PAGE 1
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Keystone Precious Metals Holdings, Inc.
Seeks long-term capital appreciation and protection of purchasing power
by investing 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 28, 1997.
Performance
Your Fund produced a total return of -5.16% for the twelve-months which ended
February 28, 1997. The Financial Times Gold Mines Index, an index of gold
stocks, returned -18.5% for the same period. We consider your Fund's performance
satisfactory during a period in which gold stocks experienced significant price
declines. We believe your Fund's conservative management style, which emphasizes
established gold mining companies with expanding reserves and proven operating
reputations, helped minimize price declines during this difficult year.
Market overview
The past year was a difficult period for gold and gold company stocks. Excess
supply resulting from central bank sales drove bullion prices down, and low
inflation in the industrialized countries dampened already weak investor
interest in the metal. In addition, strong performance in the broader equity
markets gave investors little reason to look elsewhere for competitive returns.
At the start of your Fund's fiscal year on March 1, 1996, gold bullion
prices were declining from a peak of $417 an ounce reached earlier in the month.
Prices remained in the $390 to $400 range through the end of May, and then found
support at the $380 level from June through November. Fueled by real and rumored
central bank sales, speculator selling began in earnest in late November.
Bullion prices declined to a low of $339.85 an ounce in early February, then
experienced a quick run-up to end the period at $363.45 on February 28, 1997.
Gold stocks responded slowly to the initial decline in gold prices,
trending up for the first three months of the period until it became clear that
bullion prices were no longer rising. Gold stocks declined in June and July,
then tracked the price of gold through the end of the period, rebounding
promptly with the metal in early February.
The advantages of a conservative investment strategy
The conservative management style of Keystone Precious Metals Holdings, Inc.
helped the Fund to fare slightly better than the price of gold during the year.
Although your Fund's net asset value and gold bullion both declined 9.3% during
the year, Keystone Precious Metals Holdings, Inc. paid a $0.99 per share capital
gain to shareholders of record in November, 1996. This capital gain payout was
reflected in the Fund's net asset value.
We believe this strong relative performance is due to our strategy of
focusing on well established gold mining companies with good track records and
strong exploration programs to ensure future growth. As the past year has shown,
companies with these characteristics tend to be more resilient under difficult
market conditions, but they also offer good appreciation potential when
conditions improve.
Our outlook
The gold market experienced a turbulent year, but the fundamentals still hold
true: worldwide demand for mined gold continues to outpace supply. Over the long
term, we believe that this basic dynamic should lead to higher
--continued--
<PAGE>
PAGE 2
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Keystone Precious Metals Holdings, Inc.
gold stock prices. We are also encouraged by the recent upward move in the price
of gold bullion. Even in the absence of strong investor interest, we would not
be surprised to see bullion prices return to the $380 range in the coming year.
We continue to believe that the best way to take advantage of the unpredictable
nature of these markets is to remain invested in high quality gold stocks.
Valuable diversification for long-term portfolios
Despite the negative returns of the past year, we believe long-term investing in
gold-related securities adds valuable diversification to an investment
portfolio. Holding gold-related stocks can help offset market fluctuations,
because their performance usually differs from that of broader stock and bond
market indexes. They can also provide a hedge against inflation and currency
uncertainties.
Keystone acquired by First Union Corporation
We are pleased to inform you that Keystone has been acquired by First Union
Corporation. First Union, based in Charlotte, N.C., is the nation's sixth
largest bank holding company with assets of approximately $130 billion. Keystone
Investment Management Company will continue to be the investment adviser,
responsible for managing your Fund's portfolio. Your Fund will continue to be
managed with the same style and philosophy as in the past.
First Union also owns another mutual fund management company, Evergreen
Asset Management Corp. Together, Evergreen and Keystone manage approximately $30
billion in assets. Service and marketing will now be conducted under the
"Evergreen Keystone Funds" umbrella.
We appreciate your continued support of Keystone Precious Metals Holdings,
Inc., and encourage you to write to us with any questions or comments about your
Keystone investment.
Sincerely,
/s/ Albert H. Elfner, III
Albert H. Elfner, III
Chairman
Keystone Investment
Management Company
/s/ George S. Bissell
George S. Bissell
Chairman of the Board
Keystone Funds
April 1997 [Photo: [Photo:
Albert H. Elfner, III] George S. Bissell]
Albert H. Elfner, III George S. Bissell
<PAGE>
PAGE 3
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A Discussion With
Your Fund Manager
[Photo: John C. Madden, Jr.]
John C. Madden, Jr. is a vice president and senior portfolio
manager of Keystone Precious Metals Holdings, Inc. and Keystone
Global Resources and Development Fund. A Chartered
Financial Analyst, Mr. Madden has more than 30 years of
experience in investment research and management, specializing
in precious metals, natural resources and energy. He holds a BA
from Yale University.
Q What factors contributed to the declining price of gold during the period?
A Gold's brief rise above $400 early in 1996 gave investors, dealers and
speculators a good opportunity to take profits, but once speculator interest
dropped off, price levels moved lower. The price stabilized in the $380 range
from June to November, when real and rumored central bank sales contributed to a
further decline. The sale of 10 million ounces by the Dutch central bank and
discussions of sales by the International Monetary Fund and the Swiss government
sent the price to its one-year low of $339.85 an ounce in early February 1997.
