<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1996.
File Nos. 33-64781
and 811-7441
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. --- ---
Post-Effective Amendment No -1- X
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. -3- X
KEYSTONE INSTITUTIONAL TRUST
Keystone Institutional Small Capitalization Growth Fund
(Exact Name of Registrant as Specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 338-3200
Rosemary D. Van Antwerp, Esq., 200 Berkeley Street,
Boston, MA 02116-5034
(Name and Address of Agent for Service)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has registered an indefinite number or amount of its securities under the
Securities Act of 1933. Registrant will file a Rule 24f-2 Notice within sixty
(60) days after the close of its fiscal year ended June 30, 1996.
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
- --- on (date) pursuant to paragraph (b)
- --- 60 days after filing pursuant to paragraph (a)(1)
- --- on (date) pursuant to paragraph (a)(1)
- --- 75 days after filing pursuant to paragraph (a)(2)
- --- on (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
CONTENTS OF
REGISTRATION STATEMENT
This Post-Effective Amendment No. 1 to
Registration Statement No. 33-64781/811-7441 consists of the
following pages, items of information and documents:
The Facing Sheet
The Contents Page
The Cross-Reference Sheet
PART A
Prospectus
PART B
Statement of Additional Information
PART C
PART C - OTHER INFORMATION - ITEMS 24 (a) and (b)
Financial Statements
Independent Auditors' Report
Exhibit Listing
PART C - OTHER INFORMATION - ITEMS 25-32- AND SIGNATURE PAGES
Number of Holders of Securities
Indemnification
Business and Other Connections
Principal Underwriter
Location of Accounts and Records
Undertakings
Signatures
Exhibits (including Powers of Attorney)
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
Cross-Reference Sheet pursuant to Rule 495 under the Securities Act of 1933.
Items in
Part A of
Form N-1A Prospectus Caption
- --------- ------------------
1 Cover Page
2 Fee Table
3 Performance Data
4 Cover Page
The Fund
Investment Objective and Strategies
Investment Restrictions
Risk Factors
Additional Investment Information
5 Fund Management and Expenses
6 The Fund
Dividends and Taxes
Fund Shares
Shareholder Services
Pricing Shares
7 How to Buy Shares
Pricing Shares
Shareholder Services
8 How to Redeem Shares
9 Not Applicable
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
Cross-Reference Sheet continued.
Items in
Part B of
Form N-1A Statement of Additional Information Caption
- --------- -------------------------------------------
10 Cover Page
11 Table of Contents
12 Not applicable
13 Investment Objective and Policies
Investment Restrictions
Valuation of Securities
Appendix
14 Trustees and Officers
15 Additional Information
16 Investment Manager and Adviser
Principal Underwriter
Additional Information
17 Brokerage
18 Declaration of Trust
19 Valuation of Securities
20 Distributions and Taxes
21 Principal Underwriter
22 Standardized Total Return and Yield Quotations
23 Financial Statements
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
Keystone Institutional Small Capitalization Growth Fund
PART A
PROSPECTUS
(Registrant's Prospectus as filed with Pre-Effective Amendment No. 2
to Registration Statement No. 33-64781/811-7441,
as supplemented on July 26, 1996,
is incorporated by reference herein)
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
JANUARY 17, 1996
AS SUPPLEMENTED JULY 30, 1996
This statement of additional information is not a prospectus, but
relates to, and should be read in conjunction with, the prospectus of Keystone
Institutional Trust (the "Trust") relating to its series of shares named
Keystone Institutional Small Capitalization Growth Fund (the "Fund") dated
January 17, 1996, as supplemented July 26 1996. A copy of the prospectus may
be obtained from Fiduciary Investment Company ("FICO" or the "Principal
Underwriter"), the Fund's principal underwriter, located at 200 Berkeley Street,
Boston, Massachusetts, 02116-5034 or your broker-dealer.
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TABLE OF CONTENTS
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Page
Investment Objective and Policies 2
Investment Restrictions 2
Valuation of Securities 4
Distributions and Taxes 5
Declaration of Trust 6
Investment Manager and Adviser 7
Trustees and Officers 9
Principal Underwriter 13
Brokerage 14
Standardized Total Return 16
Additional Information 16
Appendix A-1
Audited Statement of Net Assets F-1
Independent Auditors' Report F-3
Financial Statements (unaudited) F-4
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INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Trust is an open-end, diversified management investment company
that is authorized to issue more than one series of shares. At this time, the
Trust issues only one series of shares, the Keystone Institutional Small
Capitalization Growth Fund (the "Fund"). The Fund's investment objective is to
provide shareholders with long-term growth of capital. It is the Fund's policy
to invest its assets as fully as practicable.
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INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
FUNDAMENTAL INVESTMENT RESTRICTIONS
The Fund has adopted the fundamental investment restrictions set forth
below, which may not be changed without the vote of a majority (as defined in
the Investment Company Act of 1940 ("1940 Act")) of the Fund's outstanding
voting shares. Unless otherwise stated, all references to Fund assets are in
terms of current market value.
The Fund may not do the following:
(1) with respect to 75% of its total assets, invest more than 5% of the
value of its total assets, determined at market or other fair value at the time
of purchase, in the securities of any one issuer, or invest in more than 10% of
the outstanding voting securities of any one issuer, all as determined at the
time of purchase; provided that these limitations do not apply to investments in
securities issued or guaranteed by the United States ("U.S.") government or its
agencies or instrumentalities;
(2) concentrate its investments in the securities of issuers in any one
industry other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities;
(3) borrow money, except that the Fund may (a) borrow from any bank,
provided that, immediately after any such borrowing there is asset coverage of
at least 300% for all borrowings; (b) borrow for temporary purposes only and in
an amount not exceeding 5% of the value of the Fund's total assets, computed at
the time of borrowing; or (c) enter into reverse repurchase agreements, provided
that, immediately after entering into any such agreements, there is asset
coverage of at least 300% of all bank borrowings and reverse repurchase
agreements;
(4) issue senior securities, except that the Fund may (a) make
permitted borrowings of money; (b) enter into firm commitment agreements and
collateral arrangements with respect to the writing of options on securities and
engage in permitted transactions in futures and options thereon and forward
contracts; and (c) issue shares of any additional permitted classes or series;
(5) engage in the business of underwriting securities issued by other
persons, except insofar as the Fund may be deemed to be an underwriter in
connection with the disposition of its portfolio investments;
(6) invest in real estate or commodities, except that the Fund may (a)
invest in securities directly or indirectly secured by real estate and interests
therein and securities of companies that invest in real estate and interests
therein, including mortgages and other liens; and (b) enter into financial
futures contracts and options thereon for hedging purposes and enter into
forward contracts; or
(7) make loans, except that the Fund may (a) make, purchase, or hold
publicly and nonpublicly offered debt securities (including convertible
securities) and other debt investments, including loans, consistent with its
investment objective; (b) lend its portfolio securities to broker-dealers; and
(c) enter into repurchase agreements.
NON-FUNDAMENTAL INVESTMENT POLICIES
It is the position of the staff of the Securities and Exchange
Commission that investment (including holdings of debt securities) of more than
25% of the value of the Fund's assets in any one industry or group of industries
represents concentration, it being understood that securities issued by the U.S.
government or state governments or political subdivisions thereof are excluded
from the calculation because these issuers are not considered by the staff of
the Securities and Exchange Commission to be members of any industry.
In order to permit the sale of Fund shares in certain states or foreign
countries, the Fund may make commitments more restrictive than the investment
restrictions described above. Should the Fund determine that any such commitment
is no longer in the best interests of the Fund, it may revoke the commitment by
terminating sales of its shares in the state or country involved.
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VALUATION OF SECURITIES
- --------------------------------------------------------------------------------
Current values for the Fund's securities are generally determined as
follows:
(1) securities that are traded on a national securities exchange or the
over-the-counter National Market System ("NMS") are valued on the basis of the
last sales price on the exchange where primarily traded or NMS prior to the time
of the valuation, provided that a sale has occurred and that this price reflects
current market value according to procedures established by the Board of
Trustees;
(2) securities traded in the over-the-counter market, other than on NMS,
for which market quotations are readily available, are valued at the mean of the
bid and asked prices at the time of valuation;
(3) instruments having maturities of more than sixty day for which market
quotations are readily available, are valued at current market value; where
market quotations are not available, such instruments are valued at fair value
as determined by the Board of Trustees;
(4) instruments purchased with maturities of sixty days or less (including
all master demand notes) are valued at amortized cost (original purchase cost as
adjusted for amortization of premium or accretion of discount), which, when
combined with accrued interest, approximates market; instruments maturing in
more than sixty days when purchased that are held on the sixtieth day prior to
maturity are valued at amortized cost (market value on the sixtieth day adjusted
for amortization of premium or accretion of discount), which, when combined with
accrued interest, approximates market; and which, in either case, reflects fair
value as determined by the Board of Trustees; and
(5) the following securities are valued at prices deemed in good faith to
be fair under procedures established by the Board of Trustees: (a) securities,
including restricted securities, for which complete quotations are not readily
available; (b) listed securities or those on NMS if, in the Fund's opinion, the
last sales price does not reflect a current market value or if no sale occurred;
and (c) other assets.
Foreign securities for which market quotations are not readily available
are valued on the basis of valuations provided by a pricing service, approved by
the Fund's Board of Trustees, which uses information with respect to
transactions in such securities, quotations from broker-dealers, market
transactions in comparable securities and various relationships between
securities and yield to maturity in determining value.
- --------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
The Fund distributes to its shareholders dividends from net investment
income and net realized long-term and short-term capital gains annually in
shares or, at the option of the shareholder, in cash. (Distributions of ordinary
income may be eligible in whole or in part for the corporate 70% dividends
received deduction.) Shareholders who have not opted, prior to the record date
for any distribution, to receive cash will have the number of distributed shares
determined on the basis of the Fund's net asset value per share computed at the
end of the day on the record date after adjustment for the distribution. Net
asset value is used in computing the number of shares in both gains and income
distribution reinvestments. Account statements and/or checks as appropriate will
be mailed to shareholders by the 15th of the appropriate month. Unless the Fund
receives instructions to the contrary from a shareholder before the record date,
it will assume that the shareholder wishes to receive that distribution and
future gains and income distributions in shares. Instructions continue in effect
until changed in writing.
Distributed long-term capital gains are taxable as such to the
shareholder regardless of the period of time Fund shares have been held by the
shareholder. However, if such shares are held less than six months and redeemed
at a loss, the shareholder will recognize a long-term capital loss on such
shares to the extent of the long-term capital gain distribution received in
connection with such shares. If the net asset value of the Fund's shares is
reduced below a shareholder's cost by a capital gains distribution, such
distribution, to the extent of the reduction, would be a return of investment
though taxable as stated above. Since distributions of capital gains depend upon
profits actually realized from the sale of securities by the Fund, they may or
may not occur. The foregoing comments relating to the taxation of dividends and
distributions paid on the Fund's shares relate solely to federal income
taxation. Such dividends and distributions may also be subject to state and
local taxes.
When the Fund makes a distribution, it intends to distribute only the
Fund's net capital gains and such income as has been predetermined to the best
of the Fund's ability to be taxable as ordinary income. Shareholders of the Fund
will be advised annually of the federal income tax status of distributions.
