0000950146-95-000468.txt : 19950821 0000950146-95-000468.hdr.sgml : 19950821 ACCESSION NUMBER: 0000950146-95-000468 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950818 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE LIQUID TRUST CENTRAL INDEX KEY: 0000005384 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046196129 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02521 FILM NUMBER: 95565119 BUSINESS ADDRESS: STREET 1: 200 BERLELEY ST CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6173383200 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN LIQUID TRUST DATE OF NAME CHANGE: 19830523 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN LIQUITY FUND INC DATE OF NAME CHANGE: 19751102 N-30D 1 Keystone Liquid Trust Seeks stability of principal and liquidity with current income from high quality money market instruments. Dear Shareholder: We are pleased to report to you on the activities of Keystone Liquid Trust for the twelve-month period which ended June 30, 1995. Your Fund provided the following returns: Class A shares returned 4.63% for the period which includes reinvested dividends of 4.5 cents per share. Class B shares returned 3.68% for the period which includes reinvested dividends of 3.6 cents per share. Class C shares returned 3.68% for the period which includes reinvested dividends of 3.6 cents per share. Your Fund maintained a constant net asset value of $1 per share during the period, and continued to offer a safe haven for investors by focusing on high-quality, short-term money market instruments. Short-term interest rates rose during the second half of 1994 and declined slightly in the first half of 1995, resulting in more income for shareholders. In 1994, the Federal Reserve Bank (the Fed) increased the federal funds rate from 3 to 6% in an effort to control inflation. In 1995, the Fed appeared to have achieved this objective with its last rate increase on February 5. As economic indicators continued to slow in the following months, investors began to anticipate a possible cut in short-term rates. The Fed cut rates by one quarter of 1 percent in July, fulfilling these expectations. As interest rates rose in the second half of 1994, we maintained a relatively short average maturity which was 18 days on December 31, 1994. This strategy helped your Fund to take advantage of higher current yields. Higher interest rates meant that many high quality money market instruments that Keystone Liquid Trust typically invests in paid more income. In anticipation of a decline in interest rates in 1995, we attempted to lock in high current rates by lengthening the average maturity of the portfolio. At June 30, 1995 the average maturity was 56 days. Looking ahead we expect short-term interest rates may decline further as growth slows and the Fed attempts to provide a "soft landing" for the economy. We think the economy is healthy, but is slowing to a more sustainable level. In this environment, we will attempt to preserve income if rates decline-as we expect-by maintaining a relatively long average maturity. We think that Keystone Liquid Trust can provide a valuable haven for investors. The Fund remains committed to high quality and liquid money market instruments. We believe that these securities can provide the stability and safety that investors seek, especially during times of uncertainty. We intend to continue with our conservative management approach for Keystone Liquid Trust. In all market environments, we will seek stability of principal and liquidity with current income. We appreciate your continued support of Keystone funds. If you have any questions or comments about your investment, we encourage you to write to us. Sincerely, [signature of Albert H. Elfner, III] Albert H. Elfner, III Chairman and President Keystone Investments, Inc. [signature of George S. Bissell] George S. Bissell Chairman of the Board Keystone Funds August 1995 Keystone Liquid Trust SCHEDULE OF INVESTMENTS--June 30, 1995
Maturity Principal Market Date Amount Value ------------------------------------------------------------------------------------------ BANKERS' ACCEPTANCES (9.4%) Bank of New York 07/24/95 $ 5,000,000 $ 4,982,821 First Union National Bank 07/07/95 9,000,000 8,994,120 National Bank of Detroit 07/14/95 5,000,000 4,990,940 Northern Trust Corp. 07/05/95 1,000,000 999,672 Northern Trust Corp. 07/18/95 1,300,000 1,296,783 Republic Bank, New York 08/16/95 3,000,000 2,978,006 ------------------------------------------------------------------------------------------ TOTAL BANKERS' ACCEPTANCES (COST--$24,242,776) 24,242,342 ------------------------------------------------------------------------------------------ BANK NOTES (3.9%) Fifth Third Bank, Cincinnati, Ohio, 6.08% 11/10/95 5,000,000 5,002,231 Wachovia Bank & Trust, 5.76% 09/05/95 5,000,000 4,997,388 ------------------------------------------------------------------------------------------ TOTAL BANK NOTES (COST--$9,999,408) 9,999,619 ------------------------------------------------------------------------------------------ CERTIFICATES OF DEPOSIT (17.9%) Algemene Bank Nederland NV, Yankee CD, 6.16% 07/05/95 5,000,000 5,000,023 Bayerische Landesbank, Yankee CD, 6.10% 07/12/95 8,000,000 8,000,058 Commerzbank, Yankee CD, 6.43% 08/07/95 5,000,000 5,001,937 Commerzbank, Yankee CD, 6.19% 09/26/95 5,000,000 5,001,042 First Alabama Bank, CD, 5.95% 08/08/95 10,000,000 9,999,310 Rabobank, Yankee CD, 5.81% 12/29/95 5,000,000 5,000,939 Swiss Bank, New York, Yankee CD, 6.01% 07/21/95 8,000,000 8,000,119 ------------------------------------------------------------------------------------------ TOTAL CERTIFICATES OF DEPOSIT (COST--$46,004,382) 46,003,428 ------------------------------------------------------------------------------------------ COMMERCIAL PAPER (27.2%) ABN-AMRO North America Finance Co. 10/02/95 3,000,000 2,955,258 Associates Corp. North America 07/19/95 4,000,000 3,989,333 Associates Corp. North America 08/21/95 5,000,000 4,959,711 Bell Atlantic Network Funding 07/13/95 5,000,000 4,991,736 Caisse Nationale des Telecommunications 07/17/95 5,000,000 4,988,411 Coca Cola Co. 08/03/95 5,000,000 4,973,750 Coca Cola Financial Corp. 07/17/95 4,800,000 4,788,893 Emerson Electric Co. 08/16/95 5,000,000 4,963,654 General Electric Capital Corp. 09/11/95 5,000,000 4,943,125 Hewlett Packard Co. 09/28/95 5,000,000 4,928,588 Nestle Capital Corp. 09/05/95 5,000,000 4,947,556 Procter & Gamble Co. 08/02/95 3,600,000 3,581,883 Unilever Capital Corp. (b) 10/05/95 5,000,000 4,924,931 Unilever Capital Corp. (b) 12/11/95 5,000,000 4,874,107 Wal Mart Stores Inc. 07/06/95 5,000,000 4,997,513 ------------------------------------------------------------------------------------------ TOTAL COMMERCIAL PAPER (COST--$69,819,595) 69,808,449 ------------------------------------------------------------------------------------------ See Notes to Schedule of Investments. SCHEDULE OF INVESTMENTS--June 30, 1995 Maturity Principal Market Date Amount Value ------------------------------------------------------------------------------------------- U.S. GOVERNMENT (AND AGENCY) ISSUES (34.3%) FFCB, 6.02% 08/01/95 $ 8,000,000 $ 7,999,794 FHLB Discount Notes 08/30/95 10,000,000 9,903,000 FHLB Discount Notes 09/05/95 5,000,000 4,948,622 FHLB Discount Notes 11/06/95 5,000,000 4,902,000 FHLMC Discount Notes 07/19/95 5,000,000 4,986,667 FHLMC Discount Notes 08/18/95 10,000,000 9,925,634 FNMA Discount Notes 07/24/95 10,000,000 9,965,933 FNMA Discount Notes 09/14/95 5,000,000 4,941,600 FNMA Discount Notes 10/03/95 6,000,000 5,912,447 FNMA Discount Notes 10/18/95 10,000,000 9,831,772 FNMA Discount Notes 10/20/95 5,000,000 4,914,465 FNMA Discount Notes 11/01/95 5,000,000 4,905,553 U.S. Treasury Bills 11/16/95 5,000,000 4,896,489 ------------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT (AND AGENCY) ISSUES (COST--$88,023,616) 88,033,976 ------------------------------------------------------------------------------------------- Maturity Value ------------------------------------------------------------------------------------------- REPURCHASE AGREEMENTS (5.1%) Paine Webber Inc., 6.10%, purchased 06/29/95 (Collateralized by $10,245,131 FNMA #66243, 6.17%, due 01/01/19) 07/03/95 $10,006,778 10,000,000 Sanwa-BGK Securities Co., 6.25%, purchased 06/30/95 (Collateralized by $2,982,058 FHLMC #G10134, 7.50%, due 10/01/08) 07/03/95 2,981,552 2,980,000 ------------------------------------------------------------------------------------------- TOTAL REPURCHASE AGREEMENTS (COST--$12,980,000) 12,980,000 ------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (COST--$251,069,777) (A) 251,067,814 ------------------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES--NET (2.2%) 5,633,501 ------------------------------------------------------------------------------------------- NET ASSETS--(100.0%) $256,701,315 -------------------------------------------------------------------------------------------
See Notes to Schedule of Investments. (continued on next page) Keystone Liquid Trust NOTES TO SCHEDULE OF INVESTMENTS: (a) The cost of investments for federal income tax purposes is identical. Gross unrealized appreciation and depreciation of investments, based on identified tax cost, at June 30, 1995, are as follows:
Gross unrealized appreciation $ 16,513 Gross unrealized depreciation (18,476) ---------- Net unrealized appreciation (depreciation) ($ 1,963) ==========
(b) Securities that may be resold to "qualified institutional buyers" under Rule 144A or securities offered pursuant to Section 4(2) of the Federal Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. Legend of Portfolio Abbreviations FFCB--Federal Farm Credit Bank FHLB--Federal Home Loan Bank FHLMC--Federal Home Loan Mortgage Corporation FNMA--Federal National Mortgage Association See Notes to Financial Statements. FINANCIAL HIGHLIGHTS--CLASS A SHARES (For a share outstanding throughout the year)