Once the price dipped below $340, however, investors saw a buying opportunity.
Growing physical demand in the Far East and short covering by speculators led to
a quick run up at the end of February. On February 28, 1997, the price had
rebounded to $363.45 an ounce.
Q How did these market conditions affect the stocks of gold mining companies?
A It varied, as you can see from the chart. The Financial Times Gold Mines
Index lost almost twice as much as the metal, down 18.5% for the year compared
to -9.3% for gold bullion. The XAU, another popular index of gold stock
performance, lost 15.0%. But the average gold stock mutual fund, as measured by
Lipper Analytical Services, fared a little better, losing a more modest 7.6% for
the year.
- ----------------------------------- [BAR CHART] --------------------------------
Comparative performance of Keystone
Precious Metals Holdings, Inc. and key
market indexes, March 1, 1996-February 28, 1997
KPMH* -5.16%
Lipper Gold Fund Index -7.60%
Spot Gold -9.30%
XAU -15.00%
Keystone Precious Metals Holdings declined
less than the key market measures during the year.
*Includes reinvested dividends
- --------------------------------------------------------------------------------
Fund Profile
Objective: Seeks long-term capital appreciation and protection of purchasing
power by investing in gold-oriented or other precious metal and minerals
companies.
Commencement of investment operations: June 5, 1972
Net assets: $190.1 million
Newspaper listing: PrecMtl.
- --------------------------------------------------------------------------------
<PAGE>
PAGE 4
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Keystone Precious Metals Holdings, Inc.
Q How did the Fund perform during the year?
A Your Fund experienced lower volatility than either the price of gold or the
leading gold indexes, as shown in the chart. During the first half of the year,
the gold-related stocks in which your Fund invests generally experienced a
delayed reaction to changes in the price of gold, remaining high in May even as
gold bullion prices were declining. But once it became clear that the price of
gold had settled lower, gold stocks moved down, too. From November onward, gold
stock performance generally paralleled the price of the metal. Your Fund reached
its low for the year in early January, about a month ahead of the price of gold.
The Fund had a strong finish to the year, buoyed by a recovery in the South
African market. In February alone, the Fund gained 14.1% while the price of gold
rose 5.5%.
Q How were supply and demand during the year?
A The supply-demand dynamic remained positive during the year, despite the
relatively low inflation environment in the U.S. and other industrialized
countries. Demand from jewelry fabricators remained strong, and continues to
exceed the annual mined production of gold. Over the past few years, this gap
was filled by several sources, notably scrap supply, central bank sales and
forward sales by producers. When central bank sales taper off, we expect supply
to tighten, which we believe should provide a favorable environment for gold
stocks over the long term.
Q You increased the Fund's North American holdings to nearly 60% of the
portfolio during the year. Please describe some of these stocks.
A Over the year we reduced our exposure in Australia and expanded our holdings
in North America. One U.S. stock that has done quite well is Getchell Gold, a
spin-off from First Mississippi Corporation that
Asset Allocation (as a percentage of portfolio assets)
February 28, 1997 February 29, 1996
North America 59.1% 50%
- ------------------------------------------------------------
South Africa 26.8% 25%
- ------------------------------------------------------------
Australia 14.1% 25%
- ------------------------------------------------------------
produces about 200,000 ounces a year from operations in northern Nevada.
Getchell has been very successful in adding to reserves, and is now developing a
mine that will more than double company output. With growing reserves and a land
position that abuts that of Santa Fe Pacific Gold, there is also the possibility
for merger or takeover activity.
In Canada, we continue to like the Canadian royalty company Euro-Nevada.
Among other assets, this company holds royalties on Getchell's current reserves
and on Barrick Gold's Goldstrike property. In addition, the company is involved
in a joint venture to develop a low-cost, 250,000 ounce per year mine in Nevada.
Expected on stream in 1998, this mine should help the company record substantial
earnings gains over the next several years.
Q What is your strategy for managing the Fund?
A The Fund's objective is to seek long-term capital appreciation and protection
of purchasing power by investing in gold-oriented or other precious metal and
minerals companies. As a sector fund, it is likely
- ----------------------------------- [PIE CHART] --------------------------------
Asset Allocation
as of February 28, 1997
U.S 29%
Canada 30%
South Africa 27%
Australia 14%
- --------------------------------------------------------------------------------
<PAGE>
PAGE 5
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to experience greater price fluctuation than more diversified investments, but
we rely on a conservative strategy to reduce the level of volatility. We focus
on companies with growing reserves and expanding production that may have a
greater ability to maintain their value during periods of lower gold prices. We
believe this approach offers Fund investors the advantages of ongoing exposure
to the potential of gold stocks, but with reduced downside risk.
Q Bre-X Minerals, Ltd., a Canadian-based mining company, has been in the news
since the end of the Fund's fiscal year. Is this a Fund holding?
A The Fund held a minor position--less than one percent of the portfolio--in
Bre-X at the close of the fiscal year in February. In March, questions arose
about the accuracy of company reports of gold deposits in an Indonesian mine
owned by the company. We have liquidated our position in Bre-X.
Q What is your outlook for the gold market?
