PAGE 1
- --------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
Seeks capital growth by investing in companies involved in raw materials and
infrastructure development.
DEAR SHAREHOLDER:
We are pleased to report on the performance of Keystone Strategic Development
Fund for the six-month period which ended September 30, l995.
PERFORMANCE
For the period which ended September 30, 1995, your Fund generated the
following returns:
Class A shares returned 11.86% for the six-month period and 0.90% for the
eleven-month life of the Class.
Class B shares returned 11.46% for the six-month period and 0.20% for the
eleven-month life of the Class.
Class C shares returned 11.46% for the six-month period and 0.20% for the
eleven-month life of the Class.
The Morgan Stanley Capital International World Index, representing the
performance of stocks from more than 20 countries including the U.S.,
returned 10.09% for the six-month period and 11.26% for the eleven-month
period.
We are pleased with your Fund's strong recovery after a difficult period
at the start of 1995. Your Fund's emphasis on stocks in the developed and
emerging world markets was adversely affected by the devaluation of the
Mexican peso in December 1994. As we stated when we wrote to you six months
ago, we believed that the peso's devaluation had a ripple effect on the
emerging markets, temporarily halting the impressive performance of these
markets. We think your Fund's recent positive performance is evidence of a
recovery, helped by receding fears and our careful stock selection.
Throughout the six-month period we continued to emphasize companies that
we believed would benefit from the tremendous long-term fundamental growth we
foresee in certain parts of the world. Raw materials and infrastructure
stocks remained your Fund's focus. We believe these types of companies will
be the first to benefit from the rapid growth forecasted for developing
countries.
We continue to believe in the long-term potential of these companies. High
growth rates are expected for many of the markets and companies in which we
invest. But, there are significant challenges, and we expect progress will be
uneven. This may require some patience for investors and a long-term
approach. Keystone designed this unique Fund because of the unusual growth
opportunities we expect for industrial and infrastructure stocks.
Thank you for your continued support of Keystone Strategic Development
Fund. We encourage you to write to us with any questions you may have about
your investment.
Sincerely,
/s/ Albert H. ELfner, III /s/ George S. Bissell
Albert H. Elfner, III George S. Bissell
Chairman and President Chairman of the Board
Keystone Investments, Inc. Keystone Funds
<PAGE>
PAGE 2
- -------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
A DISCUSSION WITH
YOUR FUND MANAGER
John C. Madden, Jr. is a vice president and senior portfolio
manager of Keystone Strategic Development Fund. A Char-
tered Financial Analyst, Mr. Madden has over 30 years of
investment experience with both domestic and foreign securities.
He holds a BA from Yale University.
Q WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A The Fund seeks capital growth by investing in companies involved in raw
materials and infrastructure development. The Fund attempts to capitalize on
the opportunities provided by expanding economies and rapid
industrialization. Much of this growth is occurring in developing markets
around the globe, including Asia, the Pacific Rim and Latin America.
Typically these companies we invest in provide building blocks needed for
growth. The portfolio's top industry holdings include metals and mining, oil,
capital goods, and engineering companies.
Diversified by Region
as of September 30, 1995
(Percent Figures for Pie Chart)
Asia/Pacific (26%)
Europe (9%)
Latin America (21%)
North America (44%)
(as a percent of portfolio assets)
Top 10 Holdings
as of September 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Percentage of
Stocks Industry net assets
- -------------------------------------------------------------------------------
Potash Corp. of Saskatchewan (Canada) Metals and mining 3.9
- -------------------------------------------------------------------------------
Western Mining (Australia) Metals and mining 3.7
- -------------------------------------------------------------------------------
Enersis (Chile) Utility 2.9
- -------------------------------------------------------------------------------
AGCO (U.S.) Capital goods 2.9
- -------------------------------------------------------------------------------
Korea Electric Power (Korea) Utility 2.7
- -------------------------------------------------------------------------------
Schlumberger (U.S.) Oil service 2.7
- -------------------------------------------------------------------------------
RTZ (U.K.) Metals 2.6
- -------------------------------------------------------------------------------
CRA Limited (Australia) Metals 2.5
- -------------------------------------------------------------------------------
Vale Rio Doce (Brazil) Metals 2.6
- -------------------------------------------------------------------------------
ASEA AB (Sweden) Construction 2.3
- -------------------------------------------------------------------------------
</TABLE>
Q WHAT WAS THE MARKET ENVIRONMENT LIKE
DURING THE SIX-MONTH PERIOD?
A The market environment was particularly volatile shortly after the Fund's
inception in November 1994, but improved during the most recent six months.
This improvement was fueled by better liquidity, lower U.S. interest rates,
and a rebound in the U.S. dollar. During the six-month period, investors
began to return to selected emerging markets. Lower rates were positive for
many companies both in the U.S. and abroad.
Q DID YOU MAKE ANY CHANGES TO THE PORTFOLIO?