Year Ended June 30, ------------------------------------------------------------------- 1995 1994 1993 1992 1991 ----------------------------------------------------------------------------------------------------------- Net asset value beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ----------------------------------------------------------------------------------------------------------- Income from investment operations Net investment income .0454 .0235 .0230 .0386 .0634 Net realized gain (loss) on investments 0 0 (.0001) .0003 0 ----------------------------------------------------------------------------------------------------------- Total from investment operations .0454 .0235 .0229 .0389 .0634 ----------------------------------------------------------------------------------------------------------- Less distributions Dividends from above sources (.0454) (.0235) (.0229) (.0389) (.0634) ----------------------------------------------------------------------------------------------------------- Net asset value end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ----------------------------------------------------------------------------------------------------------- Total return 4.63% 2.37% 2.31% 3.96% 6.47% Ratios/supplemental data Ratios to average net assets: Net investment income 4.42% 2.50% 2.29% 3.99% 6.51% Total expenses 0.92% 1.02% 1.11% 1.10% 0.92% Net assets, end of year (thousands) $245,308 $398,617 $189,167 $227,115 $400,597 -----------------------------------------------------------------------------------------------------------
Year Ended June 30, ------------------------------------------------------------------- 1990 1989 1988 1987 1986 ----------------------------------------------------------------------------------------------------------- Net asset value beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ----------------------------------------------------------------------------------------------------------- Income from investment operations Net investment income .0760 .0786 .0597 .0524 .0667 Net realized gain (loss) on investments 0 .0001 (.0001) 0 (.0002) ----------------------------------------------------------------------------------------------------------- Total from investment operations .0760 .0787 .0596 .0524 .0665 ----------------------------------------------------------------------------------------------------------- Less distributions Dividends from above sources (.0760) (.0787) (.0596) (.0524) (.0665) ----------------------------------------------------------------------------------------------------------- Net asset value end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ----------------------------------------------------------------------------------------------------------- Total return 7.81% 8.18% 6.31% 5.35% 6.85% Ratios/supplemental data Ratios to average net assets: Net investment income 7.53% 7.88% 5.99% 5.30% 6.67% Total expenses 1.00% 1.00% 1.00% 1.00% 1.00% Net assets, end of year (thousands) $406,306 $475,640 $461,032 $375,542 $326,149 -----------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. Keystone Liquid Trust FINANCIAL HIGHLIGHTS--CLASS B SHARES (For a share outstanding throughout the period)
February 1, 1993 Year Ended June 30, (Date of Initial ------------------------ Public Offering) to 1995 1994 June 30, 1993 -------------------------------------------------------------------------------------------- Net asset value beginning of period $ 1.00 $ 1.00 $ 1.00 -------------------------------------------------------------------------------------------- Income from investment operations Net investment income .0362 .0142 .0047 Net realized gain (loss) on investments 0 0 (.0001) -------------------------------------------------------------------------------------------- Total from investment operations .0362 .0142 .0046 -------------------------------------------------------------------------------------------- Less distributions Dividends from above sources (.0362) (.0142) (.0046) -------------------------------------------------------------------------------------------- Net asset value end of period $ 1.00 $ 1.00 $ 1.00 ============================================================================================ Total return (b) 3.68% 1.43% 0.46% Ratios/supplemental data Ratios to average net assets: Net investment income 3.66% 1.84% 1.08% (a) Total expenses 1.84% 1.85% 2.15% (a) Net assets, end of period (thousands) $7,281 $11,198 $ 241 --------------------------------------------------------------------------------------------
