<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Quality Bond Fund (B-1)
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Diversified Bond Fund (B-2)
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone High Income Bond Fund (B-4)
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Balanced Fund (K-1)
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Strategic Growth Fund (K-2)
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Growth and Income Fund (S-1)
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Mid-Cap Growth Fund (S-3)
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Small Company Growth Fund (S-4)
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone International Fund Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Institutional Adjustable Rate Fund
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Institutional Trust
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Precious Metals Holdings, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone Tax Free Fund
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
PRELIMINARY PROXY MATERIAL: FOR THE INFORMATION OF THE
SECURITIES AND EXCHANGE COMMISSION ONLY.
KEYSTONE FAMILY OF MUTUAL FUNDS
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116-5034
TELEPHONE NUMBER (617) 338-3200
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 9, 1996
KEYSTONE QUALITY BOND FUND (B-1) ("B-1")
KEYSTONE DIVERSIFIED BOND FUND (B-2) ("B-2")
KEYSTONE HIGH INCOME BOND FUND (B-4) ("B-4")
KEYSTONE BALANCED FUND (K-1) ("K-1")
KEYSTONE STRATEGIC GROWTH FUND (K-2) ("K2")
KEYSTONE GROWTH AND INCOME FUND (S-1) ("S-1")
KEYSTONE MID-CAP GROWTH FUND (S-3) ("S-3")
KEYSTONE SMALL COMPANY GROWTH FUND (S-4) ("S-4")
KEYSTONE INSTITUTIONAL ADJUSTABLE RATE FUND
("ADJUSTABLE RATE")
KEYSTONE INSTITUTIONAL TRUST
("INSTITUTIONAL")
KEYSTONE INTERNATIONAL FUND INC.
("INTERNATIONAL")
KEYSTONE PRECIOUS METALS HOLDINGS, INC.
("PRECIOUS METALS")
KEYSTONE TAX FREE FUND ("TAX FREE")
To the Shareholders of the Keystone Family of Funds:
A Joint Special Meeting (the "Meeting") of shareholders of each fund listed
above (each a "Fund" and collectively the "Funds") will be held at the offices
of the Funds, 200 Berkeley Street, Boston, Massachusetts, on Monday, December 9,
1996, at 3:00 P.M., Boston time, for the purpose of considering and acting upon
the following proposals:
1.* FOR THE SHAREHOLDERS OF ALL FUNDS, to elect Trustees** of each Fund,
subject, in the case of International, to adoption of Proposal 3 below.
2.* FOR THE SHAREHOLDERS OF ALL FUNDS, to approve an Investment Advisory
and Management Agreement between each Fund and Keystone Investment
Management Company, substantially as described in the accompanying
Proxy Statement.
3. FOR THE SHAREHOLDERS OF INTERNATIONAL, to approve an amendment to the
Fund's By-Laws to permit the Board of Directors to fix the number of
Directors from time to time.
4. FOR SHAREHOLDERS OF INTERNATIONAL AND PRECIOUS METALS, to ratify the
selection of KPMG Peat Marwick LLP as the independent public accountant
of each Fund for the current fiscal year.
5. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
* Proposals 1 and 2, if approved, will not become effective unless
the proposed merger of Keystone Investments, Inc. with and into an
affiliate of First Union Corporation, as described in the accompanying
Proxy Statement, becomes effective.
** As used in this Notice, the term "Trustee" includes each Director of
International and Precious Metals.
<PAGE>
Shareholders of record of each Fund at the close of business on October 18,
1996 are entitled to receive notice of and to vote at the Meeting and any
adjournments thereof on any matters relating to that Fund.
By order of the Board of Trustees of each Fund,
Rosemary D. Van Antwerp,
Secretary
October 21, 1996
PLEASE FILL IN, DATE AND SIGN YOUR PROXY - NOW - AND MAIL IT - TODAY - IN THE
STAMPED ENVELOPE ENCLOSED FOR YOUR CONVENIENCE. IN ORDER TO AVOID UNNECESSARY
EXPENSE OR DELAY, YOUR PROMPT RESPONSE IS REQUESTED, NO MATTER WHAT SIZE YOUR
HOLDINGS MAY BE.
<PAGE>
PRELIMINARY PROXY MATERIAL: FOR THE INFORMATION OF THE
SECURITIES AND EXCHANGE COMMISSION ONLY.
KEYSTONE QUALITY BOND FUND (B-1) ("B-1")
KEYSTONE DIVERSIFIED BOND FUND (B-2) ("B-2")
KEYSTONE HIGH INCOME BOND FUND (B-4) ("B-4")
KEYSTONE BALANCED FUND (K-1) ("K-1")
KEYSTONE STRATEGIC GROWTH FUND (K-2) ("K-2")
KEYSTONE GROWTH AND INCOME FUND (S-1) ("S-1")
KEYSTONE MID-CAP GROWTH FUND (S-3) ("S-3")
KEYSTONE SMALL COMPANY GROWTH FUND (S-4) ("S-4")
KEYSTONE INSTITUTIONAL ADJUSTABLE RATE FUND
("ADJUSTABLE RATE")
KEYSTONE INSTITUTIONAL TRUST
("INSTITUTIONAL")
KEYSTONE INTERNATIONAL FUND INC.
("INTERNATIONAL")
KEYSTONE PRECIOUS METALS HOLDINGS, INC.
("PRECIOUS METALS")
KEYSTONE TAX FREE FUND ("TAX FREE")
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116-5034
TELEPHONE NUMBER (617) 338-3200
PROXY STATEMENT FOR THE
JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 9, 1996
The accompanying Proxy is solicited by the Board of Trustees(1) of each of
the above funds (each a "Fund" and collectively the "Funds"), as applicable, to
be used at a Joint Special Meeting and any adjournment or adjournments thereof
(the "Meeting") of their shareholders. The proxy material is expected to be
mailed to shareholders on or about October 25, 1996. The purpose of the Meeting
is to consider proposals ("Proposals") relating to the proposed merger (the
"Merger") of Keystone Investments, Inc. (the corporate parent of the Funds'
investment adviser and their principal underwriter) with and into an affiliate
of First Union Corporation, a multibank holding company, as described herein.
- ----------
(1) As used in this Proxy Statement, the term "Trustee" includes each Director
of International and Precious Metals.
<PAGE>
Certain terms used throughout this Proxy Statement are defined in the text.
There is also a "Definitions" section at the end of this Proxy Statement.
All properly executed Proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon. Proxies received
prior to the Meeting on which no vote is indicated will be voted "for" each
Proposal as to which it is entitled to be voted. Abstentions do not constitute
votes "for" a Proposal, have the same effect as votes "against" a Proposal, and
are treated as shares present at the Meeting for the purpose of determining
whether a quorum is present at the Meeting. Broker non-votes (i.e., Proxies from
brokers or nominees indicating that such persons have not received instructions
from the beneficial owner or other person entitled to vote each share ("Share")
on a particular matter with respect to which the brokers or nominees do not have
discretionary power) do not constitute votes "for" or "against" a Proposal and
are disregarded for purposes of determining a quorum and for every other
purpose.
Any shareholder may revoke his or her Proxy at any time before it is voted
by (i) giving written notice of revocation to the Secretary of the Fund, (ii)
properly executing and delivering a later-dated Proxy or (iii) appearing in
person at the Meeting to vote his or her Shares.
The Boards of Trustees know of no business which will be presented for
consideration at the Meeting other than that set forth in Items 1 through 4 of
the Notice of Meeting. If any other matters are properly presented, it is the
intention of the persons designated as Proxies (Messrs. Bissell and Elfner and
Ms. Van Antwerp) to vote such Proxies in accordance with their judgment on such
matters.
Shareholders of record of each Fund at the close of business on October 18,
1996 are entitled to notice of and to vote at the Meeting. Shares of each Fund
outstanding on October 1, 1996 are set forth in Exhibit A to this Proxy
Statement. Each Share is entitled to one vote on all matters described herein.
FUNDS AFFECTED BY EACH PROPOSAL AND VOTES REQUIRED FOR ADOPTION OF EACH
PROPOSAL
The following sets forth the Funds for which each Proposal is being made and
the shareholder votes required to adopt each Proposal:
PROPOSAL AFFECTED FUNDS
- -------- --------------
1. Election of Trustees All Funds
2. Approval of New Investment Advisory All Funds
and Management Agreement
3. Amendment of By-Laws International
4. Ratification of Selection of Accountant International and Precious
Metals
EACH FUND, EXCEPT INTERNATIONAL:
Approval of Proposal 1 requires the affirmative vote of the holders of a
majority of the Shares represented at the Meeting, if more than 50% of the
outstanding Shares are represented.
ALL FUNDS:
Approval of Proposal 2 requires the affirmative vote of holders of (a) 67%
of the Shares represented at the Meeting, if more than 50% of the Shares
outstanding are represented, or (b) more than 50% of the outstanding Shares,
whichever is less.
INTERNATIONAL:
Approval of Proposals 1, 3 and 4 requires the affirmative vote of the
holders of a majority of the Shares represented at the Meeting, if more than 25%
of the Shares outstanding are represented.
PRECIOUS METALS:
Approval of Proposal 4 requires the affirmative vote of the holders of a
majority of the Shares represented at the Meeting, if more than 50% of the
outstanding Shares are represented.
INTRODUCTION
The Proposed Merger. Keystone Investments, Inc. ("Keystone Investments") is
the corporate parent of wholly-owned operating subsidiaries (which together with
Keystone Investments are sometimes referred to herein as "Keystone"), which
include the Funds' investment adviser and manager, principal underwriter and
transfer agent. Keystone has provided investment advisory and management,
underwriting, distribution, administrative, transfer agency and trustee services
to mutual funds and private accounts since Keystone Investment Management
Company ("KIMCO"), the Funds' investment adviser, was organized in 1932.
Keystone Management, Inc. ("Keystone Management") serves as investment manager
of certain of the Funds. In connection with the Merger, it is proposed that all
of the functions currently performed by Keystone Management for such Funds be
assumed by KIMCO, as more fully described below. Keystone currently manages and
advises 32 mutual funds and other clients with assets which in the aggregate
total over $11 billion. Keystone Investments has entered into an Agreement and
Plan of Acquisition and Merger, dated September 6, 1996, as the same may be
amended from time to time (the "Merger Agreement"), with First Union Corporation
("First Union"), its wholly-owned subsidiary (except for directors' qualifying
shares), First Union National Bank of North Carolina ("FUNB-NC"), and FKI, Inc.,
a newly organized wholly-owned subsidiary of FUNB-NC. The principal offices of
First Union, FUNB-NC and FKI, Inc. are at One First Union Center, Charlotte,
North Carolina 28288. The Merger Agreement provides for the merger (the
"Merger") of Keystone Investments with and into FKI, Inc., which will then adopt
the name "Keystone Investments, Inc." ("New Keystone Investments").
First Union is a publicly owned multibank holding company registered under
the federal Bank Holding Company Act of 1956, as amended. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses through offices in 38 states and four foreign countries. The Capital
Management Group ("CMG") of FUNB-NC manages, advises or otherwise oversees the
investment of over $34 billion in assets belonging to a wide range of
institutional, trust and individual clients, including registered investment
companies, or series thereof, with assets of approximately $8 billion. Evergreen
Asset Management Corp. and Lieber & Company, wholly-owned subsidiaries of
FUNB-NC, serve as investment adviser, manager, and/or subadviser to
institutional, trust and individual clients, including registered investment
companies, or series thereof, with assets totalling approximately $8 billion.
The registered investment companies for which FUNB-NC, Evergreen Asset
Management Corp. and Lieber & Company serve as manager, investment adviser or
subadviser are referred to collectively as the "Evergreen funds".
Evergreen Asset Management Corp. also provides administrative services to
the Evergreen funds and, to the extent it is not obligated to provide such
services under the investment advisory agreements it has entered into with
certain of the Evergreen funds, receives an administrative fee based on each
Fund's average annual net assets. Lieber & Company, in addition to being a
registered investment adviser, is a broker-dealer and member of the New York
Stock Exchange, Inc., American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Lieber & Company provides brokerage services to the
investment companies managed by Evergreen Asset Management Corp. and to certain
institutions and individuals. First Union Brokerage Services, Inc. ("FUBS"), a
wholly-owned subsidiary of FUNB-NC, is a registered broker-dealer that is
principally engaged in providing retail brokerage services, consistent with its
federal banking authorizations. FUBS currently acts as a selected dealer for
shares of the Evergreen funds and it is expected that, following the Merger,
FUBS will also become a selected dealer for shares of the Funds. First Union
Capital Markets Corp., a wholly-owned subsidiary of First Union, is a registered
broker-dealer principally engaged in providing, consistent with its federal
banking authorizations, private placement, securities dealing and underwriting
services. First Union's banking subsidiaries, with operations in North Carolina,
South Carolina, Georgia, Florida, Tennessee, Virginia, Maryland, the District of
Columbia, New Jersey, Delaware, Connecticut, Pennsylvania and New York, engage
in domestic retail banking, worldwide commercial banking, trust banking,
investment management and other financial services and banking related
activities. First Union's non-bank financial services-related subsidiaries
provide many additional services, including mortgage banking, insurance, home
equity lending, leasing, investment banking, insurance, and securities brokerage
services.
In the Merger, First Union will issue shares of its voting common stock
("First Union Common Stock") (and options on such First Union Common Stock) to
the beneficial owners of Keystone Investments' voting common stock ("Keystone
Stock") (and options on such Keystone Stock). Substantially all of the
outstanding Keystone Stock (and options on such Keystone Stock) are beneficially
owned by certain of Keystone's present and former officers and employees and
members of their families and trusts established by them. Except for 140,042
shares held by the Keystone Employees Investment and Savings Plan and certain
unaffiliated shareholders, all of the Keystone Stock outstanding as of the date
hereof is held pursuant to eight voting trust agreements ("voting trusts") for
which certain of Keystone's senior officers and directors are the voting
trustees. A majority of the outstanding Keystone Stock, totaling 52%, is held by
seven senior officers or directors and a spouse of one such individual, and is
subject to two of such voting trusts. These officers and directors, who may be
deemed to control Keystone, are Messrs. George S. Bissell, Albert H. Elfner,
III, Ralph J. Spuehler, Jr., Stephen J. Arpante, Philip M. Byrne, Edward F.
Godfrey and Roger T. Wickers and, along with such spouse, are referred to herein
as the "Controlling Stockholders". Each of Messrs. Bissell, Elfner, Spuehler,
Godfrey and Byrne is also an "affiliated person" of Keystone Investments (as
defined under the 1940 Act). The Controlling Stockholders have agreed to have
their Keystone Stock voted in favor of the Merger at a Special Meeting of
Stockholders of Keystone Investments to be held on December 2, 1996 and,
accordingly, it is expected that the Merger Agreement will be approved at such
Special Meeting.
The Merger Agreement provides that First Union will issue in the Merger
2,912,000 shares of First Union Common Stock which, at September 6, 1996, had an
aggregate value of $186,004,000. The number of shares that will ultimately be
issued upon the Merger is subject to certain adjustments, including an
adjustment downwards of 13.5% in the event that net redemptions of shares of the
Funds and certain other Keystone funds prior to the effective date of the Merger
equal or exceed in the aggregate 15% of the outstanding shares of such Funds on
September 6, 1996. In addition, in the event that the average per share market
price of First Union Common Stock over a period of ten trading days ending on
the day five business days prior to the Effective Date (as defined herein)
declines by a certain amount determined with reference to the market prices of
shares of a certain peer group of bank holding companies, Keystone Investments
will have the option to terminate the Merger Agreement, subject to the right of
First Union to increase the aggregate number of shares of First Union Common
Stock to be issued in the Merger to compensate for such a decline in accordance
with the Merger Agreement. At _______ , 1996 an estimated ______ shares of First
Union Common Stock, having an aggregate market value of ________ were issuable
in exchange for all of the shares of Keystone Stock. The balance of the First
Union Common Stock issuable in the Merger will be paid to assignees of Keystone
TA Limited Partnership ("KTLP"), a former shareholder of Keystone, which
assisted current management in a leveraged buyout of Keystone in 1989 pursuant
to a Securities Redemption Agreement with Keystone Investments.
