SUPPLEMENT TO THE PROSPECTUSES AND
STATEMENTS OF ADDITIONAL INFORMATION OF
KEYSTONE INSTITUTIONAL ADJUSTABLE RATE FUND, KEYSTONE INSTITUTIONAL TRUST
AND MASTER RESERVES TRUST
(EACH A "FUND"; COLLECTIVELY, THE "FUNDS")
First Union Corporation has entered into an Agreement and Plan of
Acquisition and Merger with Keystone Investments, Inc. ("Keystone"), pursuant to
which Keystone will be merged with and into a subsidiary of First Union National
Bank of North Carolina (the "Merger"). The surviving corporation will be known
as Keystone Investments, Inc. Keystone Investment Management Company (the
"Adviser"), a wholly-owned subsidiary of Keystone Investments, Inc., is
investment adviser to each of the Funds.
The proposed transaction may be deemed to cause an assignment, within the
meaning of the Investment Company Act of 1940 (the "1940 Act"), of the following
agreements: (i) with respect to Master Reserves Trust, the Investment Advisory
Agreement between the Adviser and the Fund and the Investment Advisory Agreement
between the Adviser and Robert Van Partners, Inc.; and (ii) with respect to each
of the other Funds, the Investment Advisory and Management Agreement between the
Adviser and the Funds. Accordingly, the completion of the transaction is
contingent upon, among other things, the approval of the Funds' shareholders of
(i) a new investment advisory agreement between the Funds and the Adviser, and
(ii) a new subadvisory agreement between the Adviser and Robert Van Partners,
Inc. with respect to Master Reserves Trust. The Funds' Trustees have approved
the terms of such agreements, subject to the approval of shareholders and the
completion of the Merger, and have called a special meeting of shareholders to
obtain their approval of such agreements. The meeting is expected to be held in
December 1996. The proposed new investment advisory agreements and the proposed
new subadivsory agreement have terms, including investment advisory fees payable
thereunder, that are substantially identical to those in the current agreements.
The proposed transaction may also be deemed to cause an assignment, as
defined by the 1940 Act, of the Principal Underwriting Agreements between the
Funds and Fidiciary Investment Company, Inc., a wholly-owned subsidiary of the
Adviser. As a result, the Funds' Trustees have approved the following
agreements, subject to the completion of the Merger: (i) a principal
underwriting agreement with Evergreen Funds Distributor, Inc. ("EFD") and each
of the Funds; (ii) a marketing support agreement between Keystone Investments
Distributors, Inc. ("KID"), a wholly-owned subsidiary of the Adviser, and EFD
with respect to each Fund; and (iii) a subadministration agreement between the
Adviser and EFD with respect to each Fund. EFD is a wholly-owned subsidiary of
Furman Selz LLC. It is expected that on or about January 2, 1997, Furman Selz
LLC will transfer EFD, and its related services, to BISYS Group, Inc. ("BISYS")
(the "Transfer"). The Funds' Trustees have also approved, subject to completion
of the Transfer: (i) a principal underwriting agreement with EFD and each of the
Funds; (ii) a marketing support agreement between KID and EFD with respect to
each Fund; and (iii) a subadministration agreement between the Adviser and BISYS
with respect to each Fund. The terms of such agreements are substantially
identical to the terms of the agreements to be executed upon completion of the
Merger.
First Union National Bank of North Carolina is a wholly-owned
subsidiary of First Union Corporation. Subject to a number of conditions being
met, it is currently anticipated that the Merger will take place on or around
December 23, 1996. Thereafter, Keystone Investments, Inc. is expected to be a
subsidiary of First Union National Bank of North Carolina.
September 13, 1996
