<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996
File Nos. 2-51914
and 811-2521
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 52
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 30
KEYSTONE LIQUID TRUST
(Exact name of Registrant as specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(617) 338-3200
Rosemary D. Van Antwerp, Esq., 200 Berkeley Street,
Boston, MA 02116-5034
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
___ immediately upon filing pursuant to paragraph (b)
_X_ on October 31, 1996, 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)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite amount of its securities under the Securities Act of
1933. The Rule 24f-2 Notice for the issuer's fiscal year ended June 30, 1996 was
filed on August 22, 1996.
<PAGE>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed Proposed
Title of Share Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered Unit* Price** Fee
- ----------------------------------------------------------------------------
Shares of
Beneficial
Interest, 1,056,699,145 $1.00 $290,000 $100
Without
Par Value
- ----------------------------------------------------------------------------
* Computed under Rule 457(d) on the basis of the offering price per share at the
close of business on September 26, 1996.
** The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. 1,065,464,553 shares of the
Fund were redeemed during its fiscal year ended June 30, 1996. Of such shares,
9,055,408 were used as a reduction pursuant to Rule 24f-2 during the current
year. The remaining 1,056,409,145 shares are being used for a reduction in this
filing.
<PAGE>
KEYSTONE LIQUID TRUST
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 52
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 52 to Registration
Statement No. 2-51914/811-2521 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 - ITEM 24(a) and 24(b)
Financial Statements
Independent Auditors' Report
Listing of Exhibits
PART C - OTHER INFORMATION - ITEMS 25-32 - AND SIGNATURE PAGES
Number of Holders of Securities
Indemnification
Business and Other Connections
Principal Underwriter
Location of Accounts and Records
Signatures
Exhibits (including Powers of Attorney)
<PAGE>
KEYSTONE LIQUID TRUST
Cross-Reference Sheet pursuant to Rules 404 and 495 under the Securities Act of
1933.
Items in
Part A of
Form N-1A Prospectus Caption
--------- -------------------
1 Cover Page
2 Fee Table
3 Performance Data
Financial Highlights
4 Cover Page
The Fund
Investment Objective and Policies
Investment Restrictions
5 Fund Management and Expenses
Additional Information
5a Not Applicable
6 The Fund
Dividends and Taxes
Fund Shares
Shareholder Services
Pricing Shares
7 How to Buy Shares
Alternative Sales Options
Distribution Plans
Shareholder Services
8 How to Redeem Shares
Contingent Deferred Sales Charge and
Waiver of Sales Charge
9 Not applicable
<PAGE>
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 Objectives and Policies
Investment Restrictions
Brokerage
Appendix
14 Declaration of Trust
Trustees and Officers
15 Additional Information
16 Sales Charges
Distribution Plans
Investment Manager
Investment Adviser
Principal Underwriter
Additional Information
17 Brokerage
18 Investment Objectives and Policies
Declaration of Trust
19 Valuation of Securities
Distribution Plans
20 Distributions and Taxes
21 Principal Underwriter
22 Yield Quotations
23 Financial Statements
<PAGE>
KEYSTONE LIQUID TRUST
PART A
PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS OCTOBER 31 , 1996
- --------------------------------------------------------------------------------
KEYSTONE LIQUID TRUST
200 BERKELEY STREET, BOSTON, MASSACHUSETTS 02116-5034
CALL TOLL FREE 1-800-343-2898
- --------------------------------------------------------------------------------
Keystone Liquid Trust (the "Fund") is a money market mutual fund that
seeks high current income from short-term securities while preserving capital
and maintaining liquidity.
The Fund currently offers Class A, B, and C shares. Information on
share classes and their fee and sales charge structures may be found in the "Fee
Table," "How to Buy Shares," "Alternative Sales Options," "Contingent Deferred
Sales Charge and Waiver of Sales Charges," "Distribution Plans," and "Fund
Shares" sections of this prospectus.
This prospectus concisely states information about the Fund that you
should know before investing. Please read it and retain it for future reference.
Additional information about the Fund is contained in a statement of
additional information dated October 31, 1996, which has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
prospectus. For a free copy, or for other information about the Fund, write to
the address or call the telephone number provided on this page.
WHILE THE FUND INTENDS TO MAINTAIN A NET ASSET VALUE PER SHARE OF
$1.00, THERE IS NO ASSURANCE THAT IT WILL BE ABLE TO DO SO. SHARES OF THE FUND
ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page Page
Fee Table................... 2 Contingent Deferred Sales Charge and
Financial Highlights ....... 3 Waiver of Sales Charges........... 17
The Fund ................... 6 Distribution Plans ..................... 19
Investment Objective How to Redeem Shares.................... 20
and Policies............... 6 Shareholder Services.................... 23
Investment Restrictions .... 7 Performance Data ....................... 25
Pricing Shares ............. 8 Fund Shares ............................ 26
Dividends and Taxes ........ 9 Additional Information ................. 26
Fund Management and Expenses 10 Additional Investment Informatio ....... 27
How to Buy Shares .......... 12
Alternative Sales Options .. 14
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
KEYSTONE LIQUID TRUST
The purpose of this fee table is to assist investors in understanding
the costs and expenses that an investor in each class of shares of the Fund will
bear directly or indirectly. For more complete descriptions of the various costs
and expenses, see the following sections of this prospectus: "Fund Management
and Expenses"; "How to Buy Shares"; "Alternative Sales Options"; "Contingent
Deferred Sale Charge and Waiver of Sales Charges"; "Distribution Plans"; and
"Shareholder Services."
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
NO LOAD BACK-END LEVEL LOAD
OPTION LOAD OPTION(1) OPTION(2)
SHAREHOLDER TRANSACTION EXPENSES -------------- ----------------------- ------------------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases.............. None None None
(as a percentage of offering price)
Deferred Sales Load .............................. 0.00% 5.00% in the first year 1.00% in the first
(as a percentage of the lesser of original purchase declining to 1.00% in year and 0.00%
price or redemption proceeds, as applicable) the sixth year and 0.00% thereafter
thereafter
Exchange Fee (per exchange)(3)....................... $10.00 $10.00 $10.00
ANNUAL FUND OPERATING EXPENSES(4)
(as a percentage of average net assets)
Management Fees ...................................... 0.50% 0.50% 0.50%
12b-1 Fees ........................................... 0.06 1.00%(5) 1.00%(5)
Other Expenses ....................................... 0.42% 0.41% 0.44%
----- ----- -----
Total Fund Operating Expenses ........................ 0.98% 1.91% 1.94%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
EXAMPLE(6) ------ ------- ------- --------
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each period:
Class A ................................................ $10 $31 $ 54 $120
Class B ................................................ $69 $90 $123 $199
Class C ................................................ $30 $61 $105 $226
You would pay the following expenses on a $1,000
investment, assuming no
redemption at the end of each period:
Class A ................................................ $10 $31 $ 54 $120
Class B ................................................ $19 $60 $103 $199
Class C ................................................ $20 $61 $105 $226
</TABLE>
AMOUNTS SHOWN IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- ---------------
(1) Class B shares purchased on or after June 1, 1995 convert tax free to Class
A shares after eight years. See "Class B Shares" for more information.
(2) Class C shares are available only through broker-dealers who have entered
into special distribution agreements with Keystone Investment Distributors
Company, the Fund's principal underwriter.
(3) There is no fee for exchange orders received by the Fund directly from a
shareholder over the Keystone Automated Response Line ("KARL"). (For a
description of KARL, see "Shareholder Services.")
(4) Expense ratios shown above are for the Fund's fiscal year ended June 30,
1996. Total Fund Operating Expenses for the fiscal year ended June 30, 1996
include indirectly paid expenses.
(5) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the National Association of
Securities Dealers, Inc. ("NASD").
(6) The Securities and Exchange Commission requires use of a 5% annual return
figure for purposes of this example. Actual return for the Fund may be
greater or less than 5%.
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE LIQUID TRUST
CLASS A SHARES
(For a share outstanding throughout each year)
The following table contains important financial information relating
to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. The table appears in the Fund's Annual Report and should
be read in conjunction with the Fund's financial statements and related notes,
which also appear, together with the independent auditors' report, in the Fund's
Annual Report. The Fund's financial statements, related notes, and independent
auditors' report are included in the statement of additional information.
Additional information about the Fund's performance is contained in its Annual
Report, which will be made available upon request and without charge.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
NET ASSET VALUE
BEGINNING OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .0464 .0454 .0235 .0230 .0386 .0634 .0760 .0786 .0597 .0524
Net realized and
unrealized gain (loss)
on investments (.0001) 0 0 (.0001) .0003 0 0 .0001 (.0001) 0
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations .0463 .0454 .0235 .0229 .0389 .0634 .0760 .0787 .0596 .0524
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions
to shareholders (.0463) (.0454) (.0235) (.0229) (.0389) (.0634) (.0760) (.0787) (.0596) (.0524)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value end of
year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 4.73% 4.63% 2.37% 2.31% 3.96% 6.47% 7.81% 8.18% 6.31% 5.35%
Ratios/supplemental data
Ratios to average net assets:
Net investment
income 4.66% 4.42% 2.50% 2.29% 3.99% 6.51% 7.53% 7.88% 5.99% 5.30%
Total expenses 0.98%(a) 0.92% 1.02% 1.11% 1.10% 0.92% 1.00% 1.00% 1.00% 1.00%
NET ASSETS END OF YEAR $332,796 $245,308 $398,617 $189,167 $227,115 $400,597 $406,306 $475,640 $461,032 $375,542
(THOUSANDS)
</TABLE>
(a) "Ratio of total expenses to average net assets" for the year ended June 30,
1996 includes indirectly paid expenses. Excluding indirectly paid expenses for
the year ended June 30, 1996, the expense ratio would have been 0.95%.
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE LIQUID TRUST
CLASS B SHARES
(For a share outstanding throughout each year)
The following table contains important financial information relating
to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. The table appears in the Fund's Annual Report and should
be read in conjunction with the Fund's financial statements and related notes,
which also appear, together with the independent auditors' report, in the Fund's
Annual Report. The Fund's financial statements, related notes, and independent
auditors' report are included in the statement of additional information.
Additional information about the Fund's performance is contained in its Annual
Report, which will be made available upon request and without charge.
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
(DATE OF INITIAL
YEAR ENDED JUNE 30, PUBLIC OFFERING) TO
1996 1995 1994 JUNE 30, 1993
<S> <C> <C> <C> <C>
Net asset value beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .0369 .0362 .0142 .0047
Net realized and unrealized loss on
investments 0 0 0 (.0001)
- -------------------------------------------------------------------------------------------------
Total from investment operations .0369 .0362 .0142 .0046
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS (.0369) (.0362) (.0142) (.0046)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE END OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
TOTAL RETURN (C) 3.76% 3.68% 1.43% 0.46%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Net investment income 3.73% 3.66% 1.84% 1.08%(b)
Total expenses 1.91%(a) 1.84% 1.85% 2.15%(b)
NET ASSETS END OF YEAR (THOUSANDS) $10,042 $ 7,281 $11,198 $ 241
</TABLE>
(a) "Ratio of total expenses to average net assets" for the year ended June 30,
1996 includes indirectly paid expenses. Excluding indirectly paid expenses for
the year ended June 30, 1996, the expense ratio would have been 1.88%.
(b) Annualized.
(c) Excluding applicable sales charges.
<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE LIQUID TRUST
CLASS C SHARES
(For a share outstanding throughout each year)
The following table contains important financial information relating
to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. The table appears in the Fund's Annual Report and should
be read in conjunction with the Fund's financial statements and related notes,
which also appear, together with the independent auditors' report, in the Fund's
Annual Report. The Fund's financial statements, related notes, and independent
auditors' report are included in the statement of additional information.
Additional information about the Fund's performance is contained in its Annual
Report, which will be made available upon request and without charge.
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
(DATE OF INITIAL
YEAR ENDED JUNE 30, PUBLIC OFFERING)
1996 1995 1994 TO JUNE 30, 1993
<S> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations: .0370 .0362 .0142 .0045
Net investment income
Net realized and unealized loss on investments (.0001) 0 0 (.0002)
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations .0369 .0362 .0142 .0043
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS (.0369) (.0362) (.0142) (.0043)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE END OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(C) 3.75% 3.68% 1.43% 0.43%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Net investment income 3.72% 3.52% 1.97% 1.01%(b)
Total expenses 1.94%(a) 1.82% 1.86% 2.09%(b)
NET ASSETS END OF YEAR (THOUSANDS) $3,285 $4,112 $6,599 $ 34
</TABLE>
(a) "Ratio of total expenses to average net assets" for the year ended June 30,
1996 includes indirectly paid expenses. Excluding indirectly paid expenses for
the year ended June 30, 1996, the expense ratio would have been 1.91%.
(b) Annualized.
(c) Excluding applicable sales charges.
<PAGE>
- --------------------------------------------------------------------------------
THE FUND
- --------------------------------------------------------------------------------
The Fund is an open-end, diversified management investment company,
commonly known as a mutual fund. The Fund was formed as a Massachusetts business
trust on May 22, 1975. The Fund is one of more than twenty funds managed by
Keystone Management, Inc. ("Keystone Management"), the Fund's investment
manager, and is one of more than thirty funds managed or advised by Keystone
Investment Management Company ("Keystone"), the Fund's investment adviser.
Keystone and Keystone Management are, from time to time, also collectively
referred to as "Keystone."
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide shareholders with high
current income from short-term money market instruments while emphasizing
preservation of capital and maintaining liquidity.
The investment objective of the Fund is fundamental and may not be
changed without the approval of a majority of the Fund's outstanding shares (as
defined in the Investment Company Act of 1940 (the "1940 Act") which means the
lesser of (1) 67% of the shares represented at a meeting at which more than 50%
of the outstanding shares are represented or (2) more than 50% of the
outstanding shares (a "1940 Act Majority")).
Any investment involves risk, and there is no assurance that the Fund
will achieve its investment objective.
PRINCIPAL INVESTMENTS AND INVESTMENT POLICIES
To achieve its objective, the Fund invests in money market instruments
maturing in 397 days or less. Such instruments include (1) commercial paper,
including master demand notes; (2) obligations issued or guaranteed by the
United States ("U.S.") government, its agencies or instrumentalities; (3)
obligations, including certificates of deposit and bankers' acceptances, of
banks or savings and loan associations having at least $1 billion in assets as
of the date of their most recently published financial statements that are
members of the Federal Deposit Insurance Corporation, including U.S. branches of
foreign banks and foreign branches of U.S. banks; and (4) corporate obligations,
that at the date of investment, are rated AA or better by Standard & Poor's
Corporation ("S&P") or Aa or better by Moody's Investors Service ("Moody's").
The Fund may invest up to 100% of its assets in U.S. government securities,
obligations of domestic branches of U.S. banks and repurchase agreements of such
banks.
The Fund will limit its investments, including repurchase agreements,
to those U.S. dollar-denominated instruments that Keystone determines present
minimal credit risk and are at the time of acquisition eligible securities as
defined under Rule 2a-7 of the 1940 Act ("Eligible Securities"). Generally,
Eligible Securities include (1) securities rated by the requisite rating
agencies, at the date of investment, in one of the two highest short-term rating
categories; (2) securities of issuers receiving such rating with respect to
other short-term debt securities; and (3) comparable unrated securities.
Requisite rating agencies means any two agencies that have issued a rating with
respect to a security or class of debt obligations of an issuer or one rating
agency, if only one agency has issued a rating with respect to such security or
issuer. If the Fund purchases securities that are unrated or that have been
rated by a single rating agency, the purchase must be approved or ratified by
the Fund's Board of Trustees.
The short-term ratings are as follows: A-1 and A-2, the two highest
ratings given by S&P; Prime-1 and Prime-2, the two highest ratings given by
Moody's; and F-1 and F-2, the two highest ratings given by Fitch Investors
Service, Inc. ("Fitch").
While the Fund may purchase single rated or unrated securities, the
Fund anticipates that at least 95% of its assets will be invested in instruments
that, at the date of investment, are rated or deemed to be of comparable quality
to securities rated in the highest short-term rating categories by any two
rating agencies. The Fund will not invest more than 5% of its assets in
securities rated in the second highest short-term rating category.
The Fund is designed for individuals and institutions, including
counselors, brokers, lawyers, accountants, charitable and religious
organizations and others acting in a fiduciary, advisory, agency, custodial or
similar capacity. The Fund offers a convenient alternative to investing directly
in money market instruments by eliminating the mechanical problems normally
associated with direct investments while, most importantly, providing the
opportunity to obtain the higher yields often available from money market
investments made in large denominations.
Because interest rates on money market instruments fluctuate in
response to economic factors, the rates on short-term investments made by the
Fund and the daily dividend paid to shareholders will vary, rising or falling
with short-term rates generally, and that yields from short-term securities may
be lower than yields from longer term securities. Also, the value of the Fund's
securities will fluctuate inversely with interest rates. In addition, the Fund's
investments in certificates of deposit issued by U.S. branches of foreign banks
and foreign branches of U.S. banks involve somewhat more risk, but also more
potential reward (higher interest rates), than investments in comparable
domestic obligations.
The securities in which the Fund may invest may not earn as high a
level of current income as longer term or lower quality securities, which
generally have less liquidity, greater market risk and more price fluctuation.
The Fund may enter into reverse repurchase agreements and purchase and
sell securities on a when issued or delayed delivery basis.
The average weighted maturity of the Fund's investments will not exceed
90 days.
For further information about the types of investments and investment
techniques available to the Fund, including the associated risks, see the
"Additional Investment Information" section of this prospectus and the statement
of additional information.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund has adopted the fundamental restrictions summarized below,
which may not be changed without the approval of a 1940 Act majority of the
Fund's outstanding shares. These restrictions and certain other fundamental and
nonfundamental restrictions are set forth in detail in the statement of
additional information. Unless otherwise stated, all references to the Fund's
assets are in terms of current market value.
The Fund may not do the following: (1) invest more than 5% of its
assets in the securities of any one issuer other than the U.S. government; (2)
borrow money, except that, in an aggregate amount not to exceed one-third of the
Fund's assets, including the amount borrowed, the Fund may borrow money from
banks on a temporary basis or enter into reverse repurchase agreements; (3)
pledge more than 15% of its assets to secure borrowings; and (4) invest more
than 10% of its assets in repurchase agreements maturing in more than seven
days.
The Fund intends to follow policies of the Securities and Exchange
Commission as they are adopted from time to time with respect to illiquid
securities, including, at this time, (1) treating as illiquid, securities that
may not be sold or disposed of in the ordinary course of business within seven
days at approximately the value at which the Fund has valued the investment on
its books and (2) limiting its holdings of such securities to less than 10% of
net assets.
In addition, the Fund may, notwithstanding any other investment policy
or restriction, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objective, policies and restrictions as the Fund. The Fund does not currently
intend to implement this policy and would do so only if the Trustees were to
determine such action to be in the best interest of the Fund and its
shareholders. In the event of such implementation, the Fund will comply with
such requirements as to written notice to shareholders as are then in effect.
- --------------------------------------------------------------------------------
PRICING SHARES
- --------------------------------------------------------------------------------
The net asset value of a Fund share is computed each day on which the
New York Stock Exchange (the "Exchange") is open as of the close of trading on
the Exchange (currently 4:00 p.m. eastern time for purposes of pricing Fund
shares) except on days when changes in the value of the Fund's portfolio
securities do not affect the current net asset value of its shares. The Exchange
is currently closed on weekends, New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share of the Fund is arrived at by determining the value
of all of the Fund's assets, subtracting its liabilities and dividing the result
by the number of its outstanding shares.
Since the net income of the Fund is declared as a dividend each time
net income is determined, the net asset value per share is expected to remain at
$1.00 immediately after each dividend declaration.
The Fund expects to have net income at the time of each dividend
determination. If for any reason there is a net loss, the Fund will first offset
such amount pro rata against dividends accrued during the month in each
shareholder account. To the extent that such a net loss would exceed such
accrued dividends, the Fund will reduce the number of its outstanding shares by
having each shareholder contribute to the Fund's capital his pro rata portion of
the total number of shares required to be canceled in order to maintain a net
asset value of $1.00 per share of the Fund. EACH SHAREHOLDER WILL BE DEEMED TO
HAVE AGREED TO SUCH A CONTRIBUTION IN THESE CIRCUMSTANCES BY HIS OR HER
INVESTMENT IN THE FUND.
The Fund values its money market investments as follows: (1) money
market 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; and
(2) money market investments maturing in more than sixty days for which market
quotations are readily available are valued at current market value. All other
investments are valued at market value or, where market quotations are not
readily available, at fair value as determined in good faith by the Fund's Board
of Trustees.
- --------------------------------------------------------------------------------
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
The Fund has qualified and intends to continue to qualify as a
regulated investment company (a "RIC") under the Internal Revenue Code of 1986,
as amended (the "Code"). The Fund qualifies if, among other things, it
distributes to its shareholders at least 90% of its net investment income for
its fiscal year. The Fund also intends to make timely distributions, if
necessary, sufficient in amount to avoid the nondeductible 4% excise tax imposed
on a regulated investment company to the extent that it fails to distribute,
with respect to each calendar year, at least 98% of its ordinary income for such
calendar year and 98% of its net capital gains for the one-year period ending on
October 31 of such calendar year.
If the Fund qualifies as a RIC and if it distributes substantially all
of its net investment income and net capital gains, if any, to shareholders, it
will be relieved of any federal income tax liability.
The Fund declares dividends daily from its net investment income and
net capital gains, if any, and makes distributions to its shareholders monthly.
Shareholders receive Fund distributions in the form of additional shares of that
class of shares upon which the distribution is based or, at the shareholder's
option, in cash. Fund distributions in the form of additional shares are made at
net asset value without the imposition of a sales charge. Because Class B and
Class C shares bear the costs of distribution of their shares through a higher
annual distribution fee than Class A shares, expenses attributable to Class B
shares and Class C shares will generally be higher than those of Class A shares
and income distributions paid by the Fund with respect to Class A shares will
generally be greater than those paid with respect to Class B and Class C shares.
Dividends and distributions are taxable whether they are received in
cash or in shares. Income dividends and net short-term gains distributions are
taxable as ordinary income. Dividends and distributions may also be subject to
state and local taxes. Any taxable distribution declared in October, November,
or December to shareholders of record in such a month, and paid by the following
January 31, will be includable in the taxable income of shareholders as if paid
on December 31 of the year in which the distribution was declared. The Fund
advises its shareholders annually as to the federal tax status of all
distributions made during the year.