Under current federal banking law, an officer or director of a bank holding
company, or a subsidiary thereof, is prohibited from serving as an officer or
director of an open-end investment company. Accordingly, Mr. Bissell, the
current Chairman of the Funds' Boards of Trustees, who is standing for
re-election to such Boards and is currently a director of Keystone Investments,
will be prohibited from becoming a director of New Keystone Investments, which
will be a wholly-owned subsidiary of FUNB-NC following the merger. Mr. Bissell
will receive approximately _____ % of the shares of First Union Common Stock
issued to Management. (Receipt by Mr. Bissell may include receipt by family
members and trusts established by him.) Mr. Elfner, the President and a Trustee
of each of the Funds, is not standing for re-election and will resign as the
President of each Fund if the Merger is consummated. Mr. Elfner is a director
and chief executive officer of Keystone Investments and will continue as such of
New Keystone Investments following the merger. He will receive approximately
_____ % of the shares of First Union Common Stock issued to Management. In
addition to the shares of First Union Common Stock to be issued in the Merger as
the consideration for the acquisition by New Keystone Investments of Keystone
Investments' assets through the Merger, New Keystone Investments will, also
through the Merger, assume all of Keystone Investments' liabilities as of the
Effective Date, estimated to be approximately $182,000,000 at that time.
The Merger is expected to become effective on December 11, 1996, or a later
agreed date (the "Effective Date"), upon the satisfaction of specified terms and
conditions including, among other things, receipt of all necessary regulatory
approvals. Consummation of the Merger is conditioned on First Union and Keystone
Investments receiving, or a waiver of the requirement to receive, all necessary
approvals by governmental regulatory authorities, including approvals of the
Office of the Comptroller of the Currency and the Federal Reserve Board and the
expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. Consummation of the Merger
is subject to a number of additional conditions, including the approvals
proposed hereby of new investment advisory and management agreements. To satisfy
this condition, shareholders of Keystone funds which, in the aggregate provided
at least 90% of the management and advisory fees paid to Keystone by all of the
Keystone funds for the twelve months ended August 31, 1996, must approve such
proposed agreements.
If the Merger is consummated, First Union, indirectly, and FUNB-NC,
directly, will own all of the outstanding voting securities of New Keystone
Investments, which in turn will own directly or indirectly all of the
outstanding voting securities of the Keystone operating (and any other)
subsidiaries, including the Funds' investment adviser and manager, principal
underwriter, transfer agent and shareholder services provider. Such new
ownership will constitute a change in the identity and in control ("Change in
Control") of Keystone Investments and its direct and indirect subsidiaries,
which will cause the Funds' current investment advisory and management
agreements, including subadvisory agreements, where applicable, and principal
underwriting agreements, to terminate automatically in accordance with their
terms, as required by the Investment Company Act of 1940, as amended (the "1940
Act"). Such terminations will necessitate adoption of new agreements for
provision of such services. Shareholder approvals of the new investment advisory
and management agreements, including new subadvisory agreements, where
applicable, are proposed and described herein. Shareholder approvals of new
underwriting and other agreements for distribution-related services, as
described below, are not required. Such agreements have been acted upon only by
each Fund's Board of Trustees, including a majority of the Independent Trustees
(Trustees who are independent, i.e., not "interested persons", as defined in the
1940 Act, and who have no direct or indirect financial interest in such
agreements). All new investment advisory and management agreements are proposed
to be with KIMCO, which is currently the investment manager or adviser, or both,
of the Keystone funds, and with the current subadvisers, where applicable.
Keystone Management, which is the investment manager of some of the Funds, will
not remain as such. The consolidation of all investment advisory services for
the Funds under KIMCO will not involve any material changes in the services
provided to Funds for which Keystone Management currently serves as manager. All
of the proposed investment advisory and management agreements will, except as
indicated above, be substantively identical to the existing investment advisory
and management agreements. EACH FUND'S ADVISORY FEE RATE WILL REMAIN UNCHANGED.
Following the consummation of the Merger, First Union does not have any
current intention to make any immediate significant changes in the way that New
Keystone Investments provides investment advisory and management services to the
Funds. To facilitate this continuity, Keystone Investments (the obligations of
which will be assumed by New Keystone Investments) has entered into employment
contracts, effective as of the Effective Date, with each of three directors and
executive officers of Keystone Investments (Albert H. Elfner, III, Edward F.
Godfrey and Ralph J. Spuehler, Jr.). Among other things, each such employment
contract provides for a payment to be made at the end of the one-, two- and/or
three-year periods following the Effective Date during which Messrs. Elfner,
Godfrey and Spuehler, respectively, remain employees of Keystone in their
present or substantially equivalent positions. Each annual payment would equal
$ ________ for Mr. Elfner, $ ________ for Mr. Godfrey and $ ________ for Mr.
Spuehler. Such payments would also be made under certain circumstances following
termination of the employment of Messrs. Elfner, Godfrey and Spuehler,
respectively, and the expiration of a one-year non-compete period following such
termination. Messrs. Elfner and Godfrey are expected to continue to be actively
involved in providing services to the Funds to substantially the same extent to
which each has historically been involved. Mr. Spuehler is expected to be
actively involved in providing transfer agency and other shareholder services to
the Funds. Mr. Spuehler was the President of the Funds' transfer agent from 1987
to 1995. Under federal banking regulations, Mr. Elfner will not be able to
continue as an officer of the Funds.
If the Merger is consummated, Keystone Investment Distributors Company
("KID") would no longer be able to act as principal underwriter of the Funds due
to regulatory restrictions imposed by the Glass-Steagall Act upon national banks
like FUNB-NC and their affiliates that prohibit such entities from acting as the
underwriters or distributors of mutual fund shares. However KID will continue to
receive compensation from the Funds or the Funds' principal underwriter in
respect of underwriting and distribution services performed prior to the
consummation of the Merger and, following the consummation of the Merger, is
expected to be compensated by certain of the Funds or their principal
underwriter for providing certain marketing support services to the Funds or
their principal underwriter. In view of the foregoing, the Funds' Boards
approved the appointment of Evergreen Funds Distributor, Inc. ("EFD"), an
affiliate of Furman Selz LLC ("Furman Selz"), as principal underwriter of the
Funds at their meeting held on September 5, 1996, effective upon the
consummation of the Merger. At that time the Boards also approved the amendment
of the existing underwriting agreements with KID to permit KID to continue to
receive payments from the Funds with respect to distribution and underwriting
services rendered prior to the Merger, and the entry by EFD into marketing
services agreements with KID which provide for KID to provide post-Merger
marketing support and services. The address of EFD and Furman Selz is 230 Park
Avenue, New York, New York. EFD is currently the principal underwriter of the
Evergreen funds and its affiliate, Evergreen Asset Management Corp., is the
investment adviser of such funds.
Furman Selz is a registered investment adviser and broker-dealer that
provides services to a wide range of clients including investment companies,
institutions and individuals. In addition, Furman Selz, either directly or
through wholly-owned subsidiaries such as EFD, provides underwriting and
distribution services to investment companies, including investment companies
managed by banks or bank affiliates, such as FUNB-NC and Evergreen Asset
Management Corp., which themselves are prohibited from acting as principal
underwriters for registered investment companies. In connection with the
foregoing, Furman Selz has entered into an agreement with BISYS Group, Inc.
("BISYS"), pursuant to which Furman Selz has agreed to sell to BISYS its mutual
funds administration and distribution business. Pursuant to the terms of the
agreement between BISYS and Furman Selz, EFD will become a wholly-owned
subsidiary of BISYS. It is not expected that the acquisition of the mutual funds
administrative and distribution business by BISYS will affect the services
provided by EFD.
As principal underwriter of the Funds following consummation of the Merger,
EFD shall: (i) make payments to securities dealers and others engaged in the
sale of Shares; and (ii) make payments of principal and interest in connection
with the financing of commission payments made in connection with the sale of
Shares. EFD and/or KID may also do the following: (i) provide telephone
facilities and shareholder services; (ii) formulate and implement marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising,
(iii) prepare, print and distribute sales literature; (iv) prepare, print and
distribute Prospectuses of the Funds and reports for recipients other than
existing shareholders of the Funds; (v) provide to the Funds such information,
analyses and opinions with respect to marketing and promotional activities as
the Funds may, from time to time, reasonably request; and (vi) provide to the
Funds such other marketing-related and promotional services as the Funds may,
from time to time, reasonably request.
In the case of Shares sold with a front-end sales charge, EFD may retain the
difference between the current offering price of Shares, as set forth in the
current Prospectus for each Fund, and their net asset value, less any
reallowance that is payable in accordance with the sales charge schedule in
effect at any given time with respect to the Shares. In the case of Shares of
the Funds subject to a contingent deferred sales charge ("CDSC's") EFD may
retain any CDSC's payable with respect to the redemption of any Shares.
EFD will receive compensation from the Funds under the Rule 12b-1
distribution plans adopted by each of the Funds in the form of distribution
fees. EFD may pay all or part of the distribution fees to KID for the
marketing-related services described above. In addition, KID will continue to
receive all or part of the fees payable by the Funds under the distribution
plans in respect of services rendered prior to the consummation of the Merger.
The annual rate of charges payable by the Funds after the Merger under the
proposed distribution arrangements with EFD (including the marketing services
arrangement with KID) will not be greater than the annual rate of charges
currently payable by the Funds under their arrangements with KID. EFD intends to
obtain financing from FUNB-NC for advanced commission payments made in
connection with the sale of certain classes of Shares at market interest rates
for this type of financing. EFD may sell, assign, pledge or hypothecate its
rights to receive compensation as principal underwriter of the Funds in
connection with the financing of such commission payments made by EFD at the
time Shares are sold to Mutual Fund Funding 1994-1, a bankruptcy remote
subsidiary of Furman Selz, or such other entity as may be created for this
purpose, and Mutual Fund Funding 1994-1, or such other entity may in turn pledge
or assign such rights to FUNB-NC as lender to secure the financing of such
commission payments.
If the Merger is consummated, the Funds' transfer agent, Keystone Investor
Resources Center, Inc. ("KIRC"), an indirect subsidiary of Keystone Investments
which will become an indirect subsidiary of New Keystone Investments, FUNB-NC
and First Union. KIRC is expected to become the transfer agent and shareholder
services provider for the Evergreen funds, which will substantially increase
KIRC's operations. For additional information, see the section of this Proxy
Statement entitled "General Information".
There is proposed for election as Trustees of each Fund a Board consisting
of the current members of its Board, except Albert H. Elfner, III, and eight
additional members who are currently Trustees of some or all of the Evergreen
funds, all as described herein. As stated previously, Mr. Elfner is the current
President and a Trustee of each Fund. Because he will be a director and chief
executive officer of New Keystone Investments, which will be a subsidiary of
FUNB-NC and First Union if the Merger is consummated, Mr. Elfner will be
prohibited by current federal banking law from holding any positions with the
Keystone funds or Evergreen funds. Adoption of the Proposal to elect Trustees as
herein provided is contingent on the Merger becoming effective.
If the Merger is not consummated, the new investment advisory and management
and subadvisory, where applicable, and principal underwriting and other
agreements would not be entered into; the Funds' current agreements would remain
in place; the election of Trustees would not be effected; and the Funds' current
Trustees would continue in office. The current Trustees would, under these
circumstances, take such actions, if any, as they deemed necessary. If the
shareholders of any Fund do not approve the proposed new investment advisory and
management agreements, but the requisite shareholder approvals of other Funds
sufficient to satisfy the conditions to the Merger are obtained, KIMCO will be
unable to continue serving as investment adviser to each such non-approving Fund
pursuant to the existing investment advisory and management agreement. In that
event, the Board of Trustees of each non-approving Fund, with the assistance of
Keystone, will consider alternative advisory and management arrangements for
each such Fund.
1. ELECTION OF BOARDS OF TRUSTEES
The first Proposal is to elect each of the individuals nominated as a
Trustee to hold office until his successor is elected and qualifies or until his
death, retirement, resignation or removal from office. The special election is
being held to add eight Trustees to the existing Boards, contingent on the
consummation of the Merger. As required by current federal banking law, Albert
H. Elfner, III, who will be a director and chief executive officer of New
Keystone Investments if the Merger is consummated, will not be standing for
re-election and upon consummation of the Merger, will resign as a Trustee and
President of the Funds. The current Board of Trustees of each Fund, including
its Independent Trustees, has nominated the individuals described below for
election as Trustees. The nominees were selected by the Nominating Committees of
the Boards, each of which consists only of Independent Trustees. Approval of
this Proposal for International is subject to the approval of Proposal 3.
It is not expected that any of the nominees will decline or become
unavailable for election. In case this should happen, the discretionary power
given in the Proxy may be used to vote for a substitute nominee or nominees or
to fix the number of Trustees at less than nineteen. The Proxies solicited
hereby cannot be voted by shareholders for persons other than the nominees
named. Each nominee has consented to being named in this Proxy Statement and to
serve as a Trustee if elected. The nominees for election as Trustees of each
Fund and certain information about them is set forth below:
<PAGE>
NOMINEES FOR TRUSTEES
NAME (AGE)
(TRUSTEE SINCE) PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------- -------------------------------------------
Laurence B. Ashkin (68) Trustee of all the Evergreen funds other than
Evergreen Investment Trust; Real estate
developer and construction consultant; President
of Centrum Equities and Centrum Properties, Inc.
Frederick Amling (69) Trustee of the Keystone funds; Professor,
Finance Department, George Washington
University; President, Amling & Company
(investment advice); Outside Director, Torray
Fund (mutual fund); former Member, Board of
Advisers, Credito Emilano (banking).
Charles A. Austin III (61) Trustee of the Keystone funds; Investment
Counselor to Appleton Partners, Inc.
(investment advice); former Managing
Director, Seaward Management Corporation
(investment advice).
Foster Bam (69) Trustee of all the Evergreen funds other than
Evergreen Investment Trust; Partner in the
law firm of Cummings & Lockwood; Director,
Symmetrix, Inc. (sulphur company) and Pet
Practice, Inc. (veterinary services); former
Director, Chartwell Group Ltd. (manufacturer
of office furnishings and accessories), Waste
Disposal Equipment Acquisition Corporation
and Rehabilitation Corporation of America
(rehabilitation hospitals).
George S. Bissell (67)* Chairman of the Boards of Trustees of the
Keystone funds; Director, Keystone
Investments; Chairman of the Board and
Trustee of Anatolia College; Trustee of
University Hospital (and Chairman of its
Investment Committee); former Chairman of the
Board and Chief Executive Officer of Keystone
Investments and certain other companies
affiliated with Keystone Investments.
Edwin D. Campbell (69) Trustee of the Keystone funds; Principal,
Padanaram Associates, Inc.; former Executive
Director, Coalition of Essential Schools,
Brown University; former Director and
Executive Vice President, National Alliance
of Business; former Vice President,
Educational Testing Services; former Dean,
School of Business, Adelphi University.
Charles C. Chapin (67) Trustee of the Keystone funds; former Group
Vice President, Textron Corp.; former
Director, Peoples Bank (Charlotte, N.C.).
K. Dun Gifford (57) Trustee of the Keystone funds; Trustee,
Treasurer and Chairman of the Finance
Committee, Cambridge College; Chairman
Emeritus and Director, American Institute of
Food and Wine; President and Chairman,
Oldways Preservation and Exchange Trust
(education); former Chairman of the Board,
Director and Executive Vice President, The
London Harness Co. (specialty retail stores);
former Managing Partner, Roscommon Capital
Corp.; former Chief Executive Officer,
Gifford Gifts of Fine Foods; former Chairman,
Gifford, Drescher & Associates (environmental
consulting); former Director, Keystone
Investments and Keystone.
James S. Howell (71) Chairman of the Evergreen funds; former
Chairman of the Distribution Foundation for
the Carolinas; former Vice President of Lance
Inc. (food manufacturing).
Leroy Keith, Jr. (57) Trustee of the Keystone funds; President and
Chairman of the Board of 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; former
President, Morehouse College.