A Over the past year, the bull market for stocks, the strong dollar and minimal
inflation have created an unfavorable environment for gold investments. But the
fundamentals remain positive--demand by jewelry fabricators continues to outpace
mined production. While we are not anticipating a gold rally, neither do we
expect a return to the low gold prices we saw earlier this year. We believe the
companies in your Fund's portfolio are in a good position to benefit from even
small increases in the price of gold over the coming year.
Top 10 Holdings
as of February 28, 1997
Percentage of
Stock (Country) net assets
---------------------------------------------------------
Euro Nevada Mining (Canada) 7.1
---------------------------------------------------------
Franco Nevada Mining (Canada) 5.8
---------------------------------------------------------
Getchell Gold (United States) 5.5
---------------------------------------------------------
Newmont Mining Corp. (United States) 5.1
---------------------------------------------------------
Homestake Mining (United States) 5.1
---------------------------------------------------------
Barrick Gold (Canada) 4.5
---------------------------------------------------------
Newmont Gold (United States) 4.1
---------------------------------------------------------
Randgold & Exploration (South Africa) 3.7
---------------------------------------------------------
Santa Fe Pacific Gold (United States) 3.5
---------------------------------------------------------
Pioneer Group (United States) 3.3
---------------------------------------------------------
[diamond]
This column is intended to answer
questions about your Fund. If you have a question
you would like answered, please write to:
Evergreen Keystone Investment Services, Inc.
Attn: Shareholder Communications, 22nd Floor
200 Berkeley Street, Boston, Massachusetts 02116-5034.
<PAGE>
PAGE 6
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Keystone Precious Metals Holdings, Inc.
Your Fund's Performance
- ------------------------------- [MOUNTAIN CHART] ------------------------------
Growth of an investment in
Keystone Precious Metals Holdings, Inc.
In Thousands
Reinvested Initial
Distributions Investment
2/87 10000 10000
2/88 8954 9714
2/89 9717 10748
2/90 11063 12236
2/91 8215 9255
2/92 8879 10094
2/93 8307 9515
2/94 14495 16601
2/95 11150 12833
2/96 15222 17521
2/97 13830 16616
A $10,000 investment in Keystone Precious Metals
Holdings, Inc. made on February 28, 1987 with all
distributions reinvested was worth $16,616 on
February 28, 1997. Past performance is no guarantee
of future results.
- --------------------------------------------------------------------------------
Twelve-Month Performance as of February 28, 1997
- -----------------------------------------------------------
Total return* -5.16%
Net asset value 2/29/96 $26.35
2/28/97 $23.94
Dividends None
Capital gains $0.99
* Before deducting contingent deferred sales charge (CDSC).
Historical Record as of February 28, 1997
- -----------------------------------------------------------
If you If you did
Cumulative total return redeemed not redeem
1-year -7.89% -5.16%
5-year 64.62% 64.62%
10-year 66.16% 66.16%
Average annual total return
1-year -7.89% -5.16%
5-year 10.48% 10.48%
10-year 5.21% 5.21%
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.
The investment return and principal value will fluctuate so that your
shares, when redeemed, may be worth more or less than the original cost.
You may exchange your shares by phone or in writing. You may also exchange
funds using Keystone's Automated Response Line (KARL). The Fund reserves the
right to change or terminate the exchange offer.
<PAGE>
PAGE 7
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Growth of an Investment
- ----------------------------------- [PIE 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, 1987 through February 28, 1997
Fund Average
Annual Total Return
---------------------------
1 Year 5 Year 10 Year
-7.89% 10.48% 5.21%
Standard & Poor's Consumer Price
Fund 500 Index (S&P 500) Index (CPI)
2/87 10000 10000 10000
2/88 9714 9717 10393
2/89 10748 10845 10894
2/90 12236 12860 11467
2/91 9255 14731 12076
2/92 10094 17081 12417
2/93 9515 18900 12817
2/94 16601 20476 13140
2/95 12833 21983 13517
2/96 17521 29612 13875
2/97 16616 37357 14252
*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, 1997.
- --------------------------------------------------------------------------------
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 three 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
<PAGE>
PAGE 8
- --------------------------------------
Keystone Precious Metals Holdings, Inc.
increases in the cost of living. It is important to understand what the chart
shows and does not show.
