-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oOIOoILCqRZc2gUxpBl/48icN1elO8jwpisbrW9aiZTIRzx3TJP3OO/tMUjDLjIh lz5q7vXqu88E2IZMDBtTlQ== 0000950156-95-000662.txt : 19950905 0000950156-95-000662.hdr.sgml : 19950905 ACCESSION NUMBER: 0000950156-95-000662 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19950831 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: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-51914 FILM NUMBER: 95569623 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02521 FILM NUMBER: 95569624 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 485APOS 1 KEYSTONE LIQUID TRUST AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 31, 1995 File Nos. 2-51914 and 811-2521 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. Post-Effective Amendment No. 50 and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 28 KEYSTONE LIQUID TRUST (Exact name of Registrant as specified in Charter) 200 Berkeley Street, Boston, Massachusetts 02116-5034 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (617) 338-3200 Rosemary D. Van Antwerp, Esq., 200 Berkeley Street, Boston, MA 02116-5034 (Name and Address of Agent for Service) It is proposed that this filing will become effective ___ immediately upon filing pursuant to paragraph (b) of Rule 485 ___ on (date) pursuant to paragraph (b) of Rule 485 _X_ 60 days after filing pursuant to paragraph (a)(i) of Rule 485 ___ on (date) pursuant to paragraph (a)(i) of Rule 485 ___ 75 days after filing pursuant to paragraph (a)(ii) of Rule 485 ___ on (date) pursuant to paragraph (a)(ii) of Rule 485 Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has registered an indefinite amount of its securities under the Securities Act of 1933. The Rule 24f-2 Notice for the issuer's fiscal year ended June 30, 1995 was filed on August, 18, 1995. KEYSTONE LIQUID TRUST CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 50 to REGISTRATION STATEMENT This Post-Effective Amendment No. 50 to Registration Statement No. 2-51914/811-2521 consists of the following pages, items of information and documents. The Facing Sheet The Contents Page The Cross-Reference Sheet PART A Prospectus PART B Statement of Additional Information PART C PART C - OTHER INFORMATION - ITEM 24(a) and 24(b) Financial Statements Independent Auditors' Report Listing of Exhibits PART C - OTHER INFORMATION - ITEMS 25-32 - AND SIGNATURE PAGES Number of Holders of Securities Indemnification Business and Other Connections Principal Underwriter Location of Accounts and Records Signatures Exhibits (including Powers of Attorney) KEYSTONE LIQUID TRUST Cross-Reference Sheet pursuant to Rules 404 and 495 under the Securities Act of 1933. Items in Part A of Form N-1A Prospectus Caption --------- ------------------- 1 Cover Page 2 Fee Table 3 Performance Data Financial Highlights 4 Cover Page Fund Description Fund Investment Objective and Policies Investment Restrictions Risk Factors 5 Fund Management and Expenses Additional Information 5a Not Applicable 6 Fund Description Dividends and Taxes Fund Shares Shareholder Services Pricing Shares 7 How to Buy Shares Alternative Sales Options Distribution Plans Shareholder Services 8 How to Redeem Shares Contingent Deferred Sales Charge and Waiver of Sales Charge 9 Not applicable Items in Part B of Form N-1A Statement of Additional Information Caption --------- ------------------------------------------- 10 Cover Page 11 Table of Contents 12 Not applicable 13 The Fund's Objectives and Policies Investment Restrictions Brokerage Appendix 14 Declaration of Trust Trustees and Officers 15 Additional Information 16 Sales Charges Distribution Plans Investment Manager Investment Adviser Principal Underwriter Additional Information 17 Brokerage 18 The Fund's Objectives and Policies Declaration of Trust 19 Valuation and Redemption of Securities Distribution Plans 20 Distributions and Taxes 21 Principal Underwriter 22 Yield Quotations 23 Financial Statements KEYSTONE LIQUID TRUST PART A PROSPECTUS - ------------------------------------------------------------------------------ PROSPECTUS OCTOBER 30, 1995 - ------------------------------------------------------------------------------ KEYSTONE LIQUID TRUST 200 BERKELEY STREET, BOSTON, MASSACHUSETTS 02116-5034 CALL TOLL FREE 1-800-343-2898 - ------------------------------------------------------------------------------ Keystone Liquid Trust (the "Fund") is a money market mutual fund that seeks high current income from short-term securities while preserving capital and maintaining liquidity. Generally, the Fund offers three classes of shares. Information on share classes and their fee and sales charge structures may be found in the Fund's fee table, "How to Buy Shares," "Alternative Sales Options," "Contingent Deferred Sales and Waiver of Sales Charge," "Distribution Plans," and "Fund Shares." This prospectus sets forth concisely the information about the Fund that you should know before investing. Please read it and retain it for future reference. Additional information about the Fund is contained in a statement of additional information dated October 30, 1995, which has been filed with the Securities and Exchange Commission and is incorporated by reference into this prospectus. For a free copy, or for other information about the Fund, write to the address or call the toll free telephone number listed above. WHILE THE FUND INTENDS TO MAINTAIN A NET ASSET VALUE PER SHARE OF $1.00, THERE IS NO ASSURANCE THAT IT WILL BE ABLE TO DO SO. SHARES OF THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
- -------------------------------------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------------------------------------- Page Page Fee Table ......................................... 2 Contingent Deferred Sales Charge and Financial Highlights .............................. 3 Waiver of Sales Charge ....................... 14 Fund Description .................................. 6 Distribution Plans ............................ 15 Fund Objective and Policies ....................... 6 How to Redeem Shares .......................... 16 Investment Restrictions ........................... 7 Monthly Distribution Plans .................... 18 Pricing Shares .................................... 8 Shareholder Services .......................... 19 Dividends and Taxes ............................... 9 Performance Data .............................. 20 Fund Management and Expenses ...................... 9 Fund Shares ................................... 20 How to Buy Shares ................................. 11 Additional Information ........................ 21 Alternative Sales Options ......................... 12 Additional Investment Information.............. (i) - --------------------------------------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ------------------------------------------------------------------------------ FEE TABLE KEYSTONE LIQUID TRUST The purpose of this fee table is to assist investors in understanding the costs and expenses that an investor in each class will bear directly or indirectly. For more complete descriptions of the various cost and expenses, see the following sections of this prospectus: "Fund Management and Expenses"; "How to Buy Shares"; "Alternative Sales Options"; "Contingent Deferred Sale Charge and Waiver of Sales Charges"; "Distribution Plans"; and "Shareholder Services."
CLASS A SHARES CLASS B SHARES CLASS C SHARES NO LOAD BACK END LEVEL LOAD SHAREHOLDER TRANSACTION EXPENSES OPTION LOAD OPTION OPTION -------------- --------------- -------------- Sales Charge ...................................... None None None (as a percentage of offering price) Contingent Deferred Sales Charge .................. 0.00% 5.00% in the first year 1.00% in the first (as a percentage of the lesser of cost or declining to 1.00% in year and 0.00% market value of shares redeemed) the sixth year and 0.00% thereafter thereafter Exchange Fee (per exchange).................... $10.00 $10.00 $10.00 ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets) Management Fees ................................... 0.50% 0.50% 0.50% 12b-1 Fees ........................................ 0.09% 1.00% 1.00% Other Expenses .................................... 0.33% 0.34% 0.32% ---- ---- ---- Total Fund Operating Expenses ..................... 0.92% 1.84% 1.82% ==== ==== ==== EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each period: Class A ................................................................... $ 9.00 $29.00 $ 51.00 $113.00 Class B ................................................................... $69.00 $88.00 $120.00 n/a Class C ................................................................... $28.00 $57.00 $ 99.00 $214.00 You would pay the following expenses on a $1,000 investment, assuming no redemption at the end of each period: Class A ................................................................... $ 9.00 $29.00 $ 51.00 $113.00 Class B ................................................................... $19.00 $58.00 $100.00 n/a Class C ................................................................... $18.00 $57.00 $ 99.00 $214.00 AMOUNTS SHOWN IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. - ---------- Class B shares purchased on or after June 1, 1995 convert tax free to Class A shares after eight years. See "Class B Shares" for more information. Class C shares are available only through dealers who have entered into special distribution agreements with Keystone Investment Distributors Company, the Fund's principal underwriter. There is no exchange fee for exchange orders received by the Fund from individual investors over the Keystone Automated Response Line ("KARL"). (For a description of KARL, see "Shareholder Services.") Expense ratios are for the Fund's fiscal year ended June 30, 1995. Long term shareholders may pay more than the economic equivalent of the maximum front end sales charges otherwise permitted by the National Association of Securities Dealers, Inc. ("NASD"). The Securities and Exchange Commission requires use of a 5% annual return figure for purposes of this example. Actual return for the Fund may be greater or less than 5%.
FINANCIAL HIGHLIGHTS KEYSTONE LIQUID TRUST CLASS A SHARES (For a share outstanding throughout the year) The following table contains important financial information with respect to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's independent auditors. The table has been taken from the Fund's Annual Report and should be read in conjunction with the Fund's financial statements and related notes, which also appear, together with the independent auditors' report, in the Fund's Annual Report. The Fund's financial statements, related notes, and independent auditors' report are included in the statement of additional information.
YEAR ENDED JUNE 30, -------------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- NET ASSET VALUE, BEGINNING OF YEAR ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Income from investment operations Net investment income.................... .0454 .0235 .0230 .0386 .0634 .0760 .0786 .0597 .0524 .0667 Net realized gain (loss) on investments.. -0- -0- (.0001) .0003 -0- -0- .0001 (.0001) -0- (.0002) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total from investment operations ....... .0454 .0235 .0229 .0389 .0634 .0760 .0787 .0596 .0524 .0665 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from above sources ........... (.0454) (.0235) (.0229) (.0389) (.0634) (.0760) (.0787) (.0596) (.0524) (.0665) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF YEAR ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= TOTAL RETURN ........................... 4.63% 2.37% 2.31% 3.96% 6.47% 7.81% 8.18% 6.31% 5.35% 6.85% RATIOS/SUPPLEMENTAL DATA Ratios to average net assets: Net investment income ................ 4.42% 2.50% 2.29% 3.99% 6.51% 7.53% 7.88% 5.99% 5.30% 6.67% Total expenses ....................... 0.92% 1.02% 1.11% 1.10% 0.92% 1.00% 1.00% 1.00% 1.00% 1.00% Net assets, end of year (thousands) .... $245,308 $398,617 $189,167 $227,115 $400,597 $406,306 $475,640 $461,032 $375,542 $326,149