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FUND MANAGEMENT AND EXPENSES
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FUND MANAGEMENT
Subject to the general supervision of the Fund's Board of Trustees,
Keystone Management, located at 200 Berkeley Street, Boston, Massachusetts
02116-5034, is responsible for the overall management of the Fund's business and
affairs.
INVESTMENT MANAGER
Keystone Management was organized in 1989 and is a wholly-owned
subsidiary of Keystone. Its directors and principal executive officers have been
affiliated with Keystone, a seasoned investment adviser, for a number of years.
Keystone Management also serves as investment manager to each of the funds in
the Keystone Fund Family and to certain other funds in the Keystone Investments
Family of Funds.
Pursuant to its Management Agreement with the Fund (the "Management
Agreement"), Keystone Management has delegated its investment management
functions, except for certain administrative and management services as
described below, to Keystone and has entered into an Advisory Agreement with
Keystone (the "Advisory Agreement") under which Keystone provides investment
advisory and management services to the Fund. Services performed by Keystone
Management include (1) performing research and planning with respect to (a) the
Fund's qualification as a regulated investment company under Subchapter M of the
Code, (b) tax treatment of the Fund's portfolio investments, (c) tax treatment
of special corporate actions (such as reorganizations), (d) state tax matters
affecting the Fund, and (e) the Fund's distributions of income and capital
gains; (2) preparing the Fund's federal and state tax returns; and (3) providing
services to the Fund's shareholders in connection with federal and state
taxation and distributions of income and capital gains.
The Fund pays Keystone Management a fee for its services at the annual
rate of:
(1) .50 of 1% of the average daily value of the net assets of the Fund
on the first $500,000,000 of such assets; plus
(2) .45 of 1% of the average daily value of the net assets of the Fund
that exceed $500,000,000 and are less than $1,000,000,000; plus
(3) .40 of 1% of the average daily value of the net assets of the Fund
that are $1,000,000,000 or more.
The management fee is computed as of the close of business each business day and
payable monthly.
INVESTMENT ADVISER
Keystone has provided investment advisory and management services to
investment companies and private accounts since it was organized in 1932.
Keystone is a wholly-owned subsidiary of Keystone Investments, Inc. ("Keystone
Investments"). Both Keystone and Keystone Investments are located at 200
Berkeley Street, Boston, Massachusetts 02116-5034.
Keystone Investments is a private corporation predominantly owned by
current and former members of management of Keystone and its affiliates. The
shares of Keystone Investments common stock beneficially owned by management are
held in a number of voting trusts, the trustees of which are George S. Bissell,
Albert H. Elfner, III, Edward F. Godfrey, Ralph J. Spuehler, Jr. and Rosemary D.
Van Antwerp. Keystone Investments provides accounting, bookkeeping, legal,
personnel, and general corporate services to Keystone Management, Keystone,
their affiliates, and the Keystone Investments Family of Funds.
Pursuant to the Advisory Agreement, Keystone receives for its services
an annual fee equal to 85% of the management fee received by Keystone Management
under the Management Agreement.
During the fiscal year ended June 30, 1996, the Fund paid or accrued to
Keystone Management investment management fees and administrative service fees
of $1,359,239, which represented 0.50% of the Fund's average net assets. Of such
amount paid to Keystone Management, $1,155,353 was paid to Keystone for its
services to the Fund.
The Fund has adopted a Code of Ethics incorporating policies on
personal securities trading as recommended by the Investment Company Institute.
Keystone Investments has recently entered into an Agreement and Plan of
Acquisition and Merger with First Union Corporation ("First Union"), pursuant to
which Keystone Investments is to be merged with and into a subsidiary of First
Union National Bank of North Carolina ("FUNB-NC") (the "Merger"). The surviving
corporation will be known as Keystone Investments, Inc. FUNB-NC is a
wholly-owned subsidiary of First Union. Subject to a number of conditions being
met, it is currently anticipated that the Merger will take place on or around
December 23, 1996. Thereafter, Keystone Investments, Inc. is expected to be a
subsidiary of FUNB-NC.
If consummated, the proposed Merger will be deemed to cause an
assignment, within the meaning of the 1940 Act, of the Advisory Agreement and
the Management Agreement. Consequently, the completion of the transaction is
contingent upon, among other things, the approval of the Fund's shareholders of
a new investment advisory agreement between the Fund and Keystone (the "New
Advisory Agreement"). The Fund's Trustees have approved the terms of the New
Advisory Agreement, subject to the approval of shareholders and the completion
of the Merger, and have called a special meeting of shareholders to obtain their
approval of the New Advisory Agreement. The meeting is expected to be held in
December 1996. The proposed New Advisory Agreement has terms, including the fees
payable thereunder, that are substantially identical to those in the current
agreements.
In addition to an assignment of the Fund's Management Agreement and
Advisory Agreement, the Merger, if consummated, will also be deemed to cause an
assignment, as defined by the 1940 Act, of the Principal Underwriting Agreements
between the Fund and Keystone Investment Distributors Company (the "Principal
Underwriter"). The Principal Underwriter, a wholly-owned subsidiary of Keystone,
is located at 200 Berkeley Street, Boston, Massachusetts 02116-5034. As a
result, the Fund's Trustees have approved the following agreements, subject to
the completion of the Merger: (i) a principal underwriting agreement between
Evergreen Funds Distributor, Inc. ("EFD") and the Fund; (ii) a marketing support
agreement between the Principal Underwriter and EFD with respect to the Fund;
and (iii) a subadministration agreement between the Adviser and EFD with respect
to the Fund. EFD is a wholly-owned subsidiary of Furman Selz LLC. It is expected
that on or about January 2, 1997, Furman Selz LLC will transfer EFD, and its
related services, to BISYS Group, Inc. ("BISYS") (the "Transfer"). The Fund's
Trustees have also approved, subject to completion of the Transfer: (i) a
principal underwriting agreement with EFD and the Fund; (ii) a marketing support
agreement between the Principal Underwriter and EFD with respect to the Fund;
and (iii) a subadministration agreement between the Adviser and BISYS with
respect to the Fund. The terms of such agreements are substantially identical to
the terms of the agreements to be executed upon completion of the Merger.
FUND EXPENSES
The Fund will pay all of its expenses. In addition to the investment
advisory and management fees discussed above, the principal expenses that the
Fund is expected to pay include, but are not limited to, expenses of those
Trustees who are not interested persons (as defined in the 1940 Act) of the Fund
(the "Independent Trustees"); transfer dividend disbursing and shareholder
servicing agent expenses; custodian expenses; fees of its independent auditors
and legal counsel to its Independent Trustees; expenses of shareholders' and
Trustees' meetings; fees payable to government agencies, including registration
and qualification fees of the Fund and its shares under federal and state
securities laws; brokerage commissions, interest charges and taxes; and certain
extraordinary expenses. In addition, each class will pay all of the expenses
attributable to it. Such expenses are currently limited to Distribution Plan
expenses.
For the fiscal year ended June 30, 1996, the Fund's Class A, Class B
and Class C shares paid 0.98%, 1.91% and 1.94% of average net assets (including
indirectly paid expenses), respectively, in expenses.
For the fiscal year ended June 30, 1996, the Fund paid or accrued to
Keystone Investor Resource Center, Inc. ("KIRC"), the Fund's transfer and
dividend disbursing agent, $759,359 in transfer agent fees and $17,571 to
Keystone Investments for certain accounting services provided to the Fund. KIRC
is a wholly-owned subsidiary of Keystone.
SECURITIES TRANSACTIONS
Under policies established by the Board of Trustees, Keystone selects
broker-dealers to execute transactions subject to the receipt of best execution.
When selecting broker-dealers to execute portfolio transactions for the Fund,
Keystone may consider as a factor the number of shares of the Fund sold by such
broker-dealer. In addition, broker-dealers may, from time to time, be affiliated
with the Fund, Keystone Management, Keystone, the Fund's principal underwriter
or their affiliates.
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HOW TO BUY SHARES
- --------------------------------------------------------------------------------
You may purchase shares of the Fund from any broker-dealer that has a
selling agreement with Principal Underwriter. In addition, you may purchase
shares of the Fund by mailing to the Fund c/o Keystone Investor Resource Center,
Inc., P.O. Box 2121, Boston, Massachusetts 02106-2121, a completed account
application and a check payable to the Fund. You may also telephone
1-800-343-2898 to obtain the number of an account to which you can wire or
electronically transfer funds and then send in a completed account application.
Subsequent investments in any amount may be made by check, by wiring federal
funds, by direct deposit or by an electronic funds transfer ("EFT"). The
Principal Underwriter, a wholly-owned subsidiary of Keystone, is located at 200
Berkeley Street, Boston, Massachusetts 02116-5034.
All classes of Fund shares are sold on a continuing basis without a
sales load at net asset value, which is expected to be $1.00 per share on each
day on which banks in both Boston and New York are open for business. An initial
purchase of Fund shares must be at least $1,000. There is no minimum amount for
subsequent purchases.
GENERAL
Broker-dealers, banks and other financial institutions may assist their
clients in effecting transactions in the Fund's shares and may charge a fee for
these services.
Orders for the purchase of Fund shares become effective at the next
transaction time after monies become available for investment. The Fund's
transaction time is the close of trading on the Exchange (currently 4:00 p.m.
eastern time.) Investments received before 4:00 p.m. will become effective as of
4:00 p.m. and begin accruing dividends the next business day.
Your purchase of shares will be confirmed to you and your shares
credited to your account at net asset value.
The Fund reserves the right to withdraw all or any part of the offering
made by this prospectus and to reject purchase orders.
Shareholder inquiries should be directed to Keystone Investor Resource
Center, Inc. ("KIRC"), the Fund's transfer agent, by calling toll-free
1-800-343-2898 or writing to KIRC or to the firm from which you received this
prospectus.
SUB-ACCOUNTING
The Fund offers free "sub-accounting" service to banks, broker-dealers,
investment advisers and others who have multiple accounts. Multiple accounts may
be carried under one master account. Transaction advices and monthly reports are
provided for each sub-account individually, and that information also is
included in summary master account reports. For information concerning
sub-accounting, call KIRC at the telephone number listed above.
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ALTERNATIVE SALES OPTIONS
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The Fund offers Classes A, B, and C shares:
CLASS A SHARES -- NO LOAD OPTION
Class A shares are sold without a sales charge at the time of purchase.
CLASS B SHARES -- BACK-END LOAD OPTION
Class B shares are sold without a sales charge at the time of purchase,
but are, with certain exceptions, subject to a deferred sales charge if they are
redeemed. Class B shares purchased on or after June 1, 1995 are subject to a
deferred sales charge if redeemed during the 72-month period from and including
the month of purchase. Class B shares purchased prior to June 1, 1995 are
subject to a deferred sales charge upon redemption during the four calendar
years following purchase. Class B shares purchased on or after June 1, 1995 that
have been outstanding for eight years from and including the month of purchase
will automatically convert to Class A shares without the imposition of an
exchange fee. Class B shares purchased prior to June 1, 1995 retain their
existing conversion rights.
CLASS C SHARES -- LEVEL LOAD OPTION
Class C shares are sold without a sales charge at the time of purchase,
but are subject to a deferred sales charge if they are redeemed within one year
after the date of purchase. Class C shares are available only through
broker-dealers who have entered into special distribution agreements with the
Principal Underwriter.
Each Class of shares, pursuant to its Distribution Plan, currently pays
an annual service fee of 0.25% of the Fund's average daily net assets
attributable to that class. In addition to the 0.25% service fee, the Class B
and C Distribution Plans provide for the payment of an annual distribution fee
of up to 0.75% of the average daily net assets attributable to their respective
classes. As a result, income distributions paid by the Fund with respect to
Class B and Class C shares will generally be less than those paid with respect
to Class A shares.
In general, three Fund share classes have been established so that
investors in each class of any Keystone America Fund who wish to take advantage
of the exchange privilege within the Keystone America Fund Family can have a
money market fund exchange option available to them. Investors purchasing shares
of the Fund without regard to the availability of exchanges should consider
Class A shares because there is no distribution fee. (In the event of an
exchange for Class A shares of a Keystone America Fund, the applicable front-end
sales charge will be imposed.) Investors who wish to have the ability to
exchange their shares for Class B or Class C shares of other Keystone America
Funds should consider purchasing Class B or Class C shares of the Fund,
depending on the amount and intended length of the investment.
The Fund will not normally accept any purchase of Class B shares in the
amount of $250,000 or more, and will not normally accept any purchase of Class C
shares in the amount of $1,000,000 or more.
CLASS A SHARES
Class A shares are offered at net asset value without an initial sales
charge.
CLASS A DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class A
shares (the "Class A Distribution Plan") that provides for expenditures by the
Fund, currently limited to 0.25% annually of the average daily net asset value
of Class A shares, to pay expenses associated with the distribution of Class A
shares. Amounts paid by the Fund to the Principal Underwriter under the Class A
Distribution Plan are currently used to pay others, such as broker-dealers,
service fees at an annual rate of up to 0.25% of the average daily net asset
value of Class A shares maintained by such recipients and outstanding on the
books of the Fund for specified periods.
CLASS B SHARES
Class B shares are offered at net asset value, without an initial sales
charge.
With respect to Class B shares purchased on or after June 1, 1995, the
Fund, with certain exceptions, imposes a deferred sales charge in accordance
with the following schedule:
DEFERRED
SALES
CHARGE
REDEMPTION TIMING IMPOSED
- ---------------------------------- ---------
First twelve-month period .................................... 5.00%
Second twelve-month period ................................... 4.00%
Third twelve-month period .................................... 3.00%
Fourth twelve-month period ................................... 3.00%
Fifth twelve-month period .................................... 2.00%
Sixth twelve-month period .................................... 1.00%
No deferred sales charge is imposed on amounts redeemed thereafter.
With respect to Class B shares sold prior to June 1, 1995, the Fund,
with certain exceptions, imposes a deferred sales charge of 3.00% on shares
redeemed during the calendar year of purchase and the first calendar year after
the year of purchase; 2.00% on shares redeemed during the second calendar year
after the year of purchase; and 1.00% on shares redeemed during the third
calendar year after the year of purchase. No deferred sales charge is imposed on
amounts redeemed thereafter.
When imposed, the deferred sales charge is deducted from the redemption
proceeds otherwise payable to you. The deferred sales charge is retained by the
Principal Underwriter. Amounts received by the Principal Underwriter under the
Class B Distribution Plans are reduced by deferred sales charges retained by the
Principal Underwriter. See "Contingent Deferred Sales Charge and Waiver of Sales
Charges" below.
Class B shares purchased on or after June 1, 1995 that have been
outstanding for eight years from and including the month of purchase will
automatically convert to Class A shares (which are subject to a lower
Distribution Plan charge) without imposition of an exchange fee. Class B shares
purchased prior to June 1, 1995 will similarly convert to Class A shares at the
end of seven calendar years after the year of purchase. (Conversion of Class B
shares represented by share certificates will require the return of the share
certificates to KIRC.) The Class B shares so converted will no longer be subject
to the higher expenses borne by Class B shares. It is the Fund's opinion that
such a conversion will not constitute a taxable event under current federal
income tax law. In the event that this ceases to be the case, the Board of
Trustees will consider what action, if any, is appropriate and in the best
interests of the Class B shareholders.
CLASS B DISTRIBUTION PLANS
The Fund has adopted Distribution Plans with respect to its Class B
shares (the "Class B Distribution Plans") that provide for expenditures at an
annual rate of up to 1.00% of the average daily net asset value of Class B
shares to pay expenses of the distribution of Class B shares. Payments under the
Class B Distribution Plans are currently made to the Principal Underwriter
(which may reallow all or part to others, such as broker-dealers) (1) as
commissions for Class B shares sold and (2) as shareholder service fees. Amounts
paid or accrued to the Principal Underwriter under (1) and (2) in the aggregate
may not exceed the annual limitation referred to above.
The Principal Underwriter generally reallows to broker-dealers or
others a commission equal to 4.00% of the price paid for each Class B share sold
plus the first year's service fee in advance in the amount of 0.25% of the price
paid for each Class B share sold. Beginning approximately 12 months after the
purchase of a Class B share, the broker-dealer or other party will receive
service fees at an annual rate of 0.25% of the average daily net asset value of
such Class B share maintained by the recipient and outstanding on the books of
the Fund for specified periods. See "Distribution Plans" below.
CLASS C SHARES
Class C shares are offered only through broker-dealers who have special
distribution agreements with the Principal Underwriter. Class C shares are
offered at net asset value, without an initial sales charge. With certain
exceptions, the Fund may impose a deferred sales charge of 1.00% on shares
redeemed within one year after the date of purchase. No deferred sales charge is
imposed on amounts redeemed thereafter. If imposed, the deferred sales charge is
deducted from the redemption proceeds otherwise payable to you. The deferred
sales charge is retained by the Principal Underwriter. See "Contingent Deferred
Sales Charge and Waiver of Sales Charges" below.
CLASS C DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class C
shares (the "Class C Distribution Plan") that provides for expenditures at an
annual rate of up to 1.00% of the average daily net asset value of Class C
shares to pay expenses of the distribution of Class C shares. Amounts paid by
the Fund under the Class C Distribution Plan are currently made to the Principal
Underwriter (which may reallow all or part to others, such as broker-dealers)
(1) as commissions for Class C shares sold and (2) as shareholder service fees.
Amounts paid or accrued to the Principal Underwriter under (1) or (2) in the
aggregate may not exceed the annual limitation referred to above.
The Principal Underwriter generally reallows to broker-dealers or
others a commission in the amount of 0.75% of the price paid for each Class C
share sold, plus the first year's service fee in advance in the amount of 0.25%
of the price of each Class C share sold, and, beginning approximately fifteen
months after purchase, a commission at an annual rate of 0.75% (subject to NASD
rules -- see "Distribution Plans") plus service fees at an annual rate of 0.25%,
respectively, of the average daily net asset value of each Class C share
maintained by such recipients and outstanding on the books of the Fund for
specified periods. See "Distribution Plans" below.
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CONTINGENT DEFERRED SALES CHARGE AND WAIVER OF SALES CHARGES
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Any contingent deferred sales charge imposed upon the redemption of
Class B or Class C shares is a percentage of the lesser of (1) the net asset
value of the shares redeemed or (2) the net asset value at the time of purchase
of such shares.
No contingent deferred sales charge is imposed when you redeem amounts
derived from (1) increases in the value of your account above the net cost of
such shares due to increases in the net asset value per share of the Fund; (2)
certain shares with respect to which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of dividend income and
capital gains distributions; (3) Class B shares held during more than four
consecutive calendar years or more than 72 months, as the case may be; or (4)
Class C shares held for more than one year. Upon request for redemption, shares
not subject to the contingent deferred sales charge will be redeemed first.
Thereafter, shares held the longest will be the first to be redeemed.
The Fund also may sell Class A, Class B or Class C shares at net asset
value without a contingent deferred sales charge to certain Directors, Trustees,
officers and employees of the Fund and Keystone and certain of their affiliates,
to registered representatives of firms with dealer agreements with the Principal
Underwriter and to a bank or trust company acting as a trustee for a single
account. For more information, see the statement of additional information.
In addition, no contingent deferred sales charge is imposed on a
redemption of shares of the Fund in the event of (1) death or disability of the
shareholder; (2) a lump-sum distribution from a 401(k) plan or other benefit
plan qualified under the Employee Retirement Income Security Act of 1974
("ERISA"); (3) automatic withdrawals from ERISA plans if the shareholder is at
least 59 1/2 years old; (4) involuntary redemptions of accounts having an
aggregate net asset value of less than $1,000; (5) automatic withdrawals under
the Systematic Income Plan of up to 1.5% per month of the shareholder's initial
account balance; (6) withdrawals consisting of loan proceeds to a retirement
plan participant; (7) financial hardship withdrawals made by a retirement plan
participant; or (8) withdrawals consisting of returns of excess contributions or
excess deferral amounts made to a retirement plan participant.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS
The Principal Underwriter may, from time to time, provide promotional
incentives, including reallowance of up to the entire sales charge, to certain
broker-dealers whose representatives have sold or are pected to sell significant
amounts of Fund shares. In addition, broker-dealers may, from time to time,
receive additional cash payments. The Principal Underwriter may also provide
written information to broker-dealers with whom it has dealer agreements that
relates to sales incentive campaigns conducted by such broker-dealers for their
representatives as well as financial assistance in connection with pre-approved
seminars, conferences and advertising. No such programs or additional
compensation will be offered to the extent they are prohibited by the laws of
any state or any self-regulatory agency such as the NASD.
The Principal Underwriter may, at its own expense, pay concessions in
addition to those described above to broker-dealers that satisfy certain
criteria established from time to time by the Principal Underwriter. These
conditions relate to increasing sales of shares of the Keystone funds over
specified periods and certain other factors. Such payments may, depending on the
broker-dealer's satisfaction of the required conditions, be periodic and may be
up to 0.25% of the value of shares sold by such dealer.
The Principal Underwriter also may pay a transaction fee (up to the
level of the payments made allowable to broker-dealers for the sale of such
shares, as described above) to banks and other financial services firms that
facilitate transactions in shares of the Fund for their clients.
The Glass-Steagall Act currently limits the ability of a depository
institution (such as a commercial bank or a savings and loan association) to
become an underwriter or distributor of securities. In the event the
Glass-Steagall Act is deemed to prohibit depository institutions from accepting
payments under the arrangement described above, or should Congress relax current
restrictions on depository institutions, the Board of Trustees will consider
what action, if any, is appropriate.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as broker-dealers pursuant to state
law.
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DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
As discussed above, the Fund bears some of the costs of selling its
shares under Distribution Plans adopted with respect to its Class A, Class B and
Class C shares pursuant to Rule 12b-1 under the 1940 Act.
The NASD limits the amount that the Fund may pay annually in
distribution costs for sale of its shares and shareholder service fees to 1% of
the aggregate average daily net asset value of its shares, of which 0.75% may be
used to pay such distribution costs and 0.25% may be used to pay shareholder
service fees. The NASD also limits the aggregate amount that the Fund may pay
for such distribution costs to 6.25% of gross share sales since the inception of
the 12b-1 Distribution Plan, plus interest at the prime rate plus 1% on such
amounts (less any deferred sales charges paid by shareholders to the Principal
Underwriter) remaining unpaid from time to time.
The Principal Underwriter intends, but is not obligated, to continue to
pay or accrue distribution charges incurred in connection with the Class B
Distribution Plans that exceed current annual payments permitted to be received
by the Principal Underwriter from the Fund. The Principal Underwriter intends to
seek full payment of such charges from the Fund (together with annual interest
thereon at the prime rate plus one percent) at such time in the future as, and
to the extent that, payment thereof by the Fund would be within the permitted
limits. If the Fund's Independent Trustees authorize such payments, the effect
would be to extend the period of time during which the Fund incurs the maximum
amount of costs allowed by a Distribution Plan.