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 index does 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 applies to 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 28, 1997
Number Market
of Shares Value
==============================================================
COMMON STOCKS (101.0%)
AUSTRALIA (14.1%)
Gold Mining (8.7%)
Delta Gold NL (a) 800,000 $1,336,026
Newcrest Mining 654,572 2,491,380
Perilya Mines NL (a) 3,500,000 2,338,046
Plutonic Resources NL 950,000 3,770,778
Ross Mining NL 2,376,304 2,178,063
Sons of Gwalia Ltd. 799,600 4,459,475
- --------------------------------------------------------------
16,573,768
- --------------------------------------------------------------
Metals and Mining (5.4%)
Acacia Resources (a) 2,899,200 4,999,397
Normandy Mining Ltd. 3,825,000 5,288,566
- --------------------------------------------------------------
10,287,963
- --------------------------------------------------------------
TOTAL AUSTRALIA 26,861,731
==============================================================
CANADA (30.1%)
Gold Mining (21.1%)
Euro-Nevada Mining Ltd. 410,000 13,439,672
Franco-Nevada Mining Corp. Ltd. 235,000 11,073,388
Goldcorp Inc. (a) 300,000 2,414,575
Kinross Gold Corp. (a) 600,000 4,350,000
Orvana Minerals Corp. (a) 337,100 2,096,546
Prime Resources Group Inc. (a) 524,800 4,742,284
TVX Gold Inc. (a) 235,300 2,089,039
- --------------------------------------------------------------
40,205,504
- --------------------------------------------------------------
Metals and Mining (9.0%)
Agnico Eagle Mines Ltd. 80,000 1,144,362
Barrick Gold 304,700 8,628,002
Bema Gold Corp. (a) 300,000 2,502,378
Bre--X Minerals Ltd. (a) 125,000 1,792,639
Bro--X Minerals Ltd. 12,500 21,493
Placer Dome Inc. 50,000 1,073,754
Repadre Capital Corp. (a) 300,000 1,942,636
- --------------------------------------------------------------
17,105,264
- --------------------------------------------------------------
TOTAL CANADA 57,310,768
==============================================================
Number Market
of Shares Value
==============================================================
SOUTH AFRICA (26.8%)
Gold Mining (10.1%)
Free State Consolidated Gold
Mines Ltd. 75,000 $ 652,975
Free State Consolidated Gold
Mines Ltd. ADR 440,000 3,891,250
Vaal Reefs Exploration & Mining Ltd. 18,500 1,408,305
Vaal Reefs Exploration & Mining
Ltd. ADR 699,000 5,351,719
Western Areas Gold Mining Ltd. ADR 322,485 4,461,419
Western Deep Levels Ltd. 20,900 727,849
Western Deep Levels Ltd. ADR 75,000 2,620,313
- --------------------------------------------------------------
19,113,830
- --------------------------------------------------------------
Metals and Mining (16.7%)
Ashanti Goldfields Ltd. (GDR) (b) 285,000 4,310,625
Avgold Ltd. 2,445,000 5,447,282
Avgold Ltd. ADR (a) 74,131 1,649,415
Avmin Ltd. ADR 250,000 3,292,560
DeBeers Centenary 110,000 3,818,507
DeBeers Consolidated Mines Ltd. ADR 45,200 1,576,350
Elandsrand Gold Mining Ltd. ADR 300,000 1,539,630
Harmony Gold Mining (a) ADR 200,000 1,720,380
Harmony Gold Mining (a) 150,000 1,292,555
Randgold + Exploration (a) 829,666 6,991,828
- --------------------------------------------------------------
31,639,132
- --------------------------------------------------------------
TOTAL SOUTH AFRICA 50,752,962
==============================================================
UNITED STATES (30.0%)
Gold Mining (23.3%)
Getchell Gold Corp.(a) 204,700 10,542,050
Homestake Mining Co. 583,000 9,619,500
Newmont Gold Co. 160,000 7,800,000
Newmont Mining Corp. 205,000 9,737,500
Santa Fe Pacific Gold Corp. (a) 355,000 6,656,250
- --------------------------------------------------------------
44,355,300
- --------------------------------------------------------------
<PAGE>
PAGE 10
- --------------------------------------
Keystone Precious Metals Holdings, Inc.
SCHEDULE OF INVESTMENTS--February 28, 1997
Number Market
of Shares Value
==============================================================
Metals and Mining (6.7%)
Canyon Resource Corp. (a) 400,000 $ 1,375,000
Pioneer Group Inc. 270,000 6,260,625
Stillwater Mining Company (a) 220,900 5,122,119
- --------------------------------------------------------------
12,757,744
- --------------------------------------------------------------
TOTAL UNITED STATES 57,113,044
==============================================================
TOTAL COMMON STOCKS
(Cost--$156,631,103) 192,038,505
==============================================================
WARRANTS/RIGHTS (0.1%)
CANADA (0.1%)
Metals and Mining (0.1%)
Vengold 429,000 269,950
- --------------------------------------------------------------
TOTAL WARRANTS/RIGHTS (Cost--$0) 269,950
==============================================================
TOTAL INVESTMENTS
(Cost--$156,631,103) 192,308,455
==============================================================
INVESTMENTS IN WHOLLY-OWNED
UNCONSOLIDATED FOREIGN
SUBSIDIARY (0.4%)
Precious Metals (Bermuda) Ltd. 807,292
- --------------------------------------------------------------
Number Market
of Shares Value
==============================================================
OTHER ASSETS AND
LIABILITIES--NET (-1.5%) $(3,008,136)
==============================================================
NET ASSETS (100.0%) $190,107,611
==============================================================
NOTES TO SCHEDULE OF INVESTMENTS
(a) Non-income producing security.
(b) Securities that may be resold to "qualified institutional buyers" under Rule
144A of the Securities Act of 1933. These securities have been determined to
be liquid under guidelines established by the Board of Directors.