A Over the year we gradually increased the Fund's holdings of infrastructure
stocks from about 30% (on 3/31/95) to about 40% of portfolio assets. These
are stocks of companies involved in building or providing arteries of
commerce and transportation. They include
FUND PROFILE
Objective: seeks capital growth by investing in companies involved in
industrial and infrastructure development.
Commencement of investment operations: November 1, 1994
Countries: 15
Net assets: $22 million
<PAGE>
PAGE 3
- -------------------------------------------------------------------------------
the construction of roads and bridges, electric and public utilities, and
telecommunications companies. We increased our weighting of these companies
because we believe these companies should provide better price stability and
consistent returns over the long term.
Q WHAT TYPES OF COMPANIES DID YOU EMPHASIZE?
A Let me answer this with a few examples. In the area of raw materials, one
of our favorite stocks is the Australian company, Western Mining. Western
controls, with Alcoa, 25% of the world's alumina production. In addition, the
company is adding to its capacity in gold, nickel and copper. We think
profits should at least double over the next two to three years.
Q IN THE AREA OF INFRASTRUCTURE AREA?
A Of the infrastructure companies we own, one of the best performers has been
the engineering and construction company ASEA AB. This company is especially
active in the field of power generation and transmission. There is strong
demand, particularly in Asia, for new capacity, and continuing demand for
replacement and upgrades elsewhere in both emerging and established
economies. Again, we expect profit growth over the next several years to be
substantial.
A third interesting company is Vale Rio Doce (CVRD), in Brazil. In
addition to being the world's largest producer of iron ore, CVRD has
substantial operations in gold, steel and forest products as well as shipping
and railroads. Thus, CVRD is a play not only on Brazil's abundant natural
resources but also on the infrastructure needed for the country's
development.
Q. WHAT IS YOUR OUTLOOK?
A In the United States, we see signs of modest economic growth in combination
with relatively low interest rates and subdued inflation. We expect this
positive environment to continue. But, importantly, we expect the overseas
markets may be poised to rebound. We intend to continue our focus on
companies involved in infrastructure and raw materials in developed and
emerging markets. We think already there has been a recovery of liquidity in
the foreign markets and that may help encourage flow of funds into these
areas.
(Diamond end note)
This column is intended to answer questions about your Fund.
If you have a question you would like answered,
please write to: Keystone Investments, Inc.
Attn: Manager, Shareholder Communications,
200 Berkeley Street, 22nd Floor
Boston, Massachusetts 02116-5034
<PAGE>
PAGE 4
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KEYSTONE STRATEGIC DEVELOPMENT FUND
YOUR FUND'S PERFORMANCE
(Mountain chart)
Growth of an Investment in
Keystone Strategic Development Fund Class A
In Thousands
9,453
11/94 9,086
8,841
1/95 8,303
8,228
3/95 8,501
8,935
5/95 9,039
9,133
7/95 9,849
9,463
9/95 9,510
A $10,000 investment in Keystone Strategic Development Fund Class A made on
October 17, 1994 with all distributions reinvested was worth $9,510 on
September 30, 1995. Past performance is no guarantee of future results.
<TABLE>
<CAPTION>
SIX-MONTH PERFORMANCE AS OF September 30, 1995
- ---------------------------------------------------------
Class A Class B Class C
<S> <C> <C> <C>
Total returns* 11.86% 11.46% 11.46%
Net asset value 3/31/95 $9.02 $8.99 $8.99
9/30/95 $10.09 $10.02 $10.02
Dividends None None None
Capital gains None None None
</TABLE>
*Before deducting front-end or contingent deferred sales
charge (CDSC).
<TABLE>
<CAPTION>
HISTORICAL RECORD as of September 30, 1995
- ---------------------------------------------------------
Cumulative total returns Class A Class B Class C
<S> <C> <C> <C>
Life of Class
w/o sales charge 0.90% 0.20% 0.20%
with sales charge -4.90% -4.80% -0.80%
</TABLE>
Class A, Class B, and Class C shares began investment operations on October
17, 1994.
Class A share performance is reported at the current maximum front-end
sales charge of 5.75%.
Class B shares were introduced on February 1, 1993. 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 the period and reflects
the deduction of a 5% CDSC.
Class C share performance reflects the deduction of the 1% CDSC for shares
held less than one year.
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.
<PAGE>
PAGE 5
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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.