(a) Annualized. (b) Excluding applicable sales charges. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS--CLASS C SHARES (For a share outstanding throughout the period)
February 1, 1993 Year Ended June 30, (Date of Initial ------------------------ Public Offering) to 1995 1994 June 30, 1993 -------------------------------------------------------------------------------------------- Net asset value beginning of period $ 1.00 $ 1.00 $ 1.00 -------------------------------------------------------------------------------------------- Income from investment operations Net investment income .0362 .0142 .0045 Net realized gain (loss) on investments 0 0 (.0002) -------------------------------------------------------------------------------------------- Total from investment operations .0362 .0142 .0043 -------------------------------------------------------------------------------------------- Less distributions Dividends from above sources (.0362) (.0142) (.0043) -------------------------------------------------------------------------------------------- Net asset value end of period $ 1.00 $ 1.00 $ 1.00 -------------------------------------------------------------------------------------------- Total return 3.68% 1.43% 0.43% Ratios/supplemental data Ratios to average net assets: Net investment income 3.52% 1.97% 1.01% (a) Total expenses 1.82% 1.86% 2.09% (a) Net assets, end of period (thousands) $4,112 $6,599 $ 34 =============================================================================================
(a) Annualized. See Notes to Financial Statements. Keystone Liquid Trust STATEMENT OF ASSETS AND LIABILITIES June 30, 1995
=================================================================== Assets: Investments at market value (identified cost--$251,069,777) (Note 1) $251,067,814 Cash 497 Receivable for: Fund shares sold 6,306,713 Interest 699,359 Prepaid expenses and other assets 61,061 ------------------------------------------------------------------- Total assets 258,135,444 ------------------------------------------------------------------- Liabilities (Note 3): Payable for: Fund shares redeemed 399,458 Distributions to shareholders 971,569 Due to related parties 16,661 Other accrued expenses 46,441 ------------------------------------------------------------------- Total liabilities 1,434,129 ------------------------------------------------------------------- Net assets $256,701,315 ------------------------------------------------------------------- Net assets represented by paid-in capital (Note 2): Class A Shares ($1.00 a share on 245,308,083 shares outstanding) $245,308,083 Class B Shares ($1.00 a share on 7,281,559 shares outstanding) 7,281,559 Class C Shares ($1.00 a share on 4,111,673 shares outstanding) 4,111,673 ------------------------------------------------------------------- $256,701,315 ------------------------------------------------------------------- Net asset value and offering price per share (Classes A, B, and C) $1.00 -------------------------------------------------------------------
STATEMENT OF OPERATIONS Year Ended June 30, 1995
=============================================================== Investment income (Note 1): Interest $20,575,720 --------------------------------------------------------------- Expenses (Notes 2 and 3): Management fees $1,923,870 Transfer agent fees 866,507 Accounting, auditing and legal fees 60,878 Custodian fees 89,690 Trustees' fees and expenses 21,456 Printing expenses 18,383 Registration fees 188,229 Distribution Plan expenses 533,618 Insurance expenses 12,814 Miscellaneous 5,926 --------------------------------------------------------------- Total expenses 3,721,371 --------------------------------------------------------------- Net investment income 16,854,349 --------------------------------------------------------------- Net realized and unrealized gain (loss) on investments: Net realized gain (loss) on investments (71) Net change in unrealized appreciation (depreciation) on investments (685) --------------------------------------------------------------- Net gain (loss) on investments (756) --------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $16,853,593 ===============================================================
See Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS
Year Ended June 30, ------------------------------ 1995 1994 ================================================================================================================= Operations: Net investment income $ 16,854,349 $ 6,954,755 Net realized gain (loss) on investments (71) (189) Net change in unrealized appreciation (depreciation) on investments (685) 6,970 ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 16,853,593 6,961,536 ----------------------------------------------------------------------------------------------------------------- Distributions to shareholders (Note 1): Class A Shares (16,168,849) (6,849,293) Class B Shares (435,508) (62,830) Class C Shares (249,236) (49,413) ----------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (16,853,593) (6,961,536) ----------------------------------------------------------------------------------------------------------------- Capital share transactions (Note 2): Proceeds from shares sold: Class A Shares 725,781,933 905,957,790 Class B Shares 30,267,166 23,326,893 Class C Shares 11,924,336 14,136,918 Payment for shares redeemed: Class A Shares (892,973,139) (701,655,443) Class B Shares (34,518,836) (12,406,378) Class C Shares (14,624,256) (7,601,012) Net asset value of shares issued in reinvestment of distributions from net investment income: Class A Shares 13,882,242 5,148,145 Class B Shares 335,641 36,291 Class C Shares 212,269 29,614 ---------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from capital share transactions (159,712,644) 226,972,818 ---------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (159,712,644) 226,972,818 ---------------------------------------------------------------------------------------------------------------- Net assets: Beginning of year 416,413,959 189,441,141 ---------------------------------------------------------------------------------------------------------------- End of year $ 256,701,315 $ 416,413,959 ================================================================================================================
See Notes to Financial Statements. Keystone Liquid Trust NOTES TO FINANCIAL STATEMENTS (1.) Summary of Accounting Policies Keystone Liquid Trust (the "Fund") is a no-load, open-end diversified investment company for which Keystone Management, Inc. ("KMI") is the Investment Manager and Keystone Investment Management Company (formerly Keystone Custodian Funds, Inc.) ("Keystone") is the Investment Adviser. The Fund is registered under the Investment Company Act of 1940. The Fund currently offers three classes of shares. Class A shares are offered without an initial sales charge. Class B shares are offered without an initial sales charge, although a contingent deferred sales charge may be imposed at the time of redemption which decreases depending on when the shares were purchased and how long the shares have been held. Class C shares are offered without an initial sales charge, although a contingent deferred sales charge may be imposed on redemptions within one year of purchase. Class C shares are available only through dealers who have entered into special distribution agreements with Keystone Investment Distributors Company (formerly Keystone Distributors, Inc.) ("KIDC"), the Fund's underwriter. Keystone is a wholly-owned subsidiary of Keystone Investments, Inc. (formerly Keystone Group, Inc.) ("KII"), a Delaware corporation. KII is privately owned by an investor group consisting of members of current and former management of Keystone. 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. Valuation of Securities--Money market investments maturing in sixty days or less are valued at amortized cost (original purchase cost as adjusted for amortization of premium or accretion of discount) which when combined with accrued interest approximates market. Money market investments maturing in more than sixty days for which market quotations are readily available are valued at current market value. Money market investments maturing in more than sixty days when purchased which are held on the sixtieth day prior to maturity are valued at amortized cost (market value on the sixtieth day adjusted for amortization of premium or accretion of discount) which when combined with accrued interest approximates market. Repurchase Agreements--When the Fund enters into a repurchase agreement (a purchase of securities whereby the seller agrees to repurchase the securities at a mutually agreed upon date and price) the repurchase price of the securities will generally equal the amount paid by the Fund plus a negotiated interest amount. The seller under the repurchase agreement will be required to provide securities ("collateral") to the Fund whose value will be maintained at an amount not less than the repurchase price. The Fund monitors the value of collateral on a daily basis, and if the value of 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 agreements that are collateralized by U.S. Treasury and/or Federal Agency obligations. Federal Income Taxes--The Fund has qualified, and intends to qualify in the future, as a regulated investment company under the Internal Revenue Code of 1986, as amended ("Internal Revenue Code"). Thus, the Fund expects to be relieved of any federal income tax liability by distributing all of its net tax basis investment income and net tax basis capital gains, if any, to its shareholders. The Fund intends to avoid excise tax liability by making the required distributions under the Internal Revenue Code. Distributions--The Fund declares dividends daily, pays dividends monthly and automatically reinvests such dividends in additional shares at net asset value, unless shareholders request payment in cash. Dividends are declared from the total of net investment income, plus realized and unrealized gain (loss) on investments. Other--Securities transactions are accounted for on the trade date. Interest income is accrued as earned. Realized gains and losses from securities transactions are computed on the identified cost basis. (2.) Shares of Beneficial Interest The Declaration of Trust 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:
