PAGE 1
- ---------------------------------------------
Keystone Precious Metals Holdings, Inc.
Seeks capital appreciation primarily from investments in
gold-oriented or other precious metal and minerals companies.
Dear Shareholder:
We are writing to report to you on the performance of Keystone Precious
Metals Holdings, Inc. for the twelve-month period which ended February 29,
1996.
Performance
Your Fund produced a total return of 36.53% for the year. For the same
period, the Financial Times Gold Mines Index returned 35.18%. Small increases
in the price of gold during March and April, a modest rally in Australian and
North American gold stocks during the summer, and prices as high as $417 an
ounce in February contributed to your Fund's strong return.
Market overview
Your Fund's fiscal year coincided with a rise in the price of gold bullion.
On February 28, 1995 the price per ounce was at the low end of the $375 to
$390 range that characterized most of 1995. Gold bullion prices soared in
January 1996 and held up quite well during February, ending the fiscal year
at $400.75.
Increases in the price of gold bullion historically have resulted in
significant increases in the price of gold shares. The twelve month period
was no exception as gold shares rose strongly. North American gold companies,
which did not use short-term hedging, benefitted the most during this period.
The XAU, an index of North American gold stocks gained 20 points in January,
a 17% increase. These stocks accounted for 50% of portfolio holdings as of
February 29, 1996.
Looking beyond inflation
Improved economics worldwide helped increase jewelry demand for gold.
Inflation, which remained minimal in the U.S. and other industrialized
countries, was not a driving factor in this year's rally. Demand for gold
bullion was strong in the Far East in response to growing concern over the
pending political changes in Hong Kong.
Tighter supply helped prices rise
Changes in gold supply and demand during the second half of the year were
primarily responsible for the January rally in gold prices. Central bank
sales and lending decreased, which lowered supply, but global jewelry demand
remained high, causing the price of the metal to rise.
Our outlook
We believe the combination of steady demand and tightening supply has created
a positive environment for gold stocks. If these circumstances continue, the
higher average price of gold should contribute to the profitability of the
mining companies in your Fund's portfolio. Gold stocks tend to outperform the
metal because small increases in the price of gold tend to result in
significant increases in earnings and assets. We think many gold stocks are
still somewhat undervalued and believe prices may rise when investor interest
returns.
The gold market can experience dramatic short-term price fluctuations, as we
have seen during the past few months. As a result, timing this market
correctly can be difficult. That is why we recommend investors take a
--continued--
<PAGE>
PAGE 2
- ---------------------------------------------
Keystone Precious Metals Holdings, Inc.
long-term view with their investment, as we do in managing the Fund. A
professionally managed portfolio of gold stocks offers investors a hedge
against potential inflation and currency uncertainties. We believe precious
metals funds remain an important component of a well-diversified investment
strategy.
We appreciate your continued support of Keystone Precious Metals Holdings,
Inc. As always, we welcome your comments and letters.
Sincerely,
/s/ Albert H. Elfner, III
Albert H. Elfner, III
Chairman and President
Keystone Investments, Inc.
/s/ George S. Bissell
George S. Bissell
Chairman of the Board
Keystone Funds
[Photo of Albert [Photo of George
H. Elfner, III] S. Bissell]
April 1996 Albert H. Elfner, III George S. Bissell
[Dalbar Honors Dalbar Key Honors
Commitment Logo] Honoring Commitment to Excellence
Keystone was recently recognized by Dalbar, an
independent mutual fund rating organization, for
demonstrating a commitment to serving the needs of
customers. The award is intended to distinguish
companies who are committed to investors and have a
proven ability to provide good service.
- --------------------------------------------------------------------------------
Keystone Introduces Investment Insight Line for Shareholders
Now you can keep up-to-date on Keystone fund outlooks by calling Keystone
Investment Insight Line. You can hear portfolio managers discuss their latest
strategies for Keystone funds. You can also listen to Keystone's overall
market outlook from James McCall, chief investment officer. The service is
available 24 hours a day, seven days a week and updated at least monthly.
From a touch-tone phone, dial 1-800-346-3858, then press 2 for Keystone
Investment Insight Line.
- --------------------------------------------------------------------------------
<PAGE>
PAGE 3
- ---------------------------------------------
A Discussion With
Your Fund Manager
[Photo of John C. Madden, Jr.]
John C. Madden, Jr. is senior portfolio manager of your Fund and
Keystone Strategic Development Fund. A Chartered Financial Analyst, Mr.
Madden has over 30 years of experience in investment research and
management, specializing in precious metals, natural resources and
energy stocks. He holds a BA from Yale University. Together with
Keystone's international investment group, headed by Gilman Gunn, the
team evaluates and selects precious metals investments for your Fund.
Q What are your goals in managing the Fund?
A The Fund's objective is to seek price appreciation from investments in
gold-oriented or other precious metal and minerals companies. One of our
goals in managing the Fund is to smooth out some of the price volatility
associated with gold-related investing. To do this, we employ a relatively
conservative strategy, emphasizing companies with proven, long lived reserves
and growing production that can add value to the portfolio even when the
price of gold is relatively stable. We believe this approach offers Fund
investors good upside potential with lower downside risk.
Q What factors contributed to the rise in the price of gold during the
period?
A We believe that during most of the period the price of gold was
artificially held down by producer forward selling, a method of locking in
future gold prices. In addition, central bank sales and lending kept supply
relatively high. But in November, there was a fundamental change in the
equation. Central bank activity tapered off and gold lease rates jumped
dramatically, making forward selling less profitable. (The gold lease rate is
the price central banks charge for lending gold.) Lower interest rates
generally discouraged forward selling while at the same time decreased the
opportunity costs for gold speculators. With the addition of market concerns
and the political rhetoric of an election year, the stage was set for a price
increase.
- ---------------------------------------------------------------------------
[Description and Plot Points for Line Chart]
Gold Spot Closing Prices
(Month-end price per ounce in U.S. dollars)
February 1992 through February 1996
Gold (London) US$
353.75
353.75
341.700012
336.350006
337.5
343.399994
357.850006
342
350
341
336
334.5
332.5
329.5
339
356
383
378.100006
407.299988
372.100006
355.399994
369.5
370.700012
390.700012
381.899994
381.75
391
377.049988
387.299988
386.299988
383.600006
386.600006
394.25
384.5
381.399994
383.200012
375.100006
377.100006
391.399994
387.100006
384.299988
384.600006
382.600006
382.75
384
383
387.799988
387.100006
406.299988
400.75
400.75
The past performance of the index and gold is not indicative of your Fund's
return
- --------------------------------------------------------------------------------
<PAGE>
PAGE 4
- ---------------------------------------------
Keystone Precious Metals Holdings, Inc.