In connection with financing its distribution costs, including
commission advances to broker-dealers and others, the Principal Underwriter has
sold to a financial institution substantially all of its 12b-1 fee collection
rights and contingent deferred sales charge collection rights in respect of
Class B shares sold during the two-year period commencing approximately June 1,
1995. The Fund has agreed not to reduce the rate of payment of 12b-1 fees in
respect of such Class B shares unless it terminates such shares' Distribution
Plan completely. If it terminates such Distribution Plan, the Fund may be
subject to possible adverse distribution consequences.
Each of the Distribution Plans may be terminated at any time by vote of
the Independent Trustees or by vote of a majority of the outstanding voting
shares of the respective class. If a Distribution Plan is terminated, the
Principal Underwriter will ask the Independent Trustees to take whatever action
they deem appropriate under the circumstances.
Unreimbursed distribution expenses at June 30, 1996 were $1,069,672 for
Class B shares purchased prior to June 1, 1995 (10.65% of such Class B net
assets at June 30, 1996); $201,443 for Class B shares purchased on or after June
1, 1995 (2.01% of such Class B net assets at June 30, 1996); and $1,036,758 for
Class C shares (31.56% of Class C net assets at June 30, 1996).
For the year ended June 30, 1996, the Fund paid the Principal
Underwriter $148,564 under its Class A Distribution Plan; $77,113 for Class B
shares sold prior to June 1, 1995, and $25,876 for Class B shares sold on or
after June 1, 1995, under its Class B Distribution Plans; and $27,202 under its
Class C Distribution Plan.
Broker-dealers or others may receive different levels of compensation
depending on which class of shares they sell. Payments pursuant to a
Distribution Plan are included in the operating expenses of the class.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may redeem Fund shares for cash at their net redemption value,
expected to be a constant $1.00 per share, upon written order to the Fund c/o
KIRC, and presentation to the Fund of a properly endorsed share certificate (if
certificates have been issued). Your signature(s) on the written order and
certificates must be guaranteed as described below. In order to redeem by
telephone or to engage in telephone transactions generally, you must complete
the authorization in your account application. Proceeds for shares redeemed on
telephonic order will be deposited by wire or EFT only to the bank account
designated in your account application.
You may also redeem your shares through broker-dealers. The Principal
Underwriter, acting as agent for
the Fund, stands ready to repurchase Fund shares upon orders from broker-dealers
and will calculate the net asset value on the same terms as those orders for the
purchase of shares received from broker-dealers and described under "How to Buy
Shares." If the Principal Underwriter has received proper documentation, it will
pay the redemption proceeds, less any applicable deferred sales charge, to the
broker-dealer placing the order within seven days thereafter. The Principal
Underwriter charges no fee for this service. Your broker-dealer, however, may
charge a fee.
If imposed, the deferred sales charge is deducted from the redemption
proceeds otherwise payable to you.
REDEMPTION OF SHARES IN GENERAL
At various times, the Fund may be requested to redeem shares for which
it has not yet received good payment. In such a case, the Fund will mail the
redemption proceeds upon clearance of the purchase check, which may take 15 days
or more. Any delay may be avoided by purchasing shares either with a certified
check, by Federal Reserve or bank wire of funds, or by EFT. Although the mailing
of a redemption check or the wiring or EFT of redemption proceeds may be
delayed, the redemption value will be determined and the redemption processed in
the ordinary course of business upon receipt of proper documentation. In such a
case, after the redemption and prior to the release of the proceeds, no
appreciation or depreciation will occur in the value of the redeemed shares, and
no interest will be paid on the redemption proceeds. If the payment of a
redemption has been delayed, the check will be mailed or the proceeds wired or
sent EFT promptly after good payment has been collected.
The Fund computes the amount due you at the close of the Exchange at
the end of the day on which it has received all proper documentation from you.
Payment of the amount due on redemption, less any applicable contingent deferred
sales charge (as described above), will be made within seven days thereafter
except as discussed herein.
For your protection, SIGNATURES ON CERTIFICATES, STOCK POWERS AND ALL
WRITTEN ORDERS OR AUTHORIZATIONS MUST BE GUARANTEED BY A U.S. STOCK EXCHANGE
MEMBER, A BANK OR OTHER PERSONS ELIGIBLE TO GUARANTEE SIGNATURES UNDER THE
SECURITIES EXCHANGE ACT OF 1934 AND KIRC'S POLICIES. The Fund and KIRC may not
only waive this requirement, but may also require additional documents in
certain cases. Currently, the requirement for a signature guarantee has been
waived on redemptions of $50,000 or less when the account address of record has
been the same for a minimum period of 30 days. The Fund and KIRC reserve the
right to withdraw this waiver at any time.
If the Fund receives a redemption order, but you have not clearly
indicated the amount of money or number of shares involved, the Fund cannot
execute the order. In such case, the Fund will request the missing information
from you and process the order on the day such information is received.
BY CHECK
If requested, the Fund will establish a checking account for each class
of shares held by the shareholder with State Street Bank and Trust Company
("State Street"). Checks may be drawn for $500 or more and may be payable to
anyone. When a check is presented to State Street for payment, it will cause the
Fund to redeem, at the net asset value next determined, a sufficient number of
the shareholder's shares to cover the check. A shareholder thereby receives the
daily dividends declared on the shares to be redeemed to cover the check through
the day State Street instructs the Fund to redeem them. There is currently no
charge to the shareholder for this checking account.
BY TELEPHONE
A shareholder may redeem any amount from his or her account by calling
toll-free 1-800-343-2898 or by using the Keystone Automated Response Line
("KARL"). (See the "Shareholder Services" section of this prospectus for a
description of KARL.) To engage in telephone transactions generally, you must
complete the appropriate sections of the Fund's application.
In order to insure that instructions received by KIRC are genuine when
you initiate a telephone transaction, you will be asked to verify certain
criteria specific to your account. At the conclusion of the transaction, you
will be given a transaction number confirming your request, and written
confirmation of your transaction will be mailed the next business day. Your
telephone instructions will be recorded. Redemptions by telephone are allowed
only if the address and bank account of record have been the same for a minimum
period of 30 days.
If you cannot reach the Fund by telephone, you should follow the
procedures for redeeming by mail or through a broker-dealer as set forth herein.
SMALL ACCOUNTS
Because of the high cost of maintaining small accounts, the Fund
reserves the right to redeem your account if its value has fallen below $1,000,
the current minimum investment level, as a result of your redemptions (but not
as a result of market action). You will be notified in writing and allowed 60
days to increase the value of your account to the minimum investment level. No
deferred sales charges are applied to such redemptions.
GENERAL
The checking account described in this prospectus will be subject to
State Street's rules and regulations governing checking accounts. If there is an
insufficient number of shares in a shareholder's account when a check is
presented to State Street for payment, the check will be returned. If a
shareholder presents a check on his or her account in person to State Street, it
will be treated as a redemption by mail received that day.
The Fund reserves the right, at any time, to terminate, suspend or
change the terms of any redemption method described in this prospectus, except
redemption by mail, and to impose fees. State Street reserves the right, at any
time, to terminate, suspend or change the terms of the offered checking account
and to impose fees.
Except as otherwise noted, neither the Fund, KIRC nor the Principal
Underwriter assumes responsibility for the authenticity of any instructions
received by any of them from a shareholder in writing, over KARL or by
telephone. KIRC will employ reasonable procedures to confirm that instructions
received over KARL or by telephone are genuine. Neither the Fund, KIRC nor the
Principal Underwriter will be liable when following instructions received over
KARL or by telephone that KIRC reasonably believes to be genuine. If, for any
reason, reasonable procedures are not followed, the Fund, KIRC, or the Principal
Underwriter may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may temporarily suspend the right to redeem its shares when
(1) the Exchange is closed, other than customary weekend and holiday closings;
(2) trading on the Exchange is restricted; (3) an emergency exists and the Fund
cannot dispose of its investments or fairly determine their value; or (4) the
Securities and Exchange Commission so orders.
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SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
KEYSTONE AUTOMATED RESPONSE LINE
KARL offers shareholders specific fund account information and price
and yield quotations as well as the ability to effect account transactions,
including investments, exchanges and redemptions. Shareholders may access KARL
by dialing toll-free 1-800-346-3858 on any touch-tone telephone, 24 hours a day,
seven days a week.
EXCHANGES
A shareholder who has obtained the appropriate prospectus may exchange
Class A shares of the Fund that were purchased directly for shares of any of the
funds in the Keystone Fund Family. This exchange privilege may be restricted for
shareholders wishing to exchange Class A Fund shares that the shareholder
acquired in a prior exchange transaction using shares of any fund in the
Keystone Fund Family.
A Fund shareholder exchanging into any such Keystone fund acquires his
or her shares subject to the sales charges, deferred sales charges or other fees
imposed by the new fund as they may apply.
In addition, you may exchange shares of the Fund for shares of Keystone
America Funds as follows:
Class A shares may be exchanged for Class A shares of certain
Keystone America Funds;
Class B shares, except as noted below, may be exchanged for the
same type of Class B shares of certain Keystone America Funds; and
Class C shares may be exchanged for Class C shares of certain
Keystone America Funds.
Class B shares purchased on or after June 1, 1995 cannot be exchanged
for Class B shares of Keystone Capital Preservation and Income Fund during the
24-month period commencing with and including the month of original purchase.
The exchange of Class B shares and Class C shares will not be subject
to a contingent deferred sales charge. However, if the shares being tendered for
exchange are:
(1) Class B shares that have been held for less than 72 months or four
years, as the case may be, or
(2) Class C shares that have been held for less than one year,
and are still subject to a deferred sales charge, such charge will carry over to
the shares being acquired in the exchange transaction.
You may exchange shares by calling toll free 1-800-343-2898, by writing
KIRC or by calling KARL.
Subject to the foregoing restrictions, Fund shares purchased by check
may be exchanged for shares of the named funds, other than Keystone Precious
Metal Holdings, Inc. ("KPMH"). In order to exchange Fund shares for
shares of KPMH, a shareholder must have held Fund shares for a period of six
months.
You may exchange shares for another Keystone fund for a $10 fee by
calling or writing to Keystone. The exchange fee is waived for individual
investors who make an exchange using KARL. As noted above, if the shares being
exchanged are still subject to a deferred sales charge, such charge will carry
over to the shares being acquired in the exchange transaction. Shares of the
Fund purchased directly and not by prior exchange into the Fund are not subject
to an exchange fee upon exchange into another fund. The Fund reserves the right
to terminate this exchange offer or to change the fee charged for any exchange.
Orders for exchanges received by the Fund prior to 4:00 p.m. eastern
time on any day the Fund is open for business will be executed at the respective
net asset values determined as of the close of business that day. Orders for
exchanges received after 4:00 p.m. eastern time on any business day will be
executed at the respective net asset values determined at the close of the next
business day.
An excessive number of exchanges may be disadvantageous to the Fund.
Therefore, the Fund, in addition to its right to reject any exchange, reserves
the right to terminate the exchange privilege of any shareholder who makes more
than five exchanges of shares of the funds in a year or three in a calendar
quarter.
An exchange order must comply with the requirements for a redemption or
repurchase order and must specify the dollar value or number of shares to be
exchanged. An exchange constitutes a sale for federal income tax purposes.
The exchange privilege is available only in states where shares of the
fund being acquired may legally be sold.
AUTOMATIC INVESTMENT PLAN
With a Keystone Automatic Investment Plan, you can automatically
transfer as little as $100 per month or quarter from your bank account or from
the Fund to the Keystone fund of your choice. Your bank account will be debited
for each transfer. You will receive confirmation with your next account
statement.
To establish or terminate an Automatic Investment Plan or to change the
amount or schedule of your automatic investments, you may write to or call
Keystone. Please include your account numbers. Termination may take up to 30
days.
DOLLAR COST AVERAGING
Subject to the exchange restrictions set forth below and any other
applicable exchange restrictions, you may elect to have a prestated amount
automatically exchanged from your Fund account to any other Keystone fund. This
exchange may be made either monthly or quarterly. There is a $100 minimum for
each exchange, and there may be a minimal charge for each transaction. Upon
written notice, you may change the amount to be exchanged, the frequency or the
fund designated to receive such exchanges.
SYSTEMATIC INCOME PLAN
Under the Fund's Systematic Income Plan, shareholders may request that
they receive a monthly check in any specified amount of $100 or more. Upon
written notice, the frequency and amount of such payments may be changed by the
shareholder at any time. Depending upon the amount requested to be paid, the
Fund's yield and the size of the shareholder's account, the specified
distribution may in part include some return of capital. If the return of
capital is continued it may possibly exhaust the shareholder's investment in the
Fund.
RETIREMENT PLANS
The Fund has various retirement plans available to investors, including
Individual Retirement Accounts (IRAs); Rollover IRAs; Simplified Employee
Pension Plans (SEPs); Salary Reduction Plans (SARSEPs); Tax Sheltered Annuity
Plans (TSAs); 403(b)(7) Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans;
and Money Purchase Pension Plans. For details, including fees and application
forms, call toll free 1-800-247-4075 or write to KIRC.
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PERFORMANCE DATA
- --------------------------------------------------------------------------------
From time to time, the Fund may advertise "yield" and "effective
yield." BOTH YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS. PAST PERFORMANCE
SHOULD NOT BE CONSIDERED REPRESENTATIVE OF RESULTS FOR ANY FUTURE PERIOD OF
TIME. Yields are calculated separately for each class of shares of the Fund.
The "yield" of a class refers to the income generated by an investment
in the Fund over a stated seven-day period. This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly,
but, when annualized, the income earned by an investment in the Fund is assumed
to be reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. See the
statement of additional information for more complete information concerning
performance calculations.
The Fund may also include comparative performance information for each
class of shares in advertising or marketing the Fund's shares, such as data from
Lipper Analytical Services, Inc., Morningstar, Inc., Standard & Poor's
Corporation and Ibbotson Associates or other industry publications.
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FUND SHARES
- --------------------------------------------------------------------------------
The Fund issues Class A, B, and C shares that participate in dividends
and distributions and have equal voting, liquidation and other rights except
that (1) expenses related to the distribution of each class of shares or other
expenses that the Board of Trustees may designate as class expenses from time to
time, are borne solely by each class; (2) each class of shares has exclusive
voting rights with respect to its Distribution Plan; (3) each class has
different exchange privileges; and (4) each class has a different designation.
When issued and paid for, the shares will be fully paid and nonassessable by the
Fund. Shares may be exchanged as explained under "Shareholder Services," but
will have no other preference, conversion, exchange or preemptive rights. Shares
are redeemable, transferable and freely assignable as collateral. The Fund may
establish additional classes or series of shares.
Shareholders are entitled to one vote for each full share owned and
fractional votes for fractional shares. Shares of the Fund vote together except
when required by law to vote separately by class. The Fund does not have annual
meetings. The Fund will have special meetings, from time to time, as required
under its Declaration of Trust, as supplemented (the "Declaration of Trust") and
under the 1940 Act. As provided in the Fund's Declaration of Trust, shareholders
have the right to remove Trustees by an affirmative vote of a majority of the
outstanding shares. A special meeting of the shareholders will be held when
holders of 10% of the outstanding shares request a meeting for the purpose of
removing a Trustee.
The Fund is prepared to assist shareholders in communications with one
another for the purpose of convening such a meeting as prescribed by Section
16(c) of the 1940 Act.
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ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
KIRC, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034,
is a wholly-owned subsidiary of Keystone and serves as the Fund's transfer agent
and dividend disbursing agent.
When the Fund determines from its records that more than one account in
the Fund is registered in the name of a shareholder or shareholders having the
same address, upon written notice to those shareholders, the Fund intends, when
an annual report or semi-annual report of the Fund is required to be furnished,
to mail one copy of such report to that address.
Except as otherwise stated in this prospectus or required by law, the
Fund reserves the right to change the terms of the offer stated in this
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
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ADDITIONAL INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
The Fund may engage in the following investment practices to the
extent described in the prospectus and the statement of additional information.
COMMERCIAL PAPER
The Fund's investments in commercial paper are limited to those rated
A-1 by S&P, Prime-1 by Moody's or F-1 by Fitch. These are the highest ratings
assigned by such rating services.
OBLIGATIONS OF FOREIGN BRANCHES OF UNITED STATES BANKS
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by government regulation.
Payment of interest and principal upon these obligations may also be affected by
governmental action in the country of domicile of the branch (generally referred
to as sovereign risk). In addition, evidences of ownership of such securities
may be held outside the U.S., and the Fund may be subject to the risks
associated with the holding of such property overseas. Examples of governmental
actions would be the imposition of currency controls, interest limitations,
withholding taxes, seizure of assets or the declaration of a moratorium. Various
provisions of federal law governing domestic branches do not apply to foreign
branches of domestic banks.
OBLIGATIONS OF UNITED STATES BRANCHES OF FOREIGN BANKS
Obligations of U.S. branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation as well as by governmental action in the country in which the foreign
bank has its head office. In addition, there may be less publicly available
information about a U.S. branch of a foreign bank than about a domestic bank.
ILLIQUID SECURITIES
The Fund may invest in restricted securities, including securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (the
"1933 Act"). Generally, Rule 144A establishes a safe harbor from the
registration requirements of the 1933 Act for resales by large institutional
investors of securities not publicly traded in the U.S. The Fund may purchase
Rule 144A securities when such securities present an attractive investment
opportunity and otherwise meet the Fund's selection criteria. The Board of
Trustees has adopted guidelines and procedures pursuant to which Keystone
determines the liquidity of the Fund's Rule 144A securities. The Board of
Trustees monitors Keystone's implementation of such guidelines and procedures.
At the present time, the Fund cannot accurately predict exactly how the
market for Rule 144A securities will develop. A Rule 144A security that was
readily marketable upon purchase may subsequently become illiquid. In such an
event, the Board of Trustees will consider what action, if any, is appropriate.
MASTER DEMAND NOTES
Master demand notes are unsecured obligations that permit the
investment of fluctuating amounts by the Fund at varying rates of interest
pursuant to direct arrangements between the Fund, as lender, and the issuer, as
borrower. Master demand notes may permit daily fluctuations in the interest rate
and daily changes in the amount borrowed. The Fund has the right to increase the
amount under the note at any time up to the full amount provided by the note
agreement or to decrease the amount. The borrower may repay up to the full
amount of the note without penalty. Notes purchased by the Fund permit the Fund
to demand payment of principal and accrued interest at any time (on not more
than seven days' notice) and to resell the note at any time to a third party.
Notes acquired by the Fund may have maturities of more than one year, provided
that (1) the Fund is entitled to payment of principal and accrued interest upon
not more than seven days' notice, and (2) the rate of interest on such notes is
adjusted automatically at periodic intervals, which normally will not exceed 31
days but may extend up to one year. The notes are deemed to have a maturity
equal to the longer of the period remaining to the next interest rate adjustment
or the demand notice period. Because these types of notes are direct lending
arrangements between the lender and the borrower, such instruments are not
normally traded, and there is no secondary market for these notes, although they
are redeemable and thus repayable by the borrower at face value plus accrued
interest at any time. Accordingly, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. In
connection with master demand note arrangements, Keystone considers, under
standards established by the Fund's Board of Trustees, earning power, cash flow
and other liquidity ratios of the borrower and will monitor the ability of the
borrower to pay principal and interest on demand. These notes typically are not
rated by credit rating agencies. Unless rated, the Fund will invest in them only
if, at the time of investment, the issuer meets the criteria established for
commercial paper.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed by Keystone
to be creditworthy. Such persons must be registered as U.S. government
securities dealers with an appropriate regulatory organization. Under such
agreements, the bank, primary dealer or other financial institution agrees upon
entering into the contract to repurchase the security at a mutually agreed upon
date and price, thereby determining the yield during the term of the agreement.
This results in a fixed rate of return insulated from market fluctuations during
such period. Under a repurchase agreement, the seller must maintain the value of
the securities subject to the agreement at not less than the repurchase price,
such value being determined on a daily basis by marking the underlying
securities to their market value. Although the securities subject to the
repurchase agreement might bear maturities exceeding a year, the Fund intends
only to enter into repurchase agreements which provide for settlement within a
year and usually within seven days. Securities subject to repurchase agreements
will be held by the Fund's custodian or in the Federal Reserve book entry
system. The Fund does not bear the risk of a decline in the value of the
underlying security unless the seller defaults under its repurchase obligation.
In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses including (1) possible declines in the value of the
underlying securities during the period while the Fund seeks to enforce its
rights thereto; (2) possible subnormal levels of income and lack of access to
income during this period; and (3) expenses of enforcing its rights. The Board
of Trustees has established procedures to evaluate the creditworthiness of each
party with whom the Fund enters into repurchase agreements by setting guidelines
and standards of review for Keystone and monitoring Keystone's actions with
regard to repurchase agreements.
REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, the Fund would sell securities
and agree to repurchase them at a mutually agreed upon date and price. The Fund
intends to enter into reverse repurchase agreements to avoid otherwise having to
sell securities during unfavorable market conditions in order to meet
redemptions. At the time the Fund enters into a reverse repurchase agreement, it
will establish a segregated account with the Fund's custodian containing liquid
assets such as U.S. government securities or other high grade debt securities
having a value not less than the repurchase price (including accrued interest)
and will subsequently monitor the account to ensure such value is maintained.
Reverse repurchase agreements involve the risk that the market value of the
securities that the Fund is obligated to repurchase may decline below the
repurchase price.
"WHEN ISSUED" SECURITIES
The Fund may also purchase and sell securities on a when issued or
delayed delivery basis and may purchase or sell securities on a forward
commitment basis. When issued or delayed delivery transactions arise when
securities are purchased by the Fund with payment and delivery taking place in
the future in order to secure what is considered to be an advantageous price and
yield to the Fund at the time of purchase. A forward commitment transaction is
an agreement by the Fund to purchase or sell securities at a specified future
date. When the Fund engages in when issued and delayed delivery transactions,
the Fund relies on the buyer or seller, as the case may be, to consummate the
sale. Failure to do so may result in the Fund missing the opportunity to obtain
a price or yield considered to be advantageous. When issued and delayed delivery
transactions may be expected to occur a month or more before delivery is due. No
payment or delivery is made by the Fund, however, until it receives payment or
delivery from the other party to the transaction. A separate account of liquid
assets equal to the value of such purchase commitments may be maintained until
payment is made.
When issued and delayed delivery agreements are subject to risks from
changes in value based upon changes in the level of interest rates and other
market factors, both before and after delivery. The Fund does not accrue any
income on such securities or currencies prior to their delivery. To the extent
the Fund engages in when issued and delayed delivery transactions, it will do so
consistent with its investment objective and policies and not for the purpose of
investment leverage. The Fund currently does not intend to invest more than 5%
of its assets in when issued or delayed delivery transactions.