<PAGE>
PAGE 6
- -------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
SCHEDULE OF INVESTMENTS-September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
===============================================================================
<S> <C> <C>
COMMON STOCKS (90.5%)
(bullet) ARGENTINA (2.1%)
Oil (1.3%)
YPF SA 15,100 $ 272,555
- -------------------------------------------------------------------------------
Utilities ( 0.8%)
Central Costanera 73,200 190,320
- -------------------------------------------------------------------------------
(bullet) TOTAL ARGENTINA 462,875
===============================================================================
(bullet) AUSTRALIA (16.8%)
Oil (3.5%)
Santos Ltd 75,000 209,719
Woodside Petroleum 111,800 537,370
- -------------------------------------------------------------------------------
747,089
- -------------------------------------------------------------------------------
Capital Goods (1.0%)
MEMTEC Limited 127,200 225,907
- -------------------------------------------------------------------------------
Iron and Steel (4.9%)
Broken Hill Proprietary Co. Ltd. 36,267 499,932
CRA Limited 35,400 553,794
- -------------------------------------------------------------------------------
1,053,726
- -------------------------------------------------------------------------------
Metals and Mining (7.4%)
QNI Limited (b) 150,000 311,744
Savage Resources (b) 664,000 501,814
Western Mining Corp. 120,700 789,950
- -------------------------------------------------------------------------------
1,603,508
- -------------------------------------------------------------------------------
(bullet) TOTAL AUSTRALIA 3,630,230
===============================================================================
(bullet) BOLIVIA (1.1%)
Utilities (1.1%)
Compania Bolivia De Energia 8,300 242,775
===============================================================================
(bullet) BRAZIL (7.0%)
Utilities (1.5%)
Electrobras 1,020,000 314,637
- -------------------------------------------------------------------------------
Telecommunications (3.4%)
Telecomunicacoes Brasilieros
S.A. 15,500 738,188
- -------------------------------------------------------------------------------
Oil (2.1%)
Petrol Brasilieros 4,330,000 458,846
- -------------------------------------------------------------------------------
(bullet) TOTAL BRAZIL 1,511,671
===============================================================================
(bullet) CANADA (16.1%)
Oil (3.5%)
Arakis Energy Corporation (b) 44,600 287,113
Canadian Occidental
Petroleum Ltd. 15,050 477,276
- -------------------------------------------------------------------------------
764,389
- -------------------------------------------------------------------------------
Metals and Mining (10.9%)
Alcan Aluminum Ltd. 15,200 491,928
Inco Ltd. 14,800 507,886
Potash Corp. of
Saskatchewan, Inc. 13,500 841,176
TECK Corp. 26,200 521,427
- -------------------------------------------------------------------------------
2,362,417
- -------------------------------------------------------------------------------
Precious Metals (1.7%)
TVX Gold, Inc. (b) 53,200 366,119
- -------------------------------------------------------------------------------
(bullet) TOTAL CANADA 3,492,925
===============================================================================
(bullet) CHILE (4.2%)
Forest Products (1.3%)
Maderas Ysinteticos Sociedad 14,200 273,350
- -------------------------------------------------------------------------------
Utilities (2.9%)
Enersis S.A. 24,500 618,625
===============================================================================
(bullet) TOTAL CHILE 891,975
===============================================================================
See Notes to Schedule of Investments.
<PAGE>
PAGE 7
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS-September 30, 1995
(Unaudited)
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------
(bullet) FRANCE (2.3%)
Oil (1.8%)
Total S.A. 6,525 $ 394,852
- -------------------------------------------------------------------------------
Oil Service (0.5%)
Coflexip (b) 3,920 114,627
- -------------------------------------------------------------------------------
(bullet) TOTAL FRANCE 509,479
===============================================================================
(bullet) HONG KONG (1.3%)
Telecommunications (1.3%)
Hong Kong
Telecommunication 151,200 274,760
===============================================================================
(bullet) KOREA (2.8%)
Utilities (2.7%)
Korea Electric Power Corp. 23,100 586,164
- -------------------------------------------------------------------------------
Iron and Steel (0.1%)
Pohang Iron and Steel 170 14,672
===============================================================================
(bullet) TOTAL KOREA 600,836
===============================================================================
(bullet) MEXICO (1.5%)
Precious Metals (1.5%)
Industrias Penoles S.A. de
C.V. 85,000 319,749
===============================================================================
(bullet) NEW ZEALAND (2.0%)
Paper and Packaging (2.0%)
Fletcher Challenge 21,396 28,590
Fletcher Challenge Forest 150,800 406,977
===============================================================================
(bullet) TOTAL NEW ZEALAND 435,567
===============================================================================
(bullet) PERU (1.3%)
Telecommunications (1.3%)
CPT Telefonica Del Peru 148,000 283,790
===============================================================================
(bullet) SWEDEN (1.8%)
Electrical Products (1.8%)
Asea AB, Series B 3,996 396,912
===============================================================================
(bullet) UNITED KINGDOM (3.7%)
Iron and Steel (1.1%)
British Steel PLC 83,000 237,368
- -------------------------------------------------------------------------------
Metals and Mining (2.6%)
RTZ Corp. 38,139 555,905
- -------------------------------------------------------------------------------
(bullet) TOTAL UNITED KINGDOM 793,273
===============================================================================
(bullet) UNITED STATES (26.5%)
Capital Goods (8.8%)
AGCO Corp. 13,500 614,250
Caterpillar Inc. 8,400 477,750
CBI Industries Inc. 18,100 429,875
Fluor Corp. 6,700 375,200
- -------------------------------------------------------------------------------
1,897,075
- -------------------------------------------------------------------------------
Metals and Mining(1.9%)
Phelps Dodge Corp. 6,700 419,588
- -------------------------------------------------------------------------------
Precious Metals (6.9%)
AMAX Gold Inc. 33,000 202,125
Battle Mountain Gold Co. 18,300 180,714
Homestake Mining Co. 28,600 486,200
Newmont Mining Corp. 4,800 204,000
Santa Fe Pacific Gold Corp.