- --------------------------------------------------------------------------------
DECLARATION OF TRUST
- --------------------------------------------------------------------------------
MASSACHUSETTS BUSINESS TRUST
The Trust is a Massachusetts business trust established under a
Declaration of Trust dated November 30, 1995. The Trust is similar in most
respects to a business corporation. The principal distinction between the Trust
and a corporation relates to the shareholder liability described below. A copy
of the Declaration of Trust (the "Declaration of Trust") is filed as an exhibit
to the Registration Statement of which this statement of additional information
is a part. This summary is qualified in its entirety by reference to the
Declaration of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
a Fund represents an equal proportionate interest with each other share of that
series and class. Upon liquidation, shares are entitled to a pro rata share of
the Trust based on the relative net assets of each series and class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable. The Trust is authorized to issue additional classes or series of
shares. The Trust currently issues one series and one class of shares, but may
issue additional series or classes of shares at a later date.
SHAREHOLDER LIABILITY
Pursuant to certain decisions of the Supreme Judicial Court of
Massachusetts, shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. If the Trust were held to be a partnership, the possibility of the
shareholders' incurring financial loss for that reason appears remote because
(1) the Trust's Declaration of Trust contains an express disclaimer of
shareholder liability for obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or the Trustees; and (2) the Declaration of Trust
provides for indemnification out of the Trust's property for any shareholder
held personally liable for the obligations of the Trust.
VOTING RIGHTS
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. However, the Trust intends to hold meetings at least
annually. At meetings called for the initial election of Trustees or to consider
other matters, shares are entitled to one vote per share. Shares generally vote
together as one class on all matters. Classes of shares of a Fund have equal
voting rights. No amendment may be made to the Declaration of Trust which
adversely affects any class of shares without the approval of a majority of the
shares of that class. Shares have non-cumulative voting rights, which means that
the holders of more than 50% of the shares voting for the election of Trustees
can elect 100% of the Trustees to be elected at a meeting and, in such event,
the holders of the remaining 50% or less of the shares voting will not be able
to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time, the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Except as set forth above, the Trustees shall continue to hold office
indefinitely, unless otherwise required by law, and may appoint successor
Trustees. A Trustee may be removed from or cease to hold office (as the case may
be) (1) at any time by two-thirds vote of the remaining Trustees; (2) when such
Trustee becomes mentally or physically incapacitated; or (3) at a special
meeting of shareholders by a two-thirds vote of the outstanding shares. Any
Trustee may voluntarily resign from office.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
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INVESTMENT MANAGER AND ADVISER
- --------------------------------------------------------------------------------
Subject to the general supervision of the Trust's Board of Trustees,
Keystone Investment Management Company ("Keystone"), located at 200 Berkeley
Street, Boston, Massachusetts 02116-5034, provides investment advice, management
and administrative services to the Fund. Keystone, organized in 1932, is a
wholly-owned subsidiary of Keystone Investments, Inc. ("Keystone Investments"),
200 Berkeley Street, Boston, Massachusetts 02116-5034.
Keystone Investments is a corporation privately owned by current and
former members of management and certain employees of Keystone Investments and
its affiliates. The shares of Keystone Investments common stock beneficially
owned by management are held in a number of voting trusts, the trustees of which
are George S. Bissell, Albert H. Elfner, III, Edward F. Godfrey, and Ralph J.
Spuehler, Jr. Keystone Investments provides accounting, bookkeeping, legal,
personnel and general corporate services to Keystone, its affiliates and the
Keystone Investments Family of Funds.
Except as otherwise noted below, pursuant to an Investment Advisory and
Management Agreement with the Trust with resect to the Fund (the "Advisory
Agreement") and subject to the supervision of the Trust's Board of Trustees,
Keystone manages and administers the Fund's operation and manages the investment
and reinvestment of the Fund's assets in conformity with the Fund's investment
objective and restrictions. The Advisory Agreement stipulates that Keystone
shall provide office space, all necessary office facilities, equipment and
personnel in connection with its services under the Advisory Agreement and pay
or reimburse the Fund for the compensation of officers and Trustees of the Trust
who are affiliated with the investment adviser as well as pay all expenses of
Keystone incurred in connection with the provision of its services. All charges
and expenses other than those specifically referred to as being borne by
Keystone will be paid by the Fund, including, but not limited to, custodian
charges and expenses; bookkeeping and auditors' charges and expenses; transfer
agent charges and expenses; fees of Independent Trustees; brokerage commissions;
brokers' fees and expenses; issue and transfer taxes; taxes and trust fees
payable to governmental agencies; fees and expenses of the registration and
qualification of the Fund and its shares with the Securities and Exchange
Commission (sometimes referred herein as the "SEC" or the "Commission") or under
state or other securities laws, expenses of preparing, printing and mailing
reports, prospectuses, statements of additional information, notices, and proxy
materials to shareholders of the Fund; expenses of shareholders' and Trustees'
meetings; charges and expenses of legal counsel for the Trust and for the
Trustees of the Trust on matters relating to the Fund; charges and expenses of
filing annual and other reports with the SEC and other authorities; and all
extraordinary charges and expenses of the Fund.
As compensation for its services to the Fund, Keystone is entitled to a
fee at the annual rate set forth below:
Management Aggregate Net Asset Value
Fee of the Shares of the Fund
- -------------------------------------------------------------------------------
0.80% of the first $100,000,000, plus
0.75% of the next $150,000,000, plus
0.65% of amounts over $250,000,000
computed as of the close of business on each business day and paid daily.
As a continuing condition of registration of shares in a state,
Keystone has agreed to reimburse the Fund annually for certain operating
expenses incurred by the Fund in excess of certain percentages of the Fund's
average daily net assets. However, Keystone is not required to make such
reimbursements to an extent which would result in the Fund's inability to
qualify as a regulated investment company under provisions of the Internal
Revenue Code. This condition may be modified or eliminated in the future.
Keystone has voluntarily limited the annual expenses of the Fund to
1.00% of the Fund's average net assets for the fiscal period ended June 30,
1996. Keystone currently intends to continue the foregoing expense limitation
until December 31, 1996 and on a month-by-month basis thereafter. After 1996,
Keystone may modify or terminate the foregoing expense limitation.
Under the Advisory Agreement any liability of Keystone in connection
with rendering services thereunder is limited to situations involving its
willful misfeasance, bad faith, gross negligence, or reckless disregard of its
duties.
The Advisory Agreement continues in effect only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of the
outstanding shares, and such renewal has been approved by the vote of a majority
of the Independent Trustees cast in person at a meeting called for the purpose
of voting on such approval. The Advisory Agreement may be terminated, without
penalty on 60 days' written notice by the Trust's Board of Trustees or by a vote
of a majority of outstanding shares. The Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
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TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
Trustees and officers of the Trust, their principal occupations and
some of their affiliations over the last five years are as follows:
*ALBERT H. ELFNER, III: President, Chief Executive Officer and Trustee of the
Fund; Chairman of the Board, President, Director and Chief Executive
Officer of Keystone Investments, Inc. ("Keystone Investments");
President, Chief Executive Officer and Trustee or Director of all 30
Funds in the Keystone Investments Family of Funds; Director and
Chairman of the Board, Chief Executive Officer and Vice Chairman of
Keystone Investment Management Company ("Keystone"); Chairman of the
Board and Director of Keystone Institutional Company, Inc. ("Keystone
Institutional") (formerly named Keystone Investment Management
Corporation), and Keystone Fixed Income Advisors ("KFIA"); Director,
Chairman of the Board, Chief Executive Officer and President of
Keystone Management, Inc. ("Keystone Management"), Keystone Software
Inc. ("Keystone Software"); Director and President of Keystone Asset
Corporation, Keystone Capital Corporation, and Keystone Trust Company;
Director of Keystone Investment Distributors Company ("the Principal
Underwriter"), Keystone Investor Resource Center, Inc. ("KIRC"), and
Fiduciary Investment Company, Inc. ("FICO"); Director of Boston
Children's Services Association; Trustee of Anatolia College, Middlesex
School, and Middlebury College; Member, Board of Governors, New England
Medical Center; former Director and President of Hartwell Keystone
Advisers, Inc. ("Hartwell Keystone"); former Director and Vice
President of Robert Van Partners, Inc.; and former Trustee of Neworld
Bank.
FREDERICK AMLING: Trustee of the Fund; Trustee or Director of all other Keystone
Investments Funds; Professor, Finance Department, George Washington
University; President, Amling & Company (investment advice); Member,
Board of Advisers, Credito Emilano (banking); and former Economics and
Financial Consultant, Riggs National Bank.
CHARLES A. AUSTIN III: Trustee of the Fund; Trustee or Director of all other
Keystone Investments Funds; Investment Counselor to Appleton Partners,
Inc.; former Managing Director, Seaward Management Corporation
(investment advice) and former Director, Executive Vice President and
Treasurer, State Street Research & Management Company (investment
advice).
*GEORGE S. BISSELL: Chairman of the Board and Trustee of the Fund; Director of
Keystone Investments; Chairman of the Board and Trustee or Director of
all other Keystone Investments Funds; Director and Chairman of the
Board of Hartwell Keystone; Chairman of the Board and Trustee of
Anatolia College; Trustee of University Hospital (and Chairman of its
Investment Committee); former Chairman of the Board and Chief Executive
Officer of Keystone Investments; and former Chief Executive Officer of
the Fund.
EDWIN D. CAMPBELL: Trustee of the Fund; Trustee or Director of all other
Keystone Investments Funds; Executive Director, Coalition of Essential
Schools, Brown University; Director and former Executive Vice
President, National Alliance of Business; former Vice President,
Educational Testing Services; and former Dean, School of Business,
Adelphi University.
CHARLES F. CHAPIN: Trustee of the Fund; Trustee or Director of all other
Keystone Investments Funds; former Group Vice President, Textron Corp.;
and former Director, Peoples Bank (Charlotte, N.C).
LEROY KEITH, JR.: Trustee of the Fund; Trustee or Director of all other
Keystone Investments Funds; Director of Phoenix Total Return Fund and
Equifax, Inc.; Trustee of Phoenix Series Fund, Phoenix Multi-Portfolio
Fund and The Phoenix Big Edge Series Fund; and former President,
Morehouse College.
K. DUN GIFFORD: Trustee of the Fund; Trustee or Director of all other
Keystone Investments Funds; Chairman of the Board, Director and
Executive Vice President, The London Harness Company; Managing Partner,
Roscommon Capital Corp.; Trustee, Cambridge College; Chairman Emeritus
and Director, American Institute of Food and Wine; Chief Executive
Officer, Gifford Gifts of Fine Foods; Chairman, Gifford, Drescher &
Associates (environmental consulting); President, Oldways Preservation
and Exchange Trust (education); and former Director, Keystone
Investments and Keystone.
F. RAY KEYSER, JR.: Trustee of the Fund; Trustee or Director of all other
Keystone Investments Funds; Of Counsel, Keyser, Crowley & Meub, P.C.;
Member, Governor's (VT) Council of Economic Advisers; Chairman of the
Board and Director, Central Vermont Public Service Corporation and
Hitchcock Clinic; Director, Vermont Yankee Nuclear Power Corporation,
Vermont Electric Power Company, Inc., Grand Trunk Corporation, Central
Vermont Railway, Inc., S.K.I. Ltd., Sherburne Corporation, Union Mutual
Fire Insurance Company, New England Guaranty Insurance Company, Inc.
and the Investment Company Institute; former Governor of Vermont;
former Director and President, Associated Industries of Vermont; former
Chairman and President, Vermont Marble Company; former Director of
Keystone; and former Director and Chairman of the Board, Green Mountain
Bank.