(c) The cost of investments for federal income tax purposes amounted to
$172,190,611. Gross unrealized appreciation and depreciation of investments,
based on identified tax cost, at February 28, 1997, are as follows:
Gross unrealized appreciation $ 33,807,650
Gross unrealized depreciation (12,882,514)
------------
Net unrealized appreciation $ 20,925,136
============
Legend of Portfolio Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
FORWARD FOREIGN CURRENCY CONTRACTS--February 28, 1997
U.S. Value at Unrealized
Exchange In Exchange February 28, Appreciation/
Date for U.S. $ 1997 (Depreciation)
- --------------------------------------------------------------------------------
Spot Foreign Currency Exchange Contracts to Buy:
Contracts
to Receive
- --------------------------------------------------------------------------------
3/4/97 2,322,221 South African Rand 524,689 518,411 (6,278)
3/4/97 2,291,782 South African Rand 518,386 511,616 (6,770)
3/4/97 1,735,414 South African Rand 392,104 387,412 (4,692)
3/4/97 2,237,296 South African Rand 505,501 499,452 (6,049)
3/4/97 728,980 South African Rand 164,715 162,737 (1,978)
3/4/97 2,331,373 South African Rand 526,983 520,454 (6,529)
Spot Foreign Currency Exchange Contracts to Sell:
Contracts
to Deliver
- --------------------------------------------------------------------------------
3/4/97 1,729 South African Rand 386 390 4
See Notes to Financial Statements.
<PAGE>
PAGE 11
- --------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended (c)
<S> <C> <C> <C> <C>
Feb. 28, Feb. 29, Feb. 28, Feb. 28,
1997 1996 1995 1994
==================================================================================================
Net asset value beginning of year $ 26.35 $ 19.30 $ 25.09 $ 14.38
- --------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.26) (0.25) (0.13) (0.17)
Net gains (losses) on securities (1.16) 7.30 (5.54) 10.88
- --------------------------------------------------------------------------------------------------
Total from investment operations (1.42) 7.05 (5.67) 10.71
- --------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -0- -0- (0.12) -0-
Distributions in excess of net
investment income -0- -0- -0- -0-
Distributions from realized capital
gains (0.99) -0- -0- -0-
- --------------------------------------------------------------------------------------------------
Total distributions (0.99) 0.00 (0.12) 0.00
- --------------------------------------------------------------------------------------------------
Net asset value end of year $ 23.94 $ 26.35 $ 19.30 $ 25.09
==================================================================================================
Total return (a) (5.16%) 36.53% (22.70%) 74.48%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.33%(b) 2.28%(b) 2.33% 2.34%
Net investment income (loss) (1.08%) (1.08%) (0.54%) (0.75%)
Portfolio turnover rate 41% 39% 75% 73%
Average commission rate paid $ 0.01636 n/a n/a n/a
Net assets, end of year (thousands) $ 190,108 $ 217,270 $ 171,193 $ 200,489
==================================================================================================
<CAPTION>
Year Ended (c)
<S> <C> <C> <C> <C> <C> <C>
Feb. 28, Feb. 29, Feb. 28, Feb. 28, Feb. 28, Feb. 29,
1993 1992 1991 1990 1989 1988
=========================================================================================================================
Net asset value beginning of year $ 15.37 $ 14.22 $ 19.15 $ 16.82 $ 15.50 $ 17.31
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12) (0.02) -0- 0.06 0.05 (0.01)
Net gains (losses) on securities (0.76) 1.30 (4.61) 2.27 1.59 (0.17)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.88) 1.28 (4.61) 2.33 1.64 (0.18)
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment
income -0- -0- (0.06) -0- (0.12) (0.41)
Distributions in excess of net
investment income (0.11) (0.13) (0.26) -0- -0- -0-
Distributions from realized capital
gains -0- -0- -0- -0- (0.20) (1.22)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.11) (0.13) (0.32) 0.00 (0.32) (1.63)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value end of year $ 14.38 $ 15.37 $ 14.22 $ 19.15 $ 16.82 $ 15.50
=========================================================================================================================
Total return (a) (5.74%) 9.07% (24.37%) 13.85% 10.64% (2.86%)
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.83% 2.70% 2.76% 2.20% 1.68% 1.84%
Net investment income (loss) (0.86%) (0.14%) (0.02%) 0.32% 0.28% (0.05%)
Portfolio turnover rate 58% 53% 68% 95% 82% 62%
Average commission rate paid n/a n/a n/a n/a n/a n/a
Net assets, end of year (thousands) $ 114,364 $ 131,356 $ 150,200 $ 195,837 $ 222,079 $ 222,646
=========================================================================================================================
</TABLE>
(a) Excluding applicable sales charges.
(b) The ratio of operating and management expenses to average net assets
includes indirectly paid expenses. Excluding indirectly paid expenses, the
expense ratio would have been 2.31% and 2.26% for the years ended February
28, 1997 and February 29, 1996, respectively.
(c) Calculation based on average shares outstanding.
See Notes to Financial Statements.
<PAGE>
PAGE 12
- --------------------------------------------------------------------
Keystone Precious Metals Holdings, Inc.