F. Ray Keyser, Jr. (69) Trustee of the Keystone 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; Director, 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 Governor of Vermont,
former Director of Central Vermont Railway,
Inc., S.K.I. Ltd., and Arrow Financial Corp.;
and former Director and Chairman of the
Board, Proctor Bank and Green Mountain Bank.
Gerald M. McDonnell (56) Trustee of the Evergreen funds; Sales
Representative with Nucor-Yamoto, Inc. (steel
producer).
Thomas L. McVerry (57) Trustee of the Evergreen funds; former Vice
President and Director of Rexham Corporation;
former Director of Carolina Cooperative
Federal Credit Union.
William Walt Pettit (40) Trustee of the Evergreen funds; Partner in the
law firm of Holcomb and Pettit, P.A.
David M. Richardson (55) Trustee of the Keystone funds; Vice Chair and
former Executive Vice President, DHR
International, Inc. (executive recruitment);
Director, Commerce and Industry Association
of New Jersey, 411 International, Inc. and
J&M Cumming Paper Co.; former Senior Vice
President, Boyden International Inc.
(executive recruitment).
Russell A. Trustee of the Evergreen funds; Medical
Salton, III MD (48) Director, U.S. Health Care/Aetna Health
Services; former Managed Health Care Consultant;
former President, Primary Physician Care.
Michael S. Scofield (53) Trustee of the Evergreen funds; Attorney, Law
Offices of Michael S. Scofield.
Richard J. Shima (57) Trustee of the Keystone funds; Executive
Consultant, Drake Beam Morin, Inc. (executive
outplacement); Director, Connecticut Natural
Gas Corporation, Trust Company of
Connecticut, Middlesex Mutual Assurance
Company, Hartford Hospital, Old State House
Association 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
Corporation; former Managing Director,
Russell Miller, Inc. (insurance); and former
Director, Kingswood-Oxford School.
Andrew J. Simons (57)* Trustee of the Keystone funds; Partner in the
law firm of Farrell, Fritz, Caemmerer,
Cleary, Barnosky & Armentano, P.C.; Adjunct
Professor of Law, St. John's University;
Adjunct Professor of Law, Touro College
School of Law; former President, Nassau
County Bar Association.
- ----------
*May be considered an "interested person" within the meaning of the 1940 Act.
If the Merger is consummated and Mr. Bissell is elected, he will be deemed
an "interested person" of the Funds by virtue of his ownership of First Union
Common Stock. While Mr. Simons, if elected, may be deemed an "interested person"
as a result of certain legal services rendered to a subsidiary of First Union by
his law firm, Farrell, Fritz, Caemmerer, Cleary, Barnosky & Amentano, P.C., Mr.
Simons is applying for an exemption from the Securities and Exchange Commission
("SEC") which would allow him to retain his status as an Independent Trustee.
Such exemption, if granted, may not be granted until after the Merger is
effective.
COMPENSATION OF TRUSTEES
Trustees who are not Independent Trustees will receive no compensation from
the Funds. The compensation (including all expenses incurred in connection with
any meeting attended) paid by each Fund to the Trustees as a group during the
Fund's last fiscal year, as well as the annual retainer and fee per meeting
currently paid to each Independent Trustee is set forth in Exhibit B to this
Proxy Statement. If elected, the eight newly elected Trustees will begin
receiving such amounts as of January 1, 1997 or on the Effective Date of the
Merger, whichever is later.
TRUSTEES AND COMMITTEE MEETINGS
Prior to meetings of the shareholders at which Trustees are to be elected or
if a vacancy in the Boards of Trustees occurs between such meetings, a
Nominating Committee recommends candidates for nomination to the Boards of
Trustees. The members of the Nominating Committee are Messrs. Campbell, Chapin,
Gifford, Keith and Keyser. The Nominating Committee's recommendations for
nominees for election as Independent Trustees are voted on by the Independent
Trustees. The Funds currently have no procedure to consider persons recommended
by shareholders for nomination to the Boards. Messrs. Amling, Austin,
Richardson, Shima and Simons represent the Funds on the Audit Committee. The
Audit Committee reviews the services performed by KPMG Peat Marwick, the
independent public accountant for each of the Keystone funds.
Exhibit C contains information about the number of Board of Trustees,
Nominating Committee and Audit Committee meetings held by each Fund during its
most recent fiscal year.
Each of the Trustees attended at least 75% of the total number of meetings
of the Board of Trustees and applicable Committees of each Fund during its most
recent fiscal year.
After the consummation of the Merger, Messrs. Keyser and Shima are expected
to become members of an Advisory Committee established to assist the Boards of
Trustees of the Evergreen funds.
OFFICERS OF THE FUNDS AND KIMCO
The executive officers of the Funds are directors, officers or employees of
KIMCO. As required by current federal banking law, following consummation of the
Merger, officers and/or employees of Keystone will no longer be permitted to
serve as officers of the Funds. Instead, such officers are expected to be
provided by Furman Selz. The current executive officers of the Funds, their
ages, and the period for which each executive officer has served, are (and are
expected to continue until consummation of the Merger to be): George S. Bissell
(age 67), Chairman of the Board since 1979 and former Chief Executive Officer;
Albert H. Elfner, III (age 52), President and Chief Executive Officer since
1994; and James R. McCall (age 51), Senior Vice President since 1993. Each of
the executive officers has been a director, officer or employee of KIMCO or its
affiliates for at least five years.
If the Merger is consummated, the executive officer of each Fund will be
John Pileggi (age 36), President and Treasurer. Mr. Pileggi has been an officer
or employee of Furman Selz for at least five years.
The executive officers and directors of KIMCO, who are expected to continue
to be such, or who are expected to be elected if the Merger is consummated, are:
Albert H. Elfner, III Chief Executive Officer, [Chairman of
the Board and Director]
James R. McCall President and [Director]
Edward F. Godfrey Senior Vice President, Chief Financial
Officer, Treasurer and [Director]
Philip M. Byrne Senior Vice President and [Director]
Ralph J. Spuehler [Director]
Rosemary D. Van Antwerp Senior Vice President, General Counsel
and Secretary
[Directors to be added or revised]
The address of each of the persons referred to above is 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
RECOMMENDATION OF THE TRUSTEES
The Board of Trustees of each Fund, including its Independent Trustees,
recommends that the shareholders vote FOR the election of each Trustee.
2. APPROVAL OF ADVISORY AND
MANAGEMENT AGREEMENTS
BACKGROUND OF PROPOSAL
KIMCO is the investment adviser or manager, or both, of the Funds. Keystone
Management is currently the investment manager of certain Funds for which KIMCO
is only the investment adviser. If the Merger is consummated, only KIMCO will be
the investment adviser and manager of all of the Funds, and Keystone Management
will cease to have any such function. KIMCO is a wholly-owned subsidiary of
Keystone Investments.
If the Merger is consummated, the Change in Control described in the
"Introduction" above will automatically terminate the Funds' investment advisory
and management agreements in accordance with their terms, as required by the
1940 Act. The new investment advisory and management agreement of each Fund
proposed hereby for approval by each Fund's shareholders will be substantively
identical to each Fund's existing agreement. EACH FUND'S ADVISORY FEE RATE WILL
REMAIN UNCHANGED. Such approvals by shareholders of Keystone funds which in the
aggregate provided at least 90% of the advisory and management fees paid to
Keystone by such Keystone funds for the twelve months ended August 31, 1996 is a
condition to the consummation of the Merger.
TERMS OF ADVISORY AND MANAGEMENT AGREEMENTS
Pursuant to each Fund's proposed advisory and management agreement, KIMCO
will act as investment adviser and manager to each Fund.
The investment advisory and management agreement of each Fund will require
KIMCO to manage and administer the operation of such Fund, and to manage the
investment and reinvestment of such Fund's assets in conformity with such Fund's
investment objectives and restrictions, subject to the supervision of the
Trustees of the Fund, as well as to provide office space, all necessary office
facilities, equipment and personnel in connection with its services under the
investment advisory and management agreement, and all other expenses of KIMCO
incurred in connection with the investment advisory and management services
provided. Except as stated below, all charges and expenses, other than those
specifically referred to above as being borne by its investment adviser and
manager, are paid by each Fund, including, but not limited to, custodian charges
and expenses, bookkeeping and auditors' charges and expenses, transfer agent
charges and expenses, fees of Independent Trustees, brokerage commissions,
brokerage fees and expenses, issue and transfer taxes, costs and expenses under
distribution plans, interest, taxes and corporate fees payable to governmental
agencies, the cost of share certificates, fees and expenses of the registration
and qualification of the Fund and its Shares with the SEC or under state or
other securities laws, expenses of preparing, printing and mailing of
prospectuses, statements of additional information, notices, reports and proxy
materials to shareholders of the Fund, expenses of shareholders' and Trustees'
meetings, charges and expenses of legal counsel for the Fund and for the
Trustees of the Fund, charges and expenses of filing annual and other reports
with the SEC and other authorities, and all extraordinary charges and expenses
of the Fund.
The form of proposed investment advisory and management agreement for B-1,
B-2, B-4, K-1, K-2, S-1, S-3, S-4 and Institutional is attached hereto as
Exhibit D. Appendix I to Exhibit D contains each such Fund's advisory fee
schedule. The proposed investment advisory and management agreement for Tax Free
is attached hereto as Exhibit E.
As provided in its proposed investment advisory and management agreement
which is included in Exhibit F, hereto, Adjustable Rate's agreement has, and
will have, a fee structure which provides for payment of a substantial number of
Fund expenses by KIMCO.
Each Fund's proposed investment advisory and management agreement, except as
stated below, provides that KIMCO shall have no liabilities in connection with
rendering services thereunder, other than liabilities resulting from KIMCO's
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties, and that each Fund will indemnify KIMCO against liabilities, losses and
expenses incurred in connection with all liabilities, except those stated above
and liabilities involving breach of KIMCO's fiduciary duties in respect of
receipt of compensation for its services. The proposed agreements of Precious
Metals and International included in Exhibits G and H, respectively, hereto, do
not provide for such indemnity by such Funds, but the agreement for
International contains the same limit on liabilities of KIMCO.
If approved by the shareholders of each Fund, the investment advisory and
management agreement for such Fund will continue in effect until two years from
its effective date (the Effective Date of the Merger) and, thereafter, will
continue from year to year, subject to termination as hereinafter described, if
approved annually by the shareholders or Board of Trustees of such Fund, and, in
either case, by a majority of the Independent Trustees by vote in person at a
meeting called for such purpose, all as required by the 1940 Act. Each such
agreement must also provide that it will automatically terminate upon any
"assignment" of the agreement, which term includes, as will be the case with the
current agreements if the Merger is consummated, a change in control of a Fund's
investment adviser and manager. The terms of the proposed agreements being
submitted to shareholders and the execution of such agreements upon consummation
of the Merger were approved unanimously by all of the Trustees of each Fund at a
meeting called for such purpose on September 5, 1996.
As of September 30, 1996, KIMCO served as investment adviser to the Keystone
funds listed in Exhibit I, whose investment objectives are substantially similar
to each other.
If the Merger is consummated, Furman Selz, which is not affiliated with
First Union will provide personnel and certain administrative services to the
Funds pursuant to a sub-administration agreement under which it will receive
from KIMCO a fee at the maximum annual rate of 1/100th of 1% of the average
daily net asset value of each Fund's total assets. The terms of such
sub-administration agreement have been approved by the Funds' Boards of
Trustees. As stated above, Furman Selz has agreed to sell its mutual funds
administration and distribution business to BISYS. Upon the consummation of this
transaction, BISYS will act as sub-administrator pursuant to an identical
agreement. See page ____. EFD, currently a subsidiary of Furman Selz, will be
the Funds' new principal underwriter.
Exhibit J shows the amounts of compensation received by KIMCO and other
affiliates of KIMCO for the most recent fiscal year pursuant to its investment
advisory and management agreements. Exhibit K shows the amounts paid to KID for
the most recent fiscal year for its principal underwriting and distribution
services to each Fund.
CONSIDERATIONS OF THE TRUSTEES
In considering the terms of the new investment advisory and management
agreements the Trustees of each Fund concluded that the Merger should result in
substantial contributions to the operations of the Funds in four major areas
consisting of (i) investment advisory services, (ii) sales of Fund Shares, (iii)
management efficiencies and economies of scale, and (iv) transfer agency and
shareholder services and exchange options, some of which factors are
substantially interdependent.
The Trustees, after examining relevant materials furnished to them by First
Union, Keystone and Furman Selz and attending meetings with executives and
employees of First Union and its subsidiaries, Furman Selz and EFD and the
Trustees of the Evergreen funds, determined that these expected contributions
would be largely due to First Union's financial strength, investment advisory
asset base and fund universe, personnel base, transfer agency and shareholder
services requirements, marketing capability and ability to make available
additional choices of funds for exchange or purchase by Keystone fund
shareholders. A description of certain ways in which some of these are expected
to contribute to Keystone's operations in the best interests of the Funds and
their shareholders follows:
Investment Advisory Services -- The Trustees expect that the increased
financial strength and stability of the investment adviser after the Merger
would be likely to (a) enhance the investment adviser's ability to attract and
retain desirable advisory and other management personnel, (b) create
opportunities for augmenting the technological and other support infrastructure
available for portfolio management and administrative services and (c) provide
the investment adviser with access to research and other resources of the
investment management personnel of First Union and its affiliates. The Trustees
concluded that the foregoing potential benefits, considered together with the
fact that no increase in the rate of investment management and advisory fees to
be charged to the Funds was planned or contemplated, would be in the best
interest of the Funds and their shareholders.
Sales of Shares -- The Trustees concluded that (a) the proposed new
distribution arrangements, which include intended use of First Union's retail
brokerage affiliates to make Shares of the Funds available to purchasers, and
(b) the increased likelihood that major broker-dealers would choose to make
Shares of the Funds available in view of the expected greater asset base and
additional exchange options to their clients that would result from the Merger,
could lead to a significant increase in sales of Shares and therefore in asset
levels.
Management Efficiencies and Economies of Scale -- The Trustees also
concluded that the Merger could result in greater economies of scale for the
Funds in the event Fund assets increased substantially as a result of increased
sales, as described above. They noted that any increases in asset levels would
result in lower fixed costs of the Funds being reduced on a per-share basis.
They also considered that if sales were increased, the resulting cash flow would
permit portfolio management personnel to increase the size of existing
portfolios and to avoid some of the costs associated with the untimely sales of
securities to meet redemptions.
Transfer Agency, Shareholder Services and Exchange Options -- The Trustees
considered that the addition of the Evergreen funds to the family of funds
served by KIRC will enable it to enjoy economies of scale that could lead to
increased and/or improved services to the Funds and that such economies of scale
could reduce the likelihood of increases in transfer agency expenses for the
Funds. The Trustees also found that the exchange options that the First Union
affiliation would eventually provide to Fund shareholders would be a significant
benefit.
The parties to the Merger Agreement have each agreed for a period of three
years following the Effective Date to use their reasonable best efforts to
assure compliance with the safe harbor provisions of Section 15(f) of the 1940
Act. Section 15(f) provides that an investment adviser to a registered
investment company may receive a benefit in connection with a sale of any
interest in such adviser which results in an assignment of an investment
advisory contract so long as the following two conditions are satisfied: (i) for
a period of three years after such assignment, at least 75% of the Board of
Trustees of the investment company cannot be "interested persons," as defined in
the 1940 Act, (i.e., must be Independent Trustees) of the new investment adviser
or its predecessor, and (ii) no "unfair burden" (as defined in the 1940 Act) is
imposed on the investment company as a result of the assignment or any express
or implied terms, conditions or understandings applicable thereto.
RECOMMENDATION OF TRUSTEES
The Board of Trustees of each Fund, including its Independent Trustees,
recommends that the shareholders vote FOR approval of each proposed investment
management and advisory agreement.
