plan.
Under the NASD Rule, the maximum uncollected amounts for which KIDC may
seek payment from the fund under its Distribution Plans were $7,781,573 for
Class B shares purchased prior to June 1, 1995 and $102,704 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 $1,135,932 as of October 31, 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 October 31, 1995 the Fund had a capital loss carryover for federal
income tax purposes of approximately $19,474,000 which expires as follows:
$6,032,000-2001 and $13,442,000-2002. Purchases and sales of investment
securities (including proceeds received at maturity) for the year ended
October 31, 1995 were as follows:
Cost of Proceeds
Purchases from Sales
------------------------------------------------------------
Portfolio securities $ 79,001,795 $ 133,710,000
Short-term investments 2,263,187,000 2,260,193,000
------------------------------------------------------------
$2,342,188,795 $2,393,903,000
============================================================
(4.) Investment Management and Transactions with Affiliates
Under the terms of an Investment Advisory and Management Agreement between
Keystone and the Fund, Keystone provides investment management and
administrative services to the Fund. In return, Keystone receives a fee,
computed and charged to the net assets of the Fund daily, which start at
0.75% and decline, as net assets increase, to 0.45% per annum, to the net
asset value of the Fund. The Fund paid or accrued a management fee of
$1,099,920 to Keystone for the year ended October 31, 1995 which represented
0.75% of average net assets.
During the year ended October 31, 1995, the Fund paid or accrued to KII
$19,208 as reimbursement for certain accounting, tax and printing services
and $656,071 to KIRC for shareholder services.
The Fund has entered into an expense offset arrangement with its
custodian. For the year ended October 31, 1995, the Fund paid custody fees in
the amount of $318,102 and received a credit of $23,240 pursuant to the
expense offset arrangement, resulting in a total expense of $341,342. 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.
23
<PAGE>
Keystone Fund of the Americas
(5.) Foreign Currency Exchange Contracts
At October 31, 1995 the Fund had entered into the following currency exchange
contracts that obligate the Fund to deliver currencies at specified future
dates. The net unrealized depreciation of $123,142 on those contracts is
included in the accompanying financial statements. The terms of the open
contracts are as follows:
U.S. $ Currency
value to U.S. $ value
Exchange Currency to as of be as of
date be delivered 10/31/95 received 10/31/95
==============================================================================
11/01/95 1,959,579 $2,037,408 2,038,468 $2,038,468
Brazilian Real U.S. $
11/03/95 114,419 118,963 119,049 119,049
Brazilian Real U.S. $
11/01/95 4,910,400 4,924 4,933 4,933
Colombian Peso U.S. $
11/01/95 4,285,614 1,889,600 1,892,649 1,892,649
Peruvian Nouveau Sol U.S. $
01/25/96 5,405,106 4,032,346 3,905,000 3,905,000
Canadian Dollar U.S. $
----------- -----------
$8,083,241 $7,960,099
=========== ===========
- ------------------------------------------------------------------------------
FEDERAL TAX STATUS--FISCAL 1995 DISTRIBUTIONS (Unaudited)
The per-share distributions paid to you for fiscal 1995, whether taken in
shares or cash, are as follows:
Class A Shares Class B Shares Class C Shares
Income Return of Income Return of Income Return of
Dividends Capital Dividends Capital Dividends Capital
$0.299 $0.021 $0.275 $0.021 $0.275 $0.021
In January of 1996, complete information on the calendar year 1995
distributions will be forwarded to you to assist you in completing your 1995
federal income tax return.
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders
Keystone Fund of the Americas
We have audited the accompanying statement of assets and liabilities of
Keystone Fund of the Americas, including the schedule of investments, as of
October 31, 1995, and the related statement of operations for the year then
ended and the statements of changes in net assets and financial highlights
for each of the years in the two-year period then ended. 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 October 31, 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 Fund of the Americas as of October 31, 1995, the results of its
operations for the year then ended and the changes in its net assets and
financial highlights for each of the years in the two-year period then ended
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
December 8, 1995
25
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THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
Keystone's Services
for Shareholders
KEYSTONE AUTOMATED RESPONSE LINE (KARL)--Receive up-to-date account
information on your balance, last transaction and recent Fund distribution.
You may also process transactions such as investments, redemptions and
exchanges using a touch-tone telephone as well as receive quotes on price,
yield, and total return of your Keystone Fund. Call toll-free,
1-800-346-3858.
EASY ACCESS TO INFORMATION ON YOUR ACCOUNT--Information about your
Keystone account is available 24 hours a day through KARL. To speak with a
Shareholder Services representative about your account, call toll-free
1-800-343-2898 between 8:00 A.M. and 6:00 P.M. Eastern time. Retirement Plan
investors should call 1-800-247-4075.
ADDITIONS TO YOUR ACCOUNT--You can buy additional shares for your account
at any time, with no minimum additional investment.
REINVESTMENT OF DISTRIBUTIONS--You can compound the return on your
investment by automatically reinvesting your Fund's distributions at net
asset value with no sales charge.
EXCHANGE PRIVILEGE--You may move your money among funds in the same
Keystone family quickly and easily for a nominal service fee. KARL gives you
the added ability to move your money any time of day, any day of the week.
Keystone offers a variety of funds with different investment objectives for
your changing investment needs.
ELECTRONIC FUNDS TRANSFER (EFT)-- Referred to as the "paper-less
transaction," EFT allows you to take advantage of a variety of preauthorized
account transactions, including automatic monthly investments and systematic
monthly or quarterly withdrawals. EFT is a quick, safe and accurate way to
move money between your bank account and your Keystone account.
CHECK WRITING--Shareholders of Keystone Liquid Trust may exercise the
check writing privilege to draw from their accounts.
EASY REDEMPTION--KARL makes redemption services available to you 24 hours
a day, every day of the year. The amount you receive may be more or less than
your original account value depending on the value of fund shares at time of
redemption.
RETIREMENT PLANS--Keystone offers a full range of retirement plans,
including IRA, SEP-IRA, profit sharing, money purchase, and defined
contribution plans. For more information, please call Retirement Plan
Services, toll-free at 1-800-247-4075.
Keystone is committed to providing you with quality, responsive account
service. We will do our best to assist you and your financial adviser in
carrying out your investment plans.
27
<PAGE>
[back cover]
KEYSTONE AMERICA
FAMILY OF FUNDS
[diamond]
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
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.
[logo for Keystone Investments] KEYSTONE
INVESTMENTS
P.O. Box 2121
Boston, Massachusetts 02106-2121
FOA-AR-12/95
17.5M ["Recycled" symbol]
[front cover]
KEYSTONE
[graphic of mosaic Americas]
FUND OF THE
AMERICAS
[logo for Keystone Investments]
ANNUAL REPORT
OCTOBER 31, 1995