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1997
========================================================================
Assets:
Investments at market value (identified
cost--$156,631,103) $192,308,455
Investment in wholly-owned unconsolidated foreign
subsidiary, at fair value (Note 2) 807,292
- ------------------------------------------------------------------------
Total investments 193,115,747
Cash 246,043
Receivable for:
Unrealized appreciation on open spot foreign
currency contracts 4
Fund shares sold 372,396
Interest and dividends 606,515
Prepaid expenses 77,518
Other assets 1,984
- ------------------------------------------------------------------------
Total assets 194,420,207
- ------------------------------------------------------------------------
Liabilities:
Payable for:
Investments purchased 2,599,695
Unrealized depreciation on open spot foreign
currency contracts 32,296
Fund shares redeemed 1,313,670
Payable to Investment Adviser (Note 6) 6,983
Accrued reimbursable expenses (Note 6) 3,838
Other accrued expenses 356,114
- ------------------------------------------------------------------------
Total liabilities 4,312,596
- ------------------------------------------------------------------------
Net assets $190,107,611
========================================================================
Net assets represented by:
Paid-in capital $145,496,368
Accumulated undistributed net investment income 4,722,048
Accumulated net realized gains (losses) on investment
transactions 4,212,612
Net unrealized appreciation on investments and
foreign currency 35,676,583
- ------------------------------------------------------------------------
Total net assets applicable to outstanding shares of
beneficial interest ($23.94 a share on 7,941,214 shares
outstanding) $190,107,611
========================================================================
STATEMENT OF OPERATIONS
Year Ended February 28, 1997
============================================================================
Investment income:
Dividends (net of withholding taxes
of $138,290) $ 2,084,778
Interest 285,499
- ----------------------------------------------------------------------------
Total investment income 2,370,277
- ----------------------------------------------------------------------------
Expenses:
Management fee $1,322,411
Transfer agent fees 805,132
Accounting, auditing and legal 87,223
Custodian fees 150,132
Printing 33,562
Directors' fees and expenses 8,743
Distribution Plan expenses 1,923,248
Registration fees 82,609
State tax expense 34,359
Miscellaneous expenses 18,233
- ----------------------------------------------------------------------------
Total expenses 4,465,652
Less: Expenses paid indirectly
(Note 7) (31,743)
- ----------------------------------------------------------------------------
Net expenses 4,433,909
- ----------------------------------------------------------------------------
Net investment loss (2,063,632)
- ----------------------------------------------------------------------------
Equity in earnings of wholly-owned
unconsolidated foreign subsidiary (Note 2) 69,764
- ----------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency related transactions:
Realized gain on:
Investments 14,615,767
Foreign currency related transactions (591,050)
- ----------------------------------------------------------------------------
Net realized gain on investments and
foreign currency related transactions 14,024,717
Unrealized appreciation on investments:
Beginning of year 53,551,832
End of year 35,676,583
- ----------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation on investments: (17,875,249)
- ----------------------------------------------------------------------------
Net gain (loss) on investments and
foreign currency related transactions (3,850,532)
- ----------------------------------------------------------------------------
Net decrease in net assets resulting
from operations $ (5,844,400)
============================================================================
See Notes to Financial Statements.
<PAGE>
PAGE 13
- --------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
February 28, 1997 February 29, 1996
=======================================================================================================================
<S> <C> <C>
Operations
Net investment loss $ (2,063,632) $ (2,123,645)
Equity in earnings of wholly-owned unconsolidated foreign subsidiary 69,764 21,316
Net realized gain on investments and foreign currency related transactions 14,024,717 15,952,451
Net change in unrealized appreciation (depreciation) on investments and
foreign currency holdings (17,875,249) 50,472,865
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (5,844,400) 64,322,987
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from
Net realized gains on investments and foreign currency related transactions (7,301,560) 0
- -----------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 3)
Proceeds from shares sold 618,026,217 376,204,823
Payments for shares redeemed (638,015,009) (394,450,262)
Reinvestment of dividends and distributions 5,971,990 0
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from capital share
transactions (14,016,802) (18,245,439)
- -----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (27,162,762) 46,077,548
Net assets
Beginning of year 217,270,373 171,192,825
- -----------------------------------------------------------------------------------------------------------------------
End of year [including accumulated distributions in excess of net
investment income as follows: February 1996--(55,852)] $ 190,107,611 $ 217,270,373
=======================================================================================================================
</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 ("Keystone") is the investment
advisor and manager. Keystone was formerly a wholly-owned subsidiary of Keystone
Investments, Inc. ("KII") and is currently a subsidiary of First Union Keystone,
Inc. First Union Keystone, Inc. is a wholly-owned subsidiary of First Union
National Bank of North Carolina which in turn is a wholly-owned subsidiary of
First Union Corporation ("First Union"). The Fund is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified,
open-end investment company. The Fund's investment objective is to seek
long-term capital appreciation while protecting the purchasing power of
shareholders' capital. Obtaining current income is a secondary objective.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles which
require management to make estimates and assumptions that affect amounts
reported herein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Fund.
A. Valuation of Securities
Investments, including American Depository Receipts ("ADR's"), are usually
valued at the closing sales price, or, in the absence of sales and for
over-the-counter securities, the mean of the bid and asked prices.
Securities for which valuations are not available from an independent
pricing service (including restricted securities) are valued at fair value as
determined in good faith according to procedures established by the Board of
Directors.
Short-term investments with remaining maturities of 60 days or less are
carried at amortized cost, which approximates market value. Short-term
securities with greater than 60 days to maturity are valued at market value.
B. Repurchase Agreements
Pursuant to an exemptive order issued by the Securities and Exchange Commission,
the Fund, along with certain other Keystone funds, may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are fully collateralized by U.S. Treasury and/or
Federal Agency obligations.