3. AMENDMENT OF BY-LAWS OF INTERNATIONAL
TO INCREASE THE NUMBER OF DIRECTORS
Article II, Section 1 of the By-Laws of International currently provides
that the Board of Directors shall consist of no less than three Directors of
International and no more than fifteen Directors. Consequently, the proposed
election of Directors described in Proposal 1 requires an amendment of the
ByLaws by the shareholders of International to permit additional Directors. The
Boards of Trustees of most of the Keystone funds have the authority to fix the
number of Trustees from time to time, without the need for shareholder approval
and the attendant costs of a shareholder meeting. It is therefore proposed that
the By-Laws of International be amended by substituting for the first sentence
of Section 1 of Article II, the following sentence:
"Directors and Officers. The officers of the corporation shall be a Board of
Directors, the number of which shall be fixed from time to time by the Board of
Directors, and a President, Treasurer, Clerk and such other officers as the
Board of Directors may from time to time elect."
The Board of Directors can then take action to increase the number of
Directors.
RECOMMENDATION OF THE DIRECTORS
The Board of Directors of International, including its Independent
Directors, recommends that the shareholders vote FOR approval of this Proposal.
4. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC
ACCOUNTANT FOR INTERNATIONAL AND
PRECIOUS METALS FOR THE CURRENT FISCAL YEAR
The audit services expected to be provided by KPMG Peat Marwick for the
current fiscal year include work in connection with the expression of an opinion
on the annual financial statements of International and Precious Metals and
review of the Funds' Annual Reports to shareholders and their filings with the
SEC. For its services, International and Precious Metals paid KPMG Peat Marwick
$25,395 and $30,727, respectively, for their fiscal years ended October 31, 1995
and February 28, 1996, respectively.
A representative of KPMG Peat Marwick is expected to attend the Meeting and
will be given an opportunity to make a statement and/or respond to appropriate
questions from shareholders.
RECOMMENDATION OF THE DIRECTORS
The Boards of Directors, including the Independent Directors, of
International and Precious Metals, respectively, recommend that the shareholders
of International and Precious Metals, respectively, vote FOR the ratification of
the selection of KPMG Peat Marwick as independent public accountant for such
Funds.
GENERAL INFORMATION
CERTAIN BROKERAGE
S-4 has entered into principal underwriting agreements, dated December 31,
1989, with Kokusai Securities Co., Ltd. ("Kokusai") and Nomura Securities Co.,
Ltd. ("Nomura"), for the sale of Shares of S-4 in Japan. Under such agreements
each of Kokusai and Nomura has agreed to use its best efforts to find purchasers
in Japan for the Shares of S-4. Kokusai and Nomura each currently receives
service fees from KID under S-4's 12b-1 Plan.
Exhibit L contains the total of brokerage commissions paid, the total amount
of brokerage commissions paid to Kokusai and Nomura and the percentage of
aggregate brokerage commissions paid to Kokusai and Nomura for each Fund's most
recent fiscal year.
TRANSFER AGENCY AGREEMENTS
KIRC is the transfer agent of the Shares of each Fund and performs transfer
agency, recordkeeping, dividend disbursing and other related services for each
Fund.
Exhibit M of this Proxy Statement contains a schedule of fees for such
services paid by each Fund for its most recent fiscal year.
OTHER SERVICES PROVIDED TO THE FUNDS BY KIMCO
The Fund Administration Department of Keystone Investments provides
accounting and bookkeeping services to each of the Funds. Exhibit M of this
Proxy Statement contains a schedule of fees paid by each Fund to the Fund
Administration Department of Keystone Investments for such services for its most
recent fiscal year.
ADDITIONAL INFORMATION
PAYMENT OF EXPENSES
Each Fund will pay its proportionate share of expenses of the preparation,
printing and mailing to its shareholders of the Proxy, accompanying Notice of
Meeting and this Proxy Statement and any supplementary solicitation of the
shareholders.
SUPPLEMENTARY SOLICITATION
Supplementary solicitation for each Fund may be made by mail, telephone,
telegraph or personal interview by officers of the Funds, by officers or
employees of KIRC, KIMCO, Keystone Investments, First Union or their
subsidiaries, or by securities dealers through whom Shares have been sold.
The Funds may also retain ____________________ (" ____ ") to assist in the
Proxy solicitation process, and may contact certain shareholders of the Fund
over the telephone. Shareholders that are contacted by ______ may be asked to
cast their vote by telephonic Proxy. Such Proxies will be recorded in accordance
with the procedures set forth below. KIMCO believes these procedures are
reasonably designed to ensure that the identity of the shareholder casting the
vote is accurately determined and that the voting instructions of the
shareholder are accurately reflected. ______ has received an opinion of
________________ that addresses the validity, under the applicable law of the
Commonwealth of Massachusetts, of a proxy given orally. Such opinion concludes
that a Massachusetts court would find that there is no Massachusetts law or
Massachusetts public policy against the acceptance of proxies signed by an
orally-authorized agent.
In all cases where a telephonic Proxy is solicited, the _____ representative
will ask for the shareholder's full name, address, social security or employer
identification number, title (if the shareholder is authorized to act on behalf
of an entity, such as a corporation), and the number of Shares owned. If the
information solicited agrees with the information provided to ______ by KIMCO,
then the ______ representative will explain the process, read the Proposals
listed on the Proxy and ask for the shareholder's instructions on each Proposal.
The ______ representative, although he or she will answer questions about the
process, will not recommend to the shareholder how to vote, other than to read
any recommendations set forth in this Proxy Statement. Within ____ hours, ______
will send the shareholder a letter or mailgram to confirm the Shareholder's vote
and asking the shareholder to call _____ immediately if the shareholder's
instructions are not correctly reflected in the confirmation.
If the shareholder wishes to participate in the Meeting, but does not wish
to give his/her proxy by telephone, he/she may still submit the Proxy included
with this Proxy Statement or attend in person. Any Proxy given by the
shareholder, whether in writing or by telephone, is revocable.
It is expected that the cost of retaining __________ to assist in the Proxy
solicitation process will not exceed $80,000, which cost will be allocated among
the Funds pro rata.
SUBSTANTIAL SHAREHOLDERS
Exhibit N contains information about the beneficial ownership by
shareholders of more than 5% of each Fund's outstanding Shares, all as of
September 30, 1996. On that date, the existing Trustees, nominees for election
as Trustees and Officers of the Fund, together as a group, "beneficially owned"
less than 1% of each Fund's outstanding Shares.
The term "beneficial ownership" is as defined under Section 13(d) of the
1934 Act. The information as to beneficial ownership is based on statements
furnished to each Fund by the existing Trustees, officers of the Fund, nominees
for Trustees and/or on records of KIRC.
SHAREHOLDER PROPOSALS
Except for International and Precious Metals, each Fund is not required and
does not intend to hold annual or other periodic meetings of shareholders except
as required by the 1940 Act. The next meeting of the Shareholders of each Fund
will be held at such time as the Board of Trustees may determine or at such time
as may be legally required. Proposals of shareholders intended to be presented
at a Fund's next meeting must be received by the Fund for inclusion in the
Fund's Proxy Statement and Proxy within a reasonable time before the meeting.
It is suggested that shareholders submit their proposals by Certified Mail -
Return Receipt Requested. The SEC has adopted certain requirements which apply
to any proposals of shareholders.
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS
EACH OF THE FUNDS WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT
ANNUAL REPORT (AND MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT,
IF ANY) TO A SHAREHOLDER OF THE FUND UPON REQUEST. ANY SUCH REQUEST SHOULD BE
DIRECTED TO KIRC AT 200 BERKELEY STREET, BOSTON, MASSACHUSETTS 02116-5034 or
(800) 343-2898.
CERTAIN DEFINITIONS USED IN THIS PROXY STATEMENT
"12b-1 Plan(s)" The Distribution Plans adopted by the Funds
pursuant to Rule 12b-1 issued under the 1940 Act.
"1933 Act" The Securities Act of 1933, as amended.
"1934 Act" The Securities Exchange Act of 1934, as
amended.
"1940 Act" The Investment Company Act of 1940, as
amended.
"Board(s) of Trustees" The Boards of Trustees or Directors of the Funds.
"First Union" First Union Corporation, One First Union
Center, Charlotte, North Carolina 28288.
First Union owns all of the outstanding
shares of FUNB-NC (except for directors'
qualifying shares).
"FUNB-NC" First Union National Bank of North Carolina,
One First Union Center, Charlotte, North
Carolina 28288.
"Furman Selz" Furman Selz LLC, 230 Park Avenue, New York, New
York 10169. If the Merger occurs, Furman Selz
would provide certain personnel and
administrative services to the Funds.
"Independent Trustees" Those Trustees or Directors of the Funds who
are not "interested persons" of the Funds as
defined in the 1940 Act and who have no
direct or indirect financial interest in the
operation of a 12b-1 Plan or in any
agreements related to the Plan.
"KID" Keystone Investment Distributors Company, 200
Berkeley Street, Boston, Massachusetts
02116-5034, a wholly-owned subsidiary of KIMCO.
KID is the principal underwriter of the Funds
(other than Adjustable Rate and Institutional)
and of other Keystone funds.
"KIMCO" Keystone Investment Management Company, 200
Berkeley Street, Boston, Massachusetts 02116,
a wholly-owned subsidiary of Keystone
Investments, Inc. and the investment adviser
of each of the Funds, except where a
subadviser is employed.
"Keystone Investments" Keystone Investments, Inc., 200 Berkeley
Street, Boston, Massachusetts 02116-5034,
which owns all of the outstanding shares of
KIMCO. Keystone Investments is predominantly
owned by current and former employees of
Keystone Investments and its affiliates,
their family members and their trusts.
"KPMG Peat Marwick" KPMG Peat Marwick LLP, independent public
accountant. KPMG Peat Marwick is the
independent public accountant for each of the
Keystone funds, First Union and certain
mutual funds managed or advised by
subsidiaries of First Union.
"Merger Agreement" Agreement and Plan of Acquisition and Merger,
dated September 6, 1996, between First Union,
FUNB-NC, FKI, Inc. (an affiliate of First
Union), and Keystone Investments, as amended
from time to time.
"Merger" The proposed merger of Keystone Investments with
and into an affiliate of First Union pursuant to
the Merger Agreement.
"mutual fund" An open-end management investment company
registered under the 1940 Act.
October 21, 1996
<PAGE>
EXHIBIT A
NUMBER OF
SHARES OUTSTANDING
NAME OF FUND AS OF 10/1/96
- ------------ ------------------
B-1 ...................................................... 15,476,632.348
B-2 ...................................................... 37,515,299.768
B-4 ...................................................... 144,206,450.628
K-1 ...................................................... 129,015,634.866
K-2 ...................................................... 58,154,268.969
S-1 ...................................................... 8,978,133.615
S-3 ...................................................... 31,056,053.481
S-4 ...................................................... 217,287,272.224
Adjustable Rate .......................................... 8,025,797.275
Institutional ............................................ 210,000.000
International ............................................ 19,065,897.905
Precious Metals .......................................... 7.870,692.296
Tax Free ................................................. 212,183,210.217
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
COMPENSATION TO TRUSTEES
COMPENSATION OF
FISCAL YEAR TRUSTEES AS A ANNUAL MEETING
NAME OF FUND ENDED GROUP RETAINER FEE
- ---------- ---------------- ------------------- ------------ -----------
<S> <C> <C> <C> <C>
B-1 ................................. 10/31/95 $29,898 $2,000 $ 80
B-2 ................................. 8/31/96 35,248 2,500 100
B-4 ................................. 7/31/96 42,995 2,500 100
K-1 ................................. 6/30/96 44,064 3,000 120
K-2 ................................. 10/31/95 36,448 2,000 80
S-1 ................................. 8/31/96 9,311 500 20
S-3 ................................. 8/31/96 9,417 500 20
S-4 ................................. 5/31/96 46,542 3,000 120
Adjustable Rate ..................... 9/30/96 0 0 0
Institutional ....................... 6/30/96 0 0 0
International ....................... 10/31/95 8,476 500 20
Precious Metals ..................... 2/28/96 9,336 500 20
Tax Free ............................ 12/31/95 55,248 5,500 220
</TABLE>
<PAGE>
EXHIBIT C
<TABLE>
<CAPTION>
FISCAL BOARD OF AUDIT NOMINATING
YEAR TRUSTEES COMMITTEE COMMITTEE
FUND ENDED MEETINGS MEETINGS MEETINGS
- ---- ---- ------------ ------------- --------------
<S> <C> <C> <C> <C>
B-1 ........................................ 10/31/95 7 3 0
B-2 ........................................ 8/31/96 6 2 1
B-4 ........................................ 7/31/96 6 2 1
K-1 ........................................ 6/30/96 6 2 1
K-2 ........................................ 10/31/95 7 3 0
S-1 ........................................ 8/31/96 6 2 1
S-3 ........................................ 8/31/96 6 2 1
S-4 ........................................ 5/31/96 6 2 0
Adjustable Rate ............................ 9/30/96 7 1 1
Institutional .............................. 12/31/96 4 1 1
International .............................. 10/31/95 7 4 1
Precious Metals ............................ 2/28/96 7 3 1
Tax Free ................................... 12/31/95 8 2 0
</TABLE>
<PAGE>
EXHIBIT D
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the ____ day of ____________, by and between
________[FUND], a Massachusetts business trust/Pennsylvania common law trust
(the "Fund"), and KEYSTONE INVESTMENT MANAGEMENT COMPANY, a Delaware corporation
(the "Adviser").
WHEREAS, the Fund and the Adviser wish to enter into an Agreement setting
forth the terms on which the Adviser will perform certain services for the Fund.
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Fund and the Adviser agree as follows:
1. The Fund hereby employs the Adviser to manage and administer the
operation of the Fund, to supervise the provision of services to the Fund by
others, and to manage the investment and reinvestment of the assets of the Fund
in conformity with the Fund's investment objectives and restrictions as may be
set forth from time to time in the Fund's then current prospectus and statement
of additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Fund, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
2. The Adviser shall place all orders for the purchase and sale of portfolio
securities for the account of the Fund with broker-dealers selected by the
Adviser. In executing portfolio transactions and selecting broker-dealers, the
Adviser will use its best efforts to seek best execution on behalf of the Fund.
In assessing the best execution available for any transaction, the Adviser shall
consider all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker-dealer, and the reasonableness of the commission, if
any (all for the specific transaction and on a continuing basis). In evaluating
the best execution available, and in selecting the broker-dealer to execute a
particular transaction, the Adviser may also consider the brokerage and research
services (as those terms are used in Section 28(e) of the Securities Exchange
Act of 1934 (the "1934 Act") provided to the Fund and/or other accounts over
which the Adviser or an affiliate of the Adviser exercises investment
discretion. The Adviser is authorized to pay a broker-dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for the Fund which is in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction if, but only if,
the Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer viewed in terms of that particular transaction or in terms of all
of the accounts over which investment discretion is so exercised.
3. The Adviser, at its own expense, shall furnish to the Fund office space
in the offices of the Adviser or in such other place as may be agreed upon by
the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Fund, for members of the Adviser's organization to serve without
salaries from the Fund as officers or, as may be agreed from time to time, as
agents of the Fund. The Adviser assumes and shall pay or reimburse the Fund for:
(1) the compensation (if any) of the Trustees of the Fund who are affiliated
with the Adviser or with its affiliates, or with any adviser retained by the
Adviser, and of all officers of the Fund as such, and (2) all expenses of the
Adviser incurred in connection with its services hereunder. The Fund assumes and
shall pay all other expenses of the Fund, including, without limitation: (1) all
charges and expenses of any custodian or depository appointed by the Fund for
the safekeeping of its cash, securities and other property; (2) all charges and
expenses for bookkeeping and auditors; (3) all charges and expenses of any
transfer agents and registrars appointed by the Fund; (4) all fees of all
Trustees of the Fund who are not affiliated with the Adviser or any of its
affiliates, or with any adviser retained by the Adviser; (5) all broker's fees,
expenses and commissions and issue and transfer taxes chargeable to the Fund in
connection with transactions involving securities and other property to which
the Fund is a party; (6) all costs and expenses of distribution of its shares
incurred pursuant to a Plan of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act"); (7) all taxes and trust fees
payable by the Fund to Federal, state or other governmental agencies; (8) all
costs of certificates representing shares of the Fund; (9) all fees and expenses
involved in registering and maintaining registrations of the Fund and of its
shares with the Securities and Exchange Commission (the "Commission") and
registering or qualifying its shares under state or other securities laws,
including, without limitation, the preparation and printing of registration
statements, prospectuses and statements of additional information for filing
with the Commission and other authorities; (10) expenses of preparing, printing
and mailing prospectuses and statements of additional information to
shareholders of the Fund; (11) all expenses of shareholders' and Trustees'
meetings and of preparing, printing and mailing notices, reports and proxy
materials to shareholders of the Fund; (12) all charges and expenses of legal
counsel for the Fund and for Trustees of the Fund in connection with legal
matters relating to the Fund, including, without limitation, legal services
rendered in connection with the Fund's existence, trust and financial structure
and relations with its shareholders, registrations and qualifications of
securities under Federal, state and other laws, issues of securities, expenses
which the Fund has herein assumed, whether customary or not, and extraordinary
matters, including, without limitation, any litigation involving the Fund, its
Trustees, officers, employees or agents; (13) all charges and expenses of filing
annual and other reports with the Commission and other authorities; and (14) all
extraordinary expenses and charges of the Fund. In the event that the Adviser
provides any of these services or pays any of these expenses, the Fund will
promptly reimburse the Adviser therefor.