FINANCIAL HIGHLIGHTS KEYSTONE LIQUID TRUST CLASS B SHARES (For a share outstanding throughout the period) The following table contains important financial information with respect to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's independent auditors. The table has been taken from the Fund's Annual Report and should be read in conjunction with the Fund's financial statements and related notes, which also appear, together with the independent auditors' report, in the Fund's Annual Report. The Fund's financial statements, related notes, and independent auditors' report are included in the statement of additional information. FEBRUARY 1, 1993 YEAR ENDED JUNE 30, (DATE OF INITIAL ------------------- PUBLIC OFFERING) 1995 1994 TO 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. FINANCIAL HIGHLIGHTS KEYSTONE LIQUID TRUST CLASS C SHARES (For a share outstanding throughout the period) The following table contains important financial information with respect to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's independent auditors. The table has been taken from the Fund's Annual Report and should be read in conjunction with the Fund's financial statements and related notes, which also appear, together with the independent auditors' report, in the Fund's Annual Report. The Fund's financial statements, related notes, and independent auditors' report are included in the statement of additional information. FEBRUARY 1, 1993 YEAR ENDED JUNE 30, (DATE OF INITIAL ------------------- PUBLIC OFFERING) 1995 1994 TO 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. - ------------------------------------------------------------------------------ FUND DESCRIPTION - ------------------------------------------------------------------------------ The Fund (formerly American Liquid Trust) is an open-end, diversified management investment company, commonly known as a mutual fund. The Fund has been operating continuously since May 22, 1975, when it was created under Massachusetts law as a Massachusetts business trust. The Fund is one of twenty funds managed by Keystone Management, Inc. ("Keystone Management"), the Fund's investment manager, and is one of thirty funds managed or advised by Keystone Investment Management Company (formerly named Keystone Custodian Funds, Inc.) ("Keystone"), the Fund's investment adviser. Keystone and Keystone Management are, from time to time, also collectively referred to as "Keystone." - ------------------------------------------------------------------------------ FUND OBJECTIVE AND POLICIES - ------------------------------------------------------------------------------ The Fund's investment objective is to provide shareholders with high current income from short-term money market instruments while emphasizing preservation of capital and maintaining excellent liquidity. The Fund pursues this objective by investing in money market instruments maturing in 397 days or less. Such instruments include (1) commercial paper, including master demand notes; (2) obligations issued or guaranteed by the United States ("U.S.") government or by any U.S. agency or instrumentality; (3) obligations, including certificates of deposit and bankers' acceptances of banks or savings and loan associations having at least $1 billion in assets as of the date of their most recently published financial statements that are members of the Federal Deposit Insurance Corporation, including U.S. branches of foreign banks and foreign branches of U.S. banks; and (4) corporate obligations that at the date of investment are rated AA or better by Standard & Poor's Corporation ("S&P") or AA or better by Moody's Investor's Service, Inc. ("Moody's"). The Fund may invest up to 100% of its assets in U.S. government securities, obligations of domestic branches of U.S. banks and repurchase agreements of such banks. The Fund will limit its investments, including repurchase agreements, to those U.S. dollar-denominated instruments that Keystone determines present minimal credit risk and are at the time of acquisition eligible securities ("Eligible Securities") as defined under Rule 2a-7 of the Investment Company Act of 1940 ("1940 Act"). Eligible Securities include (1) securities rated by the requisite rating agencies at the date of investment in one of the two highest short-term rating categories; (2) securities of issuers receiving such rating with respect to other short-term debt securities; and (3) comparable unrated securities. Requisite rating agencies means any two agencies that have issued a rating with respect to a security or class of debt obligations of an issuer or one rating agency, if only one agency has issued a rating with respect to such security or issuer. If the Fund purchases securities that are unrated or that have been rated by a single rating agency, the purchase must be approved or ratified by the Fund's Board of Trustees. The short-term ratings are as follows: A-1 and A-2, the two highest ratings given by S&P; Prime-1 and Prime-2, the two highest ratings given by Moody's; and F-1 and F-2, the two highest ratings given by Fitch Investors Service, Inc. ("Fitch"). While the Fund may purchase single rated or unrated securities, the Fund anticipates that at least 95% of its assets will be invested in instruments that at the date of investment are rated or deemed to be of comparable quality to securities rated in the highest short-term rating categories by any two rating agencies. The Fund will not invest more than 5% of its assets in securities issued by any one issuer, except for securities issued or guaranteed by the U.S. government, its agencies or instrumentalities. The Fund will not invest more than 5% of its assets in securities rated in the second highest short-term rating category. The Fund may invest in restricted securities, including securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (the "1933 Act"). Generally, Rule 144A establishes a safe harbor from the registration requirements of the 1933 Act for resales by large institutional investors of securities not publicly traded in the U.S. The Fund may purchase Rule 144A securities when such securities present an attractive investment opportunity and otherwise meet the Fund's selection criteria. The Board of Trustees has adopted guidelines and procedures pursuant to which the liquidity of the Fund's Rule 144A securities is determined by Keystone and monitors Keystone's implementation of such guidelines and procedures. At the present time, the Fund cannot accurately predict exactly how the market for Rule 144A securities will develop. A Rule 144A security that was readily marketable upon purchase may subsequently become illiquid. In such an event, the Board of Trustees will consider what action, if any, is appropriate. The Fund is designed for individuals and institutions, including counselors, brokers, lawyers, accountants, charitable and religious organizations and others acting in a fiduciary, advisory, agency, custodial or similar capacity. The Fund offers a convenient alternative to investing directly in money market instruments by eliminating the mechanical problems normally associated with direct investments while, most importantly, providing the opportunity to obtain the higher yields often available from money market investments made in large denominations. Investors should consider that, because interest rates on money market instruments fluctuate in response to economic factors, the rates on short-term investments made by the Fund and the daily dividend paid to shareholders will vary, rising or falling with short-term rates generally, and that yields from short-term securities may be lower than yields from longer term securities. Also, the value of the Fund's securities will fluctuate inversely with interest rates, the amount of outstanding debt and other factors. In addition, the Fund's investments in certificates of deposit issued by U.S. branches of foreign banks and foreign branches of U.S. banks involve somewhat more risk, but also more potential reward (higher interest rates), than investments in comparable domestic obligations. The securities in which the Fund may invest may not earn as high a level of current income as longer term or lower quality securities, which generally have less liquidity, greater market risk and more price fluctuation. If and when the Fund invests in zero coupon bonds, the Fund does not expect to have enough zero coupon bonds to have a material effect on dividends. The Fund has undertaken to a state securities authority to disclose that zero coupon securities pay no interest to holders prior to maturity, and the interest on these securities is reported as income to the Fund and distributed to its shareholders. These distributions must be made from the Fund's cash assets or, if necessary, from the proceeds of sales of portfolio securities. The Fund will not be able to purchase additional income producing securities with cash used to make such distributions and its current income ultimately may be reduced as a result. The Fund may enter into reverse repurchase agreements and purchase and sell securities on a when issued or delayed delivery basis. The average weighted maturity of the Fund's investments will not exceed 90 days. For further information about the types of investments and investment techniques available to the Fund, including the associated risks, see "Additional Investment Information" and the statement of additional information. Of course, there can be no assurance that the Fund will achieve its investment objective since there is uncertainty in every investment. - ------------------------------------------------------------------------------ INVESTMENT RESTRICTIONS - ------------------------------------------------------------------------------ The Fund has adopted the fundamental restrictions summarized below, which may not be changed without the vote of a majority of the Fund's outstanding shares (as defined in the 1940 Act). These restrictions and certain other fundamental and nonfundamental restrictions are set forth in the statement of additional information. Unless otherwise stated, all references to the Fund's assets are in terms of current market value. Generally, the Fund will not (1) invest more than 5% of its assets in the securities of any one issuer other than the U.S. government; (2) borrow money, except that, in an aggregate amount not to exceed one-third of the Fund's assets, including the amount borrowed, the Fund may borrow money from banks on a temporary basis or enter into reverse repurchase agreements; (3) pledge more than 15% of its assets to secure borrowings; and (4) invest more than 10% of its assets in repurchase agreements maturing in more than seven days. The Fund intends to follow policies of the Securities and Exchange Commission as they are adopted from time to time with respect to illiquid securities, including, at this time, (1) treating as illiquid, securities which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Fund has valued the investment on its books and (2) limiting its holdings of such securities to less than 10% of net assets. In order to comply with Securities and Exchange