Securities pledged as collateral for repurchase agreements are held by the
custodian on the Fund's behalf. The Fund monitors the adequacy of the collateral
daily and will require the seller to provide additional collateral in the event
the market value of the securities pledged falls below the carrying value of the
repurchase agreement.
C. Foreign Currency
The books and records of the Fund are maintained in United States (U.S.)
dollars. 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 investments, income and expenses at the rate
of exchange prevailing on the respective dates of such transactions. Net
unrealized foreign exchange gain (loss) resulting from changes in foreign
currency exchange rates is a component of net unrealized appreciation
(depreciation) on investments and foreign currency transactions. Net realized
foreign currency gains and losses resulting from changes in exchange rates
include foreign currency gains and losses between trade date and settlement date
on investment securities transactions, foreign currency transactions and the
dif-
<PAGE>
PAGE 15
- --------------------------------------
ference between the amounts of interest and dividends recorded on the books of
the Fund and the amount actually received. The portion of foreign currency gains
and losses related to fluctuations in exchange rates between the initial
purchase trade date and subsequent sale trade date is included in realized gain
(loss) on foreign currency transactions
D. Security Transactions and Investment Income
Securities transactions are accounted for on the trade date. Realized gains and
losses are computed on the identified cost basis. Interest income is recorded on
the accrual basis and includes amortization of discounts. Dividend income is
recorded on the ex-dividend date.
E. Federal Income Taxes
The Fund has qualified and intends to qualify in the future as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Fund is relieved of any federal income tax liability by
distributing all of its net taxable investment income and net taxable capital
gains, if any, to its shareholders. The Fund also intends to avoid excise tax
liability by making the required distributions under the Code. Accordingly, no
provision for federal income taxes is required.
F. Distributions
The Fund distributes net investment income on or about the 15th day of April and
October each year and from its net capital gains, if any, at least annually.
Distributions to shareholders are recorded at the close of business on the
ex-dividend date.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. These differences are primarily due to the expiration of
capital loss carryovers.
G. Futures Contracts
In order to gain exposure to or protect against changes in security values, the
Fund may buy and sell futures contracts.
The initial margin deposited with a broker when entering into a futures
transaction is subsequently adjusted by daily payments or receipts as the value
of the contract changes. Such changes are recorded as unrealized gains or
losses. Realized gains or losses are recognized upon closing the contract.
Risks of entering into futures contracts include (i) the possibility of an
illiquid market for the contract, (ii) the possibility that a change in value of
the contract may not correlate with changes in the value of the underlying
instrument or index, and (iii) the credit risk that the other party will not
fulfill their obligations under the contract. Futures contracts also involve
elements of market risk in excess of the amount reflected in the statement of
assets and liabilities.
H. Forward Foreign Currency Exchange Contracts
The Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated in
a foreign currency and to hedge certain foreign currency assets or liabilities.
Forward contracts are recorded at the forward rate and are marked-to-market
daily. Realized gains and losses arising from such transactions are included in
net realized gain (loss) on foreign currency related transactions. The Fund
bears the risk of an unfavorable change in the foreign currency exchange rate
underlying the forward contract and is subject to the credit risk that the other
party will not fulfill their obligations under the contract. Forward contracts
involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
<PAGE>
PAGE 16
- --------------------------------------
Keystone Precious Metals Holdings, Inc.
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 28, 1997, the fair value of the
Fund's investment in the foreign subsidiary was determined as follows:
Cash and cash equivalents $820,130
Accrued expenses (12,838)
- --------------------------------------------------
$ 807,292
==================================================
During the year ended February 28, 1997, 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 $88,583, $18,819 and $69,764,
respectively. Management fees paid or accrued by the foreign subsidiary to
Keystone totaled $5,111 for the year ended February 28, 1997.
3. Capital Share Transactions
The Fund's Certificate of Incorporation authorizes the issuance of an unlimited
number of shares of beneficial interest with a par value of $1.00. Transactions
in shares of the Fund were as follows:
Year ended Year ended
February 28, 1997 February 29, 1996
- ---------------------------------------------------------
Shares sold 25,602,726 16,257,907
Shares redeemed (26,171,322) (16,883,225)
Shares issued in
reinvestment of
dividends and
distributions 264,364 -0-
- ---------------------------------------------------------
Net decrease (304,232) (625,318)
=========================================================
4. Securities Transactions
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities and U.S. government securities) for the year ended
February 28, 1997 were $77,971,180 and $93,244,856, respectively.
5. Distribution Plans
The Fund bears some of the costs of selling its shares under a Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act. Under the Distribution Plan,
the Fund pays its principal underwriter amounts which are calculated and paid
monthly.
On December 11, 1996, the Fund entered into a principal underwriting
agreement with Evergreen Keystone Distributor, Inc. ("EKD"), a wholly-owned
subsidiary of The BISYS Group Inc. Prior to December 11, 1996, Evergreen
Keystone Investment Services, Inc. (formerly, Keystone Investment Distributors
Company) ("EKIS"), a wholly-owned subsidiary of Keystone, served as the Fund's
principal underwriter.
Under the Distribution Plan, the Fund pays a distribution fee which may not
exceed 1.00% of the Fund's average daily net assets. Of that amount, 0.75% is
used to pay distribution expenses and 0.25% may be used to pay shareholder
service fees.