- --------------------------------------------------------------------------------
Fund Profile
Objective: Seeks capital appreciation primarily from investments in
gold-oriented or other precious metal and minerals companies.
Commencement of investment operations: June 5, 1972
Net assets: $217 million
Newspaper listing: "PrecMtl"
- --------------------------------------------------------------------------------
Q The price of gold reached $417 in February 1996, its highest level since
1993. What impact did this have on the market?
A Breaking the $400 mark had a strong psychological impact on the market,
particularly after more than two years of prices in the $370 to $400 range.
There is some evidence that this rally may be more enduring than the price
rise in 1993. In 1993, when gold broke $400 it fell back to $350 within two
months--a 9% decline. This time, prices backed off somewhat after the spike
in January, but still remained close to $400.
Q Do any other fundamentals support a higher gold price?
A Worldwide, notably in Japan and Germany, governments are trying to boost
their economies, which is a positive trend for gold investments. Currency
uncertainties in Europe have also added to speculative interest in the metal,
and demand for gold in Taiwan and China is strong.
Q How were the Fund's investments allocated?
A Over the course of the year we expanded our holdings in North America to
increase our exposure to companies that benefit from higher gold prices. We
reduced our exposure to South African gold stocks from one third to one
fourth of the portfolio. Our position in Australia remained relatively
constant throughout the year, at roughly one-fourth of the portfolio.
Q How were supply and demand during the period?
A Over the past few years, worldwide jewelry demand has substantially
exceeded the annual mined production of gold. The gap has been filled by
several sources, notably scrap supply, sales from central banks and forward
sales by producers. This kept supply and demand in balance and contributed to
a stable gold price. During the past six months, however, both central bank
and forward sales declined, while demand from jewelry fabricators remained
strong. We believe this imbalance contributed to the recent rise in the price
of gold.
Q Please describe some of the Fund's holdings.
A Newcrest Mining, a top Fund holding, is one of the top gold producers in
Australia. Newcrest is the result of the merger a few years ago between the
Australian gold interests of BHP and Newmont Mining. Newcrest's Telfer
operation is one of the largest Australian mines, with current production of
over 400,000 ounces per year. The stock has underperformed recently, because
of near-term earnings problems and the company's hedging policy, but we
believe its
- --------------------------------------------------------------------------------
[Description and Plot Points for Pie Chart]
Comparison of portfolio structure
as of February 29, 1996
North America 50%
Australia 25%
South Africa 25%
(as percentage of portfolio assets)
- --------------------------------------------------------------------------------
<PAGE>
PAGE 5
- ---------------------------------------------
World Gold Supply and Demand
January 1 - December 31 in metric tonnes
1994 1995*
- -------------------------------------------------------
Supply: mine production 2,291 2,268
- -------------------------------------------------------
Demand: jewelry consumption 3,039 3,216
- -------------------------------------------------------
In 1995 supply declined 1% while demand increased 6% compared to 1994.
___________
* Estimate. Source: Gold Fields Mineral Services
longer-term prospects remain sound. Production could approach one million
ounces annually by the end of the decade if the expansion at Telfer and
exploration in Indonesia bear fruit. The company may also benefit from the
consolidation that is taking place in the Australian gold industry.
One of our Canadian holdings, Goldcorp, is also noteworthy. Goldcorp has
interests in three North American mines. At one of them, the Red Lake mine in
Ontario, Canada, exploration drilling has uncovered such promising new
reserves that the possibility exists of tripling production and substantially
lowering costs. These are preliminary findings, of course, but the 60%
increase in the stock price since December 1995 is gratifying.
Q What is your outlook for the gold market?
A If recent trends in supply and demand last, we expect to see a continuation
in the favorable environment for gold stocks. We still believe that there is
room for growth, both in gold price and in gold mining stocks. One unknown
factor is the impact higher gold prices will have on demand. While it appears as
if some of the fundamentals that have controlled the market in recent years have
changed, just how they will evolve remains to be seen. Many of the best gold
mining companies have already taken major steps to improve their efficiency, and
are therefore well positioned to profit from even modest increases in the price
of gold.
Top 10 Holdings
as of February 29, 1996
Percentage of
Company (Country) net assets
- -------------------------------------------------------
Plutonic Resources (Australia) 5.6
- -------------------------------------------------------
Newmont Mining (United States) 4.6
- -------------------------------------------------------
Euro Nevada Mining (Canada) 4.6
- -------------------------------------------------------
Newmont Gold (United States) 4.4
- -------------------------------------------------------
Pioneer Group (United States) 4.3
- -------------------------------------------------------
Kinross Gold (Canada) 3.8
- -------------------------------------------------------
Barrick Gold (Canada) 3.8
- -------------------------------------------------------
Ashanti Goldfields (South Africa) 3.5
- -------------------------------------------------------
Acacia Resources (Australia) 3.5
- -------------------------------------------------------
Goldcorp (Canada) 3.5
- -------------------------------------------------------
[diamond]
This column is intended to answer
questions about your Fund. If you have a question
you would like answered, please write to:
Keystone Investment Distributors Company,
Attn: Shareholder Communications, 22nd floor,
200 Berkeley Street, Boston, Massachusetts 02116-5034.
<PAGE>
PAGE 6
- ---------------------------------------------
Keystone Precious Metals Holdings, Inc.
Your Fund's Performance
- --------------------------------------------------------------------------------
[Description and Plot Points for Mountain Chart]
Growth of an investment in
Keystone Precious Metals Holdings, Inc.
In Thousands
Initial Reinvested
Investment Distributions
2/86 10000 10000
13523 14012
2/88 12109 13611
13141 15060
2/90 14961 17146
11109 12968
2/92 12008 14143
11234 13332
2/94 19602 23262
15078 17982
2/96 20586 24551
Total Value $24,551
A $10,000 investment in Keystone Precious Metals Holdings, Inc. made on February
28, 1986 with all distributions reinvested was worth $24,551 on February 29,
1996. Past performance is no guarantee of future results.
- --------------------------------------------------------------------------------
The one-year return reflects the deduction of the 3% contingent deferred
sales charge for those investors who bought and sold Fund shares after one
calendar year. Investors who retained their fund investment received the
one-year return reported in the second column of the table.