Commission regulations relating to money market funds, the Fund will apply the 5% limit of assets invested in the securities of any one issuer, set forth in the first investment restriction above, to 100% of the Fund's assets. As a matter of practice, the Fund treats reverse repurchase agreements as borrowings for purposes of compliance with the limitations of the 1940 Act. Reverse repurchase agreements will be taken into account along with borrowings from banks for purposes of the one-third limit set forth in the second investment restriction above. In addition, the Fund may, notwithstanding any other investment policy or restriction, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as the Fund. The Fund does not currently intend to implement this policy and would do so only if the Trustees were to determine such action to be in the best interest of the Fund and its shareholders. In the event of such implementation, the Fund will comply with such requirements as to written notice to shareholders as are then in effect. - ------------------------------------------------------------------------------ PRICING SHARES - ------------------------------------------------------------------------------ The net asset value of a Fund share is computed each day on which the New York Stock Exchange (the "Exchange") is open as of the close of trading on the Exchange (currently 4:00 p.m. Eastern time for the purpose of pricing Fund shares) except on days when changes in the value of the Fund's securities do not affect the current net asset value of its shares. The Exchange is currently closed on weekends, New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of the Fund is arrived at by determining the value of all of the Fund's assets, subtracting its liabilities and dividing the result by the number of its outstanding shares. Since the net income of the Fund is declared as a dividend each time net income is determined, the net asset value per share is expected to remain at $1.00 immediately after each dividend declaration. The Fund expects to have net income at the time of each dividend determination. If for any reason there is a net loss, the Fund will first offset such amount pro rata against dividends accrued during the month in each shareholder account. To the extent that such a net loss would exceed such accrued dividends, the Fund will reduce the number of its outstanding shares by having each shareholder contribute to the Fund's capital his pro rata portion of the total number of shares required to be cancelled in order to maintain a net asset value of $1.00 per share of the Fund. EACH SHAREHOLDER WILL BE DEEMED TO HAVE AGREED TO SUCH A CONTRIBUTION IN THESE CIRCUMSTANCES BY HIS INVESTMENT IN THE FUND. The Fund values its money market investments as follows: (1) 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; and (2) money market investments maturing in more than sixty days for which market quotations are readily available are valued at current market value. All other investments are valued at market value or, where market quotations are not readily available, at fair value as determined in good faith by the Fund's Board of Trustees. - ------------------------------------------------------------------------------ DIVIDENDS AND TAXES - ------------------------------------------------------------------------------ The Fund has qualified and intends to qualify in the future as a regulated investment company under the Internal Revenue Code (the "Code"). The Fund qualifies if, among other things, it distributes to its shareholders at least 90% of its net investment income for its fiscal year. The Fund also intends to make timely distributions, if necessary, sufficient in amount to avoid the nondeductible 4% excise tax imposed on a regulated investment company to the extent that it fails to distribute, with respect to each calendar year, at least 98% of its ordinary income for such calendar year and 98% of its net capital gains for the one-year period ending on October 31 of such calendar year. Any taxable distribution declared in October, November, or December to shareholders of record in such a month, and paid by the following January 31, will be includable in the taxable income of shareholders on December 31 of the year in which such distributions were declared. If the Fund qualifies and if it distributes substantially all of its net investment income and net capital gains, if any, to shareholders, it will be relieved of any federal income tax liability. The Fund declares dividends daily from its net investment income and net capital gains, if any, and makes distributions to its shareholders monthly. Shareholders receive Fund distributions in the form of additional shares of that class of shares upon which the distribution is based or, at the shareholder's option, in cash. Fund distributions in the form of additional shares are made at net asset value without the imposition of a sales charge. Because Class B and Class C shares bear the costs of distribution of their shares through a higher annual distribution fee than Class A shares, expenses attributable to Class B shares and Class C shares will generally be higher, and income distributions paid by the Fund with respect to Class A shares will generally be greater, than those paid with respect to Class B and Class C shares. For federal income tax purposes, income dividends and net short-term gains distributions are taxable as ordinary income. Dividends and distributions may also be subject to state and local taxes. The Fund advises its shareholders annually as to the federal tax status of all distributions made during the year. - ------------------------------------------------------------------------------ FUND MANAGEMENT AND EXPENSES - ------------------------------------------------------------------------------ FUND MANAGEMENT Subject to the general supervision of the Fund's Board of Trustees, Keystone Management, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034, serves as investment manager to the Fund and is responsible for the overall management of the Fund's business and affairs. Keystone Management, organized in 1989, is a wholly-owned subsidiary of Keystone. Its directors and principal executive officers have been affiliated with Keystone, a seasoned investment adviser, for a number of years. Keystone Management also serves as investment manager to each of the funds in the Keystone Fund Family and to certain other funds in the Keystone Investments Family of Funds. The Fund pays Keystone Management a fee for its services at the following annual rate: (1) .50 of 1% of the average daily value of the net assets of the Fund on the first $500,000,000 of such assets; plus (2) .45 of 1% of the average daily value of the net assets of the Fund that exceed $500,000,000 and are less than $1,000,000,000; plus (3) .40 of 1% of the average daily value of the net assets of the Fund that are $1,000,000,000 or more; computed and accrued as of the close of each business day. Pursuant to its Management Agreement with the Fund, Keystone Management has delegated its investment management functions, except for certain administrative and management services to be performed by Keystone Management, to Keystone and has entered into an Advisory Agreement with Keystone under which Keystone provides investment advisory and management services to the Fund. Services performed by Keystone Management include (1) performing research and planning with respect to (a) the Fund's qualification as a regulated investment company under Subchapter M of the Code, (b) tax treatment of the Fund's portfolio investments, (c) tax treatment of special corporate actions (such as reorganizations), (d) state tax matters affecting the Fund, and (e) the Fund's distributions of income and capital gains; (2) preparing the Fund's federal and state tax returns; (3) providing services to the Fund's shareholders in connection with federal and state taxation and distributions of income and capital gains. Keystone, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034, has provided investment advisory and management services to investment companies and private accounts since it was organized in 1932. Keystone is a wholly-owned subsidiary of Keystone Investments, Inc. (formerly named Keystone Group, Inc.) ("Keystone Investments"), located at 200 Berkeley Street, Boston, Massachusetts 02116-5034. Keystone Investments is a corporation predominantly owned by current and former members of management of Keystone and its affiliates. The shares of Keystone Investments common stock beneficially owned by management are held in a number of voting trusts, the trustees of which are George S. Bissell, Albert H. Elfner, III, Edward F. Godfrey and Ralph J. Spuehler, Jr. Keystone Investments provides accounting, bookkeeping, legal, personnel and general corporate services to Keystone Management, Keystone, their affiliates and the Keystone Investments Family of Funds. Pursuant to its Advisory Agreement with Keystone Management, Keystone receives for its services an annual fee representing 85% of the management fee received by Keystone Management under its Management Agreement with the Fund. During the fiscal year ended June 30, 1995, the Fund paid or accrued to Keystone Management investment management fees and administrative service fees of $1,923,870, which represented 0.50% of the Fund's average net assets. Of such amount paid to Keystone Management, $1,635,290 was paid to Keystone for its services to the Fund. FUND EXPENSES In addition to the investment advisory and management fees discussed above, the principal expenses that the Fund is expected to pay include, but are not limited to, expenses of its transfer agent, its custodian and its independent auditors; fees of its independent Trustees ("Independent Trustees"); expenses of shareholders' and Trustees' meetings; fees payable to government agencies, including registration and qualification fees of the Fund and its shares under federal and state securities laws; expenses of preparing, printing and mailing Fund prospectuses, notices, reports and proxy material and certain extraordinary expenses. In addition, each class will pay all of the expenses attributable to it. Such expenses are currently limited to Distribution Plan expenses. The Fund will also pay its brokerage commissions, interest charges and taxes. During the fiscal year ended June 30, 1995, the Fund paid or accrued $24,777 to Keystone Investments, Inc. as reimbursement for certain accounting and printing services provided to the Fund, and $866,507 was paid or accrued to Keystone Investor Resource Center, Inc. ("KIRC") the Fund's transfer and dividend disbursing agent, for shareholder services. KIRC is a wholly-owned subsidiary of Keystone. SECURITIES TRANSACTIONS Under policies established by the Board of Trustees, Keystone selects broker-dealers to execute transactions subject to the receipt of best execution. When selecting broker-dealers to execute portfolio transactions for the Fund, Keystone may follow a policy of considering as a factor the number of shares of the Fund sold by such broker-dealers. In addition, broker-dealers may, from time to time, be affiliated with the Fund, Keystone Management, Keystone, the Fund's principal underwriter or their affiliates. PORTFOLIO TURNOVER The Fund will not trade in securities for short-term profits, but, when circumstances warrant, securities may be sold without regard to the length of time held. - ------------------------------------------------------------------------------ HOW TO BUY SHARES - ------------------------------------------------------------------------------ Keystone Investment Distributors Company (formerly named Keystone Distributors, Inc.) (the "Principal Underwriter") serves as the Fund's principal underwriter. The Principal Underwriter is a wholly-owned subsidiary of Keystone and is located at 200 Berkeley Street, Boston, Massachusetts 02116-5034. All classes of Fund shares are sold on a continuing basis without a sales load at net asset value, which is expected to be $1.00 per share on each day on which banks in both Boston and New York are open for business. An initial purchase of Fund shares must be at least $1,000. There is no minimum amount for subsequent purchases. Investors may purchase shares by the methods described below. BY FEDERAL RESERVE OR BANK WIRE (immediate credit for purchase of funds) Instruct your bank to forward federal funds to: State Street Bank and Trust Co. -- Boston ABA #0110-0002-8 Keystone Liquid Trust No. 0127-654-2 Shareholder Account Name (As registered Shareholder Account Number with the Fund) Attn: Dept. H.L. To open a new account, please observe the following procedures: (1) The wire must (a) carry the account name as it is to be registered and (b) state that it is a "new account." An account number will be assigned when the account is opened. (2) A completed application and order form must be mailed to the Fund at the address shown at the top of the form. The completed form may be sent after the wire. The minimum amount for subsequent wire investments is $2,500. Some banks may charge for wires. BY CHECK Make your check or negotiable bank draft payable to "Keystone Liquid Trust," include the check with a completed application and mail to: Keystone Investor Resource Center, Inc. P.O. Box 2121 Boston, MA 02106-2121 For subsequent purchases be sure to include the detachable purchase stub from your account statement. GENERAL Brokers, banks and other financial institutions may assist their clients in effecting transactions in the Fund's shares and may charge a fee for these services. Orders for the purchase of Fund shares become effective at the next transaction time after federal funds or bank wire monies become available to State Street Bank and Trust Company ("State Street") for a shareholder's investment. The Fund's transaction time is the close of trading on the Exchange (currently 4:00 p.m. Eastern time). Investments by wire received before 4:00 p.m. will become effective as of 4:00 p.m. and begin accruing dividends the next business day. Purchase orders are accepted only on a day on which the Exchange and State Street are open for business. Money transmitted by a check drawn on a member of the Federal Reserve System is converted to federal funds in one or two business days following receipt. Checks drawn on banks that are not members of the Federal Reserve System may take longer. Investments by checks that are scheduled for conversion to federal funds on a given day will become effective as of 4:00 p.m. and receive the dividend on Fund shares declared as of 4:00 p.m. on the following day. All payments other than in federal funds (including checks from individual investors) must be in U.S. dollars. Your purchase of shares will be confirmed to you and your shares credited to your account at the net asset value. Share certificates are not issued, except upon the written request of a shareholder. Certificates are not issued for fractional shares. Certificate shares are not eligible for the checking, telephone, or monthly or quarterly redemption procedures. The Fund reserves the right to reject any purchase order. If you desire assistance in filling out the application form or have questions, call KIRC toll free at 1-800-343-2898. SUB-ACCOUNTING The Fund offers free "sub-accounting" service to banks, brokers, investment advisers and others who have multiple accounts. Multiple accounts may be carried under one master account. Transaction advices and monthly reports are provided for each sub-account individually, and that information also is included in summary master account reports. For information concerning sub- accounting, call KIRC at the telephone number listed above. - ------------------------------------------------------------------------------ ALTERNATIVE SALES OPTIONS - ------------------------------------------------------------------------------ Generally, the Fund offers three classes of shares: CLASS A SHARES -- NO LOAD OPTION Class A shares are sold without a sales charge at the time of purchase. CLASS B SHARES -- BACK END LOAD OPTION Class B shares are sold without a sales charge at the time of purchase, but are, with certain exceptions, subject to a contingent deferred sales charge if they are redeemed. Class B shares purchased on or after June 1, 1995 are subject to a contingent deferred sales charge if redeemed during the 72 month period commencing with and including the month of purchase. Class B shares purchased prior to June 1, 1995 are subject to a deferred sales charge upon redemption during the four calendar years following purchase. Class B shares purchased on or after June 1, 1995 that have been outstanding for eight years from and including the month of purchase will automatically convert to Class A shares without the imposition of a front-end sales charge or exchange fee. Class B shares purchased prior to June 1, 1995 will retain their existing conversion rights. CLASS C SHARES -- LEVEL LOAD OPTION Class C shares are sold without a sales charge at the time of purchase, but are subject to a deferred sales charge if they are redeemed within one year after the date of purchase. Class C shares are available only through dealers who have entered into special distribution agreements with the Principal Underwriter. Each class of shares, pursuant to its Distribution Plan, pays an annual service fee of 0.25% of the Fund's average daily net assets attributable to that class. In addition to the 0.25% service fee, the Class B and C Distribution Plans provide for the payment of an annual distribution fee of up to 0.75% of the average daily net assets attributable to their respective classes. As a result, income distributions paid by the Fund with respect to Class B and Class C shares will generally be less than those paid with respect to Class A shares. In general, three Fund share classes have been established so that investors in each class of any Keystone America Fund who wish to take advantage of the exchange privilege within the Keystone America Fund Family can have a money market fund exchange option available to them. Investors purchasing shares of the Fund without regard to the availability of exchanges should consider Class A shares because there is no distribution fee. (In the event of an exchange for Class A shares of a Keystone America Fund, the applicable front end sales charge will be imposed.) Investors who wish to have the ability to exchange their shares for Class B or Class C shares of other Keystone America Funds should consider purchasing Class B or Class C shares of the Fund, depending on the amount and intended length of the investment. The Fund will not normally accept any purchase of Class B shares in the amount of $250,000 or more, and will not normally accept any purchase of Class C shares in the amount of $1,000,000 or more. CLASS A SHARES Class A shares are offered at net asset value without an initial sales charge. CLASS A DISTRIBUTION PLAN The Fund has adopted a Distribution Plan with respect to its Class A shares ("Class A Distribution Plan") that provides for expenditures, which are currently limited to 0.25% annually of the average daily net asset value of Class A shares, to pay expenses associated with the distribution of Class A shares. Amounts paid by the Fund to the Principal Underwriter 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 such recipients and outstanding on the books of the Fund for specified periods. CLASS B SHARES Class B shares are offered at net asset value, without an initial sales charge. With respect to Class B shares purchased on or after June 1, 1995, the Fund, with certain exceptions, imposes a deferred sales charge in accordance with the following schedule: DEFERRED SALES CHARGE REDEMPTION TIMING IMPOSED - ----------------- ------- First twelve month period .................... 5.00% Second twelve month period ................... 4.00% Third twelve month period .................... 3.00% Fourth twelve month period ................... 3.00% Fifth twelve month period .................... 2.00% Sixth twelve month period .................... 1.00% No deferred sales charge is imposed on amounts redeemed thereafter. With respect to Class B shares sold prior to June 1, 1995, the Fund, with certain exceptions, imposes a deferred sales charge of 3.00% on shares redeemed during the calendar year of purchase and the first calendar year after the year of purchase; 2.00% on shares redeemed during the second calendar year after the year of purchase; and 1.00% on shares redeemed during the third calendar year after the year of purchase. No deferred sales charge is imposed on amounts redeemed thereafter. If imposed, the deferred sales charge is deducted from the redemption proceeds otherwise payable to you. The deferred sales charge is retained by the Principal Underwriter. Amounts received by the Principal Underwriter under the Class B Distribution Plans are reduced by deferred sales charges retained by the Principal Underwriter. See "Contingent Deferred Sales Charge and Waiver of Sales Charges" below. Class B shares purchased on or after June 1, 1995 that have been outstanding for eight years from and including the month of purchase will automatically convert to Class A shares (which are subject to a lower Distribution Plan charge) without imposition of a front-end sales charge or exchange fee. Class B shares purchased prior to June 1, 1995 will similarly convert to Class A shares at the end of seven calendar years after the year of purchase. (Conversion of Class B shares represented by share certificates will require the return of the share certificates to KIRC.) The Class B shares so converted will no longer be subject to the higher expenses borne by Class B shares. Under current law, it is the Fund's opinion that such a conversion will not constitute a taxable event under federal income tax law. In the event that this ceases to be the case, the Board of Trustees will consider what action, if any, is appropriate and in the best interests of the Class B shareholders. CLASS B DISTRIBUTION PLANS The Fund has adopted Distribution Plans with respect to its Class B shares ("Class B Distribution Plans") that provide for expenditures 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. Payments under the Class B Distribution Plans are currently made to the Principal Underwriter (which may reallow all or part to others, such as dealers) (1) as commissions for Class B shares sold and (2) as shareholder service fees. Amounts paid or accrued to the Principal Underwriter under (1) and (2) in the aggregate may not exceed the annual limitation referred to above. The Principal Underwriter generally reallows to brokers or others a commission 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 share maintained by the recipient outstanding on the books of the Fund for specified periods. See "Distribution Plans" below. CLASS C SHARES Class C shares are available only through dealers who have entered into special distribution agreements with the Principal Underwriter. Class C shares are offered at net asset value without an initial sales charge. With certain exceptions, the Fund may impose a deferred sales charge of 1.00% on shares redeemed within one year after the