The Distribution Plan may be terminated at any time by vote of the
Independent Directors or by vote of a majority of the outstanding voting shares.
However, after the termination of the Distribution Plan, and subject to the
discretion of the Independent Directors, payments to EKIS and/or EKD may
continue as compensation for services that had been earned while the
Distribution Plan was in effect.
EKD intends, but is not obligated, to continue to pay distribution costs
that exceed the current annual
<PAGE>
PAGE 17
- --------------------------------------
payments from the Fund. EKD intends to seek full payment of such distribution
costs from the Fund at such time in the future as, and to the extent that,
payment thereof by the Fund would be within permitted limits.
Total unreimbursed distribution costs at February 28, 1997, amounted to
$12,902,884.
6. Investment Advisory and Management Agreement and Other Affiliated
Transactions
Under an Investment Advisory and Management Agreement dated December 11, 1996,
Keystone serves as the investment adviser and manager to the Fund. Keystone
provides the Fund with investment advisory and management services. In return,
Keystone is paid a management fee. 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 28, 1997, the Fund paid or accrued $25,605
to Keystone for certain accounting services. The Fund paid or accrued $805,132
to Evergreen Keystone Service Company (formerly, Keystone Investor Resource
Center, Inc.), a wholly-owned subsidiary of Keystone, for services rendered as
the Fund's transfer and dividend disbursing agent.
Officers of the Fund and affiliated Trustees receive no compensation
directly from the Fund.
7. Expense Offset Arrangement
The Fund has entered into an expense offset arrangement with its custodian. For
the year ended February 28, 1997, the Fund incurred total custody fees of
$150,132 and received a credit of $31,743 pursuant to this expense offset
arrangement, resulting in a net custody expense of $118,389. The assets
deposited with the custodian under this expense offset arrangement could have
been invested in income-producing assets.
8. Concentration of Risk
The Fund invests a substantial portion of its assets in issuers involved in gold
mining and metals and mining industries. This concentration may result in the
Fund being more affected by economic and political developments than a
comparable general equity mutual fund.
- --------------------------------------------------------------------
FEDERAL TAX STATUS--FISCAL 1997 DISTRIBUTIONS (Unaudited)
A distribution of $0.99 per share of net long-term capital gains was paid
during the fiscal year ended February 28, 1997. The distribution is taxable to
shareholders in the year in which received by them or credited to their
accounts.
In January 1998, we will send you complete information on the distributions
paid during the calendar year to help you in completing your tax return.
<PAGE>
PAGE 18
- --------------------------------------
Keystone Precious Metals Holdings, Inc.
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 28, 1997, 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 28, 1997 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 28, 1997, 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 31, 1997
<PAGE>
PAGE 19
- --------------------------------------
Additional Information--(Unaudited)
PROXY RIDER FOR KEYSTONE PRECIOUS METALS HOLDINGS, INC.
Shareholders of the Fund considered and acted upon the proposals listed below at
a special meeting of shareholders held Monday, December 9, 1996. Below are the
results of that vote:
1. To elect the following Directors:
Affirmative Withhold
============== ==========
Frederick Amling 4,930,617 165,833
Laurence B. Ashkin 4,929,336 167,114
Charles A. Austin III 4,935,125 161,325
Foster Bam 4,928,867 167,582
George S. Bissell 4,928,705 167,744
Edwin D. Campbell 4,931,717 164,733
Charles F. Chapin 4,932,852 163,598
K. Dun Gifford 4,935,124 161,325
James S. Howell 4,929,048 167,402
Leroy Keith, Jr. 4,935,451 160,999
F. Ray Keyser, Jr. 4,931,186 165,264
Gerald M. McDonell 4,933,613 162,837
Thomas L. McVerry 4,933,921 162,529
William Walt Pettit 4,933,462 162,988
David M. Richardson 4,935,260 161,190
Russell A. Salton, III MD 4,932,258 164,192
Michael S Scofield 4,933,784 162,666
Richard J. Shima 4,935,237 161,213
Andrew J. Simons 4,932,726 163,724
2. To approve an Investment Advisory and Management Agreement between the Fund
and Keystone Investment Management Company.
Affirmative 4,796,646
Against 127,735
Abstain 172,069
3. To ratify the selection of KPMG Peat Marwick LLP as the independent public
accountant of the Fund for its current fiscal year.
Affirmative 4,902,570
Against 53,866
Abstain 140,013
<PAGE>
[Back Cover]
Keystone
Family Of Funds
[diamond]
Balanced Fund (K-1)
Diversified Bond Fund (B-2)
Growth and Income Fund (S-1)
High Income Bond 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 Evergreen Keystone funds,
contact your financial adviser or call Evergreen
Keystone.
[Logo: Evergreen Keystone
(Tree logo) FUNDS (Keystone logo)]
P.O. Box 2121
Boston, Massachusetts 02106-2121
KPMH-R-4/97
22.7M [Recycle logo]
<PAGE>
[Front Cover]
KEYSTONE
PRECIOUS METALS
HOLDINGS, INC.
[Logo: Evergreen Keystone
(Tree logo) FUNDS (Keystone logo)]
ANNUAL REPORT
FEBRUARY 28, 1997