(b) 24,000 303,000
Stillwater Mining Co. 5,100 107,100
- -------------------------------------------------------------------------------
1,483,139
- -------------------------------------------------------------------------------
Utility (1.7%)
Enron Global Power &
Pipelines 16,000 366,000
- -------------------------------------------------------------------------------
Oil (2.3%)
Frontier Oil Exploration Co. 100,000 231,250
Triton Energy Corp. (b) 5,500 266,063
- -------------------------------------------------------------------------------
497,313
- -------------------------------------------------------------------------------
Oil Services (2.7%)
Schlumberger, Ltd. 8,900 580,725
- -------------------------------------------------------------------------------
(continued on next page)
<PAGE>
PAGE 8
- -------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
SCHEDULE OF INVESTMENTS-September 30, 1995
(Unaudited)
Number Market
of Shares Value
- --------------------------------------------------------------------------------
Paper & Packaging (2.2%)
Weyerhaeuser Co. 10,600 $ 483,625
(bullet) TOTAL UNITED STATES 5,727,465
(bullet) TOTAL COMMON STOCKS (Cost
$17,304,052) 19,574,282
(bullet) BRAZIL (3.1%)
Iron and Steel (3.1%)
Vale do Rio Doce Navegacao S.A. 3,236,000 541,538
Marco Polo SA 700,000 128,535
TOTAL PREFERRED STOCKS
(Cost $675,876) 670,073
==============================================================================
Maturity
Value
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (0.0%)
Investments in repurchase
agreements in a joint trading
account, 6.32%, maturing 4/3/95
(a) $ 3,001 3,000
TOTAL REPURCHASE AGREEMENTS
(Cost $3,000) 3,000
==============================================================================
MATURITY MARKET
VALUE VALUE
- ------------------------------------------------------------------------------
INVESTMENT COMPANY (1.6%)
(bullet) AUSTRALIA (1.6%)
First Resources Development Fund (b) $600,000 $ 353,688
- ------------------------------------------------------------------------------
TOTAL REGULATED INVESTMENT COMPANY
(Cost $464,864) 353,688
==============================================================================
WARRANTS/RIGHTS (0.2%)
Australia (0.2%)
First Resources Development Fund, options
(b) 600,000 45,345
- ------------------------------------------------------------------------------
TOTAL WARRANTS/RIGHTS
(Cost $0) 45,345
==============================================================================
TOTAL INVESTMENTS
(Cost $18,447,792) (c) 20,646,388
==============================================================================
FOREIGN CURRENCY HOLDINGS (1.1%)
(Cost $253,853) 244,980
==============================================================================
OTHER ASSETS AND LIABILITIES -
NET (3.5%) 749,798
==============================================================================
NET ASSETS (100.0%) $21,641,166
==============================================================================
(a) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at September 30, 1995.
(b) Non-income-producing security.
</TABLE>
<PAGE>
PAGE 9
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Period from October 7, 1994
Six Months Ended (commencement of operations)
September 30, 1995 to March 31, 1995
===============================================================================================
<S> <C> <C>
Net asset value: Beginning of period $ 9.02 $10.00
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.020) (0.002)
Net gain (loss) on investment and
foreign currency related transactions 1.090 (0.978)
- -----------------------------------------------------------------------------------------------
Total income from investment operations 1.070 (0.980)
- -----------------------------------------------------------------------------------------------
Net asset value: End of period $10.09 $ 9.02
===============================================================================================
Total return (a) 11.46% (9.80%)
Ratios/supplemental data
Ratios to average net assets:
Operating and management expenses (b) 2.52% 2.77%
Net investment income (loss) (b) (0.43%) (0.07%)
Portfolio turnover rate 23% 13%
Net assets, end of period (thousands) $4,594 $4,890
===============================================================================================
(a) Excluding applicable sales charges.
(b) Annualized
</TABLE>
See Notes to Financial Statements.
<PAGE>
PAGE 10
- -------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Period from October 7, 1994
Six Months Ended (commencement of operations)
September 30, 1995 to March 31, 1995
===============================================================================================
<S> <C> <C>
Net asset value: Beginning of period $ 8.99 $ 10.00
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.080) (0.026)
Net gain (loss) on investment and
foreign currency related transactions 1.110 (0.984)
- -----------------------------------------------------------------------------------------------
Total income from investment operations 1.030 (1.010)
- -----------------------------------------------------------------------------------------------
Net asset value: End of period $10.02 $ 8.99
===============================================================================================
Total return (a) 11.46% (10.10%)
Ratios/supplemental data
Ratios to average net assets:
Operating and management expenses (b) 3.26% 3.55%
Net investment income (loss) (b) (1.19%) (0.80%)
Portfolio turnover rate 23% 13%
Net assets, end of period (thousands) $15,255 $14,688
===============================================================================================
(a) Excluding applicable sales charges.