date of purchase. No deferred sales charge is imposed on amounts redeemed thereafter. If imposed, the deferred sales charge is deducted from the redemption proceeds otherwise payable to you. The deferred sales charge is retained by the Principal Underwriter. See "Contingent Deferred Sales Charge and Waiver of Sales Charges" below. CLASS C DISTRIBUTION PLAN The Fund has adopted a Distribution Plan with respect to its Class C shares ("Class C Distribution Plan") that provides for expenditures at an annual rate of up to 1.00% of the average daily net asset value of Class C shares to pay expenses of the distribution of Class C shares. Amounts paid by the Fund under the Class C Distribution Plan are currently used to pay others (dealers) (1) a payment at the time of purchase normally equal to 1.00% of the value of each share sold, such payment to consist of a commission in the amount of 0.75% plus the first year's service fee in advance in the amount of 0.25%; and (2) beginning approximately fifteen months after purchase, a commission at an annual rate of 0.75% (subject to NASD rules -- see "Distribution Plans") plus service fees at an annual rate of 0.25%, respectively, of the average daily net asset value of each share maintained by such recipients outstanding on the books of the Fund for specified periods. See "Distribution Plans" below. CONTINGENT DEFERRED SALES CHARGE AND WAIVER OF SALES CHARGES Any contingent deferred sales charge imposed upon the redemption of Class B or Class C shares is a percentage of the lesser of (1) the net asset value of the shares redeemed or (2) the net asset value at the time of purchase of such shares. No contingent deferred sales charge is imposed when you redeem amounts derived from (1) increases in the value of your account above the net cost of such shares due to increases in the net asset value per share of the Fund; (2) certain shares with respect to which the Fund did not pay a commission on issuance, including shares acquired through reinvestment of dividend income and capital gains distributions; (3) Class C shares held for more than one year from the date of purchase; or (4) Class B shares held during more than four consecutive calendar years or more than 72 months after purchase, as the case may be. Upon request for redemption, shares not subject to the contingent deferred sales charge will be redeemed first. Thereafter, shares held the longest will be the first to be redeemed. The Fund also may sell Class A, Class B or Class C shares at net asset value without a contingent deferred sales charge to certain Directors, Trustees, officers and employees of the Fund and Keystone and certain of their affiliates, to registered representatives of firms with dealer agreements with the Principal Underwriter and to a bank or trust company acting as a trustee for a single account. In addition, no contingent deferred sales charge is imposed on a redemption of shares of the Fund in the event of (1) death or disability of the shareholder; (2) a lump-sum distribution from a 401(k) plan or other benefit plan qualified under the Employee Retirement Income Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA plans if the shareholder is at least 59 1/2 years old; (4) involuntary redemptions of accounts having an aggregate net asset value of less than $1,000; (5) automatic withdrawals under an automatic withdrawal plan of up to 1 1/2% per month of the shareholder's initial account balance; (6) withdrawals consisting of loan proceeds to a retirement plan participant; (7) financial hardship withdrawals made by a retirement plan participant; or (8) withdrawals consisting of returns of excess contributions or excess deferral amounts made to a retirement plan participant. ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS The Principal Underwriter may, from time to time, provide promotional incentives, including reallowance of up to the entire sales charge, to certain dealers whose representatives have sold or are expected to sell significant amounts of Fund shares. In addition, dealers may from time to time receive additional cash payments. The Principal Underwriter may also provide written information to dealers with whom it has dealer agreements that relates to sales incentive campaigns conducted by such dealers for their representatives as well as financial assistance in connection with pre-approved seminars, conferences and advertising. No such programs or additional compensation will be offered to the extent they are prohibited by the laws of any state or any self-regulatory agency such as the NASD. The Principal Underwriter may, at its own expense, pay concessions in addition to those described above to dealers that satisfy certain criteria established from time to time by the Principal Underwriter. These conditions relate to increasing sales of shares of the Keystone funds over specified periods and certain other factors. Such payments may, depending on the dealer's satisfaction of the required conditions, be periodic and may be up to 0.25% of the value of shares sold by such dealer. The Principal Underwriter also may pay banks and other financial services firms that facilitate transactions in shares of the Fund for their clients a transaction fee up to the level of the payments made allowable to dealers for the sale of such shares as described above. The Glass-Steagall Act currently limits the ability of a depository institution (such as a commercial bank or a savings and loan association) to become an underwriter or distributor of securities. In the event the Glass-Steagall Act is deemed to prohibit depository institutions from accepting payments under the arrangement described above, or should Congress relax current restrictions on depository institutions, the Board of Trustees will consider what action, if any, is appropriate. In addition, state securities laws on this issue may differ from the interpretations of federal law expressed herein and banks and financial institutions may be required to register as dealers pursuant to state law. - ------------------------------------------------------------------------------ DISTRIBUTION PLANS - ------------------------------------------------------------------------------ As discussed above, the Fund bears some of the costs of selling its shares under Distribution Plans adopted with respect to its Class A, Class B and Class C shares pursuant to Rule 12b-1 under the 1940 Act. NASD rules limit the amount that a Fund may pay annually in distribution costs for sale of its shares and shareholder service fees. The NASD limits annual expenditures to 1% of the aggregate average daily net asset value of its shares, of which 0.75% may be used to pay such distribution costs and 0.25% may be used to pay shareholder service fees. NASD rules also limit the aggregate amount which the Fund may pay for such distribution costs to 6.25% of gross share sales since the inception of the 12b-1 Distribution Plans, plus interest at the prime rate plus 1% on such amounts (less any contingent deferred sales charges paid by shareholders to the Principal Underwriter) remaining unpaid from time to time. The Principal Underwriter intends, but is not obligated, to continue to pay or accrue distribution charges incurred in connection with the Class B Distribution Plans that exceed current annual payments permitted to be received by the Principal Underwriter from the Fund. The Principal Underwriter intends to seek full payment of such charges from the Fund (together with annual interest thereon at the prime rate plus one percent) at such time in the future as, and to the extent that, payment thereof by the Fund would be within the permitted limits. If the Fund's Independent Trustees authorize such payments, the effect would be to extend the period of time during which the Fund incurs the maximum amount of costs allowed by a Distribution Plan. If a Distribution Plan is terminated, the Principal Underwriter will ask the Independent Trustees to take whatever action they deem appropriate under the circumstances with respect to payment of such amounts. In connection with financing its distribution costs, including commission advances to dealers and others, the Principal Underwriter has sold to a financial institution substantially all of its 12b-1 fee collection rights and contingent deferred sales charge collection rights in respect of Class B shares sold during the two-year period commencing approximately June 1, 1995. The Fund has agreed not to reduce the rate of payment of 12b-1 fees in respect of such Class B shares unless it terminates such shares' Distribution Plan completely. If it terminates such Distribution Plan, the Fund may be subject to possible adverse distribution consequences. 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. Unreimbursed distribution expenses at year-end June 30, 1995 for Class B and Class C shares were $746,584 (10.25% of net assets) and $825,276 (20.07% of net assets), respectively. For the year ended June 30, 1995, the Fund paid the Principal Underwriter $343,747, $119,037 and $70,834 in Distribution Plan fees for Class A, Class B and Class C shares, respectively, which represent 0.09%, 1.00% and 1.00% of the average net assets of Class A, B, and C shares, respectively. Dealers or others may receive different levels of compensation depending on which class of shares they sell. Payments pursuant to a Distribution Plan are included in the operating expenses of the class. - ------------------------------------------------------------------------------ HOW TO REDEEM SHARES - ------------------------------------------------------------------------------ Shareholders may redeem Fund shares at their net asset value, expected to be a constant $1.00 per share, next determined after receipt by the Fund of a proper redemption request as described below. Shareholders may use one or more of the methods listed below to redeem shares. Shareholders wishing to use a redemption method other than the mail must complete the appropriate portions of the Fund's application and may be asked to provide additional documentation as more fully described under "Applications" below. If imposed, the deferred sales charge is deducted from the redemption proceeds otherwise payable to you. At various times, the Fund may be requested to redeem shares for which it has not yet received good payment. In such a case, the Fund may delay the mailing of a redemption check or the wiring or Electronic Fund Transfer ("EFT") of redemption proceeds until good payment has been collected for the purchase of such shares. This may take 15 days. Any delay may be avoided by purchasing shares either with a certified check or by Federal Reserve or bank wire of funds or by EFT. Although the mailing of a redemption check or the wiring or EFT of redemption proceeds may be delayed, the redemption value will be determined and the redemption processed in the ordinary course of business upon receipt of proper documentation. In such a case, after the redemption and prior to the release of the proceeds, no appreciation or depreciation will occur in the value of the redeemed shares, and no interest will be paid on the redemption proceeds. If the payment of a redemption has been delayed, the check will be mailed or the proceeds wired or sent EFT promptly after good payment has been collected. The Fund computes the amount due you at the close of the Exchange at the end of the day on which it has received all proper documentation from you. Payment of the amount due on redemption, less any applicable contingent deferred sales charge (as described above), will be made within seven days thereafter except