DAVID M. RICHARDSON: Trustee of the Fund; Trustee or Director of all other
Keystone Investments Funds; Executive Vice President, DHR
International, Inc. (executive recruitment); former Senior Vice
President, Boyden International Inc. (executive recruitment); and
Director, Commerce and Industry Association of New Jersey, 411
International, Inc. and J & M Cumming Paper Co.
RICHARD J. SHIMA: Trustee of the Fund; Trustee or Director of all other
Keystone Investments Funds; Chairman, Environmental Warranty, Inc., and
Consultant, Drake Beam Morin, Inc. (executive outplacement); Director
of Connecticut Natural Gas Corporation, Trust Company of Connecticut,
Hartford Hospital, Old State House Association and Enhanced Financial
Services, Inc.; Member, Georgetown College Board of Advisors; Chairman,
Board of Trustees, Hartford Graduate Center; Trustee, Kingswood-Oxford
School and Greater Hartford YMCA; former Director, Executive Vice
President and Vice Chairman of The Travelers Corporation; and former
Managing Director of Russell Miller, Inc.
ANDREW J. SIMONS: Trustee of the Fund; Trustee or Director of all other
Keystone Investments Funds; Partner, Farrell, Fritz, Caemmerer, Cleary,
Barnosky & Armentano, P.C.; former President, Nassau County Bar
Association; former Associate Dean and Professor of Law, St. John's
University School of Law.
EDWARD F. GODFREY: Senior Vice President of the Fund; Senior Vice President of
all other Keystone Investments Funds; Director, Senior Vice President,
Chief Financial Officer and Treasurer of Keystone Investments, the
Principal Underwriter, Keystone Asset Corporation, Keystone Capital
Corporation, Keystone Trust Company; Treasurer of Keystone
Institutional, and FICO; Treasurer and Director of Keystone Management,
and Keystone Software; Vice President and Treasurer of KFIA; and
Director of KIRC; former Treasurer and Director of Hartwell Keystone;
former Treasurer of Robert Van Partners, Inc.
JAMES R. McCALL: Senior Vice President of the Fund; Senior Vice President of
all other Keystone Investments Funds; and President of Keystone.
J. KEVIN KENELY: Treasurer of the Fund; Treasurer of all other Keystone
Investment Funds; Vice President and Controller of Keystone
Investments, Keystone, Keystone Institutional, Keystone Management, the
Principal Underwriter, FICO and Keystone Software; and Controller of
Keystone Asset Corporation and Keystone Capital Corporation.
ROSEMARY D. VAN ANTWERP: Senior Vice President and Secretary of the Fund; Senior
Vice President and Secretary of all other Keystone Investments Funds;
Senior Vice President, General Counsel and Secretary of Keystone;
Senior Vice President, General Counsel, Secretary and Director of the
Principal Underwriter, Keystone Management and Keystone Software;
Senior Vice President and General Counsel of Keystone Institutional;
Senior Vice President, General Counsel and Director of FICO and KIRC;
Vice President and Secretary of KFIA; Senior Vice President, General
Counsel and Secretary of Keystone Investments, Keystone Asset
Corporation, Keystone Capital Corporation and Keystone Trust Company;
former Senior Vice President and Secretary of Hartwell Keystone and
Robert Van Partners, Inc.
* This Trustee may be considered an "interested person" within the meaning of
the 1940 Act.
Mr. Elfner and Mr. Bissell are "interested persons" by virtue of their
positions as officers and/or Directors of Keystone Investments and several of
its affiliates including Keystone, the Principal Underwriter and KIRC. Mr.
Elfner and Mr. Bissell own shares of Keystone Investments. Mr. Elfner is
Chairman of the Board, Chief Executive Officer and a Director of Keystone
Investments. Mr. Bissell is a Director of Keystone Investments.
Annual retainers and meeting fees paid by all funds in the Keystone
Investments Family of Funds (which includes over 30 mutual funds) for the fiscal
period ended October 31, 1995, totalled approximately $477,480. As of June 30,
1996, the Trustees and officers beneficially owned less than 1.0% of the Fund's
then outstanding shares.
The address of all the Trust's Trustees and officers and the address of
the Trust is 200 Berkeley Street, Boston, Massachusetts 02116-5034.
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PRINCIPAL UNDERWRITER
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The Trust has entered into a Distribution Agreement with FICO (the
"Distribution Agreement"). FICO is a wholly-owned subsidiary of Keystone.
The Trust has appointed FICO to act as Principal Underwriter of the
Fund's shares in such states as the Fund may, from time to time, designate. FICO
will act as agent for the Fund and not as principal. FICO will have the right to
obtain subscriptions for and to sell shares as agent of the Fund.
All subscriptions and sales of shares by FICO are at the offering price
of the shares in accordance with the provisions of the Trust's Declaration of
Trust and By-Laws, and the current prospectus and statement of additional
information. All orders are subject to acceptance by the Fund, and the Fund
reserves the right in its sole discretion to reject any order received. Under
the Distribution Agreement, the Fund is not liable to anyone for failure to
accept any order.
FICO has agreed that it will, in all respects, duly conform with all
state and federal laws applicable to the sale of the shares and will indemnify
and hold harmless the Trust, and each person who has been, is or may be a
Trustee or officer of the Trust or the Fund, against expenses reasonably
incurred by any of them in connection with any claim or in connection with any
action, suit or proceeding to which any of them may be a party, that arises out
of or is alleged to arise out of any misrepresentation or omission to state a
material fact on the part of FICO or any other person for whose acts FICO is
responsible or is alleged to be responsible, unless such misrepresentation or
omission was made in reliance upon written information furnished by the Trust.
The Distribution Agreement provides that it will remain in
effect for two years and from year to year thereafter as long as its terms and
continuance are approved by a majority of the Trust's Independent Trustees at
least annually at a meeting called for that purpose, and if its continuance is
approved annually by vote of a majority of Trustees, or by vote of a majority of
the outstanding shares of the Fund.
The Distribution Agreement may be terminated, without penalty, on 60
days' written notice by the Trust or on 90 days' written notice by FICO. The
Distribution Agreement will terminate automatically upon its "assignment" as
that term is defined in the 1940 Act.
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BROKERAGE
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It is the policy of the Fund, in effecting transactions in portfolio
securities, to seek best execution of orders at the most favorable prices. The
determination of what may constitute best execution and price in the execution
of a securities transaction by a broker involves a number of considerations,
including, without limitation, the overall direct net economic result to the
Fund, involving both price paid or received and any commissions and other costs
paid, the efficiency with which the transaction is effected, the ability to
effect the transaction at all where a large block is involved, the availability
of the broker to stand ready to execute potentially difficult transactions in
the future and the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by management in determining the
overall reasonableness of brokerage commissions paid.
Subject to the foregoing, a factor in the selection of brokers is the
receipt of research services, such as analyses and reports concerning issuers,
industries, securities, economic factors and trends and other statistical and
factual information. Any such research and other statistical and factual
information provided by brokers to the Fund or Keystone is considered to be in
addition to and not in lieu of services required to be performed by Keystone
under the Advisory Agreement. The cost, value and specific application of such
information are indeterminable and cannot be practically allocated among the
Fund and other clients of Keystone or any of its affiliates who may indirectly
benefit from the availability of such information. Similarly, the Fund may
indirectly benefit from information made available as a result of transactions
effected for such other clients. Under the Advisory Agreement, Keystone is
permitted to pay higher brokerage commissions for brokerage and research
services in accordance with Section 28(e) of the Securities Exchange Act of
1934. In the event Keystone does follow such a practice, it will do so on a
basis which is fair and equitable to the Fund.
The Fund expects that purchases and sales of securities usually will be
effected through brokerage transactions for which commissions are payable.
Purchases from underwriters will include the underwriting commission or
concession, and purchases from dealers serving as market makers will include a
dealer's mark-up or reflect a dealer's mark-down. Where transactions are made in
the over-the-counter market, the Fund will deal with primary market makers
unless more favorable prices are otherwise obtainable.
The Fund may participate, if and when practicable, in group bidding for
the direct purchase from an issuer of certain securities for the Fund's
portfolio thereby taking advantage of the lower purchase price available to
members of such a group.
Neither Keystone nor the Fund intends to place securities transactions
with any particular broker-dealer or group thereof.
The policy of the Fund with respect to trading and brokerage is and
will be reviewed by the Trust's Board of Trustees from time to time. Because of
the possibility of further regulatory developments affecting the securities
exchanges and brokerage practices generally, the foregoing practices may be
changed, modified or eliminated.
Investment decisions for the Fund are made independently by Keystone
from those of the other funds and investment accounts managed by Keystone or any
of its affiliates. It may frequently develop that the same investment decision
is made for more than one such fund or account. Simultaneous transactions are
inevitable when the same security is suitable for the investment objective of
more than one such fund or account. When two or more such funds or accounts are
engaged in the purchase or sale of the same security, the transactions are
allocated as to amount in accordance with a formula which is equitable to each
fund or account. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security with respect to the
Fund. In other cases, however, it is believed that the ability of the Fund to
participate in volume transactions will produce better executions for the Fund.
In no instance are portfolio securities purchased from or sold to
Keystone, the Principal Underwriter or any of their affiliated persons, as
defined in the 1940 Act and rules and regulations issued thereunder.
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STANDARDIZED TOTAL RETURN
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Total return figures for the Fund as they may appear, from time to
time, in marketing materials are calculated by finding the average annual
compounded rates of return over one, five and ten year periods on a hypothetical
$1,000 investment that would equate the initial amount invested to the ending
redeemable value. To the initial investment, all dividends and distributions are
added, and all recurring fees charged to all shareholder accounts are deducted.
The ending redeemable value assumes a complete redemption at the end of the one,
five or ten year periods.
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ADDITIONAL INFORMATION
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SMALL ACCOUNTS
The Fund reserves the right to redeem shares in any account in which
the value of shares is less than $25,000 or aggregate of $1,000,000. The
redemption proceeds will be promptly paid to the shareholder. Shareholders will
be notified if their accounts are less than such amount and given 60 days to
bring the account up to such amount before the redemption is made.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Fund to pay
for all redemptions in cash, the Fund may authorize payment to be made in
portfolio securities or other property. The Fund has obligated itself under the
1940 Act, however, to redeem for cash all shares presented for redemption by any
one shareholder in any 90-day period up to the lesser of $250,000 or 1% of the
Fund's net assets. Securities delivered in payment of redemptions would be
valued at the same value assigned to them in computing the net asset value per
share and would, to the extent permitted by law, be readily marketable.
Shareholders receiving such securities would incur brokerage costs when these
securities are sold.
OTHER INFORMATION
State Street Bank and Trust Company, located at 225 Franklin Street,
Boston, Massachusetts 02110, is custodian of all securities and cash of the Fund
(the "Custodian"). The Custodian performs no investment management functions for
the Fund, but, in addition to its custodial services, is responsible for
accounting and related recordkeeping on behalf of the Fund.
KPMG Peat Marwick LLP, located at 99 High Street, Boston, Massachusetts
02110, Certified Public Accountants, are the independent auditors for the Fund.