The services of the Adviser to the Fund hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to others.
4. As compensation for the Adviser's services to the Fund during the period
of this Agreement, the Fund will pay to the Adviser a fee at the annual rate of:
For each Fund's Advisory Fee Schedule see Appendix I attached hereto.
5. The Adviser may enter into an agreement to retain, at its own expense, a
firm or firms ("SubAdviser") to provide the Fund all of the services to be
provided by the Adviser hereunder, if such agreement is approved as required by
law. Such agreement may delegate to such SubAdviser all of Adviser's rights,
obligations and duties hereunder.
6. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the performance of
this Agreement, except a loss resulting from the Adviser's willful misfeasance,
bad faith, gross negligence or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also an officer,
Director, partner, employee, or agent of the Adviser, who may be or become an
officer, Trustee, employee or agent of the Fund, shall be deemed, when rendering
services to the Fund or acting on any business of the Fund (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Fund and not as an officer, Director,
partner, employee, or agent or one under the control or direction of the Adviser
even though paid by it. The Fund agrees to indemnify and hold the Adviser
harmless from all taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state and foreign securities and blue
sky laws, as amended from time to time) and expenses, including (without
limitation) attorneys' fees and disbursements, arising directly or indirectly
from any action or thing which the Adviser takes or does or omits to take or do
hereunder provided that the Adviser shall not be indemnified against any
liability to the Fund or to its shareholders (or any expenses incident to such
liability) arising out of a breach of fiduciary duty with respect to the receipt
of compensation for services, willful misfeasance, bad faith, or gross
negligence on the part of the Adviser in the performance of its duties, or from
reckless disregard by it of its obligations and duties under this Agreement.
7. The Fund shall cause its books and accounts to be audited at least once
each year by a reputable independent public accountant or organization of public
accountants who shall render a report to the Fund.
8. Subject to and in accordance with the Declaration of Trust/Trust
Agreement of the Fund, the Articles of Incorporation of the Adviser and the
governing documents of any SubAdviser, it is understood that Trustees,
Directors, officers, agents and shareholders of the Fund or any Adviser are or
may be interested in the Adviser (or any successor thereof) as Directors and
officers of the Adviser or its affiliates, as stockholders of Keystone
Investments, Inc. or otherwise; that Directors, officers and agents of the
Adviser and its affiliates or stockholders of Keystone Investments, Inc. are or
may be interested in the Fund or any Adviser as Trustees, Directors, officers,
shareholders or otherwise; that the Adviser (or any such successor) is or may be
interested in the Fund or any SubAdviser as shareholder, or otherwise; and that
the effect of any such adverse interests shall be governed by said Declaration
of Trust/Trust Agreement of the Fund, Articles of Incorporation of the Adviser
and governing documents of any SubAdviser.
9. This Agreement shall continue in effect after July 1, 1994 only so long
as (1) such continuance is specifically approved at least annually by the Board
of Trustees of the Fund or by a vote of a majority of the outstanding voting
securities of the Fund, and (2) such renewal has been approved by the vote of a
majority of Trustees of the Fund who are not interested persons, as that term is
defined in the 1940 Act, of the Adviser or of the Fund, cast in person at a
meeting called for the purpose of voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Fund or by vote of the holders of a majority of the outstanding
voting securities of the Fund; and on sixty days' written notice to the Fund,
this Agreement may be terminated at any time without the payment of any penalty
by the Adviser. This Agreement shall automatically terminate upon its assignment
(as that term is defined in the 1940 Act). Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed postage prepaid, to the
other party at the main office of such party.
11. This Agreement may be amended at any time by an instrument in writing
executed by both parties hereto or their respective successors, provided that
with regard to amendments of substance such execution by the Fund shall have
been first approved by the vote of the holders of a majority of the outstanding
voting securities of the Fund and by the vote of a majority of Trustees of the
Fund who are not interested persons (as that term is defined in the 1940 Act) of
the Adviser, any predecessor of the Adviser, or of the Fund, cast in person at a
meeting called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Fund" shall have, for all purposes of this
Agreement, the meaning provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period other
than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
[FUND]
By:
----------------------------------------------------------
Title:
KEYSTONE INVESTMENT MANAGEMENT COMPANY
By:
----------------------------------------------------------
Title:
<PAGE>
APPENDIX I TO EXHIBIT D
FOR B-1, B-2, B-4:
AGGREGATE NET ASSET VALUE
MANAGEMENT FEE OF THE SHARES OF THE FUND
- -------------------------------------------------------------------------------
2.0% of gross dividend and interest income plus
0.50% of the first $100,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $500,000,000
- -------------------------------------------------------------------------------
computed as of the close of business on each business day.
FOR K-1:
AGGREGATE NET ASSET VALUE
MANAGEMENT FEE OF THE SHARES OF THE FUND
- -------------------------------------------------------------------------------
1.5% of gross dividend and interest income plus
0.60% of the first $100,000,000, plus
0.55% of the next $100,000,000, plus
0.50% of the next $100,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $500,000,000, plus
0.30% of amounts over $1,000,000,000
- -------------------------------------------------------------------------------
computed as of the close of business on each business day.
FOR K-2, S-1, S-3, AND S-4:
AGGREGATE NET ASSET VALUE
MANAGEMENT FEE OF THE SHARES OF THE FUND
- -------------------------------------------------------------------------------
0.70% of the first $100,000,000, plus
0.65% of the next $100,000,000, plus
0.60% of the next $100,000,000, plus
0.55% of the next $100,000,000, plus
0.50% of the next $100,000,000, plus
0.45% of the next $500,000,000, plus
0.40% of the next $500,000,000, plus
0.35% of amounts over $1,500,000,000
- -------------------------------------------------------------------------------
computed as of the close of business on each business day.
FOR INSTITUTIONAL TRUST:
AGGREGATE NET ASSET VALUE
MANAGEMENT FEE OF THE SHARES OF THE FUND
- -------------------------------------------------------------------------------
0.80% of the first $100,000,000, plus
0.75% of the next $150,000,000, plus
0.65% of amounts over $250,000,000, plus
- -------------------------------------------------------------------------------
computed as of the close of business on each business day and payable daily.
A pro rata portion of each Fund's fee shall be payable in arrears at the end of
each day or calendar month as the Adviser may from time to time specify to the
Fund. If and when this Agreement terminates, any compensation payable hereunder
for the period ending with the date of such termination shall be payable upon
such termination. Amounts payable hereunder shall be promptly paid when due.
<PAGE>
EXHIBIT E
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Agreement dated _________________ between KEYSTONE TAX FREE FUND, a
Massachusetts business trust organized under a Declaration of Trust dated June
20, 1985 (the "Fund"), and KEYSTONE INVESTMENT MANAGEMENT COMPANY, a Delaware
corporation (the "Company").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed
as follows:
1. SERVICES TO BE RENDERED BY THE COMPANY TO THE FUND.
The Company will provide investment management and other services to the
Fund as specified below.
A. In providing investment management services to the Fund, the Company will
determine from time to time what securities shall be acquired, held or disposed
of and what portion of the assets of the Fund shall be held uninvested. Should
the Board of Trustees of the Fund at any time, however, notify the Company in
writing of any portfolio transaction to be made or not to be made or any
investment policy to be followed by the Fund, the Company shall be obliged to
follow such direction or such investment policies for the period, if any,
specified in such notice or until the Company has received written notice that
such investment policy is no longer to be followed. The Company shall take, on
behalf of the Fund, all actions which it deems necessary to implement the
investment policies of the Fund, and in particular shall place all orders for
the purchase, sale or loan of portfolio securities for the Fund's account with
brokers or dealers or others selected by it, and to that end the Company is
authorized to give instructions to the custodian of the Fund's assets as to
deliveries of securities and payments of cash for the account of the Fund. In
the placement of such orders and the selection of brokers or dealers, the
Company shall conform to the Fund's policies concerning such matters as may be
from time to time determined by the Board of Trustees of the Fund or set forth
in the Fund's most recent prospectus under the Securities Act of 1933. In the
performance of these duties, the Company will use its best efforts to safeguard
and promote the welfare of the Fund. However, nothing in this agreement shall be
construed to constitute the Company as an agent of the Fund.
B. The Company, at its own expense, shall furnish to the Fund office space
in the offices of the Company or in such other place as may be agreed upon from
time to time, and all necessary office facilities, equipment and personnel for
managing the affairs of the Fund, and shall arrange, if desired by the Fund, for
members of the Company's organization to serve without salaries from the Fund as
officers and agents of the Fund.
C. At the request of the Board of Trustees of the Fund, the Company at its
own expense will provide or cause to be provided to the Fund the following
management and operating services, facilities and personnel (a) the officers of
the Fund and each Trustee of the Fund who is an affiliated person of the Company
or any investment adviser retained by the Company as contemplated in Section 4;
(b) determination from time to time of the value of the net assets of the Fund,
the keeping of its books and records and the safekeeping of its cash, securities
and other property; (c) auditors and accountants; (d) transfer agents, dividend
disbursing agents and registrars, including checks, stationery and other
supplies for the performance of such functions; (e) insurance and membership in
trade associations; (f) share certificates representing shares of the Fund; (g)
registration and maintenance of registrations of the Fund and of its shares with
various states and with the Securities and Exchange Commission, including the
preparation and printing of prospectuses for filing with said Commission; (h)
for shareholders' and Trustees' meetings and the preparation, printing and
mailing of reports and other material to shareholders; (i) legal counsel in
connection with the Fund's existence, organization and financial structure and
relations with its shareholders, in connection with any of the foregoing items
or otherwise, and in connection with other legal matters with respect to which
the Fund may require and desire advice of legal counsel; and (j) all other
services and facilities, the expenses of which are not hereinafter specifically
assumed by the Fund, for the management of the investment and reinvestment of
the assets of the Fund, the offering and sale of the shares of the Fund and the
administration of the affairs of the Fund. The expense, charges, dues, fees and
other costs to be borne by the Company in providing or causing to be provided to
the Fund the services, facilities and personnel described in clauses (b) through
(i) are hereinafter referred to as the "Reimbursable Expenses of the Company".
The additional management and operating services, facilities and personnel
required by clauses (b) through (i), of the immediately preceding paragraph and
the performance of the same shall be paid for solely by the Company, but shall
be at all times subject to the directions, instructions and requests of the
Board of Trustees of the Fund, including, without limitation, directions as to
the identity of the person or organization providing or performing the same, the
manner of performance and the rates of fees and charges of such persons or
organizations.
D. The Fund assumes and shall pay (1) broker's commissions (which may be
higher than other brokers would charge if paid to a broker which provides
brokerage and research services to the Company or any investment adviser
retained by the Company as contemplated by Section 4 or any affiliate of either,
for use in rendering investment management, advisory or similar services to the
Fund or other clients of the Company, of such investment adviser or of any
affiliate of either); (2) issue and transfer taxes chargeable to the Fund in
connection with securities transactions to which the Fund is a party; (3) its
interest charges and all taxes and fees (not hereinabove specifically required
to be borne by the Company) payable by the Fund to federal, state or other
governmental agencies and (4) the compensation of each Trustee of the Fund who
is not an affiliated person of the Company or any investment adviser retained by
the Company as contemplated by Section 4.
E. The Company may delegate its obligation to provide all of the services
required hereunder to the Fund to an investment adviser as contemplated by
Section 4.
F. The services of the Company to the Fund hereunder are not to be deemed
exclusive, and the Company shall be free to render similar services to others or
to have any other business or management interests.
2. COMPENSATION TO BE PAID BY THE FUND TO THE COMPANY.
As compensation for the services, facilities and personnel which the
Company is to provide or cause to be provided pursuant to Section 1, the Fund
shall pay to the Company at the end of each calendar month (i) an amount
calculated as set forth below:
ANNUAL AGGREGATE NET ASSET VALUE
MANAGEMENT OF THE SHARES
FEE INCOME OF THE FUND
- ------------------------------------------------------------------------------
2.0% of
Gross Dividend and
Interest Income
Plus
0.50% of the first $100,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $500,000,000;
and (ii) an amount equal to the amount of the Reimbursable Expenses of the
Company accrued during such calendar month.
Any other provision of this agreement to the contrary notwithstanding, the
total monthly compensation payable to the Company shall not exceed (i) the
largest amount which would not cause the Fund's expenses to exceed the lowest
applicable expense limitation imposed as of the beginning of the fiscal year by
any statute or any regulatory authority of any jurisdiction in which shares of
the Fund are qualified for offer and sale as such limitation is set forth in the
most recent notice furnished by the Company to the Fund not later than the first
day of the fiscal year or (ii) such lower percentage limit as the Company may by
written notice to the Fund declare to be effective for such period of time as
shall be stated in the notice. For purposes of clause (i) of this paragraph,
there shall be excluded from the "Fund's expenses" any amount borne directly or
indirectly by the Fund which is permitted to be excluded from the computation of
such limitation by such statute or regulatory authority. If the Company shall
serve under this agreement for less than the whole of any calendar month, the
foregoing compensation will be prorated. The Company shall submit to the Fund
detailed statements of all Reimbursable Expenses of the Company promptly after
the end of each such calendar month. The Fund and its agents, accountants and
employees shall have the right at reasonable times during normal business hours
to inspect the books and records of the Company pertaining to such Reimbursable
Expenses of the Company.
3. PUBLIC ACCOUNTANT'S REPORT.
The Fund's books and accounts shall be audited at least once each year by a
reputable, independent public accountant or organization of public accountants
who shall render a report to the Fund.
4. SUBADVISER.
The Company may enter into an agreement to retain at its own expense a firm
or firms ("SubAdviser") to provide the Fund all of the services to be provided
by the Company hereunder if such agreement is approved as required by law. Such
agreement may delegate to such SubAdviser all of the Company's rights,
obligations and duties hereunder.
5. INTERESTED AND AFFILIATED PERSONS.
Subject to and in accordance with the Declaration of Trust of the Fund, the
Articles of Incorporation of the Company and the governing documents of the
Adviser, it is understood that Trustees, officers, agents and shareholders of
the Fund or the Adviser are or may be interested in the Company (or any
successor thereof) as Directors and officers of the Company or its affiliates,
as stockholders of Keystone Investments, Inc. or otherwise; that Directors,
officers and agents of the Company and its affiliates or stockholders of
Keystone Investments, Inc. are or may be interested in the Fund or the Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Company
(or any such successor) is or may be interested in the Fund or the Adviser as
shareholder, or otherwise, and that the effect of any such adverse interests
shall be governed by said Declaration of Trust of the Fund, Articles of
Incorporation of the Company and governing documents of the Adviser.