CERTIFICATE OF RESOLUTIONS INSTRUCTIONS: Please fill in all information
requested. Any change in the information must be made by a new Certificate of
Resolutions.
1. VOTED: That STATE STREET BANK AND TRUST COMPANY, Boston, Massachusetts
"State Street"), its successors or assigns, be and hereby is designated
a depository of this corporation or business trust, and is authorized
and directed to pay and to charge to the account of this corporation or
business trust without limit as to amount and without inquiry as to
circumstance of issue or disposition of the proceeds, even if drawn or
endorsed to any signing or endorsing officer or other officer of this
corporation or business trust or tendered in payment of the individual
obligation of any such officer or for his credit or for deposit to his
personal account, any and all checks, drafts, notes, bills of exchange,
or other orders for the payment of money upon State Street, its
successors or assigns, or payable at the office thereof and signed on
behalf of this corporation or business trust by any ------------ of its
following officers, to wit (insert titles of officers rather than their
names):
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2. VOTED: That ---------------------------- is hereby authorized from time
(Title)
to time (a) to complete and execute on behalf of this
corporation or business trust one or more applications issued by
Keystone Liquid Trust substantially in the form attached to its current
prospectus and (b) to designate the bank and account referred to under
Paragraph F-2, TELEPHONE REDEMPTIONS of such application.
3. VOTED: That the preceding votes shall remain in full force and effect
until terminated by a subsequent vote and until written notice signed
by the Secretary (Clerk) of this corporation or business trust of such
subsequent vote is delivered in the case of Vote 1 to State Street and
in the case of Vote 2 to Keystone Liquid Trust.
I, ------------------------------, (Secretary) (Clerk) of
---------------------------------- , a corporation or business trust
organized under the laws of the State of
---------------------------------------------------, do hereby certify
that the above votes were duly adopted by the Board of Directors or
Trustees of said corporation or business trust on the -----------day of
-------------------- 19 --------, in conformity with its Charter (or
Trust Agreement) and By-Laws and are in full force and effect.
I further certify that the following persons are authorized to act in
accordance with the foregoing vote, that the signatures set opposite
their names are their true and correct signatures and that they have
been duly elected or appointed to the offices in this corporation or
business trust, if any, set opposite their names:
-------------------- --------------------- ------------------------
Name Signature Title
-------------------- --------------------- ------------------------
Name Signature Title
In witness whereof, I hereunto set my hand and the seal of said
corporation or business trust this
----------------------------- day of -------------------- 19 -------- .
*Confirmed
----------------------------- -----------------------------------
Secretary
Clerk
-----------------------------
(Title)
*If the Secretary, Clerk or other recording officer is authorized to
act by the above resolutions, this certificate must be signed by
another officer.
<PAGE>
[Logo} KEYSTONE
INVESTMENTS
Keystone Investment Distributors Company
200 Berkeley Street
Boston, Massachusetts 02116-5034
[Recycle Logo]
KEYSTONE
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Photo:
Grandfather pushing
Grandson on Bicycle
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LIQUID
TRUST
[Logo]
PROSPECTUS AND
APPLICATION
<PAGE>
KEYSTONE LIQUID TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
KEYSTONE LIQUID TRUST
OCTOBER 31, 1996
This statement of additional information is not a prospectus, but
relates to, and should be read in conjunction with, the prospectus of Keystone
Liquid Trust (the "Fund") dated October 31, 1996. A copy of the prospectus may
be obtained from Keystone Investment Distributors Company (the "Principal
Underwriter"), the Fund's principal underwriter, 200 Berkeley Street, Boston, MA
02116-5034, or your broker-dealer.
TABLE OF CONTENTS
Page
Investment Objective and Policies 2
Investment Restrictions 2
Distributions 5
Valuation of Securities 5
Brokerage 6
Sales Charges 8
Distribution Plans 11
Trustees and Officers 15
Investment Manager 20
Investment Adviser 22
Principal Underwriter 25
Declaration of Trust 27
Yield Quotations 29
Additional Information 30
Appendix A-1
Financial Statements F-1
Independent Auditors' Report F-12
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund is an open-end, diversified management investment company. The
Fund's investment objective is to provide shareholders with high current income
from short-term money market instruments while emphasizing preservation of
capital and maintaining excellent liquidity. The Fund pursues this objective by
investing in securities maturing in 397 days or less. See the Appendix to this
statement of additional information for descriptions of instruments in which the
Fund may invest.
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 of the Fund's
outstanding voting shares (as defined in the Investment Company Act of 1940 (the
"1940 Act"), which means the lesser of (1) 67% of the shares represented at a
meeting at which more than 50% of the outstanding shares are represented or (2)
more than 50% of the outstanding shares).
The Fund may not do the following:
(1) invest more than 25% of its assets in the securities of issuers in
any single industry, exclusive of securities issued by banks or securities
issued or guaranteed by the United States ("U.S.") government, its agencies or
instrumentalities;
(2) invest more than 5% of its assets in the securities of any one
issuer, including repurchase agreements with any one bank or dealer, exclusive
of securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities;
(3) invest in more than 10% of the outstanding securities of any one
issuer, exclusive of securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities;
(4) borrow money, except that, in an aggregate amount not to exceed
one-third of the Fund's assets, including the amount borrowed, the Fund may (a)
borrow money from banks on a temporary basis; or (b) enter into reverse
repurchase agreements; amounts borrowed shall be used exclusively to facilitate
the orderly maturation and sale of portfolio securities during any periods of
abnormally heavy redemption requests, if they should occur;
(5) pledge, hypothecate or in any manner transfer as security for
indebtedness any securities owned or held by the Fund, except as may be
necessary in connection with any borrowing mentioned above and in an aggregate
amount not to exceed 15% of the Fund's assets;
(6) make loans, provided that the Fund may purchase money market
securities or enter into repurchase agreements;
(7) enter into repurchase agreements if, as a result thereof, more than
10% of the Fund's assets would be subject to repurchase agreements maturing in
more than seven days;
(8) make investments for the purpose of exercising control over any
issuer;
(9) purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;
(10) invest in real estate, other than money market securities secured
by real estate or interests therein, or money market securities issued by
companies which invest in real estate or interests therein, commodities or
commodity contracts, interests in oil, gas or other mineral exploration or
development programs; except that the Fund may engage in currency or other
financial futures contracts and related options transactions;
(11) purchase any securities on margin;
(12) make short sales of securities or maintain a short position or
write, purchase or sell puts, calls, straddles, spreads or combinations thereof;
(13) invest in securities of issuers, other than agencies and
instrumentalities of the U.S. government, having a record, together with
predecessors, of less than three years of continuous operation if more than 5%
of the Fund's assets would be invested in such securities;
(14) purchase or retain securities of an issuer if those officers or
Trustees of the Fund or Keystone who individually own more than 1/2% of the
outstanding securities of such issuer, together own more than 5% of the
securities of such issuer; and
(15) act as an underwriter of securities.
The Fund has no current intention of attempting to increase its net
income by borrowing and currently intends to repay any borrowings made in
accordance with the fourth investment restriction enumerated above before it
makes any additional investments.
NON-FUNDAMENTAL INVESTMENT POLICIES
The Fund intends to follow policies of the Securities and Exchange
Commission (the "Commission") as they are adopted from time to time with respect
to illiquid securities, including (1) treating as illiquid securities that may
not be sold or disposed of in the ordinary course of business within seven days
at approximately the value at which the Fund has valued the investment on its
books; and (2) limiting its holdings of such securities to less than 10% of net
assets.
If a percentage limit is satisfied at the time of investment or
borrowing, a later increase or decrease resulting from a change in the value of
a security or a decrease in Fund assets is not a violation of the limit.
STATE UNDERTAKINGS
Although not a fundamental restriction or policy requiring a
shareholder's vote to change, the Fund has agreed that so long as the state
authority requires and shares of the Fund are registered for sale in that state,
the Fund will not pledge or hypothecate more than 10% of its assets.
If and when the Fund invests in zero coupon bonds, the Fund does not
expect to have enough zero coupon bonds to have a material effect on dividends.
Although not a fundamental restriction or policy requiring a shareholder's vote
to change, the Fund has undertaken to a state securities authority to disclose
that zero coupon bonds pay no interest to holders prior to maturity, and the
interest on these securities is reported as incomne to the Fund and distributed
to its shareholders.
DISTRIBUTIONS
The Fund determines and declares dividends from the net income of the
Fund as of the close of trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m. Eastern time for the purpose of pricing Fund shares) on
each day that the Exchange is open for trading (or at such other times as the
Trustees may determine). The Fund distributes those dividends on the last
business day of each month in the form of additional shares at the rate of one
share for each $1.00 distributed or, at the election of the shareholder, in
cash.
VALUATION OF SECURITIES
The Fund values its money market instruments as follows: (1) money
market 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; and
(2) money market investments maturing in more than sixty days for which market
quotations are readily available are valued at current market value. The money
market securities in which the Fund invests are traded primarily in the
over-the-counter market and are valued at the mean between most recent bid and
asked prices or yield equivalent as obtained from dealers that make markets in
such securities. Investments for which market quotations are not readily
available, or for which the markets establishing the most recent bid and asked
prices are closed or inactive, are valued at fair value as determined pursuant
to procedures established in good faith by the Fund's Board of Trustees.
REDEMPTION OF SHARES
The Fund has obligated itself under the 1940 Act to redeem for cash all
shares presented for redemption by any one shareholder in any 90-day period up
to the lesser of $250,000 or 1% of the Fund's net assets at the beginning of
such period.
BROKERAGE
It is the policy of Keystone Investment Management Company
("Keystone"), the Fund's investment adviser, in effecting transactions in the
Fund's 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 broker's 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 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, Keystone Management, Inc.
("Keystone Management"), the Fund's investment manager, or Keystone is
considered to be in addition to, and not in lieu of, services required to be
performed by Keystone Management under its Management Agreement with the Fund
(the "Management Agreement") or Keystone under its Advisory Agreement with
Keystone Management (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 Management and Keystone
who may indirectly benefit from the availability of such information. Similarly,
the Fund may indirectly benefit from information made available as a result of
transactions effected for such other clients.
The Fund expects that purchases and sales of money market instruments
usually will be principal transactions. Money market instruments are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. There usually will be no brokerage commissions paid by the Fund
for such purchases. Purchases from underwriters will include the underwriting
commission or concession, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices. 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 purchase directly from an issuer of certain securities, thereby taking
advantage of the lower purchase price available to such a group.
Neither Keystone nor the Fund intends to place securities transactions
with any particular broker-dealer or group thereof. The Fund's Board of Trustees
has determined, however, that the Fund may consider sales of Fund shares as a
factor when selecting broker-dealers to execute portfolio transactions, subject
to the requirements of best execution described above.
The policy of the Fund with respect to brokerage is and will be
reviewed by the Fund's Board of Trustees from time to time. Because of the
possibility of further regulatory developments affecting the securities
exchanges and brokerage practices generally, the foregoing practices may be
changed, modified or eliminated.
Investment decisions for the Fund are made by Keystone Management or
Keystone independently from those of the other funds and investment accounts
managed by Keystone Management or Keystone. It may frequently develop that the
same investment decision is made for more than one fund. Simultaneous
transactions are inevitable when the same security is suitable for the
investment objective of more than one account. When two or more funds or
accounts are engaged in the purchase or sale of the same security, Keystone will
allocate the transactions as to amount in accordance with a formula which is
equitable to each fund or account. Although in some cases this system could have
a detrimental effect on the price or volume of the Fund's portfolio securities,
the Fund recognizes that, in other cases its ability to participate in volume
transactions will produce better executions.
In no instance will portfolio securities be purchased from or sold to
Keystone Management, Keystone, the Principal Underwriter or any of their
affiliated persons, as defined in the 1940 Act and rules and regulations issued
thereunder.
The Fund paid no brokerage commissions for securities transactions
during its last three fiscal years.
SALES CHARGES
GENERAL
The Fund offers Class A, B, and C shares. Class A shares are offered at
net asset value without a sales charge ("No Load Option"). Class B shares
purchased on or after June 1, 1995 are subject to a contingent deferred sales
charge if redeemed during the 72-month period from and including the month of
purchase ("Back-End Load Option"). Class B shares purchased prior to June 1,
1995 are sold subject to a contingent deferred sales charge payable upon
redemption within four calendar years after the first year of purchase. Class B
shares purchased on or after June 1, 1995 that have been outstanding eight years
from and including the month of purchase will automatically convert to Class A
shares without the imposition of a front-end sales charge or exchange fee. Class
B shares purchased prior to June 1, 1995 that have been outstanding during seven
calendar years will similarly convert to Class A shares. (Conversion of Class B
shares represented by stock certificates will require the return of the stock
certificates to Keystone Investor Resource Center, Inc., the Fund's transfer and
dividend disbursing agent ("KIRC").) Class C shares are sold subject to a
contingent deferred sales charge payable upon redemption within one year after
purchase ("Level Load Option"). Class C shares are available only through
broker-dealers who have entered into special distribution agreements with the
Principal Underwriter. The prospectus contains a general description of how
investors may buy shares of the Fund and a description of applicable contingent
deferred sales charges.
CONTINGENT DEFERRED SALES CHARGES
In order to reimburse the Fund for certain expenses relating to the
sale of its shares (see "Distribution Plans"), a contingent deferred sales
charge is imposed at the time of redemption of certain Fund shares; as described
below. If imposed, the deferred sales charge is deducted from the redemption
proceeds otherwise payable to you. The deferred sales charge is retained by the
Principal Underwriter. See "Calculation of Contingent Deferred Sales Charge"
below.
CLASS B SHARES
With respect to Class B shares purchased on or after June 1, 1995, the
Fund, with certain exceptions, will impose a deferred sales charge on Class B
shares redeemed during succeeding twelve-month periods as follows: 5% during the
first twelve-month period; 4% during the second twelve-month period; 3% during
the third twelve-month period; 3% during the fourth twelve-month period; 2%
during the fifth twelve-month period; and 1% during the sixth twelve-month
period. No deferred sales charge is imposed on amounts redeemed thereafter.
With respect to Class B shares purchased prior to June 1, 1995, the
Fund, with certain exceptions, will impose a deferred sales charge of 3% on
shares redeemed during the calendar year of purchase and during the first
calendar year after purchase; 2% on shares redeemed during the second calendar
year after purchase; and 1% on shares redeemed during the third calendar year
after purchase. No deferred sales charge is imposed on amounts redeemed
thereafter.
Amounts received by the Principal Underwriter under the Class B
Distribution Plans are reduced by deferred sales charges retained by the
Principal Underwriter. See "Calculation of Contingent Deferred Sales Charge"
below.
CLASS C SHARES
With certain exceptions, the Fund will impose a deferred sales charge
of 1% on shares redeemed within one year after the date of purchase. No deferred
sales charge is imposed on amounts redeemed thereafter.
CALCULATION OF CONTINGENT DEFERRED SALES CHARGE
Any contingent deferred sales charge imposed upon the redemption of
Class B or Class C shares is a percentage of the lesser of (1) the net asset
value of the shares redeemed or (2) the net cost of such shares.
No contingent deferred sales charge is imposed when you redeem amounts
derived from (1) increases in the value of your account above the net cost of
such shares; (2) certain shares with respect to which the Fund did not pay a
commission on issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions; (3) Class B shares held more
than four consecutive calendar years or more than 72 months as the case may be;
or (4)Class C shares held for more than one year from date of purchase.
Upon request for redemption, shares not subject to the contingent
deferred sales charge will be redeemed first. Thereafter, shares held the
longest will be the first to be redeemed. There is no contingent deferred sales
charge when the shares of a class are exchanged for the shares of the same class
of another Keystone America Fund. Moreover, when shares of one such class of a
fund have been exchanged for shares of another such class of a fund, the
calendar year of the purchase, for purposes of any future deferred sales charge,
is deemed to be the year shares tendered for exchange were originally purchased.
WAIVER OF DEFERRED SALES CHARGE
No contingent deferred sales charge is imposed on a redemption of
shares of the Fund in the event of (1) death or disability of the shareholder;
(2) a lump-sum distribution from a benefit plan qualified under the Employee
Retirement Income Security Act of 1974 ("ERISA"); (3) automatic withdrawals from
ERISA plans if the shareholder is at least 59 1/2 years old; (4) involuntary
redemptions of accounts having an aggregate net asset value of less than $1,000;
(5) automatic withdrawals under a Systematic Income Plan of up to 1.5% of the
shareholder's initial account balance per month; (6) withdrawals consisting of
loan proceeds to a retirement plan participant; (7) financial hardship
withdrawals made by a retirement plan participant; or (8) withdrawals consisting
of returns of excess contributions or excess deferral amounts made to a
retirement plan participant.
DISTRIBUTION PLANS
Rule 12b-1 under the 1940 Act permits investment companies, such as the
Fund, to use their assets to bear expenses of distributing their shares, if they
comply with various conditions, including adoption of a Distribution Plan
containing certain provisions set forth in Rule 12b-1.
The National Association of Securities Dealers, Inc. ("NASD") limits
the amount that the Fund may pay annually in distribution costs for sale of its
shares and shareholder service fees. The NASD limits annual expenditures to 1%
of the aggregate average daily net asset value of its shares, of which 0.75% may
be used to pay distribution costs and 0.25% may be used to pay shareholder
service fees. The NASD also limits the aggregate amount that the Fund may pay
for distribution costs to 6.25% of gross share sales since the inception of the
Distribution Plan, plus interest at the prime rate plus 1% on such amounts (less
any contingent deferred sales charges paid by shareholders to the Principal
Underwriter) remaining unpaid from time to time.
CLASS A DISTRIBUTION PLAN
The Class A Distribution Plan provides that the Fund may expend daily
amounts at an annual rate that is currently limited to 0.25% of the Fund's
average daily net asset value attributable to Class A shares to finance any
activity that is primarily intended to result in the sale of Class A shares,
including, without limitation, expenditures consisting of payments to a
principal underwriter of the Fund (currently the Principal Underwriter) to
enable the Principal Underwriter to pay or to have paid to others who sell Class
A shares a service fee or other fee, at such intervals as the Principal
Underwriter may determine, in respect of Class A shares maintained by such
recipients and outstanding on the books of the Fund for specified periods.
Amounts paid by the Fund under the Class A Distribution Plan are
currently used to pay others, such as broker-dealers, service fees at an annual
rate of up to 0.25% of the average daily net asset value of Class A shares
maintained by such others and outstanding on the books of the Fund for specified
periods.
CLASS B DISTRIBUTION PLANS
The Fund has adopted Class B Distribution Plans that provide that the
Fund may expend daily amounts at an annual rate of up to 1.00% of the Fund's
average daily net asset value attributable to Class B shares to finance any
activity that is primarily intended to result in the sale of Class B shares,
including, without limitation, expenditures consisting of payments to a
principal underwriter of the Fund (currently the Principal Underwriter) (1) to
enable the Principal Underwriter to pay to others (broker-dealers) commissions
in respect of Class B shares sold since inception of the Distribution Plan; and
(2) to enable the Principal Underwriter to pay or to have paid to others a
service fee, at such intervals as the Principal Underwriter may determine, in
respect of Class B shares previously maintained by any such recipients and
outstanding on the books of the Fund for specified periods.
The Principal Underwriter generally reallows to broker-dealers or
others a commission equal to 4.00% of the price paid for each Class B share sold
plus the first year's service fee in advance in the amount of 0.25% of the price
paid for each Class B share sold. Beginning approximately 12 months after the
purchase of a Class B share, the broker-dealer or other party receives service
fees at an annual rate of 0.25% of the average daily net asset value of such
Class B share maintained by any such recipients and outstanding on the books of
the Fund for specified periods.
In connection with financing its distribution costs, including
commission advances to broker-dealers and others, the Principal Underwriter has
sold to a financial institution substantially all of its 12b-1 fee collection
rights and contingent deferred sales charge collection rights in respect of
Class B shares sold during the two-year period commencing approximately June 1,
1995. The Fund has agreed not to reduce the rate of payment of 12b-1 fees in
respect of such Class B shares unless it terminates such shares' Distribution
Plan completely. If it terminates such Distribution Plan, the Fund may be
subject to adverse distribution consequences.
The Principal Underwriter intends, but is not obligated, to continue to
pay or accrue distribution charges incurred in connection with each Class B
Distribution Plan that exceed current annual payments permitted to be received
by the Principal Underwriter from the Fund. The Principal Underwriter intends to
seek full payment of such charges from the Fund (together with annual interest
thereon at the prime rate plus 1%) at such time in the future as, and to the
extent that, payment thereof by the Fund would be within the permitted limits.
If the Fund's Independent Trustees authorize such payments, the effect
would be to extend the period of time during which the Fund incurs the maximum
amount of costs allowed by a Class B Distribution Plan. If a Class B
Distribution Plan is terminated, the Principal Underwriter will ask the
Independent Trustees to take whatever action they deem appropriate under the
circumstances with respect to payment of such amounts.
CLASS C DISTRIBUTION PLAN
The Class C Distribution Plan provides that the Fund may expend daily
amounts at an annual rate of up to 1.00% of the Fund's average daily net asset
value attributable to Class C shares, to finance any activity that is primarily
intended to result in the sale of Class C shares, including, without limitation,
expenditures consisting of payments to a principal underwriter of the Fund
(currently the Principal Underwriter) (1) to enable the Principal Underwriter to
pay to others (broker-dealers) commissions in respect of Class C shares sold
since inception of the Distribution Plan; and (2) to enable the Principal
Underwriter to pay or to have paid to others a service fee, at such intervals as
the Principal Underwriter may determine, in respect of Class C shares maintained
by any such recipients and outstanding on the books of the Fund for specified
periods.
The Principal Underwriter generally reallows to broker-dealers or
others a commission in the amount of 0.75% of the price paid for each Class C
share sold plus the first year's service fee in advance in the amount of 0.25%
of the price paid for each Class C share sold. Beginning approximately fifteen
months after purchase, broker-dealers or others receive a commission at an
annual rate of 0.75% (subject to NASD rules) plus service fees at the annual
rate of 0.25% of the average daily net asset value of each Class C share
maintained by such recipients and outstanding on the books of the Fund for
specified periods.