Keystone Investor Resource Center, Inc., located at 101 Main Street,
Cambridge, Massachusetts 02142-1519, is a wholly-owned subsidiary of Keystone
and acts as transfer agent and dividend disbursing agent for the Trust and the
Fund.
As of June 30, 996, the Board of Trustees of Sheet Metal Workers
Local No. 85 Pension Fund owned of record 95% of the Fund's outstanding shares.
Except as otherwise stated in its prospectus or required by law, the
Fund reserves the right to change the terms of the offer stated in its
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
No salesman or other person is authorized to give any information or to
make any representation not contained in the Fund's prospectus, this statement
of additional information or in supplemental sales literature issued by the Fund
or the Principal Underwriter. No person is entitled to rely on any information
or representation not contained therein.
The Fund's prospectus and this statement of additional information omit
certain information contained in its registration statement filed with the
Securities and Exchange Commission (the "Commission"), which may be obtained
from the Commission's principal office in Washington, D.C. upon payment of the
fee prescribed by the rules and regulations promulgated by the Commission.
<PAGE>
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APPENDIX
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MONEY MARKET INSTRUMENTS
The Fund's investments in commercial paper are limited to those rated
A-1 by Standard & Poor's Corporation, PRIME-1 by Moody's Investors Service, Inc.
or F-1 by Fitch Investors Service, Inc. These ratings and other money market
instruments are described as follows:
COMMERCIAL PAPER RATINGS
Commercial paper rated A-1 by Standard & Poor's has the following
characteristics: Liquidity ratios are adequate to meet cash requirements. The
issuer's long-term senior debt is rated "A" or better, although in some cases
"BBB" credits may be allowed. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances. Typically, the issuer's industry is
well established and the issuer has a strong position within the industry.
The rating PRIME-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public
preparations to meet such obligations. Relative strength or weakness of the
above factors determines how the issuer's commercial paper is rated within
various categories.
The rating F-1 is the highest rating assigned by Fitch. Among the
factors considered by Fitch in assigning this rating are: (1) the issuer's
liquidity; (2) its standing in the industry; (3) the size of its debt; (4) its
ability to service its debt; (5) its profitability; (6) its return on equity;
(7) its alternative sources of financing; and (8) its ability to access the
capital markets. Analysis of the relative strength or weakness of these factors
and others determines whether an issuer's commercial paper is rated F-1.
UNITED STATES GOVERNMENT SECURITIES
Securities issued or guaranteed by the United States Government include
a variety of Treasury securities that differ only in their interest rates,
maturities and dates of issuance. Treasury bills have maturities of one year or
less. Treasury notes have maturities of one to ten years and Treasury bonds
generally have maturities of greater than ten years at the date of issuance.
Securities issued or guaranteed by the United States Government or its
agencies or instrumentalities include direct obligations of the United States
Treasury and securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association,
General Services Administration, Central Bank for Cooperatives, Federal Home
Loan Banks, Federal Loan Mortgage Corporation, Federal Intermediate Credit
Banks, Federal Land Banks, Maritime Administration, The Tennessee Valley
Authority, District of Columbia Armory Board and Federal National Mortgage
Association.
Some obligations of United States Government agencies and
instrumentalities, such as Treasury bills and Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the United States; others, such as securities of Federal Home Loan
Banks, by the right of the issuer to borrow from the Treasury; still others,
such as bonds issued by the Federal National Mortgage Association, a private
corporation, are supported only by the credit of the instrumentality. Because
the United States Government is not obligated by law to provide support to an
instrumentality it sponsors, the Fund will invest in the securities issued by
such an instrumentality only when Keystone determines that the credit risk with
respect to the instrumentality does not make its securities unsuitable
investments. United States Government securities will not include international
agencies or instrumentalities in which the United States Government, its
agencies or instrumentalities participate, such as the World Bank, the Asian
Development Bank or the Inter-American Development Bank, or issues insured by
the Federal Deposit Insurance Corporation.
DERIVATIVE INSTRUMENTS
Derivatives have been variously defined to include forwards, futures, options,
mortgage-backed securities, other asset-backed securities and structured
securities, such as interest rate swaps, equity swaps, index swaps, currency
swaps and caps and floors. These basic vehicles can also be combined to create
more complex products, called hybrid derivatives. The following discussion
addresses options and futures.
OPTIONS TRANSACTIONS
WRITING COVERED OPTIONS
The Fund writes only covered options. Options written by the Fund will
normally have expiration dates of not more than nine months from the date
written. The exercise price of the options may be below, equal to, or above the
current market values of the underlying securities at the times the options are
written.
Unless the option has been exercised, the Fund may close out an option it has
written by effecting a closing purchase transaction, whereby it purchases an
option covering the same underlying security and having the same exercise price
and expiration date ("of the same series") as the one it has written. If the
Fund desires to sell a particular security on which it has written a call
option, it will effect a closing purchase transaction prior to or concurrently
with the sale of the security. If the Fund is able to enter into a closing
purchase transaction, the Fund will realize a profit (or loss) from such
transaction if the cost of such transaction is less (or more) than the premium
received from the writing of the option.
An option position may be closed out only in a secondary market for an option
of the same series. Although the Fund will generally write only those options
for which there appears to be an active secondary market, there is no assurance
that a liquid secondary market will exist for any particular option at any
particular time, and for some options no secondary market may exist. In such
event it might not be possible to effect a closing transaction in a particular
option. If the Fund as a covered call option writer is unable to effect a
closing purchase transaction, it will not be able to sell the underlying
securities until the option expires or it delivers the underlying securities
upon exercise.
Because the Fund intends to qualify as a regulated investment company under
the Internal Revenue Code, the extent to which the Fund may write covered call
options and enter into so-called "straddle" transactions involving put and call
options may be limited.
Many options are traded on registered securities exchanges. Options traded on
such exchanges are issued by the Options Clearing Corporation ("OCC"), a
clearing corporation which assumes responsibility for the completion of options
transactions.
OPTION WRITING AND RELATED RISKS
The Fund may write covered call and put options. A call option gives the
purchaser of the option the right to buy, and the writer the obligation to sell,
the underlying security at the exercise price during the option period.
Conversely, a put option gives the purchaser the right to sell, and the writer
the obligation to buy, the underlying security at the exercise price during the
option period.
So long as the obligation of the writer continues, the writer may be assigned
an exercise notice by the broker-dealer through whom the option was sold. The
exercise notice would require the writer to deliver, in the case of a call, or
take delivery of, in the case of a put, the underlying security against payment
of the exercise price. This obligation terminates upon expiration of the option,
or at such earlier time as the writer effects a closing purchase transaction by
purchasing an option of the same series as the one previously sold. Once an
option has been exercised, the writer may not execute a closing purchase
transaction. For options traded on national securities exchanges ("Exchanges"),
to secure the obligation to deliver the underlying security in the case of a
call option, the writer of the option is required to deposit in escrow the
underlying security or other assets in accordance with the rules of the OCC, an
institution created to interpose itself between buyers and sellers of options.
Technically, the OCC assumes the order side of every purchase and sale
transaction on an Exchange and, by doing so, gives its guarantee to the
transaction.
The principal reason for writing options on a securities portfolio is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the underlying securities alone. In return for the premium, the
covered call option writer has given up the opportunity for profit from a price
increase in the underlying security above the exercise price so long as the
option remains open, but retains the risk of loss should the price of the
security decline. Conversely, the put option writer gains a profit, in the form
of a premium, so long as the price of the underlying security remains above the
exercise price, but assumes an obligation to purchase the underlying security
from the buyer of the put option at the exercise price, even though the price of
the security may fall below the exercise price, at any time during the option
period. If an option expires, the writer realizes a gain in the amount of the
premium. Such a gain may, in the case of a covered call option, be offset by a
decline in the market value of the underlying security during the option period.
If a call option is exercised, the writer realizes a gain or loss from the sale
of the underlying security. If a put option is exercised, the writer must
fulfill his obligation to purchase the underlying security at the exercise
price, which will usually exceed the then market value of the underlying
security. In addition, the premium paid for the put effectively increases the
cost of the underlying security, thus reducing the yield otherwise available
from such securities.
Because the Fund can write only covered options, it may at times be unable to
write additional options unless it sells a portion of its portfolio holdings to
obtain new securities against which it can write options. This may result in
higher portfolio turnover and correspondingly greater brokerage commissions and
other transaction costs.
To the extent that a secondary market is available the covered option
writer may close out options it has written prior to the assignment of an
exercise notice by purchasing, on a closing purchase transaction, an option of
the same series as the option previously written. If the cost of such a closing
purchase, plus transaction costs, is greater than the premium received upon
writing the original option, the writer will incur a loss in the transaction.
PURCHASING PUT AND CALL OPTIONS
The Fund can close out a put option it has purchased by effecting a closing
sale transaction; for example, the Fund may close out a put option it has
purchased by selling a put option. If, however, a secondary market does not
exist at a time the Fund wishes to effect a closing sale transaction, the Fund
will have to exercise the option to realize any profit. In addition, in a
transaction in which the Fund does not own the security underlying a put option
it has purchased, the Fund would be required, in the absence of a secondary
market, to purchase the underlying security before it could exercise the option.
In each such instance, the Fund would incur additional transaction costs. The
Fund may also purchase call options for the purpose of offsetting previously
written call options of the same series.
The Fund would normally purchase call options in anticipation of an increase
in the market value of securities of the type in which the Fund may invest. The
purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities at a specified price during the option
period. The Fund would ordinarily realize a gain if, during the option period,
the value of such securities exceeded the sum of the exercise price, the premium
paid and transaction costs; otherwise the Fund would realize a loss on the
purchase of the call option.
The Fund would normally purchase put options in anticipation of a decline in
the market value of securities in its portfolio (protective puts) or securities
of the type in which it is permitted to invest. The purchase of a put option
would entitle the Fund, in exchange for the premium paid, to sell specified
securities at a specified price during the option period. The purchase of
protective puts is designed merely to offset or hedge against a decline in the
market value of the Fund's securities. Gains and losses on the purchase of
protective put options would tend to be offset by countervailing changes in the
value of underlying portfolio securities. Put options may also be purchased by
the Fund for the purpose of affirmatively benefitting from a decline in the
price of securities which the Fund does not own. The Fund would ordinarily
realize a gain if, during the option period, the value of the underlying
securities decreased below the exercise price sufficiently to cover the premium
and transaction costs; otherwise the Fund would realize a loss on the purchase
of the put option.
The Fund may purchase put and call options on securities indices for the same
purposes as the purchase of options on securities. Options on securities indices
are similar to options on securities, except that the exercise of securities
index options requires cash payments and does not involve the actual purchase or
sale of securities. In addition, securities index options are designed to
reflect price fluctuations in a group of securities or segment of the securities
market rather than price fluctuations in a single security.
OPTIONS TRADING MARKETS
Options in which the Fund will trade are generally listed on Exchanges.
Exchanges on which such options currently are traded include the Chicago Board
Options Exchange and the New York, American, Pacific, and Philadelphia Stock
Exchanges. Options on some securities may not be listed on any Exchange, but
traded in the over-the-counter market. Options traded in the over-the-counter
market involve the additional risk that securities dealers participating in such
transactions would fail to meet their obligations to the Fund. The use of
options traded in the over-the-counter market may be subject to limitations
imposed by certain state securities authorities. In addition to the limits on
its use of options discussed herein, the Fund is subject to the investment
restrictions described in the prospectus and the statement of additional
information.