6. TERMINATION AND AMENDMENT.
This agreement shall continue in effect until [ ____________ ], after which
it will terminate unless its continuance after said date is specifically
approved at least annually by the vote of a majority of the Trustees of the Fund
who are not interested persons of the Fund or interested persons of the Company
(as defined in the Investment Company Act of 1940) cast in person at a meeting
called for the purpose of voting on such approval; provided, however, that (1)
this agreement may at any time be terminated without the payment of any penalty
either by the vote of the Board of Trustees of the Fund or by the vote of a
majority of the outstanding voting securities of the Fund, on 60 days' written
notice to the Company, (2) this agreement shall immediately terminate in the
event of its assignment (within the meaning of the Investment Company Act of
1940), and (3) this agreement may be terminated by the Company on 90 days'
written notice to the Fund. The aforesaid requirement that continuance of this
agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the Investment Company Act of 1940 and the Rules and
Regulations thereunder. Any notice under this agreement shall be given in
writing, addressed and delivered, or mailed postpaid, to the other party at any
office of such party.
This agreement may be amended at any time by mutual consent of the parties,
provided that such consent on the part of the Fund shall have been approved by
the vote of a majority of the outstanding voting securities of the Fund and by
the vote of a majority of the Trustees of the Fund who are not interested
persons of the Fund or interested persons of the Company (as defined in the
Investment Company Act of 1940) cast in person at a meeting called for the
purpose of voting on such approval.
7. LIABILITY OF THE COMPANY.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Company, or of reckless disregard of its obligations and duties
hereunder, the Company shall not be subject to liability for any act or omission
in the course of, or connected with, rendering services hereunder. The Fund
agrees to indemnify and hold the Company harmless from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Act of 1933, the Securities Exchange
Act of 1934, the Investment Company of 1940, and any state and foreign
securities and blue sky laws, as amended from time to time) and expenses,
including (without limitation) attorneys' fees and disbursements, arising
directly or indirectly from any action or thing which the Company takes or does
or omits to take or do hereunder provided that the Company shall not be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of a breach of fiduciary duty
with respect to the receipt of compensation for services, willful misfeasance,
bad faith, or gross negligence on the part of the Company in the performance of
its duties, or from reckless disregard by it of its obligations and duties under
this agreement.
8. DEFINITIONS.
For the purpose of this agreement the words: (1) "vote of a majority of the
outstanding voting securities of the Fund" mean the affirmative vote, at a duly
held meeting of shareholders of the Fund, (a) of the holders of 67% or more of
the shares of the Fund present in person or by proxy and entitled to vote at
such meeting, if the holders or more than 50% of the outstanding shares of the
Fund are present in person or by proxy and entitled to vote at such meeting, or
(b) of the holders of more than 50% of the outstanding shares of the Fund,
whichever is less, and (2) the words "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the Rules and
Regulations thereunder.
A copy of the Declaration of Trust of the Fund is on file with the Secretary
of The Commonwealth of Massachusetts and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Fund as Trustees and not
individually and that the obligations of this instrument are not binding upon
the Trustees or holders of Shares of the Fund individually but are binding only
upon the assets and property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto authorized at Boston,
Massachusetts, on the day and year first above written.
KEYSTONE TAX FREE FUND
By:
----------------------------------------------------
Title:
KEYSTONE INVESTMENT MANAGEMENT COMPANY
By:
----------------------------------------------------
Title:
<PAGE>
EXHIBIT F
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Agreement made the _____ day of _____________ , by and between KEYSTONE
INSTITUTIONAL ADJUSTABLE RATE FUND, a Massachusetts business trust (the "Fund"),
and KEYSTONE INVESTMENT MANAGEMENT COMPANY, a Delaware corporation (the
"Adviser").
WHEREAS, the Fund and the Adviser wish to enter into an agreement setting
forth the terms on which the Adviser will perform certain services for the Fund.
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Fund and the Adviser agree as follows:
1. The Fund hereby employs the Adviser to manage and administer the
operation of the Fund, to supervise the provision of services to the Fund by
others and to manage the investment and reinvestment of the assets of the Fund
in conformity with the Fund's investment objectives and restrictions as may be
set forth from time to time in the Fund's then current prospectus and statement
of additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Fund, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
2. The Adviser shall place all orders for the purchase and sale of portfolio
securities for the account of the Fund with broker-dealers selected by the
Adviser. In executing portfolio transactions and in selecting broker-dealers,
the Adviser will use its best efforts to seek best execution on behalf of the
Fund. In assessing the best execution available for any transaction, the Adviser
shall consider all factors it deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker-dealer, and the reasonableness of the
commission, if any (all for the specific transaction and on a continuing basis).
In evaluating the best execution available, and in selecting the broker-dealer
to execute a particular transaction, the Adviser may also consider the brokerage
and research services (as those terms are used in Section 28(e) of the
Securities Exchange Act of 1934 (the "1934 Act")) provided to the Fund and/or
other accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Fund which is in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction if, but only if, the Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer viewed in terms of that particular
transaction or in terms of all of the accounts over which investment descretion
is so exercised.
3. The Adviser, at its own expense, shall furnish to the Fund office space
in the offices of the Adviser or in such other place as may be agreed upon by
the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Fund, for members of the Adviser's organization to serve without
salaries from the Fund as officers or, as may be agreed from time to time, as
agents of the Fund. The Adviser assumes and shall pay or reimburse the Fund for:
(1) the compensation (if any) of the Trustees of the Fund who are affiliated
with the Adviser or with its affiliates, or with any adviser retained by the
Adviser, and of all officers of the Fund as such; (2) all expenses of the
Adviser incurred in connection with its services hereunder; (3) all charges and
expenses of any custodian or depository appointed by the Fund for the
safekeeping of its cash, securities and other property; (4) all charges and
expenses for bookkeeping and auditors; (5) all charges and expenses of any
transfer agents and registrars appointed by the Fund; (6) all costs of
certificates representing shares of the Fund; (7) all fees and expenses involved
in registering and maintaining registrations of the Fund and of its shares with
the Securities and Exchange Commission ("Commission") and registering or
qualifying its shares under state or other securities laws, including, without
limitation, the preparation and printing of registration statements,
prospectuses and statements of additional information for filing with the
Commission and other authorities; (8) expenses of preparing, printing and
mailing prospectuses and statements of additional information to shareholders of
the Fund; (9) all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing notices, reports and proxy materials to
shareholders of the Fund; and (10) all charges and expenses of filing annual and
other reports with the Commission and other authorities. The Fund assumes and
shall pay all other expenses of the Fund, including, without limitation; (1) all
fees of all Trustees of the Fund who are not affiliated with the Adviser or any
of its affiliates, or with any adviser retained by the Adviser; (2) all brokers'
fees, expenses and commissions and issue and transfer taxes chargeable to the
Fund in connection with transactions involving securities and other property to
which the Fund is a party; (3) all taxes and business trust fees payable by the
Fund to federal, state or other governmental agencies; (4) all interest costs of
the Fund; (5) all charges and expenses of legal counsel to the Fund and to the
Trustees of the Fund in connection with routine legal matters relating to the
Fund, including, without limitation, legal services rendered in connection with
the Fund's existence, business trust and financial structure and relations with
its shareholders, registrations and qualifications of securities under federal,
state and other laws and issues of securities, including all charges and
expenses of legal counsel to the Fund in connection with extraordinary matters,
including, without limitation, any litigation involving the Fund, its Trustees,
officers, employees of agents; and (6) all extraordinary expenses and charges of
the Fund. In the event the Adviser provides any of these services or pays any of
these expenses, the Fund will promptly reimburse the Adviser therefor.
The services of the Adviser to the Fund hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to others.
4. As compensation for the Adviser's services to the Fund during the period
of this Agreement, the Fund will pay to the Adviser a fee at the annual rate of
0.30% of the average daily net asset value of the shares of the Fund.
A pro rata portion of the fee shall be payable in arrears at the end of each
day or calendar month as the Adviser may from time to time specify to the Fund.
If and when this Agreement terminates, any compensation payable hereunder for
the period ending with the date of such termination shall be payable upon such
termination. Amounts payable hereunder shall be promptly paid when due.
5. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the performance of
this Agreement, except a loss resulting from the Adviser's willful misfeasance,
bad faith, gross negligence or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also an officer,
director, partner, employee, or agent of the Adviser who may be or become an
officer, trustee, employee or agent of the Fund, shall be deemed, when rendering
services to the Fund or acting on any business of the Fund (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Fund and not as an officer, director,
partner, employee, or agent or one under the control or direction of the Adviser
even though paid by it. The Fund agrees to indemnify and hold the Adviser
harmless from all taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the Securities Act of
1933, the 1934 Act, the Investment Company Act of 1940 (the "1940 Act" ) and any
state and foreign securities and blue sky laws, as amended from time to time)
and expenses, including (without limitation) attorneys' fees and disbursements,
arising directly or indirectly from any action or thing which the Adviser takes
or does or omits to take or do hereunder provided that the Adviser shall not be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of breach of fiduciary duty
with respect to the receipt of compensation for services, willful misfeasance,
bad faith, or gross negligence on the part of the Adviser in the performance of
its duties, or from reckless disregard by it of its obligations and duties under
the Agreement.
6. The Fund shall cause its books and accounts to be audited at least once
each year by a reputable independent public accountant or organization of public
accountants who shall render a report to the Fund.
7. Subject to and in accordance with the Declaration of Trust of the Fund,
the Articles of Incorporation of the Adviser and the governing documents of any
adviser, it is understood that trustees, directors, officers, agents and
shareholders of the Fund or any Adviser are or may be interested in the Adviser
(or any successor thereof) as directors and officers of the Adviser or its
affiliates, as stockholders of Keystone Investments, Inc. or otherwise; that
directors, officers and agents of the Adviser and its affiliates or stockholders
of Keystone Investments, Inc. are or may be interested in the Fund or any
Adviser as trustees, directors, officers, shareholders or otherwise; that the
Adviser (or any such successor) is or may be interested in the Fund or any such
Adviser as shareholder, or otherwise; and that the effect or any such adverse
interests shall be governed by said Declaration of Trust of the Fund, Articles
of Incorporation of the Adviser and governing documents of any such adviser.
8. This Agreement shall continue in effect after [ ____________ ] only so
long as (1) such continuance is specifically approved at least annually by the
Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the Fund, and (2) such renewal has been approved by the
vote of a majority of Trustees of the Fund who are not interested pesons, as
that term is defined in the 1940 Act, of the Adviser or of the Fund, cast in
person at a meeting called for the purpose of voting on such approval.
9. On sixty days' written notice to the Adviser, this Agreement may be
terminated without the payment of any penalty at any time by the Board of
Trustees of the Fund or by vote of the holders of a majority of the outstanding
voting securities of the Fund; and on sixty days' written notice to the Fund,
this Agreement may be terminated without the payment of any penalty at any time
by the Adviser. This Agreement shall automatically terminate upon its assignment
(as that term is defined in the 1940 Act). Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed postage prepaid, to the
other party at the main office of such party.
10. This Agreement may be amended at any time by an instrument in writing
executed by both parties hereto or their respective successors, provided that
with regard to amendments of substance such execution by the Fund shall have
been first approved by the vote of the holders of a majority of the outstanding
voting securities of the Fund and by the vote of a majority of Trustees of the
Fund who are not interested persons (as that term is defined in the 1940 Act) of
the Adviser, any predecessor of the Adviser or of the Fund, cast in person at a
meeting called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Fund" shall have, for all purposes of this
Agreement, the meaning provided therefor in the 1940 Act.
11. Any compensation payable to the Adviser hereunder for any period other
than a full year shall be proportionately adjusted.
12. The provisions of the Agreement shall be governed, construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts.
13. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of the Commonwealth of Massachusetts. This instrument is executed on
behalf of the Trustees of the Fund as trustees and not individually, and the
obligations of this instrument are not binding upon the Trustees or holders of
shares of the Fund individually but are binding only upon the assets and
property of the Fund.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
KEYSTONE INSTITUTIONAL ADJUSTABLE RATE FUND
By:
-------------------------------------------------------
Title:
KEYSTONE INVESTMENT MANAGEMENT COMPANY
By:
-------------------------------------------------------
Title:
<PAGE>
EXHIBIT G
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Agreement made the ______ day of _____________ , 199 , by and between
KEYSTONE PRECIOUS METALS HOLDINGS, INC. (hereinafter sometimes called the
"Fund"), a Delaware corporation, and KEYSTONE INVESTMENT MANAGEMENT COMPANY
(hereinafter sometimes called the "Investment Adviser"), a Delaware corporation.
WITNESSETH:
WHEREAS, the Fund and the Investment Adviser wish to enter into an Agreement
setting forth the terms on which the Investment Adviser will perform certain
services for the Fund.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Adviser agree as follows:
1. The Fund hereby employs the Investment Adviser to manage the investment
and reinvestment of the assets of the Fund, subject to the supervision of the
Board of Directors of the Fund, for the period and on the terms in this
Agreement set forth. The Investment Adviser hereby accepts such employment and
agrees during such period, at its own expense, to render the services and to
assume the obligations herein set forth, for the compensation herein provided.
The Investment Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
2. The Investment Adviser, at its own expense, shall furnish to the Fund
office space in the offices of the Investment Adviser or in such other place as
may be agreed upon by the parties from time to time, and all necessary office
facilities, equipment and personnel for managing the investment and reinvestment
of the assets of the Fund, and shall arrange, if desired by the Fund, for
members of the Investment Adviser's organization to serve without salaries from
the Fund as officers or as agents of the Fund. The Investment Adviser assumes
and shall pay or reimburse the Fund for: (1) the compensation (if any) of the
Directors of the Fund who are affiliated persons (as such term is defined in the
Investment Company Act of 1940, as amended) of the Investment Adviser and of all
officers of the Fund as such, and (2) all expenses of the Investment Adviser and
the Fund incurred for the management of the investment and reinvestment of the
assets of the Fund, including any fee for services paid to any Sub-Investment
Adviser appointed pursuant to paragraph 6 hereunder. The Fund assumes and shall
pay all other expenses of the Fund, including, without limitation: (1) all
charges and expenses of any custodian or depository appointed by the Fund for
the safekeeping of its cash, securities and other property; (2) all charges and
expenses for bookkeeping and auditors; (3) all charges and expenses of any
transfer agents and registrars appointed by the Fund; (4) all fees of all
Directors of the Fund who are not affiliated persons (as such term is defined in
the Investment Company Act of 1940, as amended (the "Act")) of the Investment
Adviser or any Sub-Investment Adviser appointed pursuant to paragraph 6
hereunder; (5) all broker's fees, expenses and commissions and issue and
transfer taxes chargeable to the Fund in connection with transactions involving
securities and other property to which the Fund is a party; (6) all taxes and
corporate fees payable by the Fund to federal, state or other governmental
agencies; (7) all costs of stock certificates representing shares of the Fund;
(8) all fees and expenses involved in registering and maintaining registrations
of the Fund and of its shares with the Securities and Exchange Commission and
registering or qualifying its shares under state or other securities laws
including the preparation and printing of prospectuses for filing with said
Commission and other authorities (but not the expense of preparing any sales
literature or of printing the same or of printing any prospectus for use in
selling Fund shares, which expenses neither party undertakes by this agreement
to bear); (9) all expenses of shareholders' and Directors' meetings and of
preparing and printing reports to shareholders dealing with the shareholders;
and (10) all charges and expenses of legal counsel for the Fund in connection
with legal matters relating to the Fund, including, without limitation, legal
services rendered in connection with the Fund's corporate existence, corporate
and financial structure and relations with its shareholders, registrations and
qualifications of securities under federal, state and other laws, issues of
securities and expenses which the Fund has herein assumed. In the event the
Investment Adviser provides any services (excluding printing) involved in
registering and maintaining registrations of the Fund and of its shares with the
Securities and Exchange Commission or any services involved in preparing reports
to shareholders, the Fund will promptly reimburse the Investment Adviser
therefor on a cost basis.
The services of the Investment Adviser to the Fund hereunder are not to be
deemed exclusive, and the Investment Adviser shall be free to render similar
services to others.
3. As compensation for the Investment Adviser's services during the period
of this Agreement, the Fund will pay to the Investment Adviser a fee at the
annual rate of 3/4 of 1% of the first $100,000,000, 5/8 of 1% of the next
$100,000,000 and 1/2 of 1% of the excess over $200,000,000 of the average of the
daily net asset values of the Fund computed as of the close of business on each
business day. Such fee shall be reduced by the amount of any compensation paid
to the Investment Adviser by or on behalf of the Fund's wholly owned
subsidiaries in consideration for services rendered in connection with the
investment and reinvestment of the assets of such subsidiaries.