Keystone Precious Metals Holdings, Inc.
The investment return and principal value will fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
Twelve-Month Performance as of February 29, 1996
================================================
Total return* 36.53%
Net asset value 2/28/95 $19.30
2/29/96 $26.35
Dividends None
Capital gains None
* Before deducting contingent deferred sales charge (CDSC).
Historical Record as of February 29, 1996
===========================================================
If you If you did
Cumulative total return redeemed not redeem
1-year 33.53% 36.53%
5-year 89.32% 89.32%
10-year 145.51% 145.51%
Average annual total return
1-year 33.53% 36.53%
5-year 13.62% 13.62%
10-year 9.40% 9.40%
You may exchange your shares to another Keystone fund for a $10 fee by
contacting Keystone directly. The exchange fee is waived for individual
investors who make an exchange using Keystone's Automated Response Line
(KARL). The Fund reserves the right to change or terminate the exchange
offer.
<PAGE>
PAGE 7
- ---------------------------------------------
Growth of an Investment
- --------------------------------------------------------------------------------
[Description and Plot Points for Line Chart]
Comparison of change in value of a $10,000 investment in Keystone Precious
Metals Holdings, Inc., the Standard and Poor's 500 Index and the Consumer Price
Index.
In Thousands February 28, 1996 through February 29, 1996
- --------------------------------------------------------------------------------
Fund Average
Annual Total Return
- -----------------------------
1 Year 5 Year 10 Year
33.53%* 13.62% 9.40%
Standard
& Poor's Consumer
500 Index Price Index
Fund (S&P 500) (CPI)
2/86 10000 10000 10000
14012 12926 10210
2/88 13611 12561 10613
15060 14019 11125
2/90 17146 16623 11711
12968 19041 12342
2/92 14143 22079 12681
13332 24431 13092
2/94 23262 26468 13422
17982 28416 13806
2/96 24551 38278 14126
S&P 500 $38,278
Fund $24,551
CPI $14,126
*Reflects the deduction of the Fund's contingent deferred sales charge of 3%.
Past performance is no guarantee of future results. The Consumer Price Index is
through January 31, 1996.
- --------------------------------------------------------------------------------
This chart graphically compares your Fund's total return performance to
certain investment indexes. It is the result of fund performance guidelines
issued by the Securities and Exchange Commission. The intent is to provide
investors with more information about their investment.
Components of the Chart
The chart is composed of several lines that represent the accumulated value
of an initial $10,000 investment for the period indicated. The lines
illustrate a hypothetical investment in:
1. Keystone Precious Metals Holdings, Inc.
Your Fund seeks capital appreciation primarily from investments in
gold-oriented or other precious metal and minerals companies. The return is
quoted after deducting sales charges (if applicable), fund expenses, and
transaction costs and assumes reinvestment of all distributions.
2. Standard & Poor's 500 Index (S&P 500)
The S&P 500 is a broad-based, unmanaged index of common stock prices. It is
comprised of stocks of the largest U.S. companies. These stocks are selected
and compiled by Standard & Poor's Corporation according to criteria that may
be unrelated to your Fund's investment objective.
3. Consumer Price Index (CPI)
This index is a widely recognized measure of the cost of goods and services
produced in the U.S. The index contains factors such as prices of services,
housing, food, transportation and electricity which are compiled by the U.S.
Bureau of Labor Statistics. The CPI is generally considered a valuable
benchmark for investors who seek to outperform increases in the cost of
living.
These indexes do not include transaction costs associated with buying and
selling securities, and do not hold cash to meet redemptions. It would be
difficult for most individual investors to duplicate these indexes.
Understanding What the Chart Means
The chart demonstrates your Fund's total return performance in relation to a
well known investment index and to increases in the cost of living. It is
important to understand what the chart shows and does not show.
<PAGE>
PAGE 8
- ---------------------------------------------
Keystone Precious Metals Holdings, Inc.
This illustration is useful because it charts Fund and index performance over
the same time frame and over a long period. Long-term performance is a more
reliable and useful measure of performance than measurements of short-term
returns or temporary swings in the market. Your financial adviser can help
you evaluate fund performance in conjunction with the other important
financial considerations such as safety, stability and consistency.
Limitations of the Chart
The chart, however, limits the evaluation of Fund performance in several
ways. Because the measurement is based on total returns over an extended
period of time, the comparison often favors those funds which emphasize
capital appreciation when the market is rising. Likewise, when the market is
declining, the comparison usually favors those funds which take less risk.
Performance Can Be Distorted
Funds which are more conservative in their orientation and which place an
emphasis on capital preservation will tend to compare less favorably when the
market is rising. In addition, funds which have income as one of their
objectives also will tend to compare less favorably to relevant indexes.
Indexes may also reflect the performance of some securities which a fund may
be prohibited from buying. A bond fund, for example, may be limited to
investments in only high quality bonds, or a stock fund may only be able to
buy stocks that have been traded on a stock exchange for a minimum number of
years or of a certain company size. Indexes usually do not have the same
investment restrictions as your Fund.
Indexes Do Not Include Costs of Investing
The comparison is further limited in its utility because the indexes do not
take into account any deductions for sales charges, transaction costs or
other fund expenses. Your Fund's performance figures do reflect such
deductions. Sales charges--whether up-front or deferred--pay for the cost of
the investment advice of your financial adviser. Transaction costs pay for
the costs of buying and selling securities for your Fund's portfolio. Fund
expenses pay for the costs of investment management and various shareholder
services. None of these costs are reflected in index total returns. The
comparison is not completely realistic because an index cannot be duplicated
by an investor--even an unmanaged index--without incurring some charges and
expenses.
One of Several Measures
The chart is one of several tools you can use to understand your investment.
It should be read in conjunction with the Fund's prospectus, and annual and
semiannual reports. Also, your financial adviser, who understands your
personal financial situation, can best explain the features of your Keystone
fund and how it can meet your financial needs.
Future Returns May Be Different
Shareholders also should be mindful that the long-run performance of either
the Fund or the indexes is not representative of what shareholders should
expect to receive from their Fund investment in the future; it is presented
to illustrate only past performance and is not a guarantee of future returns.
<PAGE>
PAGE 9
- ---------------------------------------------
SCHEDULE OF INVESTMENTS--February 29, 1996
See Notes to Financial Statements.