as discussed herein. When requesting a redemption, a shareholder should state the redemption amount. The redemption order should also include the account name as registered with the Fund and the account number. If a shareholder withdraws the entire amount in his or her account at any time during the month, all dividends declared but not yet paid on the shareholder's shares will be paid at the time of such withdrawal. Any former shareholder, when reinvesting, should indicate his or her former account number on the application or correspondence. BY CHECK If requested, the Fund will establish a checking account for each class of shares held by the shareholder with State Street. Checks may be drawn for $500 or more payable to anyone. When a check is presented to State Street for payment, it will cause the Fund to redeem at the net asset value next determined a sufficient number of the shareholder's shares to cover the check. A shareholder thereby receives the daily dividends declared on the shares to be redeemed to cover the check through the day State Street instructs the Fund to redeem them. There is currently no charge to the shareholder for this checking account. BY TELEPHONE A shareholder may redeem any amount from his or her account by calling toll-free 1-800-343-2898 or by using the Keystone Automated Response Line ("KARL"). (See the "Shareholder Services" section of this prospectus for a description of KARL.) In order to insure that instructions received by KIRC are genuine when you initiate a telephone transaction, you will be asked to verify certain criteria specific to your account. At the conclusion of the transaction, you will be given a transaction number confirming your request, and written confirmation of your transaction will be mailed the next business day. Your telephone instructions will be recorded. Redemptions by telephone are allowed only if the address and bank account of record have been the same for a minimum period of 30 days. If the redemption proceeds are less than $2,500, they will be mailed by check. If they are $2,500 or more, they will be mailed or wired to your previously designated bank account as you direct. If you do not specify how you wish your redemption proceeds to be sent, they will be mailed by check. If you cannot reach the Fund by telephone, you should follow the procedures for redeeming by mail or through a broker as set forth herein. BY MAIL A shareholder may withdraw any amount from his or her account at any time by mail. Written requests for withdrawal, accompanied by properly endorsed certificates, if issued, should be sent to the Fund, c/o KIRC. Each written request for redemption and all accompanying certificates must be signed by the shareholder with SIGNATURES GUARANTEED in the manner prescribed under "Applications" below. Further documentation may be required from corporations, fiduciaries, partnerships and other shareholders. When a written redemption request is received, the Fund redeems the required amount at the net asset value next determined. Redemption proceeds are normally mailed by check the next business day. If instructed in the written redemption request, the Fund will mail the check to a designated account at the shareholder's bank. APPLICATIONS In order to use any of the foregoing redemption methods other than by mail, or to change the authority of any person to make redemptions under any such method, a shareholder must sign and complete the appropriate portions of the Fund's application. Shareholders other than individuals who wish to use any of the other redemption methods may be required to provide other documentation. An application accompanies this prospectus. Applications are also available from the Fund by calling toll-free 1-800-343-2898 or by writing KIRC. When a shareholder submits an application, the Fund will notify the shareholder of any additional documents it requires to permit the shareholder to use the redemption methods the shareholder has designated. If the designated redemption methods are to be used for the shareholder's existing account, or if the authority of a person to make redemptions under any of the redemption methods is being changed (including a change in a signature on a signature card for a checking account), the shareholder's signature on the application (or the signature card) must be guaranteed by a member firm of the New York, American, Boston, Midwest or Pacific Stock Exchanges, by any U.S. national banking association or by other persons eligible to guarantee signatures under the Securities Exchange Act of 1934 and KIRC's policies. SMALL ACCOUNTS Because of the high cost of maintaining small accounts, the Fund reserves the right to redeem your account if its value has fallen below $1,000, the current minimum investment level, as a result of your redemptions (but not as a result of market action). You will be notified in writing and allowed 60 days to increase the value of your account to the minimum investment level. GENERAL The checking account described in this prospectus will be subject to State Street's rules and regulations governing checking accounts. If there is an insufficient number of shares in a shareholder's account when a check is presented to State Street for payment, the check will be returned. If a shareholder presents a check on his or her account in person to State Street, it will be treated as a redemption by mail received that day. Since the aggregate amount in a shareholder's account changes each day because of the daily dividend, a shareholder should not attempt to withdraw the full amount in his or her account by using a check. For Fund purposes, a business day (during which purchases and redemptions of Fund shares can become effective and the transmittal of redemption proceeds can occur) is any day the Exchange is open for trading that is not an official bank holiday for the Fund's custodian bank. The right of redemption may be suspended or the date of payment postponed (1) for any period during which the Exchange is closed, other than customary weekend and holiday closings; (2) when trading on the Exchange is restricted or an emergency exists, as determined by the Securities and Exchange Commission; or (3) when the Securities and Exchange Commission has ordered such a suspension for the protection of shareholders. Subject to the limitation described above for shares purchased by check, redemption proceeds are normally wired or mailed either the same or the next business day, but in no event later than seven days after receipt of a proper redemption request unless redemptions have been suspended or postponed as described above. The value of a shareholder's investment at the time of redemption may be more or less than his or her cost depending on the market value of the securities held by the Fund at such time and the income earned. The Fund reserves the right, at any time, to terminate, suspend or change the terms of any redemption method described in this prospectus, except redemption by mail, and to impose fees. State Street reserves the right, at any time, to terminate, suspend or change the terms of the offered checking account and to impose fees. Except as otherwise noted, neither the Fund, KIRC nor the Principal Underwriter assumes responsibility for the authenticity of any instructions received by any of them from a shareholder in writing, over KARL or by telephone. KIRC will employ reasonable procedures to confirm that instructions received over KARL or by telephone are genuine. Neither the Fund, KIRC nor the Principal Underwriter will be liable when following instructions received over KARL or by telephone that KIRC reasonably believes to be genuine. - ------------------------------------------------------------------------------ MONTHLY DISTRIBUTION PLANS - ------------------------------------------------------------------------------ Without affecting the shareholder's right to use any of the methods of redemption described above, a shareholder may also elect to participate in the plans described below. AUTOMATIC EXCHANGE PLAN Subject to the exchange restrictions set forth below and any other applicable exchange restrictions, you may elect to have a prestated amount automatically exchanged from your Fund account to any other Keystone fund. This exchange may be made either monthly or quarterly. There is a $100 minimum for each exchange, and there may be a minimal charge for each transaction. Upon written notice, you may change the amount to be exchanged, the frequency or the fund designated to receive such exchanges. AUTOMATIC WITHDRAWAL PLAN Under the Fund's Automatic Withdrawal Plan, shareholders may request that they receive a monthly check in any specified amount of $100 or more. Upon written notice, the frequency and amount of such payments may be changed by the shareholder at any time. Depending upon the amount requested to be paid, the Fund's yield and the size of the shareholder's account, the specified distribution may in part include some return of capital. If the return of capital is continued it may possibly exhaust the shareholder's investment in the Fund. - ------------------------------------------------------------------------------ SHAREHOLDER SERVICES - ------------------------------------------------------------------------------ KEYSTONE AUTOMATED RESPONSE LINE The Keystone Automated Response Line offers shareholders specific fund account information and price and yield quotations as well as the ability to effect account transactions, including investments, exchanges and redemptions. Shareholders may access KARL by dialing toll free 1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a week. EXCHANGES Generally, if you have obtained the appropriate prospectus, you may exchange Class A shares of the Fund that you purchased directly for shares of any of the funds in the Keystone Fund Family, Keystone Precious Metals Holdings, Inc. ("KPMH"), Keystone International Fund Inc. ("KIF"), Keystone Tax Exempt Trust ("KTET") or Keystone Tax Free Fund ("KTFF"). This exchange privilege may be restricted for shareholders wishing to exchange Fund shares that the shareholder acquired in a prior exchange transaction using shares of any fund in the Keystone Fund Family, KPMH, KIF, KTET or KTFF. A Fund shareholder exchanging into any such Keystone fund acquires his or her shares subject to the sales charges, deferred sales charges or other fees imposed by the new fund as they may apply. In addition, you may exchange shares of the Fund for shares of Keystone America Funds as follows: Class A shares may be exchanged for Class A shares of certain Keystone America Funds; Class B shares except as noted below, may be exchanged for the same type of Class B shares of certain Keystone America Funds; and Class C shares may be exchanged for Class C shares of certain Keystone America Funds. Class B shares purchased on or after June 1, 1995 cannot be exchanged for Class B shares of Keystone Capital Preservation and Income Fund during the 24 month period commencing with and including the month of original purchase. The exchange of Class B shares and Class C shares will not be subject to a contingent deferred sales charge. However, if the shares being tendered for exchange are: (1) Class B shares which have been held for less than 72 months or four years, as the case may be, or (2) Class C shares which have been held for less than one year, and are still subject to a deferred sales charge, such charge will carry over to the shares being acquired in the exchange transaction. You may exchange shares by calling toll free 1-800-343-2898, by writing KIRC or by calling KARL. Subject to the foregoing