(b) Annualized
</TABLE>
See Notes to Financial Statements.
<PAGE>
PAGE 11
- -------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Period from October 7, 1994
Six Months Ended (commencement of operations)
September 30, 1995 to March 31, 1995
===============================================================================================
<S> <C> <C>
Net asset value: Beginning of period $ 8.99 $ 10.00
- -----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.070) (0.034)
Net gain (loss) on investment and
foreign currency related transactions 1.100 (0.976)
- -----------------------------------------------------------------------------------------------
Total income from investment operations 1.030 (1.010)
- -----------------------------------------------------------------------------------------------
Net asset value: End of period $10.02 $ 8.99
===============================================================================================
Total return (a) 11.46% (10.10%)
Ratios/supplemental data
Ratios to average net assets:
Operating and management expenses (b) 3.26% 3.51%
Net investment income (loss) (b) (1.19%) (0.93%)
Portfolio turnover rate 23% 13%
Net assets, end of period (thousands) $1,792 $1,393
===============================================================================================
(a) Excluding applicable sales charges.
(b) Annualized.
</TABLE>
<PAGE>
<PAGE>
PAGE 12
- -------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
STATEMENT OF ASSETS AND LIABILITIES--
September 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
==============================================================================
Assets:
Investments at market value
(identified cost--$18,447,792) (Note 1) $20,646,388
Foreign currency holdings
(identified cost--$253,853) (Note 1) 244,980
- ------------------------------------------------------------------------------
Total Investments
(identified cost--$18,701,645) 20,891,368
- ------------------------------------------------------------------------------
Cash 146,847
Receivable for:
Investments sold 309,626
Forward Foreign Currency Exchange Contracts
(Notes 1 and 5) 4,414,644
Dividends and interest 29,030
Fund shares sold 309,176
Deferred organization expense (Note 1) 38,806
Prepaid expenses 10,514
- ------------------------------------------------------------------------------
Total assets 26,150,011
- ------------------------------------------------------------------------------
Liabilities:
Payable for:
Investments purchased 49,508
Forward Foreign Currency Exchange Contracts
(Notes 1 and 5) 4,433,490
Fund shares redeemed 10,087
Foreign taxes withheld 549
Other accrued expenses 15,211
- ------------------------------------------------------------------------------
Total liabilities 4,508,845
- ------------------------------------------------------------------------------
Net assets $21,641,166
==============================================================================
Net assets represented by:
Paid-in-capital (Note 1) $20,880,452
Accumulated net investment income (loss) (137,186)
Accumulated realized losses on investment
and foreign currency related
transactions--net (1,273,037)
Net unrealized appreciation on investments
and foreign currency related transactions 2,191,015
Net unrealized depreciation on currency and
forward foreign currency exchange
contracts (20,078)
- ------------------------------------------------------------------------------
Total net assets $21,641,166
- ------------------------------------------------------------------------------
Net asset value per share: (Note 2)
Class A Shares ($10.09 455,417 shares
outstanding) $ 4,594,032
Class B Shares ($10.02 1,523,117 shares
outstanding) 15,254,706
Class C Shares ($10.02 178,903 shares
outstanding) 1,792,428
- ------------------------------------------------------------------------------
$21,641,166
- ------------------------------------------------------------------------------
Offering price per share:
Class A Shares (including sales charge of
5.75%) (Note 1) $10.71
- ------------------------------------------------------------------------------
Class B Shares $10.02
- ------------------------------------------------------------------------------
Class C Shares $10.02
==============================================================================
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS--
Six Months Ended September 30, 1995
==============================================================================
<S> <C> <C>
Investment income: (Note 1)
Interest $ 49,178
Dividends (net of foreign withholding
taxes of $16,344) 164,501
- ------------------------------------------------------------------------------
Total income 213,679
- ------------------------------------------------------------------------------
Expenses: (Notes 1, 2 and 4)
Management fee $ 110,929
Transfer agent fees 44,028
Auditing 13,694
Accounting and legal 2,268
Custodian fees 22,987
Printing 7,539
Distribution Plan expenses 92,065
Registration fees 27,040
Amortization of organization expense 4,737
Miscellaneous expenses 1,327
- ------------------------------------------------------------------------------
Total expenses 326,614
- ------------------------------------------------------------------------------
Investment income (loss)--net (112,935)
- ------------------------------------------------------------------------------
Realized and unrealized gain (loss) on
investments and foreign currency related
transactions--net:
Realized loss on:
Investment transactions (53,012)
Foreign currency related transactions (107,420)
- ------------------------------------------------------------------------------
Net realized loss on investments and
foreign currency related transactions (160,432)
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments
and foreign currency related transactions
Beginning of period (561,958)
End of period 2,191,015
2,752,973
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on forward
foreign currency exchange contracts
Beginning of period 25,799
End of period (20,078)