The staff of the Commission currently is of the view that the premiums which
the Fund pays for the purchase of unlisted options, and the value of securities
used to cover unlisted options written by the Fund are considered to be invested
in illiquid securities or assets for the purpose of the Fund's compliance with
its policies pertaining to illiquid securities.
RISKS PERTAINING TO THE SECONDARY MARKET. An option position may be closed out
only in a secondary market for an option of the same series. Although the Fund
will generally purchase or write only those options for which there appears to
be an active secondary market, there is no assurance that a liquid secondary
market will exist for any particular option at any particular time, and for some
options no secondary market may exist. In such event, it might not be possible
to effect closing transactions in particular options, with the result that the
Fund would have to exercise its options in order to realize any profit and might
incur transaction costs in connection therewith. If the Fund as a covered call
option writer is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market include the following:
(i) insufficient trading interest in certain options; (ii) restrictions imposed
on transactions (iii) trading halts, suspensions or other restrictions imposed
with respect to particular classes or series of options or underlying
securities; (iv) interruption of the normal operations on an Exchange or by a
broker; (v) inadequacy of the facilities of an Exchange, the OCC or a broker to
handle current trading volume; or (vi) a decision by one or more Exchanges or a
broker to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market in that class or series of options
would cease to exist, although outstanding options that had been issued as a
result of trades would generally continue to be exercisable in accordance with
their terms.
The hours of trading for options on U.S. government securities may not conform
to the hours during which the underlying securities are traded. To the extent
that the option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the option markets.
FUTURES CONTRACTS AND RELATED OPTIONS TRANSACTIONS
The Fund intends to enter into currency and other financial futures contracts
as a hedge against changes in prevailing levels of interest or currency exchange
rates to seek relative stability of principal and to establish more definitely
the effective return on securities held or intended to be acquired by the Fund
or as a hedge against changes in the prices of securities or currencies held by
the Fund or to be acquired by the Fund. The Fund's hedging may include sales of
futures as an offset against the effect of expected increases in interest or
currency exchange rates or securities prices and purchases of futures as an
offset against the effect of expected declines in interest or currency exchange
rates.
The Fund intends to engage in options transactions that are related to
currency and other financial futures contracts for hedging purposes and in
connection with the hedging strategies described above.
Although techniques other than sales and purchases of futures contracts and
related options transactions could be used to reduce the Fund's exposure to
interest rate and/or market fluctuations, the Fund may be able to hedge its
exposure more effectively and perhaps at a lower cost through using futures
contracts and related options transactions. While the Fund does not intend to
take delivery of the instruments underlying futures contracts it holds, the Fund
does not intend to enter into such futures contracts for speculation.
FUTURES CONTRACTS
Futures contracts are transactions in the commodities markets rather than in
the securities markets. A futures contract creates an obligation by the seller
to deliver to the buyer the commodity specified in the contract at a specified
future time for a specified price. The futures contract creates an obligation by
the buyer to accept delivery from the seller of the commodity specified at the
specified future time for the specified price. In contrast, a spot transaction
creates an immediate obligation for the seller to deliver and the buyer to
accept delivery of and pay for an identified commodity. In general, futures
contracts involve transactions in fungible goods such as wheat, coffee and
soybeans. However, in the last decade an increasing number of futures contracts
have been developed which specify currencies, financial instruments or
financially based indexes as the underlying commodity.
U.S. futures contracts are traded only on national futures exchanges and are
standardized as to maturity date and underlying financial instrument. The
principal financial futures exchanges in the U.S. are The Board of Trade of the
City of Chicago, the Chicago Mercantile Exchange, the International Monetary
Market (a division of the Chicago Mercantile Exchange), the New York Futures
Exchange and the Kansas City Board of Trade. Each exchange guarantees
performance under contract provisions through a clearing corporation, a
nonprofit organization managed by the exchange membership, which is also
responsible for handling daily accounting of deposits or withdrawals of margin.
A futures commission merchant ("Broker") effects each transaction in connection
with futures contracts for a commission. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC") and National Futures Association ("NFA").
OPTIONS ON CURRENCY AND OTHER FINANCIAL FUTURES
The Fund intends to purchase call and put options on currency and other
financial futures contracts and sell such options. Options on currency and other
financial futures contracts are similar to options on stocks except that an
option on a currency or other financial futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) rather than to purchase or sell stock, currency or other
financial instruments at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's futures
margin account. This amount represents the amount by which the market price of
the futures contract at exercise exceeds, in the case of a call, or is less
than, in the case of a put, the exercise price of the option on the futures
contract. If an option is exercised the last trading day prior to the expiration
date of the option, the settlement will be made entirely in cash equal to the
difference between the exercise price of the option and value of the futures
contract.
The Fund intends to use options on currency and other financial futures
contracts in connection with hedging strategies. In the future the Fund may use
such options for other purposes.
PURCHASE OF PUT OPTIONS ON FUTURES CONTRACTS
The purchase of protective put options on financial futures contracts is
analogous to the purchase of protective puts on individual stocks, where an
absolute level of protection is sought below which no additional economic loss
would be incurred by the Fund. Put options may be purchased to hedge a portfolio
of stocks or debt instruments or a position in the futures contract upon which
the put option is based.
PURCHASE OF CALL OPTIONS ON FUTURES CONTRACTS
The purchase of call options on currency and other financial futures contracts
represents a means of obtaining temporary exposure to market appreciation at
limited risk. It is analogous to the purchase of a call option on an individual
stock which can be used as a substitute for a position in the stock itself.
Depending on the pricing of the option compared to either the futures contract
upon which it is based, or upon the price of the underlying financial instrument
or index itself, the purchase of a call option may be less risky than the
ownership of the interest rate or index based futures contract or the underlying
securities. Call options on currency or other financial futures contracts may be
purchased to hedge against an interest rate increase or a market advance when
the Fund is not fully invested.
USE OF NEW INVESTMENT TECHNIQUES INVOLVING CURRENCY AND OTHER FINANCIAL FUTURES
CONTRACTS OR RELATED OPTIONS
The Fund may employ new investment techniques involving currency and other
financial futures contracts and related options. The Fund intends to take
advantage of new techniques in these areas which may be developed from time to
time and which are consistent with the Fund's investment objective. The Fund
believes that no additional techniques have been identified for employment by
the Fund in the foreseeable future other than those described above.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES CONTRACTS AND RELATED OPTIONS ON
SUCH FUTURES CONTRACTS
The Fund intends that its futures contracts and related options transactions
will be entered into for traditional hedging purposes. That is, futures
contracts will be sold to protect against a decline in the price of securities
that the Fund owns or futures contracts will be purchased to protect the Fund
against an increase in the price of securities it intends to purchase. The Fund
does not intend to enter into futures contracts for speculation.
In instances involving the purchase or sale of futures contracts by the Fund,
an amount of cash and cash equivalents or securities equal to the market value
of the futures contracts will be deposited in a segregated account with the
Fund's custodian. In addition, in the case of a purchase, the Fund may be
required to make a deposit to a margin account with a Broker to collateralize
the position, and in the case of a sale, the Fund may be required to make daily
deposits to the buyer's margin account. The Fund would make such deposits in
order to insure that the use of such futures is unleveraged.
FEDERAL INCOME TAX TREATMENT
For federal income tax purposes, the Fund is required to recognize as income
for each taxable year its net unrealized gains and losses on futures contracts
as of the end of the year as well as those actually realized during the year.
Any gain or loss recognized with respect to a futures contract is considered to
be 60% long term and 40% short term, without regard to the holding period of the
contract. In the case of a futures transaction classified as a "mixed straddle,"
the recognition of losses may be deferred to a later taxable year. The federal
income tax treatment of gains or losses from transactions in options on futures
is unclear.
In order for the Fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income. Any net gain realized from
the closing out of futures contracts, for purposes of the 90% requirement, will
be qualifying income. In addition, gains realized on the sale or other
disposition of securities held for less than three months must be limited to
less than 30% of the Fund's annual gross income. The Internal Revenue Code
effectively treats both positions in certain hedging transactions as a single
transaction for the purpose of the 30% requirement. The provision provides that,
in the case of any "designated hedge," increases and decreases in the value of
positions of the hedge are to be netted for the purposes of the 30% requirement.
However, in certain situations, in order to avoid realizing a gain within a
three month period, the Fund may be required to defer the closing out of a
contract beyond the time when it would otherwise be advantageous to do so.
RISKS OF FUTURES CONTRACTS
Currency and other financial futures contracts prices are volatile and are
influenced, among other things, by changes in stock prices, market conditions,
prevailing interest rates and anticipation of future stock prices, market
movements or interest rate changes, all of which in turn are affected by
economic conditions, such as government fiscal and monetary policies and
actions, and national and international political and economic events.
At best, the correlation between changes in prices of futures contracts and of
the securities being hedged can be only approximate. The degree of imperfection
of correlation depends upon circumstances, such as variations in speculative
market demand for futures contracts and for securities, including technical
influences in futures contracts trading; differences between the securities
being hedged and the financial instruments and indexes underlying the standard
futures contracts available for trading, in such respects as interest rate
levels, maturities and creditworthiness of issuers, or identities of securities
comprising the index and those in the Fund's portfolio. A decision of whether,
when and how to hedge involves the exercise of skill and judgment, and even a
well-conceived hedge may be unsuccessful to some degree because of market
behavior or unexpected interest rate trends.
Because of the low margin deposits required, futures trading normally involves
an extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a 10% decrease in the
value of the futures contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out, and a 15% decrease would result in a loss equal to 150% of the
original margin deposit. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, the Fund would presumably have sustained comparable losses if, instead
of entering into the futures contract, it had invested in the underlying
financial instrument. In order to be certain that the Fund has sufficient assets
to satisfy its obligations under a futures contract, the Fund will establish a
segregated account in connection with its futures contracts which will hold cash
or cash equivalents equal in value to the current value of the underlying
instruments or indices less the margins on deposit.
Most U.S. futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
RISKS OF OPTIONS ON FUTURES CONTRACTS
In addition to the risks described above for currency and other financial
futures contracts, there are several special risks relating to options on
futures contracts. The ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid secondary
market. There is no assurance that a liquid secondary market will exist for any
particular option or at any particular time. The Fund will not purchase options
on any futures contract unless and until it believes that the market for such
options has developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with the futures contracts.
Compared to the use of futures contracts, the purchase of options on such
futures involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options (plus transaction costs). However,
there may be circumstances when the use of an option on a futures contract would
result in a loss to the Fund, even though the use of a futures contract would
not, such as when there is no movement in the level of the futures contract.
FOREIGN CURRENCY TRANSACTIONS
The Fund may invest in securities of foreign issuers. When the Fund invests in
foreign securities they usually will be denominated in foreign currencies and
the Fund temporarily may hold funds in foreign currencies. Thus, the Fund's
share value will be affected by changes in exchange rates.