Class A Shares ------------------------------ Year Ended June 30, 1995 1994 ----------------------------------------------------------- Shares sold 725,781,933 905,957,790 Shares redeemed (892,973,139) (701,655,443) Shares issued in reinvestment of distributions from available sources 13,882,242 5,148,145 ---------- ------------ Net increase (decrease) (153,308,964) 209,450,492 ========== ============
Class B Shares ---------------------------- Year Ended June 30, 1995 1994 --------------------------------------------------------- Shares sold 30,267,166 23,326,893 Shares redeemed (34,518,836) (12,406,378) Shares issued in reinvestment of distributions from available sources 335,641 36,291 --------- ----------- Net increase (decrease) (3,916,029) 10,956,806 ========= ===========
Class C Shares --------------------------- Year Ended June 30, 1995 1994 -------------------------------------------------------- Shares sold 11,924,336 14,136,918 Shares redeemed (14,624,256) (7,601,012) Shares issued in reinvestment of distributions from available sources 212,269 29,614 --------- ---------- Net increase (decrease) (2,487,651) 6,565,520 ========= ==========
Keystone Liquid Trust The Fund bears some of the costs of selling its shares under a Distribution Plan adopted with respect to its Class A, Class B and Class C shares pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("1940 Act"). The Class A Distribution Plan provides for payments which are currently limited to 0.25% annually of the average daily net asset value of Class A shares, to pay expenses of the distribution of Class A shares. Amounts paid by the Fund to KIDC under the Class A Distribution Plan are currently used to pay others, such as dealers, service fees at an annual rate of up to 0.25% of the average daily net asset value of Class A shares maintained by the recipient and outstanding on the Fund's books for specified periods. The Class B Distribution Plan provides for payments at an annual rate of up to 1.00% of the average daily net asset value of Class B shares to pay expenses of the distribution of Class B shares. Amounts paid by the Fund under the Class B Distribution Plan are currently used to pay others (dealers) a commission at the time of purchase normally equal to 4.00% of the price paid for each Class B share sold plus the first year's service fee in advance in the amount of 0.25% of the price paid for each Class B share sold. Beginning approximately 12 months after the purchase of a Class B share, the broker or other party will receive service fees at an annual rate of 0.25% of the average daily net asset value of such Class B shares maintained by the recipient and outstanding on the Fund's books for specified periods. A contingent deferred sales charge will be imposed, if applicable, on Class B shares purchased after June 1, 1995 at rates ranging from a maximum of 5% of amounts redeemed during the first 12 months following the date of purchase to 1% of amounts redeemed during the sixth twelve month period following the date of purchase. Class B shares purchased on or after June 1, 1995 that have been outstanding for eight years from the month of purchase will automatically convert to Class A shares without a front end sales charge or exchange fee. Class B shares purchased prior to June 1, 1995 will retain their existing conversion rights. The Class C Distribution Plan provides for payments at an annual rate of up to 1.00% of the average daily net asset value of Class C shares to pay expenses for the distribution of Class C shares. Amounts paid by the Fund under the Class C Distribution Plan are currently used to pay others (dealers) a commission at the time of purchase in the amount of 0.75% of the price paid for each Class C share sold, plus the first year's service fee in advance in the amount of 0.25% of the price paid for each Class C share, and, beginning approximately 15 months after purchase, a commission at an annual rate of 0.75% (subject to applicable limitations imposed by the rules of the National Association of Securities Dealers, Inc.) ("NASD Rule") plus service fees at the annual rate of 0.25%, respectively, of the average net asset value of each Class C share maintained