Number Market
of Shares Value
------------------------------- --------- ------------
COMMON STOCKS (96.5%)
GOLD MINING (69.0%)
Amax Gold Inc. (a) 125,000 $ 937,500
Beatrix Mines Ltd. 140,000 1,302,083
Cameco Corp. 50,000 2,724,324
Delta Gold NL (a) 1,200,000 3,027,291
Euro-Nevada Mining Ltd. 262,200 9,938,334
Firstmiss Gold Inc. (a) 109,700 2,948,188
Franco-Nevada Mining Corp. Ltd. 117,500 7,130,166
Free State Consolidated Gold
Mines Ltd. ADR 340,000 3,293,750
Goldcorp Inc. 400,000 7,580,728
Golden Shamrock (a) 4,818,000 2,946,564
Homestake Mining Co. 175,000 3,390,625
Impala Platinum Holdings ADR 160,000 2,894,032
Kinross Gold Corp. (a) 900,000 8,325,000
Loraine Gold Mines Ltd. ADR (a) 670,000 2,337,161
Newcrest Mining 1,560,400 7,479,327
Newmont Gold Co. 170,000 9,562,500
Newmont Mining Corp. 175,000 9,953,125
North Flinders Mines 900,000 5,710,573
Orion Resources 1,000,000 1,238,437
Orvana Minerals Corp. (a) 275,000 1,703,841
Perilya Mines NL (a) 3,500,000 2,220,778
Plutonic Resources NL 2,150,000 12,080,498
Prime Resources Group Inc. (a) 524,800 5,068,591
Ranger Minerals NL (a) 1,050,000 3,242,871
Ross Mining NL 2,048,100 2,442,501
Rustenburg Platinum Holdings
Ltd. 153,056 2,857,433
Santa Fe Pacific Gold Corp. 150,000 2,343,750
Sons of Gwalia Ltd. 699,600 4,545,983
TVX Gold Inc. (a) 235,300 2,321,856
Vaal Reefs Exploration & Mining
Ltd. ADR 749,000 7,419,781
Vengold Inc. (a) 733,000 824,625
Vengold, Warrants 429,000 175,115
Western Areas Gold Mining Ltd.
ADR 416,939 7,056,695
Western Deep Levels Ltd. ADR 40,000 2,000,000
Wiluna Mines Ltd. (a) 1,000,000 917,361
------------------------------- ------- ----------
149,941,387
------------------------------- ------- ----------
METALS & MINING (27.5%)
Acacia Resources (a) 3,399,200 $ 7,639,820
Argentina Gold Corp. (a) 400,000 1,035,061
Ashanti Goldfields Ltd. (d) 335,000 7,705,000
Barrick Gold 275,000 8,318,750
Elandsrand Gold Mining Ltd. ADR 300,000 1,763,520
Harmony Gold Mining Ltd. ADR 200,000 2,609,780
Middle Witwatersrand ADR 250,000 2,906,925
Mount Edon Gold Mines Ltd. 510,000 1,208,623
Pioneer Group Inc. 320,000 9,360,000
Randgold + Exploration 1,429,666 6,091,540
Repadre Capital Corp. (a) 200,000 583,133
Target Exploration (a) 1,790,000 5,084,571
Stillwater Mining Company (a) 245,900 5,348,325
------------------------------- ------- ----------
59,655,048
------------------------------- ------- ----------
TOTAL COMMON STOCKS
(Cost--$157,324,027) 209,596,435
------------------------------- ------- ----------
Par
Value
------------------------------- ------- ----------
FIXED INCOME (0.8%)
OTHER MINING & INDUSTRIAL (0.8%)
Target Exploration, 11.250%, 01/01/97
(Cost--$582,533) SA RAND 655,000 1,860,555
-------------------------------------------- ----------
Maturity
Value
------------------------------- ------- ----------
SHORT-TERM INVESTMENTS (1.5%)
REPURCHASE AGREEMENTS (1.5%)
Investments in repurchase
agreements, in a joint
trading account purchased
2/29/96, 5.415%, maturing
3/1/96
(Cost--$3,182,000)(c) $3,182,479 3,182,000
------------------------------- ------- ----------
TOTAL INVESTMENTS
(Cost--$161,088,560) 214,638,990
------------------------------- ------- ----------
<PAGE>
PAGE 10
- ---------------------------------------------
Keystone Precious Metals Holdings, Inc.
Market
Value
- ----------------------------- ---------- ------------
INVESTMENTS IN WHOLLY-OWNED UNCONSOLIDATED FOREIGN
SUBSIDIARY (0.3%)
Precious Metals (Bermuda)
Ltd. $ 737,527
- ----------------------------- -------- ----------
OTHER ASSETS AND
LIABILITIES--NET (0.9%) 1,893,856
- ----------------------------- -------- ----------
NET ASSETS (100.0%) $217,270,373
- ----------------------------- -------- ----------
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The cost of investments for federal income tax purposes amounted to
$171,542,510. Gross unrealized appreciation and depreciation of investments,
based on identified tax cost, at February 29, 1996, are as follows:
Gross unrealized appreciation $ 58,881,947
Gross unrealized depreciation (15,047,940)
-----------
Net unrealized appreciation $ 43,834,007
===========
(c) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at February 29, 1996.
(d) Security that may be resold to "qualified institutional buyers" under
rule 144A of the Federal Securities Act of 1933. This security has been
determined to be liquid under guidelines established by the Board of
Trustees.
See Notes to Financial Statements.