#10160670
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
STATEMENT OF NET ASSETS
DECEMBER 13, 1995
ASSETS:
Cash (Note 1) $100,000
Organizational expenses 19,800
--------
Total assets $119,800
========
LIABILITIES:
Accrued expenses $ 19,800
--------
NET ASSETS: $100,000
========
Net asset value and offering price per share (10,000
shares outstanding) $ 10.00
========
Redemption price per share $ 10.00
========
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
NOTES TO STATEMENT OF NET ASSETS
DECEMBER 13, 1995
1. Keystone Institutional Small Capitalization Growth Fund ("Fund") was
organized on November 30, 1995, and had no operations prior to December 13, 1995
other than organizational matters and activities in connection with the purchase
of 10,000 shares by Keystone Investment Management Company ("KIMCO").
KIMCO is a wholly-owned subsidiary of Keystone Investments, Inc.
("Keystone Investments"), a corporation privately owned by current and former
members of management and certain employees of Keystone Investments and its
affiliates.
2. 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 organizational expenses in the same proportion as the
number of initial shares of the Fund being redeemed bears to the number of
initial shares of the Fund outstanding at the time of the redemption.
3. The Fund is authorized to issue an unlimited number of shares of
beneficial interest, without par value.
4. For information on the Investment Advisory and Management Agreement
and the Principal Underwriting Agreement see "Fund Management and Expenses", and
"Principal Underwriter" in the Fund's prospectus and/or statement of additional
information.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholder
Keystone Institutional Trust
We have audited the accompanying statement of net assets of Keystone
Institutional Small Capitalization Growth Fund, a portfolio of Keystone
Institutional Trust, as of December 13, 1995. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on the financial statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the financial position of Keystone
Institutional Small Capitalization Growth Fund, a portfolio of Keystone
Institutional Trust as of December 13, 1995 in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
December 14, 1995
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
FINANCIAL STATEMENTS
FOR THE FISCAL PERIOD ENDED JUNE 30, 1996 (UNAUDITED)
-------------------------------------------------------------------------
Keystone Institutional Trust
Keystone Institutional Small Capitalization Growth Fund
SCHEDULE OF INVESTMENTS -- June 30, 1996 (unaudited)
Number Market
of Shares Value
------------------------------------------------------------------------
COMMON STOCKS (97.9%)
Automotive (3.5%)
Discount Auto Parts, Inc. (a) 1,900 $48,212
Tower Automotive, Inc. (a) 1,500 36,844
------------------------------------------------------------------------
85,056
------------------------------------------------------------------------
Advertising (2.4%)
Desktop Data, Inc. (a) 1,800 58,950
------------------------------------------------------------------------
Amusements (3.1%)
Carmike Cinemas, Inc. (a) 900 24,300
Studio Plus America, Inc. (a) 1,600 52,400
------------------------------------------------------------------------
76,700
------------------------------------------------------------------------
Building Materials (2.7%)
Champion Enterprises, Inc. (a) 1,600 33,400
Oakwood Homes Corp. 1,600 33,000
------------------------------------------------------------------------
66,400
------------------------------------------------------------------------
Business Services (15.3%)
Equity Corporation International (a) 1,300 34,937
G&K Services, Class A 1,700 48,025
Metromail Corp. New (a) 2,700 60,413
Molten Metal Technology, Inc. (a) 1,400 41,125
Natural Microsystems Corp. (a) 1,700 60,138
Newpark Resources, Inc. (a) 1,300 47,775
U.S. Filter Corp. (a) 1,500 52,125
Vitalcom, Inc. (a) 1,700 29,325
------------------------------------------------------------------------
373,863
------------------------------------------------------------------------
Capital Goods (3.7%)
AGCO Corp. 2,000 55,500
Cognex Corp. (a) 2,100 34,256
------------------------------------------------------------------------
89,756
------------------------------------------------------------------------
Chemicals (1.7%)
Applied Eastern Technologies (a) 1,650 20,831
OM Group, Inc. 560 21,910
------------------------------------------------------------------------
42,741
------------------------------------------------------------------------
Consumer Goods (9.8%)
Aptar Group, Inc. 1,000 30,250
Blyth Industries, Inc. (a) 1,600 72,600
DeVry, Inc. Del (a) 1,700 76,500
USA Detergents, Inc. (a) 1,500 59,813
------------------------------------------------------------------------
239,163
------------------------------------------------------------------------
Drugs (4.3%)
Amylin Pharmaceuticals, Inc. (a) 1,900 20,306
Cytotherapeutics, Inc. (a) 1,700 18,912
Gilead Sciences, Inc. (a) 1,000 25,125
Magainin Pharmaceutical, Inc. (a) 2,200 22,963
Neurogen Corp. (a) 700 17,850
------------------------------------------------------------------------
105,156
------------------------------------------------------------------------
Electronics Products (2.2%)
Merix Corp. (a) 1,000 19,875
Microchip Technology, Inc. (a) 1,400 35,000
------------------------------------------------------------------------
54,875
------------------------------------------------------------------------
Finance (7.7%)
BISYS Group, Inc. (a) 1,500 56,343
Investors Financial Services Corp. 2,400 55,350
Strattec Securities Corp. (a) 1,500 26,531
TCF Financial Corp. 1,500 49,875
------------------------------------------------------------------------
188,099
------------------------------------------------------------------------
Health Care Service (4.5%)
Conceptus, Inc. (a) 1,100 18,425
PhyMatrix Corp. (a) 1,200 27,750
Thermo Cardiosystems, Inc. (a) 1,200 53,700
------------------------------------------------------------------------
99,875
------------------------------------------------------------------------
Insurance (2.6%)
HCC Insurance Holdings, Inc. 2,250 50,625
Integon Corp. 700 14,088
------------------------------------------------------------------------
64,713
------------------------------------------------------------------------
Oil Services (4.5%)
Falcon Drilling, Inc. (a) 2,500 67,656
Nuevo Energy Co. (a) 1,300 41,925
------------------------------------------------------------------------
109,581
------------------------------------------------------------------------
Restaurants (2.4%)
Apple South, Inc. 2,200 58,850
------------------------------------------------------------------------
Software Services (13.2%)
BDM International, Inc. (a) 1,000 46,500
Epic Design Technology, Inc. (a) 1,400 36,050
Geoworks, Inc. (a) 2,100 73,500
INSO Corp. (a) 900 46,462
National Instruments Corp. (a) 1,200 26,700
Peak Technologies Group, Inc.(a) 2,000 46,500
Raptor Systems, Inc. (a) 1,800 47,475
------------------------------------------------------------------------
323,187
------------------------------------------------------------------------
Telecommunications (6.6%)
CIDCO Group, Inc. (a) 1,500 52,875
Heartland Wireless Communications, Inc. (a) 2,000 48,000
Winstar Communications, Inc. (a) 2,400 59,700
------------------------------------------------------------------------
160,575
------------------------------------------------------------------------
Textiles (2.9%)
Authentic Fitness Corp. 1,600 29,800
St. John Knits, Inc. 900 40,163
------------------------------------------------------------------------
69,963
------------------------------------------------------------------------
Transportation (5.2%)
Railtex, Inc. (a) 1,900 48,450
Skywest, Inc. 2,300 42,550
Swift Transportation Co., Inc. (a) 1,900 36,338
------------------------------------------------------------------------
127,338
------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost - $2,078,549) 2,394,841
------------------------------------------------------------------------
Maturity
Value
------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (1.4%)
Investments in repurchase agreements, in a joint
trading account, purchased 6/28/96, 5.55%,
maturing 7/01/96(b) $34,016 34,000
------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost - $34,000) 34,000
------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost - $2,112,549) 2,428,841
------------------------------------------------------------------------
0THER ASSETS AND LIABILITIES -- NET (0.7%) 17,060
------------------------------------------------------------------------
NET ASSETS (100%) $2,445,901
------------------------------------------------------------------------
------------------------------------------------------------------------
(a) Non-income-producing security.
(b) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at June 30, 1996.
(c) The cost of investments for federal income tax purposes amounted to
$2,119,862. Gross unrealized appreciation and depreciation on
investments, based on identified tax cost, at June 30, 1996, are as
follows:
Gross unrealized appreciation $413,300
Gross unrealized depreciation (104,321)
---------
Net unrealized appreciation $308,979
---------
---------
See Notes to Financial Statements.
<PAGE>
- ------------------------------------------------
Keystone Institutional Trust
Keystone Institutional Small Capitalization Growth Fund
FINANCIAL HIGHLIGHTS (unaudited)
(For a share outstanding throughout the period)
Period from December 28, 1995
(Commencement of operations)
to June 30, 1996
- ---------------------------------------------------------------------
Net asset value beginning of period $10.00
- ---------------------------------------------------------------
Income from investment operations
Net investment loss (0.03)
Net realized and unrealized gain 1.68
- ---------------------------------------------------------------
Total from investment operations 1.65
- ---------------------------------------------------------------
Net asset value end of period $11.65
- ---------------------------------------------------------------
Total return 16.50%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.00% (a)(b)
Net investment loss (0.45%)(a)
Portfolio turnover rate 57%
Average commission rate paid $0.0847
Net assets end of period (thousands) $2,445
- ---------------------------------------------------------------
(a) Annualized for the period from December 28,1995 (Commencement of operations)
to June 30,1996.
(b) Figures are net of expense reimbursement by Keystone in connection with
voluntary expense limitations. Before the expense reimbursement, the
"Ratio to average net assets of total expenses" would have been 2.81%.
See Notes to Financial Statements.
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES (unaudited)
JUNE 30, 1996
- ----------------------------------------------------------------------------
ASSETS (NOTE 1)
Investments at market value (identified cost
- $2,112,549) $2,428,841
Cash 332
Receivable for:
Expense Reimbursement Receivable 21,451
Interest and dividends 81
Deferred organization cost 17,754
- ----------------------------------------------------------------------------
Total assets 2,468,459
- ----------------------------------------------------------------------------
LIABILITIES (NOTE 2)
Payable for:
Accrued expenses 17,647
Accrued organization cost 4,911
- ----------------------------------------------------------------------------
Total liabilities 22,558
- ----------------------------------------------------------------------------
NET ASSETS $2,445,901
- ----------------------------------------------------------------------------
NET ASSETS REPRESENTED BY (NOTES 1 AND 2)
Paid-in capital $2,100,000
Undistributed net investment income 36,922
Accumulated net realized loss on investments (7,313)
Net unrealized appreciation on investments 316,292
- ----------------------------------------------------------------------------
Total net assets applicable to
outstanding shares of beneficial interest
at 6/30/96($11.65 a share on 210,000 shares outstanding) $2,445,901
- ----------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
STATEMENT OF OPERATIONS (unaudited)
PERIOD FROM DECEMBER 28, 1995 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1996
- ----------------------------------------------------------------------------
INVESTMENT INCOME : (NOTE 1)
Dividends $1,943
Interest 4,577
- ----------------------------------------------------------------------------
Total income 6,520
- ----------------------------------------------------------------------------
EXPENSES : (NOTES 2 AND 4)
Management fee $9,209
Custodian fees 6,833
Audit fee 4,995
Transfer agent fee 1,000
Organization expense 2,046
Registration fees 9,197
Reimbursement from Investment Adviser (21,451)
- ----------------------------------------------------------------------------
Total expenses 11,829
- ----------------------------------------------------------------------------
Net investment loss (5,309)
- ----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments 34,918
- ----------------------------------------------------------------------------
Net change in unrealized appreciation on investments 316,292
- ----------------------------------------------------------------------------
Net gain on investments 351,210
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $345,901
- ----------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- ----------------------------------------------------------------
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS (unaudited)
Period from December 28, 1995
(commencement of operations)
to June 30, 1996
- ----------------------------------------------------------------------------
OPERATIONS
Net investment loss ($5,309)
Net realized gain on investments 34,918
Net change in unrealized appreciation 316,292
- ----------------------------------------------------------------------------
Net increase in net assets
resulting from operations 345,901
- ----------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 2)
Proceeds from shares sold 2,100,000
- ----------------------------------------------------------------------------
Total increase in net assets 2,445,901
- ----------------------------------------------------------------------------
NET ASSETS
Beginning of period 0
- ----------------------------------------------------------------------------
End of period $2,445,901
- ----------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
Keystone Institutional Trust
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1.) Significant Accounting Policies
Keystone Institutional Trust, (the "Fund"), is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified open-end
management investment company. The Fund was formed as a Massachusetts business
trust under a Declaration of Trust dated November 30, 1995. The Fund currently
issues one series of shares, Keystone Institutional Small Capitalization Growth
Fund (the "Fund"). Keystone Investment Management Company ("Keystone") is the
Fund's investment adviser. The Fund's objective is long-term growth of capital.