- ------------------------------------------------------------------------------
(45,877)
- ------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
on investments, foreign currency related transactions
and forward foreign currency exchange contracts 2,707,096
- ------------------------------------------------------------------------------
Net gain (loss) on investments, foreign currency
related transactions and forward foreign
currency exchange contracts 2,546,664
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $2,433,729
==============================================================================
</TABLE>
<PAGE>
<PAGE>
PAGE 13
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Period from October 7, 1994
September 30, 1995 (commencement of operations)
(Unaudited) to March 31, 1995
===============================================================================================
<S> <C> <C>
Operations:
Net Investment income (loss) $ (112,935) $ (54,640)
Net realized loss on investment and foreign
currency related transactions (160,432) (1,120,540)
Net change in unrealized appreciation
(depreciation) on investments, foreign
currency related transactions and foreign
currency exchange contracts 2,707,096 (536,159)
- ------------------------------------------------------------------------------------------
Net decrease in net assets resulting from
operations 2,433,729 (1,711,339)
- ------------------------------------------------------------------------------------------
Capital share transactions: (Note 2)
Proceeds from shares sold--Class A Shares 528,245 5,752,543
Proceeds from shares sold--Class B Shares 1,433,467 17,241,435
Proceeds from shares sold--Class C Shares 337,736 1,573,595
Payments for shares redeemed--Class A Shares (1,402,195) (506,367)
Payments for shares redeemed--Class B Shares (2,560,719) (1,400,994)
Payments for shares redeemed--Class C Shares (99,570) (78,400)
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from capital share transactions (1,763,036) 22,581,812
Total increase in net assets 670,693 20,870,473
- ------------------------------------------------------------------------------------------
Net assets:
Beginning of period 20,970,473 100,000
- -----------------------------------------------------------------------------------------
End of period (including accumulated net
investment income (loss)) as follows:
September 30, 1995--(137,186)
March 31, 1995--(24,251) (Note 1) $21,641,166 $20,970,473
=========================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
PAGE 14
- -------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
NOTES TO FINANCIAL STATEMENTS
(1.) SIGNIFICANT ACCOUNTING POLICIES
Keystone Strategic Development Fund (the "Fund") is a Massachusetts business
trust for which Keystone Investment Management Company ("Keystone")
(formerly, Keystone Custodian Funds, Inc.) is the investment adviser. The
Fund 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 decreases
depending on when the shares were purchased and how long the shares 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 ("KIDC") (formerly,
Keystone Distributors, Inc.), the Fund's principal underwriter.
Equitilink International Management Limited ("EIML"), acts as sub-adviser
to the Fund. Subject to the supervision of the Fund's Board of Trustees and
Keystone, EIML provides investment supervision and furnishes an investment
program for certain assets of the Fund, as well as providing research and
advice concerning the purchase and sale of securities by the Fund.
Keystone is a wholly-owned subsidiary of Keystone Investments, Inc.
("KII") (formerly, Keystone Group, Inc.), a Delaware corporation. KII is
privately owned by an investor group consisting of current and former members
of management of Keystone. Keystone Investor Resource Center, Inc. ("KIRC"),
a wholly-owned subsidiary of Keystone, is the Fund's transfer agent.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. Investments, including American Depository Receipts ("ADRs"), are
usually valued at the closing sales price or, in the absence of sales and for
over-the-counter securities, the mean of bid and asked quotations. Management
values the following securities at prices it deems in good faith to be fair:
(a) securities (including restricted securities) for which complete
quotations are not readily available and (b) listed securities if, in the
opinion of management, the last sales price does not reflect a current value
or if no sale occurred. ADRs, which are certificates representing shares of
foreign securities deposited in domestic and foreign banks, are traded and
valued in United States dollars.
Short-term investments maturing in sixty days or less are valued at
amortized cost (original purchase cost as adjusted for amortization of
premium or accretion of discount) which, when combined with accrued interest,
approximates market. Short-term investments maturing in more than sixty days
for which market quotations are readily available are valued at current
market value. Short-term investments maturing in more than sixty days when
purchased which are held on the sixtieth day prior to maturity are valued at
amortized cost (market value on the sixtieth day adjusted for amortization of
premium or accretion of discount) which, when combined with accrued interest,
approximates market. Investments denominated in a foreign currency are
adjusted daily to reflect changes in exchange rates.
B. Those investments traded or denominated in foreign currency amounts are
translated into United States dollars as follows: market value of
investments, assets, and liabilities at the daily rate of exchange; and
purchases and sales of investments, income, and expenses at the rate of
exchange prevailing on the respective dates of such transactions.
<PAGE>
PAGE 15
- -------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
C. Securities transactions are accounted for no later than one business day
after the trade date. Realized gains and losses are recorded on the
identified cost basis. Interest income is recorded on the accrual basis and
dividend income is recorded on the ex-dividend date.