<PAGE>
PAGE 11
- ---------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended
Feb. 29, Feb. 28, Feb. 28, Feb. 28, Feb. 29,
1996 (a) 1995 (a) 1994 (a) 1993 (a) 1992 (a)
- ---------------------------------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of year $ 19.30 $ 25.09 $ 14.38 $ 15.37 $ 14.22
- ---------------------------------- ------- ------- ------- ------- ---------
Income from investment operations:
Net investment income (loss) (0.25) (0.13) (0.17) (0.12) (0.02)
Net gains (losses) on securities 7.30 (5.54) 10.88 (0.76) 1.30
Net commissions paid on fund share
sales (b) -0- -0- -0- -0- -0-
- ---------------------------------- ------- ------- ------- ------- ---------
Total from investment operations 7.05 (5.67) 10.71 (0.88) 1.28
- ---------------------------------- ------- ------- ------- ------- ---------
Less distributions:
Dividends from net investment
income -0- (0.12) -0- -0- -0-
Distributions in excess of net
investment income (c) -0- -0- -0- (0.11) (0.13)
Distributions from realized
capital gains -0- -0- -0- -0- -0-
- ---------------------------------- ------- ------- ------- ------- ---------
Total distributions 0.00 (0.12) 0.00 (0.11) (0.13)
- ---------------------------------- ------- ------- ------- ------- ---------
Net asset value end of year $ 26.35 $ 19.30 $ 25.09 $ 14.38 $ 15.37
- ---------------------------------- ------- ------- ------- ------- ---------
Total return (d) 36.53% (22.70%) 74.48% (5.74%) 9.07%
Ratios/supplemental data
Ratios to average net assets:
Operating and Management expenses 2.28%(e) 2.33% 2.34% 2.83% 2.70%
Net investment income (loss) (1.08%) (0.54%) (0.75%) (0.86%) (0.14%)
Portfolio turnover rate 39% 75% 73% 58% 53%
- ---------------------------------- ------- ------- ------- ------- ---------
Net assets, end of year
(thousands) $217,270 $171,193 $200,489 $114,364 $131,356
- ---------------------------------- ------- ------- ------- ------- ---------
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Feb. 28, Feb. 28, Feb. 28, Feb. 29, Feb. 28,
1991 (a) 1990 (a) 1989 (a) 1988 (a) 1987
- ---------------------------------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of year $ 19.15 $ 16.82 $ 15.50 $ 17.31 $ 12.80
- ---------------------------------- ------- ------- ------- ------- ---------
Income from investment operations:
Net investment income (loss) -0- 0.06 0.05 (0.01) 0.25
Net gains (losses) on securities (4.61) 2.27 1.59 (0.17) 4.85
Net commissions paid on fund share
sales (b) -0- -0- -0- -0- (0.14)
- ---------------------------------- ------- ------- ------- ------- ---------
Total from investment operations (4.61) 2.33 1.64 (0.18) 4.96
- ---------------------------------- ------- ------- ------- ------- ---------
Less distributions:
Dividends from net investment
income (0.06) -0- (0.12) (0.41) (0.37)
Distributions in excess of net
investment income (c) (0.26) -0- -0- -0- -0-
Distributions from realized
capital gains -0- -0- (0.20) (1.22) (0.08)
- ---------------------------------- ------- ------- ------- ------- ---------
Total distributions (0.32) 0.00 (0.32) (1.63) (0.45)
- ---------------------------------- ------- ------- ------- ------- ---------
Net asset value end of year $ 14.22 $ 19.15 $ 16.82 $ 15.50 $ 17.31
- ---------------------------------- ------- ------- ------- ------- ---------
Total return (d) (24.37%) 13.85% 10.64% (2.86%) 40.12%
Ratios/supplemental data
Ratios to average net assets:
Operating and Management expenses 2.76% 2.20% 1.68% 1.84% 1.41%
Net investment income (loss) (0.02%) 0.32% 0.28% (0.05%) 1.98%
Portfolio turnover rate 68% 95% 82% 62% 89%
- ---------------------------------- ------- ------- ------- ------- ---------
Net assets, end of year
(thousands) $150,200 $195,837 $222,079 $222,646 $98,433
- ---------------------------------- ------- ------- ------- ------- ---------
</TABLE>
(a) Calculation based on average shares outstanding.
(b) Prior to June 30, 1987, net commissions paid on new sales of shares under
the Fund's Rule 12b-1 Distribution Plan had been treated for both
financial statement and tax purposes as capital charges.
(c) Effective March 1, 1993 the Fund adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of
Income, Capital Gain and Return of Capital Distributions by Investment
Companies. As a result, distribution amounts exceeding book basis net
investment income (or tax basis net income on a temporary basis) are
presented as "Distributions in excess of net investment income."
Similarly, capital gain distributions in excess of book basis capital
gains (or tax basis capital gains on a temporary basis) are presented as
"Distributions in excess of net realized capital gains." For the fiscal
years ended February 28, 1993, February 29, 1992, and February 28, 1991,
distributions in excess of book basis net income were charged to paid-in
capital.
(d) Excluding applicable sales charges.
(e) "Ratio of operating and management expenses to average net assets" for
the year ended February 29, 1996 includes indirectly paid expenses.
Excluding indirectly paid expenses for the year ended February 29, 1996,
the expense ratio would have been 2.26%.
See Notes to Financial Statements.
<PAGE>
PAGE 12
- ---------------------------------------------
Keystone Precious Metals Holdings, Inc.
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996
================================================================================
Assets:
Investments at market value (identified
cost--$161,088,560) (Note 1) $214,638,990
Investment in wholly-owned unconsolidated foreign
subsidiary, at fair value (Note 2) 737,527
- ------------------------------------------------------ -----------
Total investments 215,376,517
Cash 303
Receivable for:
Fund shares sold 1,812,683
Interest and dividends 379,471
Prepaid expenses 21,798
Other assets 4,435
Due from foreign subsidiary 897
- ------------------------------------------------------ -----------
Total assets 217,596,104
- ------------------------------------------------------ -----------
Liabilities:
Payable for:
Fund shares redeemed 251,823
Payable to Investment Adviser (Note 5) 2,861
Accrued reimbursable expenses (Note 5) 1,920
Other accrued expenses 69,127
- ------------------------------------------------------ -----------
Total liabilities 325,731
- ------------------------------------------------------ -----------
Net assets $217,270,373
- ------------------------------------------------------ -----------
Net assets represented by (Notes 1 and 3):
Paid-in capital $163,900,840
Accumulated distributions in excess of net
investment income (55,852)
Accumulated net realized gains (losses) on investment
transactions (126,447)
Net unrealized appreciation on investments and
foreign currency 53,551,832
- ------------------------------------------------------ -----------
Total net assets applicable to outstanding shares of
beneficial interest ($26.35 a share on 8,245,446
shares outstanding) $217,270,373
- ------------------------------------------------------ -----------
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year Ended February 29, 1996
================================================================================
Investment income (Note 1):
Dividends (net of withholding taxes of
$156,666) $ 2,169,487
Interest 176,754
- ----------------------------------------------- ------- ----------
Total investment income 2,346,241
- ----------------------------------------------- ------- ----------
Expenses (Notes 3 and 5):
Management fee $ 1,354,605
Transfer agent fees 831,209
Accounting, auditing and legal 67,602
Custodian fees 97,617
Printing 30,365
Directors' fees and expenses 9,336
Distribution Plan expenses 1,979,775
Registration fees 84,757
State tax expense 30,001
Miscellaneous expenses 12,846
- ----------------------------------------------- ------- ----------
Total expenses 4,498,113
Less: Expenses paid indirectly (Note 5) (28,227)
- ----------------------------------------------- ------- ----------
Net expenses 4,469,886
- ----------------------------------------------- ------- ----------
Net investment loss (2,123,645)
- ----------------------------------------------- ------- ----------
Equity in earnings of wholly-owned
unconsolidated foreign subsidiary (Note 2) 21,316
- ----------------------------------------------- ------- ----------
Net realized and unrealized gain (loss) on
investments and foreign currency related
transactions
(Note 4):
Realized gain on:
Investments 15,958,230
Foreign currency related transactions (5,779)
- ----------------------------------------------- ------- ----------
Net realized gain on investments and foreign
currency related transactions 15,952,451
Unrealized appreciation on investments:
Beginning of year 3,078,967
End of year 53,551,832
- ----------------------------------------------- ------- ----------
Net change in unrealized appreciation or
depreciation on investments: 50,472,865
- ----------------------------------------------- ------- ----------
Net gain (loss) on investments and foreign
currency related transactions 66,425,316
- ----------------------------------------------- ------- ----------
Net increase in net assets resulting from
operations $64,322,987
- ----------------------------------------------- ------- ----------
See Notes to Financial Statements.