Keystone is a wholly-owned subsidiary of Keystone Investments, Inc. ("KII"), a
Delaware corporation. KII is a private corporation predominately owned by
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 and dividend disbursing 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, which
requires management to make estimates and assumptions that affect amounts
reported herein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial relative to the net assets of the
Fund.
A. Investments are usually valued at the closing sales price, or, in the absence
of sales and for over-the-counter securities, the mean of bid and asked
quotations. Management values the following securities at prices it deems in
good faith to be fair under the direction of the Fund's Board of Trustees: (1)
securities (including restricted securities) for which complete quotations are
not readily available; and (2) listed securities if, in the opinion of
management, the last sales price does not reflect a current value or if no sale
occurred.
B. 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 that are held on the
sixtieth day prior to maturity are valued at amortized cost (market value on the
sixtieth day adjusted for amortization of premium or accretion of discount),
which, when combined with accrued interest, approximates market. The Fund may
enter into currency and other financial futures contracts as a hedge against
changes in interest or currency exchange rates. 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 that remain open at fiscal year-end are
marked-to-market and the resultant net gain or loss is included in federal
taxable income.
Investments denominated in a foreign currency are adjusted daily to reflect
changes in exchange rates. 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 investment, income and
expenses at the rate of exchange prevailing on the respective dates of such
transactions. Net unrealized foreign exchange gains/losses are a component of
unrealized appreciation/ depreciation of investments. In addition to market
risk, the Fund is subject to the credit risk that the other party will not be
able to complete the obligations of the contract.
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. Distributions to shareholders are recorded
at the close of business on the ex-dividend date.
D. The Fund has qualified, and intends to qualify in the future, as a regulated
investment company under the Internal Revenue Code of 1986, as amended
("Internal Revenue Code"). Thus, the Fund is relieved of any federal income 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 the value of which 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. If
the value of 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. 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.
F. In connection with portfolio purchases and sales of securities denominated in
foreign currency, the Fund may enter into forward foreign currency exchange
contracts. Additionally, from time to time the Fund may enter into such
contracts to hedge certain foreign currency assets. Contracts are recorded at
market value and marked-to-market daily. Realized gains and losses arising from
such transactions are included in net realized gain (loss) on foreign currency
related transactions. The Fund is subject to the credit risk that the other
party will not complete the obligations of the contract.
G. The Fund intends to distribute its net investment income 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 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 primarily due to net operating losses generated by the Fund.
H. 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 proceed 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.
(2.) Capital Share Transactions
The Fund's Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest without par value. For the fiscal period
indicated, transactions in shares of the Fund were as follows:
Period from December 28, 1995
(Commencement of operations) to
June 30, 1996
-------------
Sales 210,000
-------
Net increase 210,000
-------
-------
(3.) Securities Transactions
Cost of purchases and proceeds from sales of investment securities excluding
short-term securities during the period ended June 30, 1996 were $3,361,668 and
$1,318,037, respectively.
(4.) Investment Management and Transactions With Affiliates
Under the terms of the Investment Management Agreement between Keystone and the
Fund, Keystone provides investment management and administrative services to
the Fund. In return, Keystone is paid a management fee that is computed and
paid daily. The management fee is calculated by applying percentage rates to
the aggregate net asset value of the Fund's shares as follows: 0.80% of the
first $100,000,000 plus 0.75% of the next $150,000,000, plus 0.65% of amounts
over $250,000,000.
During the period ended June 30, 1996, the Fund paid or accrued to Keystone
investment management and administrative service fees of $9,209, which
represented 0.80% of the Fund's average daily net asset value during the period.
During the period ended June 30, 1996, the Fund paid or accrued $1,000 to KIRC
for transfer agent fees.
Keystone has agreed to reimburse the Fund annually for certain operating
expenses incurred by the Fund in excess of applicable state expense limits.
However, Keystone is not required to make such reimbursement to an extent which
would result in the Fund's inability to qualify as a regulated investment
company under provisions of the Internal Revenue Code.
In addition, for the fiscal period ended June 30, 1996, Keystone has voluntarily
agreed to limit the expenses of the Fund to 1.0% annually of average net assets.
Keystone currently intends to continue said expense limit through December 31,
1996 and on a month-by-month basis thereafter. In connection with said voluntary
expense limitation, Keystone has reimbursed the Fund $21,451. Keystone does not
intend to seek repayment of this amount.
Certain officers and/or Directors of Keystone are also officers and/or Trustees
of the Trust. Officers of Keystone and affiliated Trustees receive no
compensation directly from the Trust. Currently, the Independent Trustees of the
Trust receive no Compensation for their services.
<PAGE>
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). Financial Statements:
FINANCIAL STATEMENTS AT DECEMBER 13, 1995
Statement of Net Assets December 13, 1995
(audited)
Notes to Statement of Net Assets December 13, 1995
(audited)
Independent Auditors' Report December 14, 1995
FINANCIAL STATEMENTS FOR THE FISCAL PERIOD ENDED JUNE 30, 1996 (UNAUDITED)
Schedule of Investments June 30, 1996
(unaudited)
Financial Highlights For the period
from December 28,
1995 (commencement
of operations) to
June 30, 1996
(unaudited)
Statement of Assets and Liabilities June 30, 1996
(unaudited)
Statement of Operations For the period
from December 28,
1995 (commencement
of operations) to
June 30, 1996
(unaudited)
Statement of Change in Net Assets For the period
from December 28,
1995 (commencement
of operations) to
June 30, 1996
(unaudited)
Notes to Financial Statements For the period
from December 28,
1995 (commencement
of operations) to
June 30, 1996
(unaudited)
SUPPORTING SCHEDULES
All schedules are omitted as the required information is inapplicable.
<PAGE>
(24)(b) Exhibits
(1) A copy of the Registrant's Declaration of Trust was filed with
Pre-Effective Amendment No. 2 to Registration Statement 811-07441/33-64781
("Pre-Effective Amendment No. 2") as Exhibit 24(b)(1).
(2) A copy of the Registrant's By-Laws was filed with Pre-Effective Amendment
No. 2 as Exhibit 24(b)(2).
(3) Not applicable.
(4) Not applicable.
(5) A copy of the form of Investment Management and Advisory Agreement between
Registrant and Keystone Investment Management Company was filed with
Pre-Effective Amendment No. 2 as Exhibit 24(b)(5).
(6) A copy of the form of Principal Underwriting Agreement between Registrant
and Keystone Investment Management Company was filed with Pre-Effective
Amendment No. 2 as Exhibit 24(b)(6).
(7) Not applicable.
(8) A copy of the form of Custodian, Fund Accounting and Recordkeeping
Agreement between Registrant and State Street Bank and Trust Company was
filed with Pre-Effective Amendment No. 2 as Exhibit 24(b)(8).
(9) Not applicable.
(10) Opinion of counsel as to the legality of the shares being registered was
filed with Pre-Effective Amendment No. 2 as Exhibit 24(b)(10).
(11) Consent as to use of Report of Registrant's independent auditors is filed
with this Registration Statement as Exhibit 24(b)(11).
(12) Not applicable.
(13) A copy of the Subscription Agreement between Registrant and Keystone
Investment Management Company was filed with Pre-Effective Amendment No. 2
as Exhibit 24(b)(6).
(14) Not applicable.
(15) Not applicable.
(16) Schedules for computation of performance quotations are filed with this
Registration Statement as Exhibit 24(b)(16).
(17) A Financial Data Schedule is filed with this Registration Statement as
Exhibit 24(b)(17).
(18) Not applicable.
(19) Powers of Attorney are filed with this Registration Statement as Exhibit
24(b)(19).
<PAGE>
Item 25. Persons Controlled by or Under Common Control With Registrant
Not applicable.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of June 30, 1996
-------------- ------------------------
Shares of Beneficial 2
Interest
Item 27. Indemnification
Provisions for the indemnification of the Registrant's Trustees and
officers are contained in Article VIII of Registrant's Declaration of Trust, a
copy of which was filed with Pre-Effective Amendment No. 2 as Exhibit
24(b)(1) and is incorporated by reference herein.
Provisions for the indemnification of Fiduciary Investment Company,
Inc., the Registrant's principal underwriter, are contained in Section 7 of the
Principal Underwriting Agreement between the Registrant and Fiduciary Investment
Company, Inc., a copy of which was filed with Pre-Effective Amendment No. 2 as
Exhibit 24(b)(6) and is incorporated by reference herein.
Provisions for the indemnification of Keystone Investment Management
Company, Registrant's investment adviser, are contained in Section 5 of the
Investment Advisory and Management Agreement between Registrant and Keystone
Investment Management Company, a copy of which was filed with Pre-Effective
Amendment No. 2 as Exhibit 24(b)(5) and is incorporated by reference herein.
<PAGE>
Item 28. Businesses and Other Connections of Investment Adviser
The following table lists the names of the various officers and
directors of Keystone Investment Management Company, the Registrant's
investment adviser, and their respective positions. For each named
individual, the table lists, for at least the past two fiscal years,
(i) any other organizations (excluding investment advisory clients)
with which the officer and/or director has had or has substantial
involvement; and (ii) positions held with such organizations.
<PAGE>
LIST OF OFFICERS AND DIRECTORS OF
KEYSTONE INVESTMENT MANAGEMENT COMPANY
Position with
Keystone Other
Investment Business
Name Management Company Affiliations
- ---- ------------------ ------------
Albert H. Chairman of Chairman of the Board,
Elfner, III the Board, Chief Executive Officer,
Chief Executive President and Director:
Officer,and Keystone Investments,Inc.
Director Keystone Management,Inc.
Keystone Software, Inc.
Keystone Asset Corporation
Keystone Capital Corporation
Chairman of the Board and
Director:
Keystone Fixed Income
Advisers, Inc.
Keystone Institutional
Company, Inc.
President and Director:
Keystone Trust Company
Director or Trustee:
Fiduciary Investment
Company, Inc.
Keystone Investment
Distributors Company
Keystone Investor
Resource Center, Inc.
Boston Children's
Services Associates
Middlesex School
Middlebury College
Former Trustee or Director:
Neworld Bank
Robert Van Partners, Inc.
Philip M. Byrne Director President and Director:
Keystone Institutional
Company, Inc.
Senior Vice President:
Keystone Investments, Inc.