A pro rata portion of the fee shall be payable in arrears at the end of each
calendar month or fiscal quarter of the Fund as the Investment Adviser may from
time to time specify in writing to the Fund. If this Agreement terminates other
than at the end of a fiscal year of the Fund, any compensation payable hereunder
for the period ending with the date of such termination shall be payable upon
such termination.
Notwithstanding the foregoing, the Investment Adviser agrees to bear any
expenses of the Fund which would cause the Fund to exceed in any fiscal year the
most restrictive expense limitation applicable to the Fund under state law or
regulation and agrees to seek and obtain the approval of a majority of the
Directors of the Fund who are not interested persons (as that term is defined in
the Act) of the Investment Adviser or the Fund before requesting the Fund to
withdraw from offering its shares in any state in which the Fund is presently
offering its shares.
4. The Fund shall cause its books and accounts to be audited at least once
each year by a reputable, independent public accountant or organization of
public accountants who shall render a report to the Fund.
5. Subject to and in accordance with the Certificate of Incorporation of the
Fund, and the Certificate of Incorporation of the Investment Adviser,
respectively, it is understood that Directors, officers, agents and shareholders
of the Fund are or may be interested in the Investment Adviser (or any successor
thereof) as Directors and officers of the Investment Adviser and its affiliates,
as stockholders of Keystone Investments, Inc. or otherwise; that Directors,
officers and agents of the Investment Adviser and its affiliates, or
stockholders of Keystone Investments, Inc. are or may be interested in the Fund
as Directors, officers, shareholders or otherwise, that the Investment Adviser
(or any such successor) is or may be interested in the Fund as shareholder or
otherwise; and that the effect of any such adverse interests shall be governed
by said Certificate of Incorporation of the Fund and Certificate of
Incorporation of the Investment Adviser, respectively.
6. The Investment Adviser may enter into an agreement to retain at its own
expense any other firm or firms to provide the Fund investment advisory
services, if such agreement is approved by a vote of a majority of the
outstanding voting securities of the Fund and by the vote of a majority of the
Directors of the Fund who are not parties to such agreement or interested
persons (as that term is defined in the Act) of the Fund or of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
7. This Agreement shall continue in effect for two years from the date set
forth above and thereafter only so long as (1) such continuance is specifically
approved at least annually by the Board of Directors of the Fund or by a vote of
a majority of the outstanding voting securities of the Fund, and (2) such
renewal has been approved by the vote of a majority of Directors of the Fund who
are not interested persons (as that term is defined in the Act) of the
Investment Adviser or of the Fund, cast in person at a meeting called for the
purpose of voting on such approval.
8. On sixty days' written notice to the Investment Adviser, this Agreement
may be terminated at any time, without the payment of any penalty, by the Board
of Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund; and on ninety days' written notice to the Fund, this
Agreement may be terminated at any time, without the payment of any penalty, by
the Investment Adviser. This Agreement shall automatically terminate upon its
assignment (as that term is defined in the Act). Any notice under this Agreement
shall be given in writing, addressed and delivered, or mailed prepaid, to the
other party at any office of such party.
9. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by a vote of a majority of the outstanding voting securities of the
Fund. A "majority of the outstanding voting securities of the Fund" shall have,
for all purposes of this Agreement, the meaning provided therefor in the Act.
10. Any compensation payable to the Investment Adviser hereunder or any
reimbursement by the Investment Adviser of expenses of the Fund pursuant to
paragraph 3 above for any period other than a full year shall be proportionately
adjusted.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
KEYSTONE PRECIOUS METALS HOLDINGS, INC.
By:
------------------------------------------------------------
Title:
KEYSTONE INVESTMENT MANAGEMENT COMPANY
By:
------------------------------------------------------------
Title:
<PAGE>
EXHIBIT H
KEYSTONE INTERNATIONAL FUND INC.
BOSTON, MASSACHUSETTS
Keystone Investment Management Company
200 Berkeley Street
Boston, Massachusetts 02116
Dear Sirs:
INVESTMENT ADVISORY AGREEMENT
KEYSTONE INTERNATIONAL FUND INC. (the "Fund") has been incorporated under
the laws of Massachusetts to engage in the business of investing in securities.
Its Board of Directors has selected you to act as investment manager of the Fund
and to provide certain other services, as more fully set forth below, and you
are willing to act as such investment manager and to perform such services under
the terms and conditions hereinafter set forth. Accordingly, the Fund agrees
with you as follows:
1. Advisory Services -- You will regularly provide the Fund with investment
research, advice and supervision and will furnish continuously an investment
program for the Fund's portfolio. You will recommend what securities shall be
purchased for the portfolio of the Fund, what portfolio securities shall be sold
by the Fund, and what portion of the Fund's assets shall be held uninvested. You
shall advise and assist the officers of the Fund in taking such steps as are
necessary or appropriate to carry out the decisions of its Board of Directors
and the appropriate committees of such Board regarding the foregoing matters and
the general conduct of the investment business of the Fund.
2. Expenses of Operation -- You will pay the ordinary office expenses of the
Fund including its rent and will provide investment advisory, research and
statistical facilities and all clerical services relating to research,
statistical and investment work. You will not be required to pay any expenses of
the Fund other than those enumerated in this paragraph 2 and in particular, but
without limiting the generality of the foregoing, will not be required to pay
brokers' commissions; legal, auditing, and registrar's fees and expenses; taxes
and governmental fees; the cost of sale, underwriting, distribution, redemption,
transfer or repurchase of shares of the Fund; the expenses of registering or
qualifying securities for sale; the cost of preparing and distributing reports
and notices to shareholders; or the fees or disbursements of custodians of the
Fund's assets including expenses incurred in the performance of any obligations
enumerated in the Articles of Organization or Bylaws of the Fund, insofar as
they govern agreements with any such custodian.
3. Compensation to the Adviser -- For all services to be rendered and
payments made as provided in paragraphs 1 and 2 hereof, the Fund will pay you a
management fee, which shall be deducted daily from the assets of the Fund at the
rate of (a) .75 of 1% per annum of the total daily net asset vlaue of the Fund
for those assets of the Fund which are less than $200,000,000; (b) .65 of 1% per
annum of the total daily net asset value of the Fund for those assets of the
Fund which are $200,000,000 or more, but less than $400,000,000; (c) .55 of 1%
per annum of the total daily net asset value of the Fund for those assets of the
Fund which are $400,000,000 or more, but less than $600,000,000 and (d) .45 of
1% per annum of the total daily net asset value of the Fund for those assets of
the Fund which are $600,000,000 or more.
4. Avoidance of Inconsistent Position -- In connection with purchases or
sales of portfolio securities for the account of the Fund, neither you nor any
of your directors, officers or employees will act as principal or agent or
receive any commission.
5. Investment Adviser -- You may enter into an agreement to retain, at your
own expense, a firm or firms ("SubAdviser") to provide the Fund all of the
services to be provided by you hereunder, if such agreement is approved as
required by law. Such agreement may delegate to such SubAdviser all of your
rights, obligations and duties hereunder.
6. Limitation of Liability of Adviser -- You shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from reckless disregard by you of your
obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Fund shall
be deemed when acting within the scope of his employment by the Fund to be
acting in such employment solely for the Fund and not as your employee or agent.
7. Duration and Termination of this Agreement -- This Agreement shall go
into effect on the date hereof and, unless terminated as provided in this
paragraph 6 or in paragraph 7 hereof shall continue in effect until [_________];
thereafter it shall continue in effect from year to year but only so long as
such continuance is approved at least annually by the Board of Directors of the
Fund or by the vote of a majority of the outstanding voting securities of the
Fund. In addition, this Agreement shall not be entered into, renewed or
performed unless the terms of this Agreement and any renewal thereof have been
approved by the vote of a majority of the Directors of the Fund, who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated either by the Board of Directors of the Fund or by
the vote of a majority of the outstanding voting securities of the Fund or by
you. Such termination shall be effective after 60-days' notice and shall be
without penalty. This Agreement shall automatically terminate in the event of
its assignment.
8. Amendment of this Agreement -- No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought and no amendment of this Agreement shall be
effective until approved by the vote of a majority of the Fund's outstanding
voting securities.
9. Miscellaneous -- The captions in this Agreement are included for
convenience or reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction of effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
As used in this Agreement, the terms "assignment" and "majority of the
outstanding voting securities" shall have the meanings given to them by Sections
2(a)(4) and 2(a)(42), respectively, of the Investment Company Act of 1940.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Fund, whereupon this letter shall become a binding contract.
Yours very truly,
KEYSTONE INTERNATIONAL FUND INC.
By:
------------------------------------------------------
Title:
The foregoing Agreement is hereby accepted as of the date thereof.
KEYSTONE INVESTMENT MANAGEMENT COMPANY
By:
------------------------------------------------------
Title:
<PAGE>
EXHIBIT I
KEYSTONE FUNDS ADVISED BY KIMCO WITH SUBSTANTIALLY
SIMILAR INVESTMENT OBJECTIVES
(1) LONG-TERM GROWTH OF CAPITAL BY INVESTING IN EQUITY SECURITIES OF
COMPANIES WITH SMALL MARKET CAPITALIZATIONS:
<TABLE>
<CAPTION>
ARRANGEMENTS WHEREBY
ANNUAL INVESTMENT ADVISORY THE ADVISER HAS
FEES (PERCENT OF AVERAGE AGREED TO LIMIT
FUND NAME NET ASSETS DAILY NET ASSETS) THE FUND'S ANNUAL EXPENSES
--------- ---------- ----------------- --------------------------
<S> <C> <C> <C>
Keystone Basic monthly fee of 1.00% up to and including N/A
America Hartwell Emerging $100,000,000, declining to 0.65% of amounts over
Growth Fund, Inc. $400,000,000, plus an incentive fee of up to 1/2 of
1% depending on the fund's investment performance
relative to the S&P 500
Keystone Small Company 0.70% of the first $100,000,000, declining to 0.35% N/A
Growth Fund (S-4) of amounts over $1,500,000,000.
Keystone Small Company 0.70% of the first $100,000,000, declining to 0.35% Class A, B and C expenses are
Growth Fund II of amounts over $1,500,000,000. limited to 1.95%, 2.70% and 2.70%,
respectively, on a month-by-month
basis
Keystone Institutional 0.80% of the first $100,000,000, declining to 0.65% Expenses are limited to 1.00% until
Trust - Small of amounts over $250,000,000. 12/31/96 and month-by-month
Capitalization Growth Fund thereafter
</TABLE>
(2) CURRENT INCOME CONSISTENT WITH LOW VOLATILITY OF PRINCIPAL BY
INVESTING PRIMARILY IN ADJUSTABLE RATE SECURITIES:
<TABLE>
<CAPTION>
ARRANGEMENTS WHEREBY
ANNUAL INVESTMENT ADVISORY THE ADVISER HAS
FEES (PERCENT OF AVERAGE AGREED TO LIMIT
FUND NAME NET ASSETS DAILY NET ASSETS) THE FUND'S ANNUAL EXPENSES
--------- ---------- ----------------- --------------------------
<S> <C> <C> <C>
Keystone Capital 2.0% of gross dividend and interest income, plus Class A, B and C expenses are
Preservation and Income 0.50% of the first $100,000,000, declining to 0.25% limited to 0.90%, 1.65% and 1.65%,
Fund of amounts over $500,000,000. respectively, on a month-by-month
basis
Keystone Institutional 0.30% KIMCO pays substantially all of the
Adjustable Rate Fund Fund's expenses from its fee
</TABLE>
(3) HIGHEST POSSIBLE INCOME, EXEMPT FROM FEDERAL TAXES, WHILE
PRESERVING CAPITAL BY INVESTING PRIMARILY IN MUNICIPAL BONDS:
<TABLE>
<CAPTION>
ARRANGEMENTS WHEREBY
ANNUAL INVESTMENT ADVISORY THE ADVISER HAS
FEES (PERCENT OF AVERAGE AGREED TO LIMIT
FUND NAME NET ASSETS DAILY NET ASSETS) THE FUND'S ANNUAL EXPENSES
--------- ---------- ----------------- --------------------------
<S> <C> <C> <C>
Keystone Tax Free Fund 2.0% of gross dividend and interest income, N/A
plus 0.50% of the first $100,000,000, declining
to 0.25% of amounts over $500,000,000
Keystone Tax Free Income 2.0% of gross dividend and interest income, N/A
Fund plus 0.50% of the first $100,000,000, declining
to 0.25% of amounts over $500,000,000
</TABLE>
(4) CURRENT INCOME AND CAPITAL APPRECIATION CONSISTENT WITH
CONSERVATION OF PRINCIPAL:
<TABLE>
<CAPTION>
ARRANGEMENTS WHEREBY
ANNUAL INVESTMENT ADVISORY THE ADVISER HAS
FEES (PERCENT OF AVERAGE AGREED TO LIMIT
FUND NAME NET ASSETS DAILY NET ASSETS) THE FUND'S ANNUAL EXPENSES
--------- ---------- ----------------- --------------------------
<S> <C> <C> <C>
Keystone Balanced 1.5% of gross dividend and interest income, N/A
Fund (K-1) plus 0.50% of the first $100,000,000, declining
to 0.25% of amounts over $1,000,000,000
Keystone Balanced 1.5% of gross dividend and interest income, Class A, B and C expenses are
Fund II plus 0.50% of the first $100,000,000, declining limited to 1.50% 2.25% and 2.25%,
to 0.25% of amounts over $1,000,000,000 respectively through June 30, 1997
and on a month-by-month basis
thereafter
</TABLE>
(5) MONEY MARKET FUNDS THAT SEEK CURRENT INCOME WHILE PRESERVING CAPITAL:
<TABLE>
<CAPTION>
ARRANGEMENTS WHEREBY
ANNUAL INVESTMENT ADVISORY THE ADVISER HAS
FEES (PERCENT OF AVERAGE AGREED TO LIMIT
FUND NAME NET ASSETS DAILY NET ASSETS) THE FUND'S ANNUAL EXPENSES
--------- ---------- ----------------- --------------------------
<S> <C> <C> <C>
Keystone Liquid Trust 0.50% of the first $500,000,000, declining to 0.40% N/A
of amounts over $1,000,000,000
Master Reserves Trust 5% quarterly of gross income minus the fund's net KIMCO pays substantially all of the
expenses. Fund's expenses from its fee
</TABLE>
(6) INCOME EXEMPT FROM FEDERAL AND STATE INCOME TAX IN A PARTICULAR STATE:
<TABLE>
<CAPTION>
ARRANGEMENTS WHEREBY
ANNUAL INVESTMENT ADVISORY THE ADVISER HAS
FEES (PERCENT OF AVERAGE AGREED TO LIMIT
FUND NAME NET ASSETS DAILY NET ASSETS) THE FUND'S ANNUAL EXPENSES
--------- ---------- ----------------- --------------------------
<S> <C> <C> <C>
Keystone State Tax Free For each portfolio: 0.55% of the first $50,000,000, For each portfolio, Class A, B and
Fund, which is comprised of declining to 0.25% of amounts over $500,000,000 C expenses are limited to 0.75%,
the following portfolios: 1.50% and 1.50%, respectively, on a
* Keystone Florida Tax month-by-month basis
Free Fund
* Keystone
Massachusetts
Tax Free Fund
* Keystone
Pennsylvania
Tax Free Fund
* Keystone New York
Insured Tax Free Fund
Keystone State Tax Free For each portfolio: 0.55% of the first $50,000,000, For each portfolio, Class A, B and
Fund -- Series II, which is declining to 0.25% of amounts over $500,000,000 C expenses are limited to 0.75%,
comprised of the following 1.50% and 1.50%, respectively, on a
portfolios: month-by-month basis
* Keystone California
Insured Tax Free Fund
* Keystone
Missouri Tax
Free Fund
</TABLE>
<PAGE>
EXHIBIT J
<TABLE>
<CAPTION>
INVESTMENT ADVISORY FEES
EXPENSE
AGGREGATE LIMITATION,
AMOUNT IF ANY (AS A
NET ASSETS OF ADVISORY PERCENTAGE OF
FISCAL YEAR ON SEPT. 30, FEE FOR LAST AVERAGE NET
NAME OF FUND ENDED 1996 FISCAL YEAR ASSETS)
- -------- --------------- --------------- --------------- ---------------------
<S> <C> <C> <C> <C>
B-1 ..................................................... 10/31/95 $1,876,672 N/A
B-2 ..................................................... 8/31/96 3,481,728 N/A
B-4 ..................................................... 7/31/96 3,788,171 N/A
K-1 ..................................................... 6/30/96 6,447,849 N/A
K-2 ..................................................... 10/31/95 2,779,544 N/A
S-1 ..................................................... 8/31/96 1,492,757 N/A
S-3 ..................................................... 8/31/96 1,908,509 N/A
S-4 ..................................................... 5/31/96 8,473,139 N/A
Adjustable Rate ......................................... 9/30/96 N/A
Institutional ........................................... 6/30/96 9,209 Limited to 1.00%
International ........................................... 10/31/95 985,652 N/A
Precious Metals ......................................... 2/28/96 1,354,605 N/A
Tax Free ................................................ 12/31/95 5,327,202 N/A
Emerging Growth ......................................... 9/30/96 N/A
Balanced Fund ........................................... 6/30/97* Limited to 1.50% for
Class A and 2.25%
for Classes B & C
Capital Preservation and Income ......................... 9/30/96 Limited to 0.90% for
Class A and 1.65%
for Classes B & C
Emerging Markets ........................................ 10/31/96** Limited to 0.00% for
Classes A, B, C
Total Return ............................................ 11/30/95 300,290 N/A
Fund of the Americas .................................... 10/31/95 1,099,920 N/A
Global Opportunities .................................... 9/30/96 N/A
Global Resources ........................................ 3/31/96 217,332 N/A
Government Securities ................................... 7/31/96 365,012 N/A
Intermediate Term ....................................... 7/31/96 273,644 Limited to 1.10% for
Class A and 1.85%
for Classes B & C
Liquid Trust ............................................ 6/30/96 1,359,239 N/A
Omega ................................................... 12/31/95 1,280,436 N/A
Small Company Growth .................................... 5/31/96 21,221 Limited to 1.95% for
Class A and 2.70%
for Classes B & C
State Tax Free .......................................... 3/31/96 1,168,889 Limited to 0.75% for
Class A and 1.50%
for Classes B & C
State Tax Free II ....................................... 11/30/95 233,519 Limited to 0.75% for
Class A and 1.50%
for Classes B & C
Strategic Income ........................................ 7/31/96 1,663,669 N/A
Tax Free Income ......................................... 11/30/95 919,802 N/A
World Bond .............................................. 10/31/95 93,806 N/A
<FN>
* Balanced Fund began operations on August 16, 1996; these fees are for the period from August 16, 1996 to September 30, 1996.