by the recipient and outstanding on the Fund's books for specified periods. Each of the Distribution Plans may be terminated at any time by vote of the Independent Trustees or by vote of a majority of the outstanding voting shares of the respective class. However, after the termination of any Distribution Plan, at the discretion of the Board of Trustees, payments to KIDC may continue as compensation for its services which had been earned while the Distribution Plan was in effect. For the year ended June 30, 1995, the Fund paid or accrued Distribution Plan fees of $343,747, $119,037 and $70,834 for Class A, Class B and Class C, respectively. These fees, which are charged to the operating expenses of the Fund, represent 0.09%, 1.00% and 1.00%, respectively, of the average net assets of each Class. Under the NASD Rule, the maximum uncollected amounts for which KIDC may seek payment from the Fund under its Distribution Plans are $746,584 and $825,276 for Class B and C, respectively, as of June 30, 1995. (3.) Investment Management and Other Transactions with Affiliates Under the terms of the Investment Management Agreement between KMI and the Fund KMI provides investment management and administrative services to the Fund. In return, KMI is paid a management fee computed daily and payable monthly calculated by applying percentage rates, starting at 0.50%, and declining as net assets increase, to 0.40% per annum, to the net asset value of the Fund. KMI has entered into an Investment Advisory Agreement with Keystone under which Keystone provides investment advisory and management services to the Fund and receives for its services an annual fee representing 85% of the management fee received by KMI. During the year ended June 30, 1995, the Fund paid or accrued to KMI investment management and administration services fees of $1,923,870, which represented 0.50% of the Fund's average net assets. Of such amount paid to KMI, $1,635,290 was paid to Keystone for its services to the Fund. During the year ended June 30, 1995, the Fund paid or accrued $24,777 to KII as reimbursement for certain accounting and printing services provided to the Fund, and $866,507 was paid or accrued to KIRC for transfer agent fees. (4.) Class Level Expenses Presently, the Fund's class-specific expenses are limited to expenses incurred by a class of shares pursuant to its respective Distribution Plan. For the year ended June 30, 1995, the total amount of expenses incurred by the Distribution Plan of each respective class is set forth in Note (2.) "Shares of Beneficial Interest." Keystone Liquid Trust INDEPENDENT AUDITORS' REPORT The Trustees and Shareholders Keystone Liquid Trust We have audited the accompanying statement of assets and liabilities of Keystone Liquid Trust, including the schedule of investments, as of June 30, 1995, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the ten-year period then ended for Class A shares, and for each of the years in the two-year period then ended and the period from February 1, 1993 (date of initial public offering) to June 30, 1993 for Class B and Class C shares. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1995, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Keystone Liquid Trust as of June 30, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods specified in the first paragraph above in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Boston, Massachusetts July 28, 1995 FEDERAL TAX STATUS--FISCAL 1995 DISTRIBUTIONS (Unaudited) During the fiscal year ended June 30, 1995, dividends of $0.0454, $0.0362, and $0.0362 per share were paid or are payable to shareholders of Keystone Liquid Trust Class A, B, and C, respectively. All dividends are taxable to shareholders as ordinary income in the year in which received by them or credited to their accounts and are not eligible for the corporate dividend received deduction. In January 1996 we will send you information on the distributions paid during the calendar year to help you in completing your federal tax return. [cover] KEYSTONE FAMILY OF FUNDS * Balanced Fund (K-1) Diversified Bond Fund (B-2) Growth and Income Fund (S-1) High Income Bond Fund (B-4) International Fund Liquid Trust Mid-Cap Growth Fund (S-3) Precious Metals Holdings Quality Bond Fund (B-1) Small Company Growth Fund (S-4) Strategic Growth Fund (K-2) Tax Exempt Trust Tax Free Fund This report was prepared primarily for the information of the Fund's shareholders. Its use for other purposes is authorized only when it is preceded or accompanied by the prospectus, describing all fees, charges and other important facts about the Fund. [keystone logo] KEYSTONE INVESTMENTS P.O. Box 2121 Boston, Massachusetts 02106-2121 KLT-AR-8/95 [recycle logo] 16M KEYSTONE [picture of boy riding bike with man helping him] LIQUID TRUST [keystone logo] ANNUAL REPORT JUNE 30, 1995