Herbert L. Senior Vice None
Bishop, Jr. President
Donald C. Dates Senior Vice None
President
<PAGE>
Position with
Keystone Other
Investment Business
Name Management Company Affiliations
- ---- ------------------ ------------
Gilman Gunn Senior Vice None
President
Edward F. Director, Director, Senior Vice
Godfrey Senior Vice President
President, Chief Financial Officer and
Treasurer and Treasurer:
Chief Financial Keystone Investments, Inc.
Officer Keystone Investment
Distributors Company
Treasurer:
Keystone Institutional
Company, Inc.
Keystone Management, Inc.
Keystone Software, Inc.
Fiduciary Investment
Company, Inc.
Former Treasurer and
Director:
Hartwell Keystone
Advisers, Inc.
James R. McCall Director and None
President
Ralph J. Director President and Director:
Spuehler, Jr. Keystone Investment
Distributors Company
Senior Vice President and
Director:
Keystone Investments, Inc.
Chairman and Director:
Keystone Investor
Resource Center, Inc.
Keystone Management, Inc.
Formerly President:
Keystone Management, Inc.
Formerly Treasurer:
Keystone Investments, Inc.
Keystone Investment
Management Company
<PAGE>
Position with
Keystone Other
Investment Business
Name Management Company Affiliations
- ---- ------------------ ------------
Rosemary D. Senior Vice General Counsel, Senior
Van Antwerp President, Vice President and
General Counsel Secretary:
and Secretary Keystone Investments, Inc.
Senior Vice President and
General Counsel:
Keystone Institutional
Company, Inc.
Senior Vice President,
General Counsel and
Director:
Keystone Investor
Resource Center, Inc.
Fiduciary Investment
Company, Inc.
Keystone Investment
Distributors Company
Senior Vice President,
General Counsel, Director
and Secretary:
Keystone Management, Inc.
Keystone Software, Inc.
Former Senior Vice
President and Secretary:
Hartwell Keystone
Advisers, Inc.
Vice President and Secretary:
Keystone Fixed Income
Advisers, Inc.
J. Kevin Kenely Vice President Vice President:
Keystone Investments, Inc.
Keystone Investment
Distributors Company
Keystone Institutional
Company, Inc.
Keystone Management, Inc.
Keystone Institutional
Company, Inc.
Keystone Software, Inc.
Fiduciary Investment
Company, Inc.
Formerly Controller:
Keystone Investments, Inc.
Keystone Investment
Management Company
Keystone Investment
Distributors Company
Keystone Institutional
Company, Inc.
Keystone Management, Inc.
Keystone Software, Inc.
Fiduciary Investment
Company, Inc.
John D. Rogol Vice President Vice President and
and Controller Controller:
Keystone Investments, Inc.
Keystone Invesmtent
Distributors Company
Keystone Institutional
Company, Inc.
Keystone Management, Inc.
<PAGE>
Position with
Keystone Other
Investment Business
Name Management Company Affiliations
- ---- ------------------ ------------
John D. Rogol (con't) Keystone Software, Inc.
Fiduciary Investment
Company, Inc.
Controller:
Keystone Asset Corporation
Keystone Capital Corporation
Robert K. Vice President None
Baumback
Betsy A. Blacher Senior Vice None
President
Francis X. Claro Vice President None
Kristine R. Vice President None
Cloyes
Christopher P. Senior Vice None
Conkey President
Richard Cryan Senior Vice None
President
Maureen E. Senior Vice None
Cullinane President
George E. Dlugos Vice President None
Antonio T. Docal Vice President None
Sami J. Karam Vice President None
George J. Kimball Vice President None
JoAnn L. Lyndon Vice President None
<PAGE>
Position with
Keystone Other
Investment Business
Name Management Company Affiliations
- ---- ------------------ ------------
John C. Vice President None
Madden, Jr.
Stephen A. Marks Vice President None
Eleanor H. Marsh Vice President None
Walter T. Senior Vice None
McCormick President
Barbara McCue Vice President None
Stanley M. Niksa Vice President None
Robert E. O'Brien Vice President None
Margery C. Parker Vice President None
William H. Vice President None
Parsons
Daniel A. Rabasco Vice President None
Kathy K. Wang Vice President None
Judith A. Warners Vice President None
Joseph J. Asst. Vice None
Decristofaro President
<PAGE>
Item 29. Principal Underwriter
(a) Fiduciary Investment Company, Inc., the Trust's principal
underwriter, also acts as principal underwriter or distributor
for:
Keystone Institutional Adjustable Rate Fund
Master Reserves Trust
(b) For information with respect to each officer and Director of
Registrant's principal underwriter, see the following table:
Position and Offices Position and
Name and Principal with Fiduciary Offices with
Business Address Investment Company, Inc. the Trust
- ------------------ ------------------------ -------------
Ralph J. Spuehler, Jr. President and Director None
Rosemary D. Van Antwerp Senior Vice President, Senior Vice
General Counsel and President and
Director Secretary
Edward F. Godfrey Treasurer Senior Vice
President
Jean S. Loewenberg Clerk Assistant
Secretary
J. Kevin Kenely Vice President Treasurer
John D. Rogol Vice President and None
Controller
The business address of the persons listed above is 200 Berkeley
Street, Boston, Massachusetts 02116-5034.
<PAGE>
Item 30. Location of Accounts and Records
200 Berkeley Street
Boston, Massachusetts 02116-5034
Keystone Investor Resource Center, Inc.
101 Main Street
Cambridge, Massachusetts 02142
State Street Bank and Trust Company
1776 Heritage Drive
Quincy, Massachusetts 02171
Iron Mountain
3431 Sharp Slot Road
Swansea, Massachusetts 02777
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Upon request and without charge, the Registrant hereby undertakes to
furnish each person to whom a copy of the Registrant's prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement purstuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Boston, in The
Commonwealth of Massachusetts, on the 30th day of July, 1996.
KEYSTONE INSTITUTIONAL TRUST
Keystone Institutional Small
Capitalization Growth Fund
By: /s/Rosemary D. Van Antwerp
------------------------
Rosemary D. Van Antwerp
Senior Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 30th day of July, 1996.
SIGNATURES TITLE
- ---------- -----
/s/ George S. Bissell Chairman of the Board and Trustee
- --------------------------
George S. Bissell*
/s/ Albert H. Elfner, III Chief Executive Officer, President
- -------------------------- and Trustee
Albert H. Elfner, III*
/s/ J. Kevin Kenely Treasurer (Principal Financial
- -------------------------- and Accounting Officer)
J. Kevin Kenely*
*By /s/ James M. Wall
--------------------------
James M. Wall**
Attorney-in-Fact
<PAGE>
/s/ Frederick Amling Trustee
- --------------------------
Frederick Amling*
/s/ Charles A. Austin, III Trustee
- --------------------------
Charles A. Austin, III*
/s/ Edwin D. Campbell Trustee
- --------------------------
Edwin D. Campbell*
/s/ Charles F. Chapin Trustee
- --------------------------
Charles F. Chapin*
/s/ K. Dun Gifford Trustee
- --------------------------
K. Dun Gifford*
/s/ Leroy Keith, Jr. Trustee
- --------------------------
Leroy Keith, Jr.*
/s/ F. Ray Keyser, Jr. Trustee
- --------------------------
F. Ray Keyser, Jr.*
/s/ David M. Richardson Trustee
- --------------------------
David M. Richardson*
/s/ Richard J. Shima Trustee
- --------------------------
Richard J. Shima*
/s/ Andrew J. Simons Trustee
- --------------------------
Andrew J. Simons*
*By /s/ James M. Wall
--------------------------
James M. Wall**
Attorney-in-Fact
** James M. Wall, by signing his name hereto, does hereby sign this document
on behalf of each of the above-named individuals pursuant to powers of attorney
duly executed by such persons and attached hereto as Exhibit 24(b)(19).
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- -------------- ------------
1 Declaration of Trust1
2 By-Laws1
5 Investment Advisory and
Management Agreement1
6 Principal Underwriting Agreement1
8 Custodian, Trust Accounting
and Recordkeeping Agreement1
10 Opinion and Consent of Counsel1
11 Consent of Independent Auditors2
13 Subscription Agreement1
16 Schedules for computation of performance quotations2
17 Financial Data Schedules2 (Filed as Exhibit 27)
19 Powers of Attorney2
1 Filed with Pre-Effective Amendment No. 2 to Registration Statement
811-07441/33-64781 ("Pre-Effective Amendment No. 2").
2 Filed herewith.
EXHIBIT 99.11
CONSENT OF INDEPENDENT AUDITORS
The Trustees
Keystone Institutional Trust
We consent to the use of our report dated December 14, 1995, included
herein and to the reference to our firm under the caption "ADDITIONAL
INFORMATION" in the statement of additional information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
July 30th, 1996
<PAGE>
Exhibit 24(b)(19)
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and/or Chairman of the Board and Chief
Executive Officer and for which Keystone Custodian Funds, Inc. serves as Adviser
or Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and in my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
/s/ George S. Bissell
George S. Bissell
Director/Trustee,
Chairman of the Board
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and/or Chief Executive Officer and for
which Keystone Custodian Funds, Inc. serves as Adviser or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and in my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
/s/ Albert H. Elfner, III
Albert H. Elfner, III
Director/Trustee,
President and Chief
Executive Officer
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Rosemary D. Van Antwerp, Jean S.
Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of
them singly, my true and lawful attorneys, with full power to them and each of
them to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-1 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Director, Trustee or officer and for which Keystone Investment
Management Company serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and in my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ J. Kevin Kenely
J. Kevin Kenely
Treasurer
Dated: December 15, 1995
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Frederick Amling
Frederick Amling
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Charles A. Austin III
Charles A. Austin III
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Edwin D. Campbell
Edwin D. Campbell
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Charles F. Chapin
Charles F. Chapin
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ K. Dun Gifford
K. Dun Gifford
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Leroy Keith, Jr.
Leroy Keith, Jr.
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ F. Ray Keyser, Jr.
F. Ray Keyser, Jr.
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ David M. Richardson
David M. Richardson
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Richard J. Shima
Richard J. Shima
Director/Trustee
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.
/s/ Andrew J. Simons
Andrew J. Simons
Director/Trustee
Dated: December 14, 1994
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> KEYSTONE INSTITUTIONAL SMALL CAP GROWTH FUND CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> DEC-28-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 2,112,549
<INVESTMENTS-AT-VALUE> 2,428,841
<RECEIVABLES> 21,532
<ASSETS-OTHER> 18,086
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,468,459
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,558
<TOTAL-LIABILITIES> 22,558
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,100,000
<SHARES-COMMON-STOCK> 210,000
<SHARES-COMMON-PRIOR> 210,000
<ACCUMULATED-NII-CURRENT> 36,922
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,313)
<ACCUM-APPREC-OR-DEPREC> 316,292
<NET-ASSETS> 2,445,901
<DIVIDEND-INCOME> 1,943
<INTEREST-INCOME> 4,577
<OTHER-INCOME> 0
<EXPENSES-NET> (11,829)
<NET-INVESTMENT-INCOME> (5,309)
<REALIZED-GAINS-CURRENT> 34,918
<APPREC-INCREASE-CURRENT> 316,292
<NET-CHANGE-FROM-OPS> 345,901
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 210,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,445,901
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (9,209)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (11,829)
<AVERAGE-NET-ASSETS> 2,327,733
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 1.68
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.65
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