DISTRIBUTION PLANS - GENERAL
Each of the Distribution Plans may be terminated at any time by vote of
the Fund's Trustees who had no direct or indirect financial interest in the
Distribution Plans or any agreement related thereto (the "Rule 12b-1 Trustees"),
or by vote of a majority of the outstanding voting shares of the respective
class of the Fund. Any change in a Distribution Plan that would materially
increase the distribution expenses of the Fund provided for in the Distribution
Plan requires shareholder approval. Otherwise, the Distribution Plans may be
amended by the Trustees, including the Rule 12b-1 Trustees.
While a Distribution Plan is in effect, the Fund will be required to
commit the selection and nomination of candidates for Trustees who are not
interested persons of the Fund (as defined in the 1940 Act)(the "Independent
Trustees") to the discretion of the Independent Trustees.
The total amounts paid by the Fund under the foregoing arrangements may
not exceed the maximum Distribution Plan limits specified above. The amounts and
purposes of expenditures under a Distribution Plan must be reported to the Rule
12b-1 Trustees quarterly. The Rule 12b-1 Trustees may require or approve changes
in the implementation or operation of a Distribution Plan and may also require
that total expenditures by the Fund under a Distribution Plan be kept within
limits lower than the maximum amount permitted by a Distribution Plan as stated
above.
Whether any expenditure under a Distribution Plan is subject to a state
expense limit will depend upon the nature of the expenditure and the terms of
the state law, regulation or order imposing the limit. A portion of the Fund's
Distribution Plan expenses may be includable in the Fund's total operating
expenses for purposes of determining compliance with state expense limits.
During the year ended June 30, 1996, the Fund paid the Principal
Underwriter $148,564, $77,113, $25,876 and $27,202 in Distribution Plan fees for
Class A shares, Class B shares sold prior to June 1, 1995, Class B shares sold
on or after June 1, 1995 and Class C shares, respectively, which represented
0.06%, 0.89%, 0.30% and 1.00%, respectively, of the average net assets of each
Class.
The Independent Trustees of the Fund have determined that the sales of
the Fund's shares resulting from payments under the Distribution Plans have
benefited the Fund.
TRUSTEES AND OFFICERS
Trustees and officers of the Fund, their principal occupations and some
of their affiliations over the last five years are as follows:
*ALBERT H. ELFNER, III: President, Chief Executive Officer and Trustee of the
Fund; Chairman of the Board, President and Chief Executive Officer of
Keystone Investments, Keystone, Keystone Management and Keystone
Software, Inc. ("Keystone Software"); President, Chief Executive
Officer and Trustee or Director of all other funds in the Keystone
Investments Family of Funds; Chairman of the Board and Director of
Keystone Institutional Company, Inc. ("Keystone Institutional")and
Keystone Fixed Income Advisors ("KFIA"); Director and President of
Keystone Asset Corporation, Keystone Capital Corporation and Keystone
Trust Company; Director of the Principal Underwriter, 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, Robert Van Partners, Inc.; and former Trustee of Neworld
Bank.
FREDERICK AMLING: Trustee of the Fund; Trustee or Director of all other funds in
the Keystone Investments Family of Funds; Pro fessor, Finance
Department, George Washington University; President, Amling & Company
(investment advice); and former Member, Board of Advisers, Credito
Emilano (banking).
CHARLES A. AUSTIN III: Trustee of the Fund; Trustee or Director of all other
funds in the Keystone Investments Family of Funds; Investment Counselor
to Appleton Partners, Inc.; and former Managing Director, Seaward
Management Corporation (in vestment advice).
*GEORGE S. BISSELL: Chairman of the Board and Trustee of the Fund; Chairman of
the Board and Trustee or Director of all other funds in the Keystone
Investments Family of Funds; Director of Keystone Investments; Chairman
of the Board and Trustee of Anatolia College; Trustee of University
Hospital (and Chairman of its Investment Committee); former Director
and Chairman of the Board of Hartwell Keystone; and former Chairman of
the Board and Chief Executive Officer of Keystone Investments.
EDWIN D. CAMPBELL: Trustee of the Fund; Trustee or Director of all other
funds in the Keystone Investments Family of Funds; Principal, Padanaram
Associates, Inc.; and former Executive Director, Coalition of Essential
Schools, Brown University.
CHARLES F. CHAPIN: Trustee of the Fund; Trustee or Director of all other funds
in the Keystone Investments Family of Funds; and former Director,
Peoples Bank (Charlotte, NC).
K. DUN GIFFORD: Trustee of the Fund; Trustee or Director of all other
funds in the Keystone Investments Family of Funds; Trustee, Treasurer,
and Chairman of the Finance Committee, Cambridge College; Chairman
Emeritus and Director, American Institute of Food and Wine; Chairman
and President, Oldways Preservation and Exchange Trust (education);
Former Chairman of the Board, Director, and Executive Vice President,
The London Harness Company; former Managing Partner, Roscommon Capital
Corp.; former Chief Executive Officer, Gifford Gifts of Fine Foods;
former Chairman, Gifford, Drescher & Associates (environmental
consulting); and former Director, Keystone Investments and Keystone.
LEROY KEITH, JR.: Trustee of the Fund; Trustee or Director of all other funds
in the Keystone Investments Family of Funds; Chairman of the Board and
Chief Executive Officer, Carson Products Company; 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.
F. RAY KEYSER, JR.: Trustee of the Fund; Trustee or Director of all other
funds in the Keystone Investments Family of Funds; Chairman and Of
Counsel, Keyser, Crowley, Meub, Layden, Kulig & Sullivan P.C.; Member,
Governor's (VT) Council of Economic Advisers; Chairman of the Board and
Director, Central Vermont Public Service Corporation and Lahey
Hitchcock Clinic; Di rector, Vermont Yankee Nuclear Power Corporation,
Grand Trunk Corporation, Grand Trunk Western Railroad, Union Mutual
Fire Insurance Company, New England Guaranty Insurance Company, Inc.,
and the Investment Company Institute; former Director and President,
Associated Industries of Vermont; former Director of Keystone, Central
Vermont Railway, Inc., S.K.I. Ltd., and Arrow Financial Corp.; and
former Director and Chairman of the Board, Hitchcock Clinic, Proctor
Bank, and Green Mountain Bank.
DAVID M. RICHARDSON: Trustee of the Fund; Trustee or Director of all other
funds in the Keystone Investments Family of Funds; Vice Chair and
former Executive Vice President, DHR Interna tional, 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 funds
in the Keystone Investments Family of Funds; Chairman, Environmental
Warranty, Inc. (insurance agency); Executive Consultant, Drake Beam
Morin, Inc. (executive outplacement); Director of Connecticut Natural
Gas Corpora tion, Hartford Hospital, Old State House Association,
Middlesex Mutual Assurance Company, and Enhance Financial Services,
Inc.; Chairman, Board of Trustees, Hartford Graduate Center; Trustee,
Greater Hartford YMCA; former Director, Vice Chairman and Chief
Investment Officer, The Travelers Corpora tion; former Trustee,
Kingswood-Oxford School; and former Managing Director and Consultant,
Russell Miller, Inc.
ANDREW J. SIMONS: Trustee of the Fund; Trustee or Director of all other funds
in the Keystone Investments Family of Funds; Partner, Farrell, Fritz,
Caemmerer, Cleary, Barnosky & Armentano, P.C.; Adjunct Professor of Law
and former Associate Dean, St. John's University School of Law; Adjunct
Professor of Law, Touro College School of Law; and former President,
Nassau County Bar Association.
EDWARD F. GODFREY: Senior Vice President of the Fund; Senior Vice President of
all other funds in the Keystone Investments Family of Funds; Director,
Senior Vice President, Chief Financial Officer, and Treasurer of
Keystone Investments, the Principal Underwriter, Keystone Asset
Corporation, Keystone Capital Corporation, and Keystone Trust Company;
Treasurer of Keystone Institutional and FICO; Treasurer and Director of
Keystone Management and Keystone Software; Vice President and Treasurer
of KFIA; Director of KIRC; former Treasurer and Director of Hartwell
Keystone; and former Treasurer of Robert Van Partners, Inc.
JAMES R. McCALL: Senior Vice President of the Fund; Senior Vice President of
all other funds in the Keystone Investments Family of Funds; and
President of Keystone.
J. KEVIN KENELY: Treasurer of the Fund; Treasurer of all other funds in
the Keystone Investments Family of Funds; Vice President and former
Controller of Keystone Investments, Keystone, the Principal
Underwriter, FICO, and Keystone Software; and former 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 funds in the Keystone
Investments Family of Funds; Senior Vice President, General Counsel,
and Secretary of Keystone; Senior Vice President, General Counsel,
Secretary, and Director of the Principal Underwriter, Keystone
Management, and Keystone Software; Senior Vice President and General
Counsel of Keystone Institutional; Senior Vice President, General
Counsel, and Director of FICO and KIRC; Vice President and Secretary of
KFIA; Senior Vice President, General Counsel, and Secretary of Keystone
Investments, Keystone Asset Corporation, Keystone Capital Corporation,
and Keystone Trust Company; and former Senior Vice President and
Secretary of Hartwell Keystone and Robert Van Partners, Inc.
CHRISTOPHER P. CONKEY: Vice President of the Fund; Vice President of certain
other Keystone Investments Funds; and Senior Vice President of
Keystone.
* This Trustee may be considered an "interested person" within the meaning of
the 1940 Act.
Mr. Elfner and Mr. Bissell are "interested persons" of the Fund by
virtue of their positions as officers and/or Directors of Keystone Investments
and several of its affiliates including Keystone, the Principal Underwriter and
KIRC. Mr. Elfner and Mr. Bissell own shares of Keystone Investments. Mr. Elfner
is Chairman of the Board, Chief Executive Officer and Director of Keystone
Investments. Mr. Bissell is a Director of Keystone Investments.
During the fiscal year ended June 30, 1996, no Trustee affiliated with
Keystone or any officer received any direct remuneration from the Fund. Annual
retainers and meeting fees paid by all funds in the Keystone Investments Family
of Funds (which includes over 30 mutual funds) for the calendar year ended
December 31, 1995, totaled approximately $450,716. On September 30, 1996,
Trustees and officers of the Fund beneficially owned less than 1% of the Fund's
then outstanding Class A shares and none of the Fund's then outstanding Class B
and Class C shares.
The address of all Trustees and officers of the Fund and the address of
the Fund is 200 Berkeley Street, Boston, Massachusetts 02116-5034.
INVESTMENT MANAGER
Subject to the general supervision of the Fund's Board of Trustees,
Keystone Management, located at 200 Berkeley Street, Boston, Massachusetts
02116-5034, serves as investment manager to the Fund. As investment manager,
Keystone Management is responsible for the overall management of the Fund's
business and affairs. Keystone Management, organized in 1989, is a wholly-owned
subsidiary of Keystone, and its directors and principal executive officers have
been affiliated with Keystone, a seasoned investment adviser, for a number of
years. Keystone Management also serves as investment manager to each of the
funds in the Keystone Fund Family and to certain other funds in the Keystone
Investments Family of Funds.
Except as otherwise noted below, pursuant to the Management Agreement,
Keystone Management manages and administers the operation of the Fund and
manages the investment and reinvestment of the Fund's assets in conformity with
the Fund's investment objective and restrictions. The Management Agreement
stipulates that Keystone Management shall provide office space and all necessary
facilities, equipment and personnel for management of the Fund's affairs and
shall pay all compensation of employees, officers, and Trustees of the Fund who
are affiliated persons of Keystone and Keystone Management. The Fund shall bear
all other costs and expenses including, but not limited to: (i) interest and
taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv) compensation
and expenses of its Trustees and officers other than those affiliated with
Keystone or Keystone Management; (v) legal, audit and accounting expenses; (vi)
fees and expenses of a custodian and transfer agent; (vii) expenses incident to
the issuance of Fund Shares, including issuance on the payment of, or
reinvestment of, dividends; (viii) fees and expenses of the registration and
qualification of the Fund and its Shares with the Commission or under state
securities laws; (ix) expenses of preparing, printing and mailing prospectuses,
reports, notices and proxy material to shareholders of the fund; (x) all other
expenses incidental to holding meetings of the Fund's shareholders; and (xi)
such nonrecurring expenses as may arise, including litigation affecting the Fund
and the legal obligations with respect to which the Fund may have to indemnify
its officers and Trustees.
The Management Agreement permits Keystone Management to enter into an
agreement with Keystone or another investment adviser, under which Keystone or
such other investment adviser, as investment adviser, will provide substantially
all the services to be provided by Keystone Management under the Management
Agreement. The Management Agreement also permits Keystone Management to delegate
to Keystone or another investment adviser substantially all of the investment
manager's rights, duties and obligations under the Management Agreement.
Services performed by Keystone Management include (1) performing
research and planning with respect to (a) the Fund's qualification as a
regulated investment company under Subchapter M of the Internal Revenue Code
(the "Code"), (b) tax treatment of the Fund's portfolio investments,(c) tax
treatment of special corporate actions (such as reorganizations), (d) state tax
matters affecting the Fund, and (e) the Fund's distributions of income and
capital gains; (2) preparing the Fund's federal and state tax returns; and (3)
providing services to the Fund's shareholders in connection with federal and
state taxation and distributions of income and capital gains.
The Fund pays Keystone Management a fee for its services at the annual
rate of:
(1) 0.50 of 1% of the average daily value of the net assets of the
Fund on the first $500,000,000 of such assets; plus
(2) 0.45% of 1% of the average daily value of the net assets of the
Fund on such assets which exceed $500,000,000 and are less than
$1,000,000,000; plus
(3) 0.40% of 1% of the average daily value of the net assets of the
Fund on such assets which are $1,000,000,000 or more.
The fee is computed and accrued as of the close of each business day
and is payable monthly.
The Fund is subject to certain state annual expense limitations, the
most restrictive of which are as follows:
2.5% of the first $30 million of Fund average net assets;
2.0% of the next $70 million of Fund average net assets; and
1.5% of Fund average net assets over $100 million.
Capital charges and certain expenses, including a portion of the Fund's
Distribution Plan expenses, are not included in the calculation of the state
expense limitations. This limitation may be modified or eliminated in the
future.
As a continuing condition of registration of shares in a state,
Keystone Management 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. Keystone Management is not required, however,
to make such reimbursements to the extent it would result in the Fund's
inability to qualify as a regulated investment company under provisions of the
Code. This condition may be modified or eliminated in the future.
The Management Agreement continues in effect only if approved at least
annually (i) by the Fund's Board of Trustees or by a vote of a majority of the
outstanding shares, and (ii) 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 Management Agreement may be terminated, without penalty, by the
Fund's Board of Trustees or by a vote of a majority of outstanding shares on 60
days' written notice to Keystone Management, and by Keystone Management on 60
days' written notice to the Fund.
INVESTMENT ADVISER
Pursuant to its Management Agreement with the Fund, Keystone Management
has delegated its investment management functions, except for certain
administrative and management services, to Keystone and has entered into the
Advisory Agreement under which Keystone provides investment advisory and
management services to the Fund.
Keystone has provided investment advisory and management services to
investment companies and private accounts since it was organized in 1932.
Keystone is a wholly-owned subsidiary of Keystone Investments. Both Keystone and
Keystone Investments are located at 200 Berkeley Street, Boston, Massachusetts
02116-5034.
Keystone Investments is a private corporation predominantly owned by
current and former members of management of Keystone. 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, Ralph J. Spuehler, Jr., and Rosemary D. Van Antwerp.
Keystone Investments provides accounting, bookkeeping, legal, personnel and
general corporate services to Keystone Management, Keystone, their affiliates
and the Keystone Investments Family of Funds.
Pursuant to the Advisory Agreement, Keystone receives for its services
an annual fee equal to 85% of the management fee received by Keystone Management
under the Management Agreement.
Pursuant to the Advisory Agreement and subject to the supervision of
the Fund's Board of Trustees, Keystone manages and administers the operation of
the Fund 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 and all necessary
facilities, equipment and personnel for management of the Fund's affairs and
shall pay all compensation of employees, officers, and Trustees of the Fund who
are affiliated persons of Keystone and Keystone Management. The Fund shall bear
all other costs and expenses including, but not limited to: (i) interest and
taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv) compensation
and expenses of its Trustees and officers other than those affiliated with
Keystone or Keystone Management; (v) legal, audit and accounting expenses; (vi)
fees and expenses of a custodian and transfer agent; (vii) expenses incident to
the issuance of Fund Shares, including issuance of the payment of, or
reinvestment of, dividends; (viii) fees and expenses of the registration and
qualification of the Fund and its Shares with the Commission or under state
securities laws; (ix) expenses of preparing, printing and mailing prospectuses,
reports, notices and proxy material to shareholders of the fund; (x) all other
expenses incidental to holding meetings of the Fund's shareholders; and (xi)
such nonrecurring expenses as may arise, including litigation affecting the Fund
and the legal obligations with respect to which the Fund may have to indemnify
its officers and Trustees.
During the fiscal year ended June 30, 1994, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$1,407,708, which represented 0.50% of the Fund's average net assets. Of such
amount paid to Keystone Management, $1,196,552 was paid to Keystone for its
services to the Fund.
During the fiscal year ended June 30, 1995, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$1,923,870, which represented 0.50% of the Fund's average net assets. Of such
amount paid to Keystone Management, $1,635,290 was paid to Keystone for its
services to the Fund.
During the fiscal year ended June 30, 1996, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$1,359,239, which represented 0.50% of the Fund's average net assets. Of such
amount paid to Keystone Management, $1,155,353 was paid to Keystone for its
services to the Fund.
Keystone Investments has recently entered into an Agreement and Plan of
Acquisition and Merger with First Union Corporation ("First Union"), pursuant to
which Keystone Investments will be merged with and into a subsidiary of First
Union National Bank of North Carolina ("FUNB-NC")(the "Merger"). The surviving
corporation will be known as Keystone Investments, Inc. FUNB-NC is a
wholly-owned subsidiary of First Union. Subject to a number of conditions being
met, it is currently anticipated that the Merger will take place on or around
December 23, 1996. Thereafter, Keystone Investments, Inc. is expected to be a
subsidiary of FUNB-NC.
If consummated, the proposed Merger will be deemed to cause an
assignment, within the meaning of the 1940 Act, of both the Management Agreement
and the Advisory Agreement. Consequently, the completion of the Merger is
contingent upon, among other things, the approval of the Fund's shareholders of
a new investment advisory agreement between the Fund and Keystone ("the "New
Advisory Agreement"). The Fund's Trustees have approved the terms of the New
Advisory Agreement, subject to the approval of shareholders and the completion
of the Merger, and have called a special meeting of shareholders to obtain their
approval of the New Advisory Agreement. The meeting is expected to be held in
December 1996. The proposed New Advisory Agreement has terms, including fees
payable thereunder, that are substantially identical to those in the current
agreements.
PRINCIPAL UNDERWRITER
The Fund has entered into Principal Underwriting Agreements, (the
"Underwriting Agreements") with the Principal Underwriter, a Delaware
corporation and wholly-owned subsidiary of Keystone.
The Principal Underwriter, as agent, currently has the right to obtain
subscriptions for and to sell shares of the Fund to the public. In so doing, the
Principal Underwriter may retain and employ representatives to promote
distribution of the shares and may obtain orders from broker-dealers or others,
acting as principals, for sales of shares. No representative, dealer or broker
has any authority to act as agent for the Fund. The Principal Underwriter has
not undertaken to buy or to find purchasers for any specific number of shares.
The Principal Underwriter may receive payments from the Fund pursuant to the
Fund's Distribution Plans.
All subscriptions and sales of shares by the Principal Underwriter are
at the offering price of the shares in accordance with the provisions of the
Fund's Declaration of Trust, as supplemented, By-Laws, and current prospectus
and statement of additional information. All orders are subject to acceptance by
the Fund, and the Fund reserves the right, in its sole discretion, to reject any
order received. Under the Underwriting Agreements, the Fund is not liable to
anyone for failure to accept any order.
The Fund has agreed under the Underwriting Agreements to pay all
expenses in connection with registration of its shares with the Commission and
auditing and filing fees in connection with registration of its shares under the
various state "blue-sky" laws.
From time to time, if in the Principal Underwriter's judgement it could
benefit sales of Fund shares, the Principal Underwriter may provide to selected
broker-dealers promotional materials and selling aids including, but not limited
to, personal computers, related software and Fund data files.
The Principal Underwriter has agreed that it will, in all respects,
duly conform with all state and federal laws applicable to the sale of the
shares. The Principal Underwriter has also agreed that it will indemnify and
hold harmless the Fund and each person who has been, is, or may be a Trustee or
officer of the Fund against expenses reasonably incurred by any of them in
connection with any claim, 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 the
Principal Underwriter or any other person for whose acts the Principal
Underwriter is responsible or is alleged to be responsible, unless such
misrepresentation or omission was made in reliance upon written information
furnished by the Fund.
The Underwriting Agreements may be terminated, without penalty, on 60
days' written notice by the Fund's Board of Trustees or by a vote of a majority
of outstanding shares. The Underwriting Agreements will terminate automatically
upon their "assignment," as that term is defined in the 1940 Act.
In addition to an assignment of the Fund's Management Agreement and
Advisory Agreement, the Merger, if consummated, will also be deemed to cause an
assignment, as defined by the 1940 Act, of the Principal Underwriting Agreements
between the Fund and the Principal Underwriter. As a result, the Fund's Trustees
have approved the following agreements, subject to the completion of the Merger:
(i) a principal underwriting agreement between Evergreen Funds Distributor, Inc.
("EFD") and the Fund; (ii) a marketing support agreement between the Principal
Underwriter and EFD with respect to each Fund; and (iii) a subadministration
agreement between the Adviser and EFD with respect to each Fund. EFD is a
wholly-owned subsidiary of Furman Selz LLC. It is expected that on or about
January 2, 1997, Furman Selz LLC will transfer EFD, and its related services, to
BISYS Group, Inc. ("BISYS") (the "Transfer"). The Fund's' Trustees have also
approved, subject to completion of the Transfer: (i) a principal underwriting
agreement with EFD and the Fund; (ii) a marketing support agreement between the
Principal Underwriter and EFD with respect to the Fund; and (iii) a
subadministration agreement between the Adviser and BISYS with respect to the
Fund. The terms of such agreements are substantially identical to the terms of
the agreements to be executed upon completion of the Merger.
DECLARATION OF TRUST
The Fund is a Massachusetts business trust established under a
Declaration of Trust dated May 22, 1975, as amended and restated on December 1,
1985 (the "Declaration of Trust"). The Fund is similar in most respects to a
business corporation. The principal distinction between the Fund and a
corporation relates to the shareholder liability described below. This summary
is qualified in its entirety by reference to the Declaration of Trust.