<PAGE>
PAGE 13
- ---------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS Year Ended Year Ended
February 29, February 28,
1996 1995
======================================================================== ============== ================
<S> <C> <C>
Operations:
Net investment loss $ (2,123,645) $ (1,113,674)
Equity in earnings of wholly-owned unconsolidated foreign subsidiary 21,316 16,070
Net realized gain on investments and foreign currency related
transactions 15,952,451 16,264,818
Net change in unrealized appreciation (depreciation) on investments and
foreign currency holdings 50,472,865 (63,783,342)
- ------------------------------------------------------------------------ ------------ --------------
Net increase (decrease) in net assets resulting from operations 64,322,987 (48,616,128)
- ------------------------------------------------------------------------ ------------ --------------
Net distributions to shareholders from investment income (Notes 1 and 6) 0 (1,048,057)
- ------------------------------------------------------------------------ ------------ --------------
Capital share transactions (Note 3):
Proceeds from shares sold 376,204,823 374,710,377
Payments for shares redeemed (394,450,262) (355,122,400)
Reinvestment of dividends and distributions 0 779,722
- ------------------------------------------------------------------------ ------------ --------------
Net increase (decrease) in net assets resulting from capital share
transactions (18,245,439) 20,367,699
- ------------------------------------------------------------------------ ------------ --------------
Total increase (decrease) in net assets 46,077,548 (29,296,486)
Net assets:
Beginning of year 171,192,825 200,489,311
- ------------------------------------------------------------------------ ------------ --------------
End of year [including accumulated distributions in excess of net
investment income on February 29, 1996 of ($55,852) and undistributed
net investment income on February 28, 1995 of $1,129,201] (Note 1) $217,270,373 $ 171,192,825
======================================================================== ============ ==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
PAGE 14
- ---------------------------------------------
Keystone Precious Metals Holdings, Inc.
NOTES TO FINANCIAL STATEMENTS
(1.) Significant Accounting Policies
Keystone Precious Metals Holdings, Inc. (the "Fund") is a Delaware
corporation for which Keystone Investment Management Company (formerly named
Keystone Custodian Funds, Inc.) ("Keystone") is the investment adviser. It is
registered as a diversified open-end management investment company under the
Investment Company Act of 1940 (the "Act").
Since August 1, 1995, Harbor Capital Management Company, Inc. ("Harbor
Capital") has served as Consultant to Keystone with respect to the Fund.
Prior to August 1, 1995, Harbor Capital served as a subadviser to the Fund.
Pursuant to the terms of its Consultant Agreement, Harbor Capital provides
Keystone with monthly reports discussing the world's gold bullion markets and
gold stocks markets, and advice regarding economic factors and trends in the
precious metals sector.
Keystone is a wholly-owned subsidiary of Keystone Investments, Inc.
(formerly Keystone Group, Inc.) ("KII"), a Delaware corporation. KII is a
private corporation predominately owned by current and former members of
management of Keystone and its affiliates. Keystone Investor Resource Center,
Inc. ("KIRC"), a wholly-owned subsidiary of Keystone, is the Fund's transfer
agent.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
which requires management to make estimates and assumptions that affect
amounts reported herin. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the net
assets of the Fund.
A. Investments, including American Depository Receipts ("ADRs"), are usually
valued at the closing sales price or, in the absence of sales and for
over-the-counter securities, the mean of bid and asked quotations.
Management values the following securities at prices it deems in good faith
to be fair: (a) securities for which complete quotations are not readily
available and (b) listed securities if, in the opinion of management, the
last sales price does not reflect a current value or if no sale occurred.
ADRs are negotiable certificates issued by a United States Bank representing
the right to recieve securities of a foreign issuer deposited in that bank or
a foreign bank, and are traded and valued in United States dollars. Those
securities traded in foreign currency amounts are translated into United
States dollars at the daily rate of exchange. Net unrealized foreign exchange
gains/losses are a component of unrealized appreciation/depreciation of
investments.
Short-term investments maturing in sixty days or less are valued at
amortized cost (original purchase cost as adjusted for amortization of
premium or accretion of discount) which, when combined with accrued interest,
approximates market. Short-term investments maturing in more than sixty days
for which market quotations are readily available are valued at current
market value. Short-term investments maturing in more than sixty days when
purchased that are held on the sixtieth day prior to maturity are valued at
amortized cost (market value on the sixtieth day adjusted for amortization of
premium or accretion of discount) which, when combined with accrued interest,
approximates market.
B. The Fund enters into currency and other financial futures contracts as a
hedge against changes in interest or currency exchange rates. A futures
contract is an agreement between two parties to buy and sell a specific
amount of a commodity, security, financial instrument, or, in the case of a
stock index, cash at a set
<PAGE>
PAGE 15
- ---------------------------------------------
price on a future date. Upon entering into a futures contract, the Fund is
required to deposit with a broker an amount ("initial margin") equal to a
certain percentage of the purchase price indicated in the futures contract.