D. The Fund intends to qualify, as a regulated investment company under the
Internal Revenue Code of 1986, as amended ("Internal Revenue Code"). Thus,
the Fund expects to be relieved of any federal income tax liability by
distributing all of its net taxable investment income and net taxable capital
gains, if any, to its shareholders. The Fund intends to avoid excise tax
liability by making the required distributions under the Internal Revenue
Code.
E. When the Fund enters into a repurchase agreement (a purchase of securities
whereby the seller agrees to repurchase the securities at a mutually agreed
upon date and price) the repurchase price of the securities will generally
equal the amount paid by the Fund plus a negotiated interest amount. The
seller under the repurchase agreement will be required to provide securities
("collateral") to the Fund whose value will be maintained at an amount not
less than the repurchase price, 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 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 fully collateralized
by U.S. Treasury and/or Federal Agency obligations.
F. From time to time the Fund may enter into forward foreign currency
exchange contracts to hedge certain foreign currency assets. Contracts are
recorded at market value. Realized gains and losses arising from such
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.
G. The Fund distributes net investment income and net capital gains, if any,
to shareholders annually. Distributions to shareholders are determined in
accordance with income tax regulations, and are recorded on the ex-dividend
date. Distributions from taxable net investment income and net capital gains
can differ from book basis net investment income and net capital gains.
The significant differences between financial statement amounts available for
distribution and distributions made in accordance with income tax regulations
are due to differences in the treatment of net operating losses and
unrealized appreciation on foreign currency exchange contracts.
H. Organizational 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 expense
in the same proportion as the number of initial shares
<PAGE>
PAGE 16
- -------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
being redeemed bears to the number of initial shares outstanding at the time
of redemption.
(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:
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------
Six Months Ended Year Ended
September 30, 1995 March 31, 1995
<S> <C> <C>
- ------------------------------------------------------------------------------
Shares sold 54,135 594,548
Shares redeemed (140,997) (55,269)
- ------------------------------------------------------------------------------
Net increase/decrease (86,862) 539,279
==============================================================================
<CAPTION>
Class B Shares
-------------------------------------------------------
Six Months Ended Year Ended
September 30, 1995 March 31, 1995
<S> <C> <C>
- ------------------------------------------------------------------------------
Shares sold 146,255 1,787,714
Shares redeemed (257,607) (156,245)
- ------------------------------------------------------------------------------
Net increase (111,352) 1,631,469
==============================================================================
<CAPTION>
Class C Shares
-------------------------------------------------------
Six Months Ended Year Ended
September 30, 1995 March 31, 1995
<S> <C> <C>
- ------------------------------------------------------------------------------
Shares sold 33,676 160,011
Shares redeemed (9,793) (8,991)
- ------------------------------------------------------------------------------
Net increase 23,883 151,020
==============================================================================
</TABLE>
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 12b-1 under the Investment Company Act of 1940 ("1940 Act").
The Class A Distribution Plan provides for payments which are currently
limited to 0.25% annually of the average daily net asset value of Class A
shares to pay expenses of the distribution of Class A shares. Amounts paid by
the Fund to KIDC under the Class A distribution Plan are currently used to
pay others, such as dealers, service fees at an annual rate of up to 0.25% of
the average net asset value of shares sold by such and remaining outstanding
on the books of the Fund for specified periods.
The Class B Distribution Plan provides for payment at an annual rate of
1.00% of the average daily net asset value of Class B shares to pay expenses
of the distribution of Class B shares. Amounts paid by the Fund under the
Class B Distribution Plan are currently used to pay others (dealers) (i) a
commission at the time of purchase normally equal to 3.00% of the value of
each share sold; and (ii) service fees at an annual rate of 0.25% of the
average net asset value of shares sold by such others and remaining
outstanding on the books of the Fund for specified periods.
Effective June 1, 1995, the commission paid will increase to approximately
4% of the value of each share sold. In addition, the class B shares purchased
after June 1, 1995 at rates ranging from a maximum of 5% of amounts redeemed
during the first 12 months following the date of purchase to 1% of amounts
redeemed during the sixth twelve month period following the date of purchase.
Class B shares purchased on or after June 1, 1995 that have been outstanding
for eight years following the month of purchase will automatically convert to
class A shares without a front end sales charge or exchange fee. Class B
shares purchased prior to June 1, 1995 will retain their existing conversion
rights.
The Class C Distribution Plan provides for payments at an annual rate of
up to 1.00% of the average daily net asset value of Class C shares to pay
expenses for the distribution of Class C shares. Amounts paid by the Fund
under the Class C Distribution Plan are currently used to pay others
(dealers) (i) a payment at the time of purchase of 1.00% of the value of each
share sold, such payment to consist of a commission in the amount of 0.75%
and the first year's service fee in advance in the amount of 0.25%; and (ii)
beginning approximately 15 months after purchase, a commission
<PAGE>
<PAGE>
PAGE 17
- -------------------------------------------------------------------------------
at an annual rate of 0.75% (subject to applicable limitations imposed by the
rules of the National Association of Securities Dealers, Inc.) ("NASD Rule")
and service fees at an annual rate of 0.25%, respectively, of the average net
asset value of each share sold by such others and remaining outstanding on
the books of the Fund for specified periods.