SHAREHOLDER LIABILITY
Pursuant to certain decisions of the Supreme Judicial Court of
Massachusetts, shareholders of a Massachusetts business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. If, the Fund were held to be a partnership, the possibility of Fund
shareholders incurring financial loss for that reason appears remote because the
Fund's Declaration of Trust (1) contains an express disclaimer of shareholder
liability for obligations of the Fund; (2) requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Fund or the Trustees; and (3) provides for indemnification out
of Fund property for any shareholder held personally liable for the obligations
of the Fund.
VOTING RIGHTS
Shareholders elected Trustees at a meeting held on July 27, 1993. No
further meetings of shareholders for the purpose of electing Trustees will be
held, unless required by law or until such time as less than a majority of the
Trustees holding office have been elected by shareholders. At such time, the
Trustees then in office will call a shareholders' meeting for election of
Trustees.
Except as set forth above, the Trustees shall continue to hold office
indefinitely unless otherwise required by law and may appoint successor
Trustees. Any Trustee may removed from or cease to hold office (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 majority vote of the outstanding shares. Any Trustee may
voluntarily resign from office.
Under the terms of the Declaration of Trust, the Fund does not hold
annual meetings. At meetings called for the initial election of Trustees or to
consider other matters, shares are entitled to one vote per share. Shares
generally vote together as one class on all matters. Classes of shares have
equal voting rights except that each class of shares has exclusive voting rights
with respect to its Distribution Plan. No amendment may be made to the
Declaration of Trust that 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 the holders of more than 50% of the shares voting in
the election of Trustees can, if they choose to do so, elect all of the Trustees
of the Fund, in which event the holders of the remaining shares will be unable
to elect any person as a Trustee.
LIMITATIONS OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only
for his own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, shall not be
liable for any neglect or wrongdoing of any such person; provided, however, that
nothing in the Declaration of Trust shall protect a Trustee against any
liability for his willful misfeasance, bad faith, gross negligence or reckless
disregard of his duties.
The Trustees have absolute and exclusive control over the management
and disposition of assets of the Fund and may perform such acts as in their sole
judgment and discretion are necessary and proper for conducting the business and
affairs of the Fund or promoting the interests of the Fund and the shareholders.
YIELD QUOTATIONS
The current yield of each class of the Fund equals the net change,
exclusive of capital changes (all realized and unrealized gains and losses); in
the value of a hypothetical pre-existing account having a balance of one share
at the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7) and carrying the
resulting current yield figure to the nearest hundredth of one percent. The
determination of net change in account value reflects the value of additional
shares purchased with the dividends from the original share and dividends
declared on both the original share and any such additional shares and all fees
charged to shareholder accounts in proportion to the length of the base period
and the average account size of a class.
If realized and unrealized gains and losses were included in the
calculation of the current yield, the current yield of a class of the Fund might
vary materially from that reported in advertisements.
For the seven day period ended June 30, 1996, the current yields of
Class A, Class B and Class C shares were 4.50%, 3.61%, and 3.61%, respectively.
In addition to the current yield of a class, the Fund may, from time to
time, advertise effective yield. The effective yield is calculated by
compounding the unannualized base period return by adding 1, raising the sum to
a power equal to 365 divided by 7, subtracting 1 from the result and carrying
the resulting effective yield figure to the nearest hundredth of one percent.
For the seven day period ended June 30, 1996, the effective yields of
Class A, Class B and Class C shares were 4.60%, 3.67%, and 3.67%, respectively.
The current and effective yields, as quoted in such advertisements,
will be based on information as of a date no more than fourteen days prior to
the date of their publication. Each yield will vary depending on market
conditions. Principal is not insured. Each yield also depends on the quality,
maturity and type of instruments held in the Fund and operating expenses. The
advertisements will include, among other things, the length of and the date of
the last day in the base period used in computing the quotation.
The yield of any investment is generally a function of quality and
maturity, type of investment and operating expenses. The current yield of a
class of the Fund will fluctuate from time to time and is not necessarily
representative of future results. In addition, past performance is not a
guarantee of future results.
Current yield information is useful in reviewing the Fund's
performance, but because current yield will fluctuate, such information may not
provide a basis for comparison with bank deposits or other investments that pay
a fixed yield for a stated period of time. An investor's principal is not
guaranteed by the Fund.
ADDITIONAL INFORMATION
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the custodian (the "Custodian") of all securities and
cash of the Fund. The Custodian performs no investment management functions for
the Fund, but, in addition to its custodial services, is responsible for
accounting and related record keeping on behalf of the Fund.
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110,
Certified Public Accountants, are the independent auditors for the Fund.
KIRC, located at 200 Berkeley Street, Boston, Massachusetts 02116, is a
wholly-owned subsidiary of Keystone.
As of September 30, 1996, there were no shareholders of record owning
5% or more of the Fund's outstanding Class A shares.
As of September 30, 1996, Charles G. Koch, ATTN: K. Williams, 4111 East
37th St. N, Wichita, KS, 67220 owned 7.945% of the outstanding Class B shares.
As of September 30, 1996, Beacon Council, 80 Southwest 8th Street,
Miami, FL 33130 owned 11.496% of the outstanding Class C 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 dealer, 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, and 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 the registration statement filed with 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.
A-1
APPENDIX
MONEY MARKET INSTRUMENTS
The Fund's investments in commercial paper will consist of issues rated
at the time of investment A-1, by Standard & Poor's Corporation ("S&P"), PRIME-1
OR PRIME-2 by Moody's Investors Service, Inc. ("Moody's") or F-1 OR F-2 by Fitch
Investors Service, Inc. ("Fitch").
COMMERCIAL PAPER RATINGS
STANDARD & POOR'S RATINGS
Commercial paper rated A-1 by S&P 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.
MOODY'S RATINGS
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) eval uation
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.
FITCH'S RATINGS
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 Governm ent
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 Govern ment or its
agencies or instrumentalities include direct obli gations 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 Nation al Mortgage
Association pass-through certificates, are support ed 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 instru mentalities in which the United States Government, its
agencies or instrumentalities participate, such as the World Bank, the Asian
Development Bank or the InterAmerican Development Bank, or issues insured by the
Federal Deposit Insurance Corporation.
CERTIFICATES OF DEPOSIT
Certificates of deposit are receipts issued by a bank in exchange for
the deposit of funds. The issuer agrees to pay the amount deposited plus
interest to the bearer of the receipt on the date specified on the certificate.
The certificate usually can be traded in the secondary market prior to maturity.
Certificates of deposit will be limited to U.S. dollar-denom inated
certificates of U.S. banks, including their branches abroad, and of U.S.
branches of foreign banks, which are members of the Federal Reserve System or
the Federal Deposit Insurance Corporation, and have at least $1 billion in
deposits as of the date of their most recently published financial statements.
The Fund will not acquire time deposits or obligations issued by the
International Bank for Reconstruction and Devel opment, the Asian Development
Bank or the Inter-American Development Bank. Additionally, the Fund does not
currently intend to purchase foreign securities (except to the extent that
certificates of deposit of foreign branches of U.S. banks may be deemed foreign
securities) or purchase certificates of deposit, bankers' acceptances or other
similar obligations issued by foreign banks (except certificates of deposit of
certain U.S. branches of foreign banks).
BANKERS' ACCEPTANCES
Bankers' acceptances typically arise from short-term credit
arrangements designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by the bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Bankers' accep tances acquired by the Fund must have been accepted by U.S.
commercial banks, including foreign branches of U.S. commercial banks, having
total deposits at the time of purchase in excess of $1 billion and must be
payable in U.S. dollars.
ZERO COUPON BONDS
If and when the Fund invests in zero coupon bonds, the Fund does not
expect to have enough zero copuon bonds to have a maerial effect on dividends.
The Fund has undertaken to a state securities authority to disclose that zero
<PAGE>
SCHEDULE OF INVESTMENTS--June 30, 1996
<TABLE>
<CAPTION>
Maturity Principal Market
Date Amount Value
- -------------------------------------------------------- ------- ---------- -------------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT (17.4%)
Algemene Bank Nederland NV, Euro CD, 5.08% 07/16/96 $ 5,000,000 $ 4,999,222
Bayerische Landesbank, Euro CD, 5.41% 10/29/96 5,000,000 4,996,354
Bayerische Vereinsbank, Euro CD, 5.35% 07/05/96 5,000,000 4,999,919
Bayerische Vereinsbank, Yankee CD, 5.12% 08/05/96 5,000,000 4,998,157
Deutsche Bank, Yankee CD, 5.37% 07/15/96 5,000,000 4,999,933
Deutsche Bank AG, New York, Yankee CD, 5.62% 01/15/97 5,000,000 4,994,081
First Alabama Bank, CD, 5.34% 07/29/96 10,000,000 9,999,346
NBD Bank NA, CD, 5.35% 08/07/96 10,000,000 9,999,992
Rabobank Nederland NV, Yankee CD, 5.31% 07/18/96 5,000,000 4,999,562
Union Bank Switzerland, Euro CD, 5.05% 07/08/96 5,000,000 4,999,595
- -------------------------------------------------------- ------- ---------- -------------
TOTAL CERTIFICATES OF DEPOSIT (Cost--$60,002,903) 59,986,161
- --------------------------------------------------------------------------------- -------------
COMMERCIAL PAPER (62.7%)
ABN-AMRO North America Finance Co. 08/22/96 5,000,000 4,961,000
American Express Credit Corp. 07/16/96 5,000,000 4,988,875
American Express Credit Corp. 07/17/96 5,000,000 4,988,156
Ameritech Corp. (b) 08/12/96 7,000,000 6,955,900
Ameritech Corp. 08/23/96 8,000,000 7,936,871
Associates Corp. 07/03/96 5,000,000 4,998,533
Associates Corp. of North America 07/09/96 5,000,000 4,994,122
Associates Corp. of North America 07/12/96 5,000,000 4,991,918
Bell Atlantic Capital Funding Corp. 07/01/96 4,815,000 4,815,000
Bell Atlantic Financial Services, Inc. 07/26/96 10,000,000 9,962,778
BellSouth Telecommunications, Inc. 07/25/96 9,000,000 8,968,320
BellSouth Telecommunications, Inc. 08/27/96 5,000,000 4,957,329
Coca-Cola Co. 07/19/96 5,000,000 4,986,750
Coca-Cola Co. 07/22/96 10,000,000 9,968,967
Commerzbank AG, New York 07/08/96 5,000,000 4,994,828
duPont (E.I.) deNemours & Co. 07/12/96 5,000,000 4,991,887
duPont (E.I.) deNemours & Co. 07/24/96 5,000,000 4,983,006
duPont (E.I.) deNemours & Co. 08/15/96 5,000,000 4,966,563
Emerson Electric Co. 07/23/96 5,000,000 4,983,744
General Electric Co. 07/26/96 6,000,000 5,976,681
General Electric Capital Corp. 08/13/96 5,000,000 4,967,571
General Electric Capital Corp. 01/06/97 5,000,000 4,851,688
Heinz (H.J.) Co. 07/02/96 5,000,000 4,999,267
Heinz (H.J.) Co. 07/18/96 4,500,000 4,488,695
Heinz (H.J.) Co. 07/30/96 5,000,000 4,978,371
Hewlett Packard Co. 07/11/96 5,000,000 4,992,597
Hewlett Packard Co. 07/30/96 5,000,000 4,978,451
Hewlett Packard Co. 08/29/96 4,200,000 4,162,486
(continued on next page)
<PAGE>
PAGE 4
- ----------------------
Keystone Liquid Trust
Maturity Principal Market
Date Amount Value
- -------------------------------------------------------- ------- ---------- -------------
COMMERCIAL PAPER (continued)
Kellogg Co. 07/31/96 $10,400,000 $ 10,353,633
Nestle Capital Corp. 07/02/96 7,000,000 6,998,973
Nestle Capital Corp. 07/16/96 3,100,000 3,093,141
Pitney Bowes Credit Corp. 07/23/96 5,200,000 5,183,285
Proctor & Gamble Co. 07/10/96 10,000,000 9,986,675
Proctor & Gamble Co. 08/28/96 4,500,000 4,460,705
Unilever Capital Corp. (b) 07/09/96 5,000,000 4,994,111
Unilever Capital Corp. (b) 09/03/96 5,500,000 5,446,711
Unilever Capital Corp. (b) 10/15/96 5,000,000 4,919,322
Wal Mart Stores, Inc. 07/01/96 3,825,000 3,825,000
- -------------------------------------------------------- ------- ---------- -------------
TOTAL COMMERCIAL PAPER (Cost--$217,073,278) 217,051,910
- --------------------------------------------------------------------------------- -------------
U.S. GOVERNMENT (AND AGENCY) ISSUES (14.4%)
FFCB, 5.30% 08/01/96 7,000,000 6,999,551
FHLB Medium Term Notes, 5.82% 05/01/97 3,000,000 2,997,639
FHLMC Discount Notes 07/03/96 10,000,000 9,997,083
FHLMC Discount Notes 07/15/96 5,000,000 4,989,763
FHLMC Discount Notes 08/05/96 5,000,000 4,974,333
FHLMC Discount Notes 08/22/96 5,000,000 4,961,650
FNMA Discount Notes 08/06/96 5,150,000 5,122,808
FNMA Discount Notes 08/20/96 5,000,000 4,963,056
FNMA Discount Notes 09/10/96 5,000,000 4,947,243
- -------------------------------------------------------- ------- ---------- -------------
TOTAL U.S. GOVERNMENT (AND AGENCY) ISSUES (Cost--$49,956,759) 49,953,126
- --------------------------------------------------------------------------------- -------------
Maturity
Value
- -------------------------------------------------------- ------- ---------- -------------
REPURCHASE AGREEMENTS (5.6%)
Keystone Joint Repurchase Agreement (Investments in
repurchase agreements, in a joint trading account,
5.55%, purchased 6/28/96) (c) 07/01/96 $18,008,325 18,000,000
State Street Bank & Trust, Co., 5.00%, purchased
6/28/96 (Collateralized by $1,080,000 U.S. Treasury
Bond, 10.75%, due 8/15/05) 07/01/96 1,400,583 1,400,000
- -------------------------------------------------------- ------- ---------- -------------
TOTAL REPURCHASE AGREEMENTS (Cost--$19,400,000) 19,400,000
- --------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (COST--$346,432,940) (a) 346,391,197
OTHER ASSETS AND LIABILITIES--NET (-0.1%) (268,054)
- --------------------------------------------------------------------------------- -------------
NET ASSETS--(100.0%) $346,123,143
- --------------------------------------------------------------------------------- -------------
</TABLE>
<PAGE>
PAGE 5
- ----------------------
SCHEDULE OF INVESTMENTS--June 30, 1996
(a) The cost of investments for federal income tax purposes is identical.
Gross unrealized appreciation and depreciation of investments, based on
identified tax cost, at June 30, 1996 are as follows:
Gross unrealized appreciation $ 0
Gross unrealized depreciation (41,743)
---------
Net unrealized depreciation $(41,743)
=========
(b) Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4(2) of the Federal
Securities Act of 1933, as amended. These securities have been determined
to be liquid under guidelines established by the Board of Trustees.
(c) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at June 30, 1996.
Legend of Portfolio Abbreviations
FFCB--Federal Farm Credit Bank
FHLB--Federal Home Loan Bank
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
See Notes to Financial Statements.
<PAGE>
PAGE 6
- ----------------------
Keystone Liquid Trust
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------
1996 1995 1994 1993 1992
--------------------------------------- ------------ ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------- ------------ ------- ------- ------- ---------
Income from investment operations:
Net investment income .0464 .0454 .0235 .0230 .0386
Net realized and unrealized gain (loss)
on investments (.0001) 0 0 (.0001) .0003
--------------------------------------- ------------ ------- ------- ------- ---------
Total from investment operations .0463 .0454 .0235 .0229 .0389
--------------------------------------- ------------ ------- ------- ------- ---------
Less distributions to shareholders (.0463) (.0454) (.0235) (.0229) (.0389)
--------------------------------------- ------------ ------- ------- ------- ---------
Net asset value end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------- ------------ ------- ------- ------- ---------
Total return 4.73% 4.63% 2.37% 2.31% 3.96%
Ratios/supplemental data
Ratios to average net assets:
Net investment income 4.66% 4.42% 2.50% 2.29% 3.99%
Total expenses 0.98%(a) 0.92% 1.02% 1.11% 1.10%
Net assets end of year (thousands) $332,796 $245,308 $398,617 $189,167 $227,115
--------------------------------------- ------------ ------- ------- ------- ---------
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------
1991 1990 1989 1988 1987
--------------------------------------- ------------ ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------- ------------ ------- ------- ------- ---------
Income from investment operations:
Net investment income .0634 .0760 .0786 .0597 .0524
Net realized and unrealized gain (loss)
on investments 0 0 .0001 (.0001) 0
--------------------------------------- ------------ ------- ------- ------- ---------
Total from investment operations .0634 .0760 .0787 .0596 .0524
--------------------------------------- ------------ ------- ------- ------- ---------
Less distributions to shareholders (.0634) (.0760) (.0787) (.0596) (.0524)
--------------------------------------- ------------ ------- ------- ------- ---------
Net asset value end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------- ------------ ------- ------- ------- ---------
Total return 6.47% 7.81% 8.18% 6.31% 5.35%
Ratios/supplemental data
Ratios to average net assets:
Net investment income 6.51% 7.53% 7.88% 5.99% 5.30%
Total expenses 0.92% 1.00% 1.00% 1.00% 1.00%
Net assets end of year (thousands) $400,597 $406,306 $475,640 $461,032 $375,542
--------------------------------------- ------------ ------- ------- ------- ---------
</TABLE>
(a) "Ratio of total expenses to average net assets" for the year ended June
30, 1996 includes indirectly paid expenses. Excluding indirectly paid
expenses for the year ended June 30, 1996, the expense ratio would have
been 0.95%.
See Notes to Financial Statements.
<PAGE>
PAGE 7
- ----------------------
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
February 1, 1993
Year Ended June 30, (Date of Initial
-------------------------------- Public Offering) to
1996 1995 1994 June 30, 1993
- --------------------------------------------- ------------ ------ ------ --------------------
<S> <C> <C> <C> <C>
Net asset value beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------- ------------ ------ ------ --------------------
Income from investment operations:
Net investment income .0369 .0362 .0142 .0047
Net realized and unrealized loss on
investments 0 0 0 (.0001)
- --------------------------------------------- ------------ ------ ------ --------------------
Total from investment operations .0369 .0362 .0142 .0046
- --------------------------------------------- ------------ ------ ------ --------------------
Less distributions to shareholders (.0369) (.0362) (.0142) (.0046)
- --------------------------------------------- ------------ ------ ------ --------------------
Net asset value end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------- ------------ ------ ------ --------------------
Total return (c) 3.76% 3.68% 1.43% 0.46%
Ratios/supplemental data
Ratios to average net assets:
Net investment income 3.73% 3.66% 1.84% 1.08%(b)
Total expenses 1.91%(a) 1.84% 1.85% 2.15%(b)
Net assets end of year (thousands) $10,042 $ 7,281 $11,198 $ 241
- --------------------------------------------- ------------ ------ ------ --------------------
</TABLE>
(a) "Ratio of total expenses to average net assets" for the year ended June
30, 1996 includes indirectly paid expenses. Excluding indirectly paid
expenses for the year ended June 30, 1996, the expense ratio would have
been 1.88%.
(b) Annualized.
(c) Excluding applicable sales charges.
See Notes to Financial Statements.
<PAGE>
PAGE 8
- ----------------------
Keystone Liquid Trust
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
February 1, 1993
Year Ended June 30, (Date of Initial
-------------------------------- Public Offering) to
1996 1995 1994 June 30, 1993
- --------------------------------------------- ------------ ------ ------ --------------------
<S> <C> <C> <C> <C>
Net asset value beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------- ------------ ------ ------ --------------------
Income from investment operations:
Net investment income .0370 .0362 .0142 .0045
Net realized and unrealized loss on
investments (.0001) 0 0 (.0002)
- --------------------------------------------- ------------ ------ ------ --------------------
Total from investment operations .0369 .0362 .0142 .0043
- --------------------------------------------- ------------ ------ ------ --------------------
Less distributions to shareholders (.0369) (.0362) (.0142) (.0043)
- --------------------------------------------- ------------ ------ ------ --------------------
Net asset value end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------- ------------ ------ ------ --------------------
Total return (c) 3.75% 3.68% 1.43% 0.43%
Ratios/supplemental data
Ratios to average net assets:
Net investment income 3.72% 3.52% 1.97% 1.01% (b)
Total expenses 1.94%(a) 1.82% 1.86% 2.09% (b)
Net assets end of year (thousands) $ 3,285 $ 4,112 $ 6,599 $ 34
- --------------------------------------------- ------------ ------ ------ --------------------
</TABLE>
(a) "Ratio of total expenses to average net assets" for the year ended June
30, 1996 includes indirectly paid expenses. Excluding indirectly paid
expenses for the year ended June 30, 1996, the expense ratio would have
been 1.91%.
(b) Annualized.
(c) Excluding applicable sales charges.
See Notes to Financial Statements.
<PAGE>
PAGE 9
- ----------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
Assets (Note 1)
Investments at market value
(identified cost--$346,432,940) $346,391,197
Cash 147,619
Receivable for:
Fund shares sold 100
Interest 941,675
Prepaid expenses and other assets 56,798
- ------------------------------------------- -------------
Total assets 347,537,389
- ------------------------------------------- -------------
Liabilities (Note 1)
Payable for:
Fund shares redeemed 232,880
Distributions to shareholders 1,132,539
Accrued expenses 48,827
- ------------------------------------------- -------------
Total liabilities 1,414,246
- ------------------------------------------- -------------
Net assets $346,123,143
- ------------------------------------------- -------------
Net assets represented by (Note 2)
Class A Shares ($1.00 a share on
332,795,671 shares outstanding) $332,795,671
Class B Shares ($1.00 a share on
10,042,074 shares outstanding) 10,042,074
Class C Shares ($1.00 a share on 3,285,398
shares outstanding) 3,285,398
- ------------------------------------------- -------------
$346,123,143
- ------------------------------------------- -------------
Net asset value and offering price per
share (Class A, B and C) $1.00
- ------------------------------------------- -------------
STATEMENT OF OPERATIONS
Year Ended June 30, 1996
Investment income (Note 1)
Interest $15,264,626
- -------------------------------------- --------- ------------
Expenses (Notes 2 and 3)
Management fees $1,359,239
Transfer agent fees 759,359
Accounting, auditing and legal fees 52,723
Custodian fees 148,640
Trustees' fees and expenses 34,299
Distribution Plan expenses 278,755
Miscellaneous 149,465
- -------------------------------------- --------- ------------
Total expenses 2,782,480
Less: Expenses paid indirectly
(Note 3) (81,434)
- -------------------------------------- --------- ------------
Net expenses 2,701,046
- -------------------------------------- --------- ------------
Net investment income 12,563,580
- -------------------------------------- --------- ------------
Net realized and unrealized gain
(loss) on investments (Note 1)
Net realized gain on investments 4,475
Net change in unrealized
depreciation on investments (39,780)
- -------------------------------------- --------- ------------
Net realized and unrealized loss on
investments (35,305)
- -------------------------------------- --------- ------------
Net increase in net assets resulting
from operations $12,528,275
- -------------------------------------- --------- ------------
See Notes to Financial Statements.