restrictions, Fund shares purchased by check may be exchanged for shares of the named funds, other than KPMH, KTET or KTFF, after 15 days, provided good payment for the purchase of Fund shares has been collected. In order to exchange Fund shares for shares of KPMH, KTET or KTFF, a shareholder must have held Fund shares for a period of six months. You may exchange your shares as described above for another Keystone fund for a $10 fee by calling or writing to Keystone. The exchange fee is waived for individual investors who make an exchange using KARL. Shares of the Fund purchased directly and not by prior exchange into the Fund are not subject to an exchange fee upon exchange into another fund. The Fund reserves the right to change the fee charged for any exchange. Orders for exchanges received by the Fund prior to 4:00 p.m. Eastern time on any day the funds are open for business will be executed at the respective net asset values determined as of the close of business that day. Orders for exchanges received after 4:00 p.m. Eastern time on any business day will be executed at the respective net asset values determined at the close of the next business day. An excessive number of exchanges may be disadvantageous to the Fund. Therefore, the Fund, in addition to its right to reject any exchange, reserves the right to terminate the exchange privilege of any shareholder who makes more than five exchanges of shares of the funds in a year or three in a calendar quarter. An exchange order must comply with the requirements for a redemption or repurchase order and must specify the dollar value or number of shares to be exchanged. Exchanges are subject to the minimum initial purchase requirements of the fund being acquired. An exchange constitutes a sale for federal income tax purposes. The exchange privilege is available only in states where shares of the fund being acquired may legally be sold. RETIREMENT PLANS The Fund has various pension and profit-sharing plans available to investors, including Individual Retirement Accounts ("IRAs"); Rollover IRAs; Simplified Employee Pension Plans ("SEPs"); Tax Sheltered Annuity Plans ("TSAs"); 401(k) Plans; Keogh Plans; Corporate Profit-Sharing Plans, Pension and Target Benefit Plans; Money Purchase Pension Plans and Salary-Reduction Plans. For details, including fees and application forms, call toll free 1- 800-247-4075 or write to KIRC. AUTOMATIC INVESTMENT PLAN Shareholders may take advantage of investing on an automatic basis by establishing an automatic investment plan. Additional investments are drawn on a shareholder's checking account monthly and used to purchase Fund shares. - ------------------------------------------------------------------------------ PERFORMANCE DATA - ------------------------------------------------------------------------------ From time to time the Fund may advertise "yield" and "effective yield." BOTH YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. Yields are calculated separately for each class of shares of the Fund. The "yield" of a class refers to the income generated by an investment in the Fund over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly, but, when annualized, the income earned by an investment in the Fund is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. See the SAI for more complete information concerning performance calculations. The Fund may also include comparative performance information for each class of shares in advertising or marketing the Fund's shares, such as data from Lipper Analytical Services, Inc., Morningstar, Inc., Standard & Poor's Corporation and Ibbotson Associates or other industry publications. - ------------------------------------------------------------------------------ FUND SHARES - ------------------------------------------------------------------------------ Generally, the Fund currently issues three classes of shares that participate in dividends and distributions and have equal voting, liquidation and other rights except that (1) expenses related to the distribution of each class of shares or other expenses that the Board of Trustees may designate as class expenses from time to time, are borne solely by each class; (2) each class of shares has exclusive voting rights with respect to its Distribution Plan; (3) each class has different exchange privileges; and (4) each class generally has a different designation. When issued and paid for, the shares will be fully paid and nonassessable by the Fund. Shares may be exchanged as explained under "Shareholder Services," but will have no other preference, conversion, exchange or preemptive rights. Shareholders are entitled to one vote for each full share owned and fractional votes for fractional shares. Shares of the Fund vote together except when required by law to vote separately by class. Shares are redeemable, transferable and freely assignable as collateral. - ------------------------------------------------------------------------------ ADDITIONAL INFORMATION - ------------------------------------------------------------------------------ KIRC, 101 Main Street, Cambridge, Massachusetts 02142-1519, is a wholly-owned subsidiary of Keystone and serves as the Fund's transfer agent and dividend disbursing agent. When the Fund determines from its records that more than one account in the Fund is registered in the name of a shareholder or shareholders having the same address, upon written notice to those shareholders, the Fund intends, when an annual report or semi-annual report of the Fund is required to be furnished, to mail one copy of such report to that address. Except as otherwise stated in this prospectus or required by law, the Fund reserves the right to change the terms of the offer stated in this prospectus without shareholder approval, including the right to impose or change fees for services provided. - ------------------------------------------------------------------------------ ADDITIONAL INVESTMENT INFORMATION - ------------------------------------------------------------------------------ DESCRIPTION OF CERTAIN INVESTMENTS AND INVESTMENT TECHNIQUES AVAILABLE TO THE FUND COMMERCIAL PAPER The Fund's investments in commercial paper are limited to those rated A-1 by S&P, Prime-1 by Moody's or F-1 by Fitch. These are the highest ratings assigned by such rating services. OBLIGATIONS OF FOREIGN BRANCHES OF UNITED STATES BANKS The obligations of foreign branches of U.S. banks may be general obligations of the parent bank in addition to the issuing branch, or may be limited by the terms of a specific obligation and by government regulation. Payment of interest and principal upon these obligations may also be affected by governmental action in the country of domicile of the branch (generally referred to as sovereign risk). In addition, evidences of ownership of such securities may be held outside the U.S., and the Fund may be subject to the risks associated with the holding of such property overseas. Various provisions of federal law governing domestic branches do not apply to foreign branches of domestic banks. OBLIGATIONS OF UNITED STATES BRANCHES OF FOREIGN BANKS Obligations of U.S. branches of foreign banks may be general obligations of the parent bank in addition to the issuing branch or may be limited by the terms of a specific obligation and by federal and state regulation as well as by governmental action in the country in which the foreign bank has its head office. In addition, there may be less publicly available information about a U.S. branch of a foreign bank than about a domestic bank. MASTER DEMAND NOTES Master demand notes are unsecured obligations that permit the investment of fluctuating amounts by the Fund at varying rates of interest pursuant to direct arrangements between the Fund, as lender, and the issuer, as borrower. Master demand notes may permit daily fluctuations in the interest rate and daily changes in the amount borrowed. The Fund has the right to increase the amount under the note at any time up to the full amount provided by the note agreement or to decrease the amount, and the borrower may repay up to the full amount of the note without penalty. Notes purchased by the Fund permit the Fund to demand payment of principal and accrued interest at any time (on not more than seven days' notice). Notes acquired by the Fund may have maturities of more than one year, provided that (1) the Fund is entitled to payment of principal and accrued interest upon not more than seven days' notice, and (2) the rate of interest on such notes is adjusted automatically at periodic intervals which normally will not exceed 31 days but may extend up to one year. The notes are deemed to have a maturity equal to the longer of the period remaining to the next interest rate adjustment or the demand notice period. Because these types of notes are direct lending arrangements between the lender and the borrower, such instruments are not normally traded, and there is no secondary market for these notes, although they are redeemable and thus repayable by the borrower at face value plus accrued interest at any time. Accordingly, the Fund's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. In connection with master demand note arrangements, Keystone considers, under standards established by the Fund's Board of Trustees, earning power, cash flow and other liquidity ratios of the borrower and will monitor the ability of the borrower to pay principal and interest on demand. These notes typically are not rated by credit rating agencies. Unless rated, the Fund will invest in them only if the issuer meets the criteria established for commercial paper discussed in the Statement of Additional Information, which limit such investments to commercial paper rated A-1 by S&P, Prime-1 by Moody's and F-1 by Fitch. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements with member banks of the Federal Reserve System which have at least $1 billion in assets, primary dealers in U.S. government securities or other financial institutions believed by Keystone to be creditworthy. Such persons are required to be registered as U.S. government securities dealers with an appropriate regulatory organization. Under such agreements, the bank, primary dealer or other financial institution agrees upon entering into the contract to repurchase the security at a mutually agreed upon date and price, thereby determining the yield during the term of the agreement. This results in a fixed rate of return insulated from market fluctuations during such period. The seller under a repurchase agreement will be required to maintain the value of the securities subject to the agreement at not less than the repurchase price, and such value will be determined on a daily basis by marking the underlying securities to their market value. Although the securities subject to the repurchase agreement might bear maturities exceeding a year, the Fund only intends to enter into repurchase agreements which provide for settlement within a year and usually within seven days. Securities subject to repurchase agreements will be held by the Fund's custodian or in the Federal Reserve book entry system. The Fund does not bear the risk of a decline in the value of the underlying security unless the seller defaults under its repurchase obligation. In the event of a bankruptcy or other default of a seller of a repurchase agreement, the Fund could experience both delays in liquidating the underlying securities and losses including (1) possible declines in the value of the underlying securities during the period while the Fund seeks to enforce its rights thereto; (2) possible subnormal levels of income and lack of access to income during this period; and (3) expenses of enforcing its rights. The Board of Trustees has established procedures to evaluate the creditworthiness of each party with whom the Fund enters into repurchase agreements by setting guidelines and standards of review for Keystone and monitoring Keystone's actions with regard to repurchase agreements. REVERSE REPURCHASE AGREEMENTS Under a reverse repurchase agreement, the Fund would sell securities and agree to repurchase them at a mutually agreed upon date and price. The Fund intends to enter into reverse repurchase agreements to avoid otherwise having to sell securities during unfavorable market conditions in order to meet redemptions. At the time the Fund enters into a reverse repurchase agreement, it will establish a segregated account with the Fund's custodian containing liquid assets having a value not less than the repurchase price (including accrued interest) and will subsequently monitor the account to ensure such value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities which the Fund is obligated to repurchase may decline below the repurchase price. Borrowing and reverse repurchase agreements magnify the potential for gain or loss on the portfolio securities of the Fund and, therefore, increase the possibility of fluctuation in the Fund's net asset value. This factor is known as leverage. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund's obligation to repurchase the securities and the Fund's use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such determination. The staff of the Securities and Exchange Commission has taken the position that the 1940 Act treats reverse repurchase agreements as being included in the percentage limit on borrowings imposed on a Fund. "WHEN ISSUED" SECURITIES The Fund may purchase securities on a when issued or delayed delivery basis and may purchase or sell securities on a forward commitment basis. When issued or delayed delivery transactions arise when securities are purchased by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of purchase. A forward commitment transaction is an agreement by the Fund to purchase or sell securities at a specified future date. When the Fund engages in when issued and delayed delivery transactions, the Fund relies on the buyer or seller, as the case may be, to consummate the sale. Failure to do so may result in the Fund missing the opportunity to obtain a price or yield considered to be advantageous. When issued and delayed delivery transactions may be expected to occur a month or more before delivery is due. However, no payment or delivery is made by the Fund until it receives payment or delivery from the other party to the transaction. The Securities and Exchange Commission has established certain requirements to assure that the Fund is able to meet its obligations under these contracts; for example, a separate account of liquid assets equal to the value of such purchase commitments may be maintained until payment is made. When issued and delayed delivery agreements are subject to risks from changes in value based upon changes in the level of interest rates and other market factors, both before and after delivery. The Fund does not accrue any income on such securities or currencies prior to their delivery. To the extent the Fund engages in when issued and delayed delivery transactions, it will do so for the purpose of acquiring portfolio securities consistent with its investment objectives and policies and not for the purpose of investment leverage. The Fund currently does not intend to invest more than 5% of its assets in when issued or delayed delivery transactions. CERTIFICATE OF RESOLUTIONS INSTRUCTIONS: Please fill in all information requested. Any change in the information must be made by a new Certificate of Resolutions. 1. VOTED: That STATE STREET BANK AND TRUST COMPANY, Boston, Massachusetts ("State Street"), its successors or assigns, be and hereby is designated a depository of this corporation or business trust, and is authorized and directed to pay and to charge to the account of this corporation or business trust without limit as to amount and without inquiry as to circumstance of issue or disposition of the proceeds, even if drawn or endorsed to any signing or endorsing officer or other officer of this corporation or business trust or tendered in payment of the individual obligation of any such officer or for his credit or for deposit to his personal account, any and all checks, drafts, notes, bills of exchange, or other orders for the payment of money upon State Street, its successors or assigns, or payable at the office thereof and signed on behalf of this corporation or business trust by any ------------ of its following officers, to wit (insert titles of officers rather than their names): --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 2. VOTED: That ---------------------------- is hereby authorized from time to (Title) time (a) to complete and execute on behalf of this corporation or business trust one or more applications issued by Keystone Liquid Trust substantially in the form attached to its current prospectus and (b) to designate the bank and account referred to under Paragraph F-2, TELEPHONE REDEMPTIONS of such application. 3. VOTED: That the preceding votes shall remain in full force and effect until terminated by a subsequent vote and until written notice signed by the Secretary (Clerk) of this corporation or business trust of such subsequent vote is delivered in the case of Vote 1 to State Street and in the case of Vote 2 to Keystone Liquid Trust. I, ------------------------------, (Secretary) (Clerk) of -------------------- -------------- , a corporation or business trust organized under the laws of the State of --------------------------------------------------------------- , do hereby certify that the above votes were duly adopted by the Board of Directors or Trustees of said corporation or business trust on the ----------- day of -------------------- 19 --------, in conformity with its Charter (or Trust Agreement) and By-Laws and are in full force and effect. I further certify that the following persons are authorized to act in accordance with the foregoing vote, that the signatures set opposite their names are their true and correct signatures and that they have been duly elected or appointed to the offices in this corporation or business trust, if any, set opposite their names: - ----------------------------- ----------------------- ----------------------- Name Signature Title - ----------------------------- ----------------------- ----------------------- Name Signature Title In witness whereof, I hereunto set my hand and the seal of said corporation or business trust this --------------------------------------------- day of --------------------------- 19 -------- . *Confirmed - --------------------------------------- ------------------------------------- Secretary Clerk - --------------------------------------- (Title) *If the Secretary, Clerk or other recording officer is authorized to act by the above resolutions, this certificate must be signed by another officer. KEYSTONE FUND FAMILY Quality Bond Fund (B-1) Diversified Bond Fund (B-2) High Income Bond Fund (B-4) Balanced Fund (K-1) Strategic Growth Fund (K-2) Growth and Income Fund (S-1) Mid-Cap Growth Fund (S-3) Small Company Growth Fund (S-4) International Fund Precious Metals Holdings Tax Free Fund Tax Exempt Trust Liquid Trust [LOGO] KEYSTONE INVESMENTS Keystone Investment Distributors Company 200 Berkeley Street Boston, Massachusetts 02116-5034 KLT-P 10/95 [Recycle Logo] KEYSTONE LIQUID TRUST [LOGO] PROSPECTUS AND APPLICATION KEYSTONE LIQUID TRUST PART B STATEMENT OF ADDITIONAL INFORMATION STATEMENT OF ADDITIONAL INFORMATION KEYSTONE LIQUID TRUST OCTOBER 30, 1995 This statement of additional information is not a prospectus, but relates to, and should be read in conjunction with, the prospectus of Keystone Liquid Trust (the "Fund") dated October 30, 1995. A copy of the prospectus may be obtained from Keystone Investment Distributors Company (formerly named Keystone Distributors, Inc.) (the "Principal Underwriter"), the Fund's principal underwriter, 200 Berkeley Street, Boston, MA 02116-5034. - ------------------------------------------------------------------------------- TABLE OF CONTENTS - ------------------------------------------------------------------------------- Page The Fund's Objective and Policies 2 Investment Restrictions 2 Valuation and Redemption of Securities 4 Distributions and Taxes 4 Yield Quotations 5 Sales Charges 6 Distribution Plans 9 Trustees and Officers 12 Declaration of Trust 16 Investment Manager 17 Investment Adviser 20 Principal Underwriter 21 Brokerage 22 Additional Information 24 Appendix A-1 Financial Statements F-1 Independent Auditors' Report F-13 - ------------------------------------------------------------------------------- THE FUND'S OBJECTIVE AND POLICIES - ------------------------------------------------------------------------------- The Fund's investment objective is to provide shareholders with high current income from short-term money market instruments while emphasizing preservation of capital and maintaining excellent liquidity. The Fund pursues this objective by investing in securities maturing in 397 days or less. See the Appendix to this statement of additional information for descriptions of instruments in which the Fund may invest. - ------------------------------------------------------------------------------- INVESTMENT RESTRICTIONS - ------------------------------------------------------------------------------- None of the restrictions enumerated below may be changed without a vote of the holders of a majority, as defined in the Investment Company Act of 1940 (the "1940 Act"), of the Fund's outstanding shares. The Fund will not do the following: (1) invest more than 25% of its assets in the securities of issuers in any single industry, exclusive of securities issued by banks or securities issued or guaranteed by the United States ("U.S.") government, its agencies or instrumentalities; (2) invest more than 5% of its assets in the securities of any one issuer, including repurchase agreements with any one bank or dealer, exclusive of securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities; (3) invest in more than 10% of the outstanding securities of any one issuer, exclusive of securities issued or guaranteed by the U.S. government, its agencies or instrumentalities; (4) borrow money, except that, in an aggregate amount not to exceed one-third of the Fund's assets, including the amount borrowed, the Fund may (a) borrow money from banks on a temporary basis; or (b) enter into reverse repurchase agreements; amounts borrowed shall be used exclusively to facilitate the orderly maturation and sale of portfolio securities during any periods of abnormally heavy redemption requests, if they should occur; (5) pledge, hypothecate or in any manner transfer as security for indebtedness any securities owned or held by the Fund, except as may be necessary in connection with any borrowing mentioned above and in an aggregate amount not to exceed 15% of the Fund's assets; (6) make loans, provided that the Fund may purchase money market securities or enter into repurchase agreements; (7) enter into repurchase agreements if, as a result thereof, more than 10% of the Fund's assets would be subject to repurchase agreements maturing in more than seven days; (8) make investments for the purpose of exercising control over any issuer; (9) purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization; (10) invest in