Subsequent payments ("variation margin") are made or received by the Fund
each day, as the value of the underlying instrument or index fluctuates, and
are recorded for book purposes as unrealized gains or losses by the Fund. For
federal tax purposes, any futures contracts which remain open at fiscal
year-end are marked-to-market and the resultant net gain or loss is included
in federal taxable income.
Foreign currency amounts are translated into United States dollars as
follows: market value of investments, assets and liabilities at the daily
rate of exchange, purchases and sales of investmentss, income and expense at
the rate of exchange prevailing on the respective dates of such transactions.
Net unrealized foreign exchange gains/losses are a component of unrealized
appreciation/depreciation of investments. In addition to market risk, the
Fund is subject to the credit risk that the other party will not complete the
obligation of the contract.
C. Securities transactions are accounted for no later than one business day
after the trade date. Realized gains and losses are computed on the
identified cost basis. Interest income is recorded on the accrual basis and
dividend income is recorded on the ex-dividend date. Distributions to
shareholders are recorded on the ex-date.
D. The Fund has qualified, and intends to qualify in the future, as a
regulated investment company under the Internal Revenue Code of 1986, as
amended ("Internal Revenue Code"). Thus, the Fund expects to be relieved of
any federal income tax liability by distributing all of its net taxable
investment income and net taxable capital gains, if any, to its shareholders.
The Fund intends to avoid excise tax liability by making the required
distributions under the Internal Revenue Code.
E. When the Fund enters into a repurchase agreement (a purchase of securities
whereby the seller agrees to repurchase the securities at a mutually agreed
upon date and price) the repurchase price of the securities will generally
equal the amount paid by the Fund plus a negotiated interest amount. The
seller, under the repurchase agreement, will be required to provide
securities ("collateral") to the Fund whose value will be maintained at an
amount not less than the repurchase price, and which generally will be
maintained at 101% of the repurchase price. The Fund monitors the value of
collateral on a daily basis, and if the value of the collateral falls below
required levels, the Fund intends to seek additional collateral from the
seller or terminate the repurchase agreement. If the seller defaults, the
Fund would suffer a loss to the extent that the proceeds from the sale of the
underlying securities were less than the repurchase price. Any such loss
would be increased by any cost incurred on disposing of such securities. If
bankruptcy proceedings are commenced against the seller under the repurchase
agreement, the realization on the collateral may be delayed or limited.
Repurchase agreements entered into by the Fund will be limited to
transactions with dealers or domestic banks believed to present minimal
credit risks, and the Fund will take constructive receipt of all securities
underlying repurchase agreements until such agreements expire.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with certain other Keystone funds, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agree-
<PAGE>
PAGE 16
- ---------------------------------------------
Keystone Precious Metals Holdings, Inc.
ments that are collateralized by U.S. Treasury and/or Federal Agency
obligations.
F. In connection with portfolio purchases and sales of securities denominated
in a foreign currency, the Fund may enter into forward foreign currency
exchange contracts ("contracts"). Additionally, from time to time, the Fund
may enter into contracts to hedge certain foreign currency assets. Contracts
are recorded at market value. Realized gains and losses arising from such
transactions are included in net realized gain (loss) on investments and
forward foreign currency exchange contracts.
G. The Fund distributes net investment income to shareholders, if any,
semiannually, and net capital gains, if any, annually. Distributions from net
investment income are based on tax basis net income. The significant
difference between financial statement amounts available for distribution and
distributions made in accordance with income tax regulations are primarily
attributable to the deferral of post-October losses and utilization of
capital loss carryforwards.
(2.) Investment in Foreign Subsidiary
Precious Metals (Bermuda) Ltd., the Fund's wholly-owned foreign subsidiary,
was acquired in May 1975 and has as its primary objective the acquisition of
precious metals. The Fund accounts for its investments in the subsidiary
under the equity method of accounting. At February 29, 1996, the fair value
of the Fund's investment in the foreign subsidiary was determined as follows:
Cash and cash equivalents $747,056
Accrued expenses (9,529)
----------------------------- -------
Fair Value $737,527
============================= =======
During the year ended February 29, 1996, the foreign subsidiary had no
purchases or sales of precious metals. Investment activities of the foreign
subsidiary resulted in gross investment income, general and administrative
expenses, and net investment income of $36,405, $15,089 and $21,316,
respectively. Management fees paid or accrued by the foreign subsidiary to
Keystone totaled $4,946 for the year ended February 29, 1996.
(3.) Capital Share Transactions
One hundred million shares of the Fund with a par value of $1.00 are
authorized for issuance. Transactions in shares of the Fund were as follows:
Year ended Year ended
February 29, 1996 February 28, 1995
- ---------------------- ----------------- ------------------
Sales 16,257,907 15,698,308
Redemptions (16,883,225) (14,849,643)
Reinvestment of
dividends and
distributions 0 32,096
- ---------------------- --------------- -----------------
Net increase
(decrease) (625,318) 880,761
====================== =============== =================
The Fund bears some of the cost of selling its shares under a Distribution
Plan adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Under the Distribution Plan, the Fund pays Keystone Investment Distributors
Company ("KIDCO"), (formerly Keystone Distributors, Inc.) the principal
underwriter and a wholly-owned subsidiary of Keystone, amounts which in total
may not exceed the Distribution Plan maximum.
In connection with the Distribution Plan and subject to the limitations
discussed above, Fund shares are offered for sale at net asset value without
any initial sales charge. From the amounts received by KIDCO in connection
with the Distribution Plan, and subject to the limitations discussed above,
KIDCO generally pays brokers or others a commission equal to 4.0% of the
price paid to the Fund for each sale of Fund shares as
<PAGE>
PAGE 17
- ---------------------------------------------
well as a shareholder service fee at a rate of 0.25% per annum of the net
asset value of shares maintained by such recipients and outstanding on the
books of the Fund for specified periods.
To the extent Fund shares are redeemed within four calendar years of
original issuance, depending upon when those shares were issued, the Fund may
be eligible to receive a deferred sales charge from the investor as partial
reimbursement for sales commissions previously paid on those shares. This
charge is based on declining rates, which begin at 4.0%, applied to the
lesser of the net asset value of shares redeemed or the total cost of such
shares.