<PAGE>
PAGE 10
- ----------------------
Keystone Liquid Trust
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------
1996 1995
- ------------------------------------------------------------------------------ ----------- --------------
<S> <C> <C>
Operations
Net investment income $ 12,563,580 $ 16,854,349
Net realized gain (loss) on investments 4,475 (71)
Net change in unrealized depreciation on investments (39,780) (685)
- ------------------------------------------------------------------------------ ----------- --------------
Net increase in net assets resulting from operations 12,528,275 16,853,593
- ------------------------------------------------------------------------------ ----------- --------------
Distributions to shareholders (Note 1)
Class A Shares (12,043,595) (16,168,849)
Class B Shares (383,777) (435,508)
Class C Shares (100,903) (249,236)
- ------------------------------------------------------------------------------ ----------- --------------
Total distributions to shareholders (12,528,275) (16,853,593)
- ------------------------------------------------------------------------------ ----------- --------------
Capital share transactions (Note 2)
Class A Shares 87,487,588 (153,308,964)
Class B Shares 2,760,515 (3,916,029)
Class C Shares (826,275) (2,487,651)
- ------------------------------------------------------------------------------ ----------- --------------
Net increase (decrease) in net assets resulting from capital share
transactions 89,421,828 (159,712,644)
- ------------------------------------------------------------------------------ ----------- --------------
Total increase (decrease) in net assets 89,421,828 (159,712,644)
Net assets
Beginning of year 256,701,315 416,413,959
- ------------------------------------------------------------------------------ ----------- --------------
End of year $346,123,143 $ 256,701,315
- ------------------------------------------------------------------------------ ----------- --------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
PAGE 11
- ----------------------
NOTES TO FINANCIAL STATEMENTS
(1.) Summary of Accounting Policies
Keystone Liquid Trust (the "Fund") is an open-end diversified investment
management company for which Keystone Management, Inc. ("KMI") is the
Investment Manager and Keystone Investment Management Company ("Keystone") is
the Investment Adviser. The Fund is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Fund is a money market mutual
fund that seeks high current income from short-term securities while
preserving capital and maintaining liquidity.
The Fund offers Class A, B, and C shares. Class A shares are offered without
an initial sales charge. Class B shares are offered without an initial sales
charge, although a contingent deferred sales charge may be imposed at the
time of redemption, which decreases depending on when the shares were
purchased and how long the shares have been held. Class C shares are offered
without an initial sales charge, although a contingent deferred sales charge
may be imposed on redemptions within one year of purchase. Class C shares are
available only through dealers who have entered into special distribution
agreements with Keystone Investment Distributors Company ("KIDC"), the Fund's
principal underwriter.
Keystone is a wholly-owned subsidiary of Keystone Investments, Inc. ("KII"),
a Delaware corporation. KII is a private corporation owned by an investor
group consisting predominantly of current and former members of management of
Keystone and its affiliates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles,
which require management to make estimates and assumptions that affect
amounts reported herein. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the net
assets of the Fund.
Valuation of Securities--Money market 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. Money market investments maturing in
more than sixty days for which market quotations are readily available are
valued at current market value. Money market 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.
Repurchase Agreements--When the Fund enters into a repurchase agreement (a
purchase of securities whereby the seller agrees to repurchase the securities
at a mutually agreed upon date and price) the repurchase price of the
securities will generally equal the amount paid by the Fund plus a negotiated
interest amount. The seller under the repurchase agreement will be required
to provide securities (collateral) to the Fund whose value will be maintained
at an amount not less than the repurchase price. The Fund monitors the value
of the collateral on a daily basis, and, if the value of the collateral falls
below required levels, the Fund intends to seek additional collateral from
the seller or terminate the repurchase agreement. If the seller defaults, the
Fund would suffer a loss to the extent that the proceeds from the sale of the
underlying securities were less than the repurchase price. Any such loss
would be increased by any cost incurred on disposing of such securities. If
bankruptcy proceedings are commenced against the seller under the repurchase
agree-
<PAGE>
PAGE 12
- ----------------------
Keystone Liquid Trust
ment, the realization on the collateral may be delayed or limited. Repurchase
agreements entered into by the Fund will be limited to transactions with
dealers or domestic banks believed to present minimal credit risks, and the
Fund will take constructive receipt of all securities underlying repurchase
agreements until such agreements expire.Keystone Liquid Trust
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with certain other Keystone funds, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are fully collateralized
by U.S. Treasury and/or Federal Agency obligations.
Distributions--The Fund declares dividends daily, pays dividends monthly and
automatically reinvests such dividends in additional shares at net asset
value, unless shareholders request payment in cash. Dividends are declared
from the total of net investment income, plus realized and unrealized gain
(loss) on investments.
Securities Transactions and Investment Income--Secu rities transactions are
accounted for no later than one business day after the trade date. Realized
gains and losses from securities transactions are computed on the identified
cost basis. Interest income is recorded on the accrual basis.
Federal Income Taxes--The Fund has qualified, and intends to qualify in the
future, as a regulated investment company under the Internal Revenue Code of
1986, as amended ("Internal Revenue Code"). Thus, the Fund expects to be
relieved of any federal income tax liability by distributing all of its net
tax basis investment income and net tax basis capital gains, if any, to its
shareholders. The Fund intends to avoid any excise tax liability by making
the required distributions under the Internal Revenue Code.
(2.) Shares of Beneficial Interest
The Fund's Declaration of Trust authorizes the issuance of an unlimited
number of shares of beneficial interest without par value. Since the Fund
sold, redeemed and reinvested shares at $1.00 net asset value, the shares and
dollar amount are the same. Transactions in Fund shares were as follows:
Year Ended June 30,
Class A Shares 1996 1995
- -------------------------- ------------ --------------
Sales $ 1,105,810,542 $ 725,781,933
Redemptions (1,027,927,276) (892,973,139)
Reinvestment of
distributions from
available sources 9,604,322 13,882,242
- -------------------------- ------------ --------------
Net increase (decrease) $ 87,487,588 $(153,308,964)
========================== ============ ==============
Class B Shares
- -------------------------- ------------ --------------
Sales $ 31,488,209 $ 30,267,166
Redemptions (29,034,624) (34,518,836)
Reinvestment of
distributions from
available sources 306,930 335,641
- -------------------------- ------------ --------------
Net increase (decrease) $ 2,760,515 $ (3,916,029)
========================== ============ ==============
Class C Shares
- -------------------------- ------------ --------------
Sales $ 7,581,549 $ 11,924,336
Redemptions (8,502,653) (14,624,256)
Reinvestment of
distributions from
available sources 94,829 212,269
- -------------------------- ------------ --------------
Net decrease $ (826,275) $ (2,487,651)
========================== ============ ==============
<PAGE>
PAGE 13
- ----------------------
The Fund bears some of the costs of selling its shares under Distribution
Plans adopted with respect to its Class A, Class B and Class C shares
pursuant to Rule 12b-1 under the 1940 Act.
The Fund's Class A Distribution Plan provides for expenditures, which are
currently limited to 0.25% annually of the average daily net asset value of
Class A shares, to pay expenses associated with the distribution of Class A
shares. Amounts paid by the Fund to KIDC under the Class A Distribution Plan
are currently used to pay others, such as dealers, service fees at an annual
rate of up to 0.25% of the average daily net asset value of Class A shares
maintained by such others.
The Fund's Class B Distribution Plans provide for expenditures at an annual
rate of up to 1.00% of the average daily net asset value of Class B shares to
pay expenses associated with the distribution of Class B shares. For Class B
shares sold on or after June 1, 1995, amounts paid by the Fund under such
shares' Class B Distribution Plan are currently used to pay others (dealers)
a commission at the time of purchase normally equal to 4.00% of the price
paid for each Class B share sold plus the first year's service fee in advance
in the amount of 0.25% of the price paid for each Class B share sold.
Beginning approximately 12 months after the purchase of such Class B shares,
the dealer or other party will receive service fees at an annual rate of
0.25% of the average daily net asset value of such Class B shares maintained
by such others. A contingent deferred sales charge will be imposed, if
applicable, on Class B shares purchased on or after June 1, 1995 at rates
ranging from a maximum of 5% of amounts redeemed during the first 12 month
period from and including the month of purchase to 1% of amounts redeemed
during the sixth twelve month period. Class B shares purchased on or after
June 1, 1995 that have been outstanding for eight years from and including
the month of purchase will automatically convert to Class A shares without a
front-end sales charge or exchange fee. Class B shares purchased prior to
June 1, 1995 convert to Class A shares after seven years.
The Fund's Class C Distribution Plan provides for expenditures at an annual
rate of up to 1.00% of the average daily net asset value of Class C shares to
pay expenses associated with the distribution of Class C shares. Amounts paid
by the Fund under the Class C Distribution Plan are currently used to pay
others (dealers) a commission at the time of purchase in the amount of 0.75%
of the price paid for each Class C share sold plus the first year's service
fee in advance in the amount of 0.25% of the price paid for each Class C
share. Beginning approximately 15 months after purchase date, the dealer or
other party will receive a commission at an annual rate of 0.75% of the
average net asset value (subject to applicable limitations imposed by rules
adopted by the National Association of Securities Dealers, Inc.("NASD")) plus
service fees at the annual rate of 0.25% of the average net asset value of
each Class C share maintained by such others on the Fund's books for
specified periods.
Each of the Distribution Plans may be terminated at any time by a vote of
the Independent Trustees or by vote of a majority of the outstanding voting
shares of the respective class. However, after the termination of any
Distribution Plan, at the discretion of the Board of Trustees, payments to
KIDC may continue as compensation for its services which had been earned
while the Distribution Plans were in effect.
During the year ended June 30, 1996, the Fund paid or accrued to KIDC
$148,564 under its Class A Distribution Plan. During the year ended June 30,
1996 under its Class B Distribution Plans, the Fund
<PAGE>
PAGE 14
- ----------------------
Keystone Liquid Trust
paid or accrued to KIDC $77,113 for Class B shares sold prior to June 1, 1995
and $25,876 for Class B shares sold on or after June 1, 1995. During the year
ended June 30, 1996, the Fund paid or accrued $27,202 under its Class C
Distribution Plan.Keystone Liquid Trust
Under applicable NASD rules, the maximum uncollected amounts for which KIDC
may seek payment from the Fund under its Distribution Plans as of June 30,
1996 are $1,069,672 for Class B shares purchased prior to June 1, 1995,
$201,443 for Class B shares purchased on or after June 1, 1995, and
$1,036,758 for Class C shares.
Presently, the Fund's class-specific expenses are limited to Distribution
Plan expenses incurred by a class of shares pursuant to its Distribution
Plan.
(3.) Investment Management Agreement and Other Transactions
Under the terms of the Investment Management Agreement between KMI and the
Fund, KMI provides investment management and administrative services to the
Fund. In return, KMI is paid a management fee computed and paid daily
calculated by applying percentage rates, starting at 0.50%, and declining as
net assets increase, to 0.40% per annum, to the net asset value of the Fund.
KMI has entered into an Investment Advisory Agreement with Keystone under
which Keystone provides investment advisory and management services to the
Fund and receives for its services an annual fee representing 85% of the
management fee received by KMI.
During the year ended June 30, 1996, the Fund paid or accrued to KMI
investment management and administration services fees of $1,359,239, which
represented 0.50% of the Fund's average net assets. Of such amount paid to
KMI, $1,155,353 was paid to Keystone for its services to the Fund.
During the year ended June 30, 1996, the Fund paid or accrued $17,571 to KII
as reimbursement for certain accounting services provided to the Fund.
Keystone Investor Resource Center, Inc. ("KIRC"), a wholly-owned subsidiary
of Keystone, is the Fund's transfer and dividend disbursing agent. For the
year ended June 30, 1996, the Fund paid or accrued $759,359 to KIRC for
transfer agent fees.
The Fund has entered into an expense offset arrangement with its custodian.
For the year ended June 30, 1996, the Fund paid custody fees in the amount of
$67,206 and received a credit of $81,434 pursuant to the expense offset
arrangement, resulting in a total expense of $148,640. The assets deposited
with the custodian under this expense offset arrangement could have been
invested in income-producing assets.
Certain officers and/or Directors of Keystone are also officers and/or
Trustees of the Fund. Officers of Keystone and affiliated Trustees receive no
compensation directly from the Fund.
- ------------------------------------------------------------------------------
FEDERAL TAX STATUS--FISCAL 1996 DISTRIBUTIONS (Unaudited)
During the fiscal year ended June 30, 1996, dividends of $0.0463, $0.0369 and
$0.0369 per share were paid or are payable to shareholders of Keystone Liquid
Trust Class A, B, and C, respectively. All dividends are taxable to
shareholders as ordinary income in the year in which received by them or
credited to their accounts and are not eligible for the corporate dividend
received deduction. In January 1997 we will send you information on the
distributions paid during the calendar year to help you in completing your
federal tax return.
<PAGE>
PAGE 15
- ----------------------
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders
Keystone Liquid Trust
We have audited the accompanying statement of assets and liabilities of
Keystone Liquid Trust, including the schedule of investments, as of June 30,
1996, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in the
ten-year period then ended for Class A shares, and for each of the years in
the three-year period then ended and the period from February 1, 1993 (date
of initial public offering) to June 30, 1993 for Class B and Class C shares.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 1996, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Keystone Liquid Trust as of June 30, 1996, the results of its operations for
the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
years or periods specified in the first paragraph above in conformity with
generally accepted accounting principles.
/S/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
July 26, 1996
<PAGE>
KEYSTONE LIQUID TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). FINANCIAL STATEMENTS
All financial statements listed below are included in Registrant's Statement of
Additional Information.
Schedule of Investments June 30, 1996
Financial Highlights
Class A For each of the years in the
ten-year period ended
June 30, 1996
Class B For each of the years in the
three-year period ended
June 30, 1996 and the period
from February 1, 1993 (date
of initial public offering) to
June 30, 1996
Class C For each of the years in the
three-year period ended
June 30, 1996 and the period
from February 1, 1993 (date
of initial public offering) to
June 30, 1996
Statement of Assets and Liabilities June 30, 1996
Statement of Operations Year ended
June 30, 1996
Statement of Changes in Net Assets Two years ended
June 30, 1996
Notes to Financial Statements
Independent Auditors' Report July 26, 1996
<PAGE>
Item 24(b) Exhibits
(1) A copy of Registrant's Declaration of Trust dated December 1, 1985, as
supplemented (the "Declaration of Trust") was filed with Post-Effective
Amendment No. 50 to Registration Statement No. 2-51914/811-2521
("Post-Effective Amendment No. 50") as Exhibit 24(b)(1) and is
incorporated by reference herein.
(2) A copy of the Registrant's By-Laws, as amended (the "By-Laws"), was
filed with Post-Effective Amendment No. 50 as Exhibit 24(b)(2) and is
incorporated by reference herein.
(3) Not applicable.
(4)(A) Registrant's Declaration of Trust, Articles III, V, VI, and VIII, was
filed with Post-Effective Amendment No. 50 as Exhibit 24(b)(1) and is
incorporated by reference herein.
(4)(B) Registrant's By-Laws, Article I, Section 1.4 was filed with
Post-Effective Amendment No. 50 as Exhibit 24(b)(2) and is incorporated
by reference herein.
(5)(A) A copy of the Management Agreement between Registrant and Keystone
Management, Inc. was filed with Post-Effective Amendment No. 50 as
Exhibit 24(b)(5)(A) and is incorporated by reference herein.
(5)(B) A copy of the Advisory Agreement between Keystone Management, Inc. and
Keystone Investment Management Company was filed with Post-Effective
Amendment No. 50 as Exhibit 24(b)(5)(B) and is incorporated by
reference herein.
(6)(A) Copies of the Principal Underwriting Agreements between Registrant and
Keystone Investment Distributors Company were filed with Post-Effective
Amendment No. 50 as Exhibit 24(b)(6)(A) and are incorporated by
reference herein.
A copy of the form of Dealer Agreement used by Keystone Investment
Distributors Company was filed with Post-Effective Amendment No. 43 to
Registration Statement No. 2-51914/811-2521 as Exhibit 24(b)(6)(A) and
is incorporated by reference herein.
(7) Not applicable.
(8) A copy of the Custodian, Fund Accounting and Recordkeeping Agreement,
as amended between Registrant and State Street Bank and Trust Company
was filed with Post-Effective Amendment No. 50 as Exhibit 24(b)(8) and
is incorporated by reference herein.
(9) Not applicable.
(10) An opinion and consent of counsel as to the legality of securities
registered by the Fund is filed herewith as Exhibit 24(b)(10).
(11) Consent as to the use of Registrant's Independent Auditors Report is
filed herewith as Exhibit 24(b)(11).
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Copies of Registrant's Distribution Plans adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940 were filed herewith with
Post-Effective Amendment No. 50 as Exhibit 24(b)(15) and are
incorporated by reference herein.
(16) A schedule for computation of the effective and current yields is filed
herewith as Exhibit 24(b)(16).
(17) Financial Data Schedules are filed herewith as Exhibit 24(b)(17).
(18) A copy of the form of Registrant's Multiple Class Plan adopted pursuant
to Rule 18f-3 was filed with Post-Effective No. 49 to Registration
Statement No. 2-51914/811-2521 as Exhibit 24(b)(18) and is incorporated
by reference herein.
(19) Powers of Attorney are filed herewith 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
Title of Class Holders as of September 30, 1996
-------------- --------------------------------
Shares of Beneficial Class A - 15,857
Interest, without par Class B - 639
value Class C - 562
Item 27. Indemnification
Provisions for the indemnification of the Registrant's Trustees and
officers are contained in Article VIII of the Declaration of Trust, a copy of
which was filed with Post-Effective Amendment No. 50 as Exhibit 24(b)(1).
Provisions for the indemnification of Keystone Investment Management
Company, Registrant's investment adviser, are contained in Section 4 of the
Advisory Agreement, by and between Keystone Management, Inc. and Keystone
Investment Management Company, a copy of which was filed with Post-Effective
amendment No. 50 as Exhibit 24(b)(1).
Provisions for the indemnification of Keystone Investment Distributors
Company, Registrant's principal underwriter, are contained in Section 9 of the
Principal Underwriting Agreements (for Class B-1 and B-2 Shares) by and between
Registrant and Keystone Investment Distributors Company, copies of which were
filed with Post-Effective Amendment No. 50 as Exhibit 24(b)(5)(B).
Item 28. Businesses and Other Connections of Investment Advisers
The following tables list the names of the various officers and
directors of Keystone Management, Inc. and Keystone Investment
Management Company, Registrant's investment manager and adviser,
respectively, and their respective positions. For each named
individual, the tables list, 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 MANAGEMENT, INC.
Position with
Keystone Other
Management, Business
Name Inc. Affiliations
Albert H. Chairman of Chairman of the Board,
Elfner, III the Board, Chief Executive Officer,
Chief Execu- President and Director:
tive Officer, Keystone Investments, Inc.
President and Keystone Software, Inc.
Director Keystone Asset Corporation
Keystone Capital Corporation
Keystone Investments
Family of Funds
Chairman of the Board
and Director:
Keystone Investment
Management Company
Keystone Institutional
Company, Inc.
Keystone Fixed Income
Advisers, Inc.
President and Director:
Keystone Trust Company
Director or Trustee:
Fiduciary Investment
Company, Inc.
Keystone Investor
Resource Center, Inc.
Boston Children's
Services Association
Middlesex School
Middlebury College
Former Trustee or Director:
Neworld Bank
Edward F. Godfrey Treasurer and Senior Vice President,
Director Chief Financial Officer,
Treasurer and Director
Keystone Investments, Inc.
Keystone Investment
Management Company
Keystone Investment
Distributors Company
Treasurer:
Keystone Institutional
Company, Inc.
Keystone Software, Inc.
Fiduciary Investment
Company, Inc.
Former Treasurer and Dirctor:
Hartwell Keystone
Advisers, Inc.
Senior Vice President:
Keystone Investments
Family of Funds
Ralph J. Director President and Director:
Spuehler, Jr. Keystone Investment
Distributors Company
Chairman and Director:
Keystone Investor
Resource Center, Inc.
Keystone Investment
Management Company
Senior Vice President and
Director:
Keystone Investments, Inc.
Treasurer:
Hartwell Emerging Growth Fund
Former President:
Keystone Management, Inc.
Former Treasurer:
Keystone Investments, Inc.
Keystone Investment
Management Company
Rosemary D. Van Senior Vice General Counsel, Senior
Antwerp President, Vice President and Secretary:
General Counsel Keystone Investments, Inc.
and Secretary 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.
Formerly Senior Vice
President and Secretary:
Hartwell Keystone
Advisers, Inc.
Vice President and Secretary:
Keystone Fixed Income
Advisers, Inc.
John D. Rogol Vice President Vice President and
and Controller Controller:
Keystone Investments, Inc.
Keystone Investment
Management Company
Keystone Investment
Distributors Company
Keystone Institutional
Company, Inc.
Fiduciary Investment
Company, Inc.
Keystone Software, Inc.
Advisers, Inc.
J. Kevin Kenely Vice President Vice President:
Keystone Investments, Inc.
Keystone Investment
Distributors Company
Keystone Institutional
Company, Inc.
Keystone Investment
Management Company
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.
Michael A. Thomas Vice President Vice President:
Keystone Investments, Inc.
<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
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
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.
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
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
Item 29. Principal Underwriter
(a) Keystone Investment Distributors Company, which acts as Registrant's
principal underwriter, also acts as principal underwriter for the
following entities:
Keystone Quality Fund (B-1)
Keystone Diversified Bond Fund (B-2)
Keystone High Income Bond Fund (B-4)
Keystone Balanced Fund (K-1)
Keystone Strategic Growth Fund (K-2)
Keystone Growth and Income Fund (S-1)
Keystone Mid-Cap Growth Fund (S-3)
Keystone Small Company Growth Fund (S-4)
Keystone Capital Preservation and Income Fund
Keystone Fund for Total Return
Keystone Global Opportunities Fund
Keystone Government Securities Fund
Keystone America Hartwell Emerging Growth Fund, Inc.