Each of the Distribution Plans may be terminated at any time by vote of
the Independent Trustees or by vote of a majority of the outstanding voting
shares of the respective class. However, after the termination of any
Distribution Plan, at the discretion of the Board of Trustees, payments to
KIDC may continue as compensation for its services which have been earned
while the Distribution Plan was in effect.
For the period ended September 30, 1995, the Fund paid KIDC $6,253, under
its Class A Distribution Plan. The Fund paid KIDC $76,394 for Class B shares
sold prior to June 1, 1995 and $1,585 for Class B shares sold on or after
June 1, 1995. The Fund paid KIDC $7,913 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 Class B Distribution Plans were $936,363
for class B shares purchased prior to June 1, 1995 and $52,406 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 $108,043 as of September 30, 1995.
Presently, the Fund's class-specific expenses are limited to Distribution
Plan expenses incurred by a class of shares.
(3.) SECURITIES TRANSACTIONS
For the period ended September 30, 1995, purchases and sales of investment
securities were as follows:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
- ------------------------------------------------------------------------------
<S> <C> <C>
Portfolio securities $ 6,061,636 $ 4,739,794
Short-term investments 202,709,874 206,817,874
------------ ------------
$208,771,510 $211,557,668
============ ============
</TABLE>
(4.) INVESTMENT MANAGEMENT AND TRANSACTIONS WITH AFFILIATES
Under the terms of the Investment Advisory and Management Agreement between
Keystone and the Fund, dated September 21, 1994, Keystone provides investment
management and administrative services to the Fund. In return, Keystone is
paid a management fee at the annual rate of 1.00% of the aggregate net asset
value of the Fund. Keystone has entered into a Sub- Investment Advisory
Agreement with EIML, dated September 21, 1994, under which EIML provides
investment research and advice to the Fund in both a non-discretionary and a
discretionary capacity. For its services EIML receives from Keystone a
monthly fee equal to; (1) 20% of Keystone's net fee for such month for
services rendered in a non-discretionary capacity; plus (2) 10% of Keystone's
net fee for such month for services rendered in a discretionary capacity.
For the period ended September 30, 1995, the Fund paid or accrued to Keystone
investment management and administrative service fees of $110,929, which
represented 1.00% of the Fund's average net assets on an annualized basis.
For the period ended September 30, 1995, Keystone paid or accrued to EIML
$22,186 for services rendered in a non- discretionary capacity.
The Fund is subject to certain state annual expense limits, the most
restrictive of which is as follows: 2.5% of the first $30 million of Fund
assets, 2.0% of the next $70 million of Fund assets, and 1.5% of Fund assets
over $100 million.
<PAGE>
PAGE 18
- -------------------------------------------------------------------------------
KEYSTONE STRATEGIC DEVELOPMENT FUND
For the period ended September 30, 1995, the Fund paid or accrued to KIRC
$9,807 as reimbursement for certain accounting, tax and printing services and
$44,028 for transfer agent fees.
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. Currently, the Independent Trustees of
the Fund receive no compensation for their services.
(5.) Forward Foreign Currency Exchange
Contracts
At March 31, 1995, the Fund had entered into the following foreign currency
exchange contracts that obligate the Fund to deliver currencies at specified
future dates. The unrealized depreciation of ($18,846) on these contracts is
included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
Exchange Currency to U.S. $ value Currency to U.S. $ value
date be delivered as of 9/30/95 be received as of 9/30/95
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
November
10, 1995 3,991,509 3,011,205 2,957,708 2,957,708
Australian $ U.S. $
November
10, 1995 937,000 937,000 1,267,278 956,038
U.S $ Australian $
November
03, 1995 2,390,688 485,285 500,898 500,898
French Franc U.S. $
- ------------------------------------------------------------------------------
$4,433,490 $4,414,644
==============================================================================
</TABLE>
(6.) DISTRIBUTIONS TO SHAREHOLDERS
The Fund intends to distribute to its shareholders dividends from net
investment income and net realized long-term capital gains, if any, annually.
Any taxable distribution which is declared in October, November or December
and paid in the following fiscal year will be taxable to shareholders in the
year declared.
<PAGE>
PAGE 19
- ------------------------------------------------------------------------------
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.
<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, Inc.
Fund of the Americas
Strategic Development Fund
This report was prepared primarily for the information
of the Fund's shareholders. Its use for other purposes is
authorized only when it is preceded or accompanied by
the prospectus, describing all fees, charges and other
important facts about the Fund.
[Keystone Logo] KEYSTONE INVESTMENTS
P.O. Box 2121
Boston, Massachusetts 02106-2121
SDF-AR11/95
4M ["Recycled" symbol]
[FRONT COVER]
KEYSTONE
[Photo]
STRATEGIC DEVELOPMENT FUND
[Keystone logo]
SEMIANNUAL REPORT
SEPTEMBER 30, 1995