** Emerging Markets began operations on May 31, 1996; these fees are for the period from May 31, 1996 to September 30, 1996.
</TABLE>
<PAGE>
EXHIBIT K
DISTRIBUTION PLAN EXPENSES
FISCAL DISTRIBUTION PLAN DEFERRED
YEAR EXPENSES PAID BY SALES CHARGES
NAME OF FUND ENDED THE FUND TO KID PAID TO KID
- ---------- ------ ----------------- -------------
B-1 ............................ 10/31/95 $ 3,107,302 $ 379,967
B-2 ............................ 8/31/96 6,610,025 655,758
B-4 ............................ 7/31/96 6,747,276 862,707
K-1 ............................ 6/30/96 14,166,573 1,167,950
K-2 ............................ 10/31/95 4,584,433 484,167
S-1 ............................ 8/31/96 2,149,525 98,000
S-3 ............................ 8/31/96 1,792,828 52,515
S-4 ............................ 5/31/96 18,458,861 1,916,107
Adjustable Rate - Class Y ...... 9/30/96 23,210 N/A
Adjustable Rate - Class Z ...... 9/30/96 N/A N/A
Institutional .................. 6/30/96 N/A N/A
International .................. 10/31/95 1,316,980 375,704
Precious Metals ................ 2/28/96 1,979,775 659,545
Tax Free ....................... 12/31/95 4,719,697 95,377
<PAGE>
EXHIBIT L
<TABLE>
<CAPTION>
BROKERAGE BY FUND
% OF FUND'S % OF FUND'S
AGGREGATE AGGREGATE
BROKERAGE BROKERAGE
BROKERAGE COMMISSIONS COMMISSIONS
COMMISSIONS BROKERAGE BROKERAGE PAID TO PAID TO
PAID BY COMMISSIONS COMMISSIONS KOKUSAI NOMURA
FUND PAID TO PAID TO FOR LAST FOR LAST
FUND FYE FOR FYE KOKUSAI NOMURA FISCAL YEAR FISCAL YEAR
- ---- ---- ---------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
B-1 ................. 10/31/95 N/A N/A N/A N/A N/A
B-2 ................. 8/31/96 N/A N/A N/A N/A N/A
B-4 ................. 7/31/96 N/A N/A N/A N/A N/A
K-1 ................. 6/30/96 $ 3,079,117 $ 78,964 $ 980 2.56% .03%
K-2 ................. 10/31/95 2,920,975 100,718 11,739 3.45% .40%
S-1 ................. 8/31/96 1,540,872 169,998 21,019 11.03% 1.36%
S-3 ................. 8/31/96 2,266,036 49,759 6,370 2.20% .28%
S-4 ................. 5/31/96 15,176,376 103,309 N/A .68% N/A
Adjustable Rate ..... 9/30/96 N/A N/A N/A N/A N/A
Institutional ....... 6/30/96 17,392 N/A N/A N/A N/A
International ....... 10/31/95 810,683 136,740 35,672 16.87% 4.44%
Precious Metals ..... 2/28/96 216,048 1,750 N/A .81% N/A
Tax Free ............ 12/31/95 N/A N/A N/A N/A N/A
</TABLE>
<PAGE>
EXHIBIT M
<TABLE>
<CAPTION>
FEES PAID TO KIRC AND FUND REPORTING
FEES PAID TO FEES PAID TO
FISCAL KIRC FUND REPORTING
YEAR DURING LAST DEPARTMENT DURING
NAME OF FUND ENDED FISCAL YEAR LAST FISCAL YEAR
------------ ----- ----------- ----------------
<S> <C> <C> <C>
B-1................................ 10/31/95 $ 729,430 $25,306
B-2 ............................... 8/31/96 1,454,352 22,638
B-4................................ 7/31/96 1,927,228 18,334
K-1 ............................... 6/30/96 3,226,256 19,572
K-2 ............................... 10/31/95 1,296,268 24,342
S-1 ............................... 8/31/96 611,194 15,735
S-3 ............................... 8/31/96 711,550 24,767
S-4 ............................... 5/31/96 3,683,215 20,669
Adjustable Rate ................... 9/30/96 0 0
Institutional ..................... 6/30/96 1,000 N/A
International ..................... 10/31/95 616,119 62,044
Precious Metals ................... 2/28/96 831,209 19,093
Tax Free .......................... 12/31/95 1,433,700 21,661
</TABLE>
<PAGE>
EXHIBIT N
<TABLE>
<CAPTION>
LIST OF SHAREHOLDERS WITH FUND OWNERSHIP OF 5%
# OF SHARES % OF
NAME OF FUND REGISTRATION OWNED FUND
- ------------ ------------ ----- ----
<S> <C> <C> <C>
Institutional Trust Board of Trustees of Sheet 200,000.000 95.238%
Metal Workers
Local No. 85, Pension Fund
3835 Presidential Parkway, Suite 123
Atlanta, GA 30340-3723
Adjustable Rate -- Solano Partnership Health Plan 1,124,820.266 95.238%
Class Y ATTN: Deborah Cox
421 Executive Ct N #A
Suisun, CA 94585-4019
Skyline Telephone Membership Corp. 107,805.851 7.236%
ATTN; Hobart G. Davis
P.O. Box 759
Jefferson, NC 28694
Willian H. Morgan, Jr. 103,157.587 6.924%
906 Weightman
Greenwood, MS 38930-2438
Adjustable Rate -- Bank of New York Trustee 4,368,060.008 63.809%
Class Z FBO Saatchi & Saatchi Cash
Bal. Retirement Plan Trust
ATTN: Ms. Amy Nellissen
375 Hudson Street
New York, NY 10014
Ampex Retirement Master Trust 1,734,219.774 25.465%
P.O. Box 1992
Boston, MA 02105-1992
Keystone Investment Distributors Co. 514,483.793 7.516%
ATTN: Corporate Finance Dept.,
21st Floor
200 Berkeley Street
Boston, MA 02116-5022
</TABLE>
<PAGE>
[LOGO] KEYSTONE
INVESTMENTS
October 7, 1996
Dear Shareholder:
On December 9, 1996, a Special Meeting of Shareholders of the Keystone Funds
will be held to approve the proposed acquisition of Keystone Investments, Inc.
by First Union Corp., the nation's sixth largest bank holding company and
manager of the Evergreen Group of Mutual Funds. The enclosed proxy material
describes the important issues which will be voted upon at that meeting.
If you will be unable to attend the special meeting in person, we ask that
you sign the enclosed proxy card and return it as soon as possible in the
accompanying postage-paid envelope. IT IS VERY IMPORTANT THAT YOU VOTE PROMPTLY
SO THAT WE MAY ENSURE THAT THE NECESSARY QUORUM OF SHAREHOLDER VOTES IS
REPRESENTED AT THE MEETING.
If the proposals described in the proxy statement are approved,
* Keystone Investment Management Company, your Fund's investment adviser,
will become a subsidiary of First Union Corp. and
* The Independent Trustees of the Evergreen Funds will join the present
Independent Trustees on the Boards of the Keystone Funds.
IT SHOULD BE CLEARLY UNDERSTOOD THAT THE PROPOSED ACQUISITION WILL NOT
ALTER THE INVESTMENT STRATEGY OR OBJECTIVES OF YOUR FUND AND IT WILL NOT
INCREASE YOUR FUND'S MANAGEMENT FEES.
The Independent Non-Management Trustees of the Keystone Funds have
unanimously approved the proposals and encourage you to do the same. They
believe that the acquisition will create significant opportunities for benefits
to the shareholders of the Keystone Funds in a number of meaningful ways,
including,
* Significantly increased financial strength and stability to enable
Keystone to attract and retain the highest caliber of investment,
administrative and service personnel and for enhanced future technology
and administrative services for the Funds. First Union has indicated
publicly (and privately) its intention to devote the resources necessary
to become one of the largest mutual fund sponsors in the country.
* Potential economies of scale in the Keystone Funds' shareholder servicing
and transfer agency operations by incorporating the Evergreen Funds into
the Keystone operations.
* Growth of the Keystone Funds through the retail brokerage affiliates of
First Union, which will make shares available throughout its network. It
has become clear that competitive growth in fund assets is necessary to
attract and retain the highest caliber of investment, administrative and
service personnel.
* Future ability to exchange shares of Keystone Funds for shares of the
Evergreen Funds, including types of funds not currently offered by
Keystone.
The accompanying proxy materials are, by their nature, lengthy and complex.
If you have any questions, please call 1-800- ____ .
Of course, we will be delighted if you can attend the meeting and discuss
these proposals, or any other relevant matter, with us personally. If, however,
time or distance precludes you from joining us, IT IS IMPORTANT THAT YOU ACT
PROMPTLY BY SIGNING AND RETURNING THE ENCLOSED PROXY CARD SO THAT WE WILL HAVE A
QUORUM AT THE MEETING ON DECEMBER 9.
<PAGE>
We appreciate your continued support and look forward to receiving your
votes of approval.
Sincerely yours,
/s/ Albert H. Elfner, III
Albert H. Elfner, III
Chairman
<PAGE>
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
You can help reduce the cost of additional mailings by
[Logo] KEYSTONE promptly returning your signed proxy. No matter how
INVESTMENTS many shares you own, your vote counts!
PLEASE SIGN AND RETURN YOUR PROXY TODAY!
Please fold and detach card at perforation before mailing
FUND NAME PRINTS HERE PROXY FOR THE JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MONDAY, DECEMBER 9, 1996
The undersigned, revoking all Proxies heretofore given, hereby appoints
Messrs. George S. Bissell and Albert H. Elfner, III and Ms. Rosemary D.
Van Antwerp, or any of them as Proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all shares of each Fund which
the undersigned is entitled to vote at a meeting of shareholders to be held at
3:00 P.M., Boston time, on Monday December 9, 1996 at the offices of the Funds,
200 Berkeley Street, Boston, Massachusetts and at all adjournments thereof, as
fully as the undersigned would be entitled to vote if personally present, on
the proposals set forth in the Notice of said meeting, as described in the Proxy
Statement accompanying such Notice as follows:
NOTE: PLEASE SIGN IN BOX BELOW EXACTLY AS
YOUR NAME(S) APPEAR ON THIS CARD.
Dated: ____________________, 1996
NOTE: When signing as attorney, executor,
administrator, trustee, guardian, or as
custodian for a minor, please sign your
name and give your full title as such. If
signing on behalf of a corporation,
please sign the full corporate name and
your name and indicate your title. If you
are a partner signing for a partnership,
please sign the partnership name and your
name. Joint owners should each sign this
proxy. Please sign, date and return.
_________________________________________
_________________________________________
Signature(s) K
<PAGE>
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES (DIRECTORS) OF THE FUND.
THE BOARD OF TRUSTEES (DIRECTORS) OF THE FUND RECOMMENDS A VOTE FOR PROPOSALS 1
THROUGH 4 INCLUDING A VOTE FOR THE ELECTION OF ALL NOMINEES FOR TRUSTEE
(DIRECTOR).
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR ANY PROPOSALS IF
NO CHOICE IS INDICATED.
THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS
AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
PLEASE VOTE BY FILING IN THE APPROPRIATE BOX BELOW USING BLUE OF BLACK INK OR
DARK PENCIL. DO NOT USE RED INK.
Please fold and detach card at perforation before mailing
1. FOR THE SHAREHOLDERS OF ALL FUNDS, FOR AUTHORITY TO VOTE
to elect the following persons as WITHHELD ON ALL
Trustee (Director) of the Fund. TRUSTEES (DIRECTORS)
Laurence B. Ashkin, Frederick Amling,
Charles A. Austin III, Foster Bam, [ ] [ ]
George S. Bissell, Edwin D. Campbell,
Charles F. Chapin, K. Dun Gifford,
Leroy Keith, Jr., James S. Howell,
F. Ray Keyser, Gerald M. McDonnell,
Thomas L. McVerry, William Walt
Pettit, David M. Richardson, Russell
A. Salton, III M.D., Michael S.
Scofield, Richard J. Shima and Andrew
J. Simons, subject to the completion
of the Merger (as described in the
Proxy Statement).
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, PLEASE
WRITE HIS NAME BELOW:)
- --------------------------------------------------------------------------------
2. FOR THE SHAREHOLDERS OF ALL FUNDS, FOR AGAINST ABSTAIN
to approve an Investment Advisory and [ ] [ ] [ ]
Management Agreement between Keystone
Investment Management Company and the
Fund, subject to completion of the
Merger (as described in the Proxy
Statement), substantially as described
in the Proxy Statement. (Advisory fee
rates will NOT change.)
3. FOR THE SHAREHOLDERS OF KEYSTONE [ ] [ ] [ ]
INTERNATIONAL FUND INC. ONLY, to
approve an amendment to the Fund's
By-Laws to permit the Board of
Directors to fix the number of
Directors from time to time.
4. FOR THE SHAREHOLDERS OF KEYSTONE [ ] [ ] [ ]
INTERNATIONAL FUND INC. AND KEYSTONE
PRECIOUS METALS HOLDINGS, INC. ONLY,
to ratify the selection of KPMG Peat
Marwick LLP as the independent public
accountant of the Fund for the current
fiscal year.
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF CARD.