Keystone Intermediate Term Bond Fund
Keystone Omega Fund
Keystone Strategic Income Fund
Keystone State Tax Free Fund
Keystone State Tax Free Fund-Series II
Keystone Tax Free Income Fund
Keystone World Bond Fund
Keystone Fund of the Americas
Keystone International Fund
Keystone Precious Metals Holdings, Inc.
Keystone Strategic Development Fund
Keystone Tax Free Fund
Keystone Small Company Growth Fund II
Keystone Balanced Fund II
Keystone Emerging Markets Fund
(b) For information with respect to each officer and director of
Registrant's acting principal underwriter, see the following pages.
Name and Position and Offices with Position and
Principal Keystone Investment Offices with
Business Address Distributors Company the Fund
- ---------------- ------------------------- ------------
Ralph J. Spuehler* Director, President None
Edward F. Godfrey* Director, Senior Vice Senior Vice
President, Treasurer President
and Chief Financial
Officer
Rosemary D. Van Antwerp* Director, Senior Vice Senior Vice
President, General Counsel President and
Secretary
Albert H. Elfner, III* Director President
Charles W. Carr* Senior Vice President None
Peter M. Delehanty* Senior Vice President None
J. Kevin Kenely* Vice President Treasurer
John D. Rogol* Vice President and None
Controller
Gregg A. Mahalich Divisional Vice None
14952 Richards Drive W. President
Minnetonka, MN 55345
C. Kenneth Molander Divisional Vice None
8 King Edward Drive President
Londenderry, NH 03053
William L. Carey, Jr. Regional Manager and None
4 Treble Lane Vice President
Malvern, PA 19355
John W. Crites Regional Manager and None
2769 Oakland Circle W. Vice President
Aurora, CO 80014
Richard J. Fish Regional Manager and None
309 West 90th Street Vice President
New York, NY 10024
Michael E. Gathings Regional Manager and None
245 Wicklawn Way Vice President
Roswell, GA 30076
Paul D. Graffy Regional Manager and None
15509 Janas Drive Vice President
Lockport, IL 60441
Robert G. Holz, Jr. Regional Manager and None
313 Meadowcrest Drive Vice President
Richardson, Texas 75080
Todd L. Kobrin Regional Manager and None
20 Iron Gate Vice President
Metuchen, NJ 08840
Ralph H. Johnson Regional Manager and None
345 Masters Court, #2 Vice President
Walnut Creek, CA 94598
Robert P. Matson Regional Manager and None
4557 N. O'Connor Blvd. Vice President
No. 1286
Irving, TX 75062
Paul J. McIntyre Regional Manager and None
118 Main Centre, #203 Vice President
Northville, MI 48167
Thomas O. Meloy Regional Manager and None
2808 McKinney Ave. Vice President
No. 141
Dallas, TX 75204
Alan V. Niemi Regional Manager and None
3511 Grant Street and Vice President
Lee's Summit, MO 64064
Ronald L. Noble Regional Manager and None
428 N. Adventure Trail and Vice President
Virginia Beach, VA 23454
Juliana Perkins Regional Manager and None
2348 West Adrian Street Vice President
Newbury Park, CA 91320
Matthew D. Twomey Regional Manager and None
9627 Sparrow Court Vice President
Ellicott City, MD 21042
Mitchell I. Weiser Regional Manager and None
7031 Ventura Court Vice President
Parkland, FL 33067
L. Welden Evans Regional Banking Officer None
490 Huntcliff Green and Vice President
Atlanta, GA 30350
Raymond P. Ajemian* Manager and Vice President None
Jonathan I. Cohen* Vice President None
Michael S. Festa* Vice President None
Russell A. Haskell* Vice President None
Robert J. Matson* Vice President None
John M. McAllister* Vice President None
Mark Minnucci* Vice President None
Ashley M.Norwood* Assistant Vice President None
Burton Robbins Vice President None
1586 Folkstone Terrace
Westlake Village, CA 91361
Julie A. Robinson* Vice President None
Thomas E. Ryan, III* Vice President None
Joan M. Balchunas* Assistant Vice President None
Thomas J. Gainey* Assistant Vice President None
Lyman Jackson* Assistant Vice President None
Eric S. Jeppson* Assistant Vice President None
Peter M. Sullivan Assistant Vice President None
21445 Southeast 35th Way
Issaquah, WA 98027
Jean S. Loewenberg* Assistant Secretary Assistant
Secretary
Colleen L. Mette* Assistant Secretary Assistant
Secretary
Dorothy E. Bourassa* Assistant Secretary Assistant
Secretary
* Located at 200 Berkeley Street, Boston, Massachusetts 02116-5034
Item 29(c). - Not applicable
Item 30. Location of Accounts and Records
Keystone Investments, Inc.
200 Berkeley Street
Boston, Massachusetts 02116-5034
State Street Bank and Trust Company
1776 Heritage Drive
Quincy, Massachusetts 02171
Iron Mountain
331 Sharp Slot Road
Swansea, Massachusetts 02777
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
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, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, in The
Commonwealth of Massachusetts, on the 7th day of October, 1996.
KEYSTONE LIQUID TRUST
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 Amendment to
Registrant's Registration Statement has been signed below by the following
persons in the capacities indicated on the day of October, 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>
SIGNATURES TITLE
- ---------- ------
/s/ Frederick Amling Trustee
- -------------------------
Frederick Amling*
/s/ Charles A. Austin, III Trustee
- --------------------------
Charles A. Austin, III*
/s/ Edwin D. Campbell Trustee
- --------------------------
Edwin D. Campbell*
/s/ Charles F. Chapin Trustee
- --------------------------
Charles F. Chapin*
/s/ K. Dun Gifford Trustee
- --------------------------
K. Dun Gifford*
/s/ Leroy Keith, Jr. Trustee
- --------------------------
Leroy Keith, Jr.*
/s/ F. Ray Keyser, Jr. Trustee
- --------------------------
F. Ray Keyser, Jr.*
/s/ David M. Richardson Trustee
- --------------------------
David M. Richardson*
/s/ Richard J. Shima Trustee
- --------------------------
Richard J. Shima*
/s/ Andrew J. Simons Trustee
- --------------------------
Andrew J. Simons*
*By:/s/ 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 Trust,
as supplemented(1)
2 By-Laws, as amended(1)
5 (A) Management Agreement(1)
(B) Advisory Agreement(1)
6 (A) Underwriting Agreements,
as amended(1)
Dealers Agreement(2)
8 Custodian Agreement, Fund
Accounting and Recordkeeping
Agreement, as amended(1)
10 Opinion and Consent of Counsel
11 Independent Auditors' Consent
15 Class A, B and C Distribution
Plans(1)
16 Current and Effective Yield
Schedules
17 Financial Data Schedules
18 Multiple Class Plan(3)
19 Powers of Attorney
- -------------------
(1) Incorporated by reference herein to Post-Effective Amendment No. 50 to
Registration Statement No. 2-51914/811-2521.
(2) Incorporated by reference herein to Post-Effective Amendment No. 43 to
Registration Statement No. 2-51914/811-2521.
(3) Incorporated by reference herein to Post-Effective Amendment No. 49 to
Registration Statement No. 2-51914/811-2521.
October 7, 1996
Keystone Liquid Trust
200 Berkeley Street
Boston, Massachusetts 02116-5034
Gentlemen:
I am Senior Vice President of and General Counsel to Keystone
Investment Management Company, investment adviser to Keystone Liquid Trust (the
"Fund"). You have asked for my opinion with respect to the proposed issuance of
1,056,699,145 additional shares of the Fund.
To my knowledge, a Prospectus is being filed with the Securities and
Exchange Commission (the "Commission") as part of Post-Effective Amendment No.
52 to the Fund's Registration Statement, which covers the public offering and
sale of the Fund shares currently registered with the Commission.
In my opinion, such additional shares, if issued and sold in accordance
with the Fund's Declaration of Trust, as supplemented (the "Declaration of
Trust"), and offering Prospectus, will be legally issued, fully paid, and
nonassessable by the Fund, entitling the holders thereof to the rights set forth
in the Declaration of Trust and subject to the limitations set forth therein.
My opinion is based upon my examination of the Fund's Declaration of
Trust and By-Laws; a review of the minutes of the Fund's Board of Trustees
authorizing the issuance of such additional shares; and the Fund's Prospectus.
In my examination of such documents, I have assumed the genuineness of all
signatures and the conformity of copies to originals.
I hereby consent to the use of this opinion in connection with
Post-Effective Amendment No. 52 to the Fund's Registration Statement, which
covers the registration of such additional shares.
Very truly yours,
/s/Rosemary D. Van Antwerp
Rosemary D. Van Antwerp
Senior Vice President and
General Counsel
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Keystone Liquid Trust
We consent to the use of our report dated July 26, 1996, included herein
and to the references to our firm under the captions "FINANCIAL HIGHLIGHTS" in
the prospectus and "ADDITIONAL INFORMATION" in the statement of additional
information.
/S/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
October 7, 1996
<TABLE>
<CAPTION>
EFFECTIVE YIELD FOR
KLT ' CLASS A '
(1) (2) (3) (4) (5) (6)
7-Day 30-Day
EFFECTIVE EFFECTIVE
7 DAY 7 DAY YIELD 30 DAY YIELD
BPR ROLLING YIELD 365/7 ROLLING 365/30
DATE DAILY DIVIDEND DIVIDEND (2)/ 7 X 365 [((2) +1)] -1 DIVIDEND [((5) +1)] -1
<S> <C> <C> <C> <C> <C> <C>
06/01/96 A 0.00012203 $0.000856 4.48% 4.58% $0.003669 4.57%
06/02/96 A 0.00012204 $0.000856 4.47% 4.57% $0.003669 4.57%
06/03/96 A 0.00012368 $0.000857 4.48% 4.58% $0.003671 4.57%
06/04/96 A 0.00012464 $0.000859 4.49% 4.59% $0.003674 4.58%
06/05/96 A 0.00012282 $0.000860 4.49% 4.59% $0.003675 4.58%
06/06/96 A 0.00012298 $0.000860 4.50% 4.60% $0.003676 4.58%
06/07/96 A 0.00012388 $0.000862 4.51% 4.61% $0.003673 4.57%
06/08/96 A 0.00012388 $0.000864 4.52% 4.62% $0.003678 4.58%
06/09/96 A 0.00012389 $0.000866 4.53% 4.63% $0.003679 4.58%
06/10/96 A 0.00012430 $0.000866 4.53% 4.63% $0.003680 4.58%
06/11/96 A 0.00012443 $0.000866 4.53% 4.63% $0.003682 4.59%
06/12/96 A 0.00012440 $0.000868 4.54% 4.64% $0.003685 4.59%
06/13/96 A 0.00012408 $0.000869 4.54% 4.65% $0.003683 4.59%
06/14/96 A 0.00012449 $0.000869 4.55% 4.65% $0.003690 4.60%
06/15/96 A 0.00012450 $0.000870 4.55% 4.65% $0.003692 4.60%
06/16/96 A 0.00012450 $0.000871 4.55% 4.66% $0.003694 4.60%
06/17/96 A 0.00012457 $0.000871 4.55% 4.66% $0.003696 4.60%
06/18/96 A 0.00012348 $0.000870 4.55% 4.65% $0.003697 4.60%
06/19/96 A 0.00012317 $0.000869 4.54% 4.65% $0.003698 4.61%
06/20/96 A 0.00012328 $0.000868 4.54% 4.64% $0.003699 4.61%
06/21/96 A 0.00012301 $0.000867 4.53% 4.63% $0.003700 4.61%
06/22/96 A 0.00012302 $0.000865 4.52% 4.62% $0.003701 4.61%
06/23/96 A 0.00012302 $0.000864 4.52% 4.62% $0.003701 4.61%
06/24/96 A 0.00012269 $0.000862 4.51% 4.61% $0.003701 4.61%
06/25/96 A 0.00012265 $0.000861 4.50% 4.60% $0.003701 4.61%
06/26/96 A 0.00012377 $0.000861 4.50% 4.61% $0.003702 4.61%
06/27/96 A 0.00012330 $0.000861 4.50% 4.61% $0.003703 4.61%
06/28/96 A 0.00012290 $0.000861 4.50% 4.60% $0.003704 4.61%
06/29/96 A 0.00012290 $0.000861 4.50% 4.60% $0.003704 4.61%
06/30/96 A 0.00012290 $0.000861 4.50% 4.60% $0.003705 4.62%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EFFECTIVE YIELD FOR
KLT ' CLASS B '
(1) (2) (3) (4) (5) (6)
7-Day 30-Day
EFFECTIVE EFFECTIVE
7 DAY 7 DAY YIELD 30 DAY YIELD
BPR ROLLING YIELD 365/7 ROLLING 365/30
DATE DAILY DIVIDEND DIVIDEND (2)/ 7 X 365 [((2) +1)] -1 DIVIDEND [((5) +1)] -1
<S> <C> <C> <C> <C> <C> <C>
06/01/96 B 0.00009627 $0.000675 3.53% 3.59% $0.002887 3.58%
06/02/96 B 0.00009628 $0.000674 3.52% 3.59% $0.002888 3.58%
06/03/96 B 0.00009776 $0.000675 3.53% 3.59% $0.002891 3.58%
06/04/96 B 0.00009922 $0.000678 3.55% 3.61% $0.002895 3.59%
06/05/96 B 0.00009668 $0.000679 3.55% 3.61% $0.002895 3.59%
06/06/96 B 0.00009697 $0.000679 3.55% 3.62% $0.002896 3.59%
06/07/96 B 0.00009784 $0.000681 3.56% 3.62% $0.002893 3.59%
06/08/96 B 0.00009784 $0.000683 3.57% 3.63% $0.002898 3.59%
06/09/96 B 0.00009785 $0.000684 3.58% 3.64% $0.002899 3.59%
06/10/96 B 0.00009819 $0.000685 3.58% 3.64% $0.002900 3.60%
06/11/96 B 0.00009942 $0.000685 3.58% 3.64% $0.002902 3.60%
06/12/96 B 0.00009827 $0.000686 3.59% 3.65% $0.002905 3.60%
06/13/96 B 0.00009774 $0.000687 3.59% 3.66% $0.002903 3.60%
06/14/96 B 0.00009831 $0.000688 3.60% 3.66% $0.002909 3.61%
06/15/96 B 0.00009831 $0.000688 3.60% 3.66% $0.002911 3.61%
06/16/96 B 0.00009831 $0.000689 3.60% 3.66% $0.002913 3.61%
06/17/96 B 0.00009859 $0.000689 3.60% 3.67% $0.002916 3.62%
06/18/96 B 0.00009910 $0.000689 3.60% 3.66% $0.002919 3.62%
06/19/96 B 0.00009823 $0.000689 3.60% 3.66% $0.002921 3.62%
06/20/96 B 0.00009873 $0.000690 3.61% 3.67% $0.002924 3.63%
06/21/96 B 0.00009861 $0.000690 3.61% 3.67% $0.002927 3.63%
06/22/96 B 0.00009862 $0.000690 3.61% 3.67% $0.002929 3.63%
06/23/96 B 0.00009862 $0.000691 3.61% 3.68% $0.002931 3.63%
06/24/96 B 0.00009845 $0.000690 3.61% 3.67% $0.002932 3.64%
06/25/96 B 0.00009804 $0.000689 3.60% 3.67% $0.002934 3.64%
06/26/96 B 0.00010289 $0.000694 3.63% 3.69% $0.002940 3.65%
06/27/96 B 0.00009869 $0.000694 3.63% 3.69% $0.002943 3.65%
06/28/96 B 0.00009744 $0.000693 3.62% 3.69% $0.002944 3.65%
06/29/96 B 0.00009744 $0.000692 3.62% 3.68% $0.002945 3.65%
06/30/96 B 0.00009744 $0.000690 3.61% 3.67% $0.002946 3.65%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EFFECTIVE YIELD FOR
KLT ' CLASS C '
(1) (2) (3) (4) (5) (6)
7-Day 30-Day
EFFECTIVE EFFECTIVE
7 DAY 7 DAY YIELD 30 DAY YIELD
BPR ROLLING YIELD 365/7 ROLLING 365/30
DATE DAILY DIVIDEND DIVIDEND (2)/ 7 X 365 [((2) +1)] -1 DIVIDEND [((5) +1)] -1
<S> <C> <C> <C> <C> <C> <C>
06/01/96 C 0.00009879 $0.000681 3.56% 3.63% $0.002895 3.59%
06/02/96 C 0.00009879 $0.000684 3.57% 3.64% $0.002898 3.59%
06/03/96 C 0.00009782 $0.000685 3.58% 3.64% $0.002899 3.59%
06/04/96 C 0.00009920 $0.000688 3.60% 3.66% $0.002901 3.60%
06/05/96 C 0.00009765 $0.000689 3.60% 3.67% $0.002902 3.60%
06/06/96 C 0.00009685 $0.000688 3.60% 3.66% $0.002903 3.60%
06/07/96 C 0.00009797 $0.000687 3.59% 3.66% $0.002906 3.60%
06/08/96 C 0.00009797 $0.000686 3.59% 3.65% $0.002906 3.60%
06/09/96 C 0.00009798 $0.000685 3.58% 3.65% $0.002907 3.61%
06/10/96 C 0.00009813 $0.000686 3.59% 3.65% $0.002909 3.61%
06/11/96 C 0.00009824 $0.000685 3.58% 3.64% $0.002910 3.61%
06/12/96 C 0.00009823 $0.000685 3.58% 3.65% $0.002913 3.61%
06/13/96 C 0.00009796 $0.000686 3.59% 3.65% $0.002919 3.62%
06/14/96 C 0.00009903 $0.000688 3.59% 3.66% $0.002919 3.62%
06/15/96 C 0.00009903 $0.000689 3.60% 3.66% $0.002922 3.62%
06/16/96 C 0.00009903 $0.000690 3.61% 3.67% $0.002925 3.63%
06/17/96 C 0.00009944 $0.000691 3.61% 3.68% $0.002928 3.63%
06/18/96 C 0.00009817 $0.000691 3.61% 3.68% $0.002930 3.63%
06/19/96 C 0.00010047 $0.000693 3.62% 3.69% $0.002934 3.64%
06/20/96 C 0.00010156 $0.000697 3.64% 3.71% $0.002940 3.65%
06/21/96 C 0.00009837 $0.000696 3.64% 3.71% $0.002944 3.65%
06/22/96 C 0.00009837 $0.000695 3.64% 3.70% $0.002945 3.65%
06/23/96 C 0.00009837 $0.000695 3.63% 3.70% $0.002947 3.65%
06/24/96 C 0.00009827 $0.000694 3.63% 3.69% $0.002948 3.66%
06/25/96 C 0.00009821 $0.000694 3.63% 3.69% $0.002950 3.66%
06/26/96 C 0.00009951 $0.000693 3.62% 3.69% $0.002953 3.66%
06/27/96 C 0.00009883 $0.000690 3.61% 3.67% $0.002955 3.67%
06/28/96 C 0.00009850 $0.000690 3.61% 3.67% $0.002958 3.67%
06/29/96 C 0.00009850 $0.000690 3.61% 3.67% $0.002958 3.67%
06/30/96 C 0.00009850 $0.000690 3.61% 3.67% $0.002958 3.67%
</TABLE>
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 and
Chief Executive Officer
Dated: December 14, 1994
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director, Trustee or officer and for which Keystone
Custodian Funds, Inc. serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and in my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
/S/ Albert H. Elfner, III
-------------------------------
Albert H. Elfner, III
Director/Trustee and President
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 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/ 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 LIQUID TRUST CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 346,432,940
<INVESTMENTS-AT-VALUE> 346,391,197
<RECEIVABLES> 941,775
<ASSETS-OTHER> 204,417
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 347,537,389
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,414,246
<TOTAL-LIABILITIES> 1,414,246
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 332,795,671
<SHARES-COMMON-STOCK> 332,795,671
<SHARES-COMMON-PRIOR> 245,308,083
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 332,795,671
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,533,652
<OTHER-INCOME> 0
<EXPENSES-NET> (2,455,359)
<NET-INVESTMENT-INCOME> 12,078,293
<REALIZED-GAINS-CURRENT> 4,312
<APPREC-INCREASE-CURRENT> (39,010)
<NET-CHANGE-FROM-OPS> 12,043,595
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,043,595)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,105,810,542
<NUMBER-OF-SHARES-REDEEMED> (1,027,927,276)
<SHARES-REINVESTED> 9,604,322
<NET-CHANGE-IN-ASSETS> 87,487,588
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (1,294,486)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (2,455,359)
<AVERAGE-NET-ASSETS> 259,932,326
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> KEYSTONE LIQUID TRUST CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 346,432,940
<INVESTMENTS-AT-VALUE> 346,391,197
<RECEIVABLES> 941,775
<ASSETS-OTHER> 204,417
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 347,537,389
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,414,246
<TOTAL-LIABILITIES> 1,414,246
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,042,074
<SHARES-COMMON-STOCK> 10,042,074
<SHARES-COMMON-PRIOR> 7,281,559
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10,042,074
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 577,792
<OTHER-INCOME> 0
<EXPENSES-NET> (193,749)
<NET-INVESTMENT-INCOME> 384,043
<REALIZED-GAINS-CURRENT> 133
<APPREC-INCREASE-CURRENT> (399)
<NET-CHANGE-FROM-OPS> 383,777
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (383,777)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,488,209
<NUMBER-OF-SHARES-REDEEMED> (29,034,624)
<SHARES-REINVESTED> 306,930
<NET-CHANGE-IN-ASSETS> 2,760,515
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (51,207)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (193,749)
<AVERAGE-NET-ASSETS> 10,341,470
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> KEYSTONE LIQUID TRUST CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 346,432,940
<INVESTMENTS-AT-VALUE> 346,391,197
<RECEIVABLES> 941,775
<ASSETS-OTHER> 204,417
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 347,537,389
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,414,246
<TOTAL-LIABILITIES> 1,414,246
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,285,398
<SHARES-COMMON-STOCK> 3,285,398
<SHARES-COMMON-PRIOR> 4,111,673
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,285,398
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 153,182
<OTHER-INCOME> 0
<EXPENSES-NET> (51,938)
<NET-INVESTMENT-INCOME> 101,244
<REALIZED-GAINS-CURRENT> 30
<APPREC-INCREASE-CURRENT> (371)
<NET-CHANGE-FROM-OPS> 100,903
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (100,903)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,581,549
<NUMBER-OF-SHARES-REDEEMED> (8,502,653)
<SHARES-REINVESTED> 94,829
<NET-CHANGE-IN-ASSETS> (826,275)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (13,546)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (51,938)
<AVERAGE-NET-ASSETS> 2,730,909
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