The Distribution Plan provides that the Fund may expend up to 0.3125%
quarterly (approximately 1.25% annually) of the Fund's average daily net
assets to pay distribution costs for sales of its shares and to pay
shareholder service fees. A rule of the National Association of Securities
Dealers, Inc. ("NASD Rule") limits the annual expenditures which the Fund may
incur under the Distribution Plan to 1.00% of the Fund's average daily net
asset value, of which 0.75% may be used to pay such distribution costs and
0.25% may be used to pay shareholder service fees. The NASD Rule also limits
the aggregate amount which the Fund may pay for such distribution costs to
6.25% of gross share sales since the inception of the Fund's 12b-1
Distribution Plan, plus interest at the prime rate plus 1.00% per annum on
unpaid amounts thereof (less any contingent deferred sales charges paid by
the shareholders to KIDCO) remaining unpaid from time to time.
The Fund has operated its Distribution Plan in accordance with both the
Plan and the NASD Rule since July 8, 1992, except that until July 7, 1993,
maximum annual payments with respect to net asset Value as represented by
shares sold prior to January 1, 1992 remained at the current rate of 0.3125%
quarterly (approximately 1.25% annually).
KIDCO intends, but is not obligated, to continue to pay or accrue
distribution costs and service fees which exceed annual maximum payments
permitted to be received by KIDCO from the Fund. KIDCO intends to seek full
payment of such amounts from the Fund (together with annual interest thereon
at the prime rate plus 1.00%) at such time in the future as, and to the
extent that, payment thereof by the Fund would be within permitted limits.
KIDCO currently intends to seek payment of interest only on such amounts paid
or accrued by KIDCO subsequent to January 1, 1992.
Commencing on July 8, 1992, contingent deferred sales charges applicable to
shares of the Fund issued after January 1, 1992 have, to the extent permitted
by the NASD Rule, been paid to KIDCO rather than to the Fund.
During the year ended February 29, 1996, the Fund paid KIDCO $1,979,775.
During the period, KIDCO retained $755,218 after payments of commissions on
new sales and service fees to dealers and others of $1,224,557. Under a rule
of the NASD, the maximum uncollected amounts for which KIDCO may seek payment
from the Fund under its Distribution Plan is $12,834,715 (5.91% of the Fund's
net asset value as of February 29, 1996).
(4.) Securities Transactions
Realized gains and losses are computed on the identified cost basis. Gains
and losses on foreign currency related transactions are treated as ordinary
income for federal income tax purposes. As of February 29, 1996, the Fund had
a capital loss carryover for federal
<PAGE>
PAGE 18
- ---------------------------------------------
Keystone Precious Metals Holdings, Inc.
income tax purposes of approximately $126,447 which expires as follows:
2001--$126,447.
Cost of purchases and proceeds from sales of investment securities
excluding short-term securities for the year ended February 29, 1996 were
$75,310,671 and $93,617,463, respectively.
(5.) Investment Management and Transactions with Affiliates
Officers and directors of the Fund who are employees of Keystone or the
Consultant receive no compensation directly from the Fund. Several officers
of the Fund are also officers, directors and/or stockholders of Keystone and
have an interest in the management fee paid by the Fund to Keystone. The
management fee paid by the Fund to Keystone is determined by applying
percentage rates, which start at 0.75%, and decline, as net assets increase,
to 0.50% per annum, to the average daily net assets of the Fund. Such fee is
reduced by the amount of any investment advisory fee paid to Keystone by the
Fund's subsidiary. Since August 1, 1995, Harbor Capital has served as a
Consultant to Keystone with respect to the Fund. For its services as
Consultant, Harbor Capital receives from Keystone a fee at the annual rate of
0.10% of the Fund's average daily net assets.
During the year ended February 29, 1996, the Fund paid or accrued
management fees of $1,354,605 to Keystone, which represented 0.69% of the
Fund's average daily net assets on an annualized basis. Keystone paid or
accrued a fee of $301,007 to Harbor Capital which acted as sub-advisor to the
Fund for the period from March 1, 1995 through July 31, 1995 and as
Consultant for the period from August 1, 1995 through February 29, 1996.
During the year ended February 29, 1996, the Fund paid or accrued $19,093
to KIRC and Keystone Investments, Inc., as reimbursement for the cost of
certain accounting services provided to the Fund. During the year ended
February 29, 1996, $831,209 was paid or accrued to KIRC for shareholder
services.
The Fund has entered into an expense offset arrangement with its custodian.
For the year ended February 29, 1996 the Fund paid custody fees in the amount
of $69,390 and received credit of $28,227 pursuant to the expense offset
arrangement, resulting in a total expense of $97,617. The assets deposited
with the custodian under the expense offset arrangement could have been
invested in income-producing assets.
<PAGE>
PAGE 19
- ---------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Directors and Shareholders of
Keystone Precious Metals Holdings, Inc.
We have audited the accompanying statement of assets and liabilities of
Keystone Precious Metals Holdings, Inc. including the schedule of
investments, as of February 29, 1996, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the ten-year period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of February 29, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Keystone Precious Metals Holdings, Inc. as of February 29, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the ten-year period then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
March 29, 1996
<PAGE>
[Back Cover]
- --------------------------------------------------------------------------------
KEYSTONE
FAMILY OF FUNDS
[diamond]
Balanced Fund (K-1)
Diversified Bond Fund (B-2)
Growth and Income Fund (B-4)
International Fund Inc.
Liquid Trust
Mid-Cap Growth Fund (S-3)
Precious Metals Holdings, Inc.
Quality Bond Fund (B-1)
Small Company Growth Fund (S-4)
Strategic Growth Fund (K-2)
Tax Free Fund
- --------------------------------------------------------------------------------
This report was prepared primarily for the information of the Fund's
shareholders. It is authorized for distribution if preceded or accompanied by
the Fund's current prospectus. The prospectus contains important information
about the Fund including fees and expenses. Read it carefully before you invest
or send money. For a free prospectus on other Keystone funds, contact your
financial adviser or call Keystone.
[Keystone KEYSTONE
Logo] INVESTMENTS
P.O. Box 2121
Boston, Massachusetts 02106-2121
PMH-AR-4/96
21.6M [Recycle Logo]
- --------------------------------------------------------------------------------
K E Y S T O N E
=====================================================================
PRECIOUS
METALS
HOLDINGS,
INC.
=====================================================================
ANNUAL
REPORT
- --------------------------------------------------------------------------------
[Keystone Logo]
FEBRUARY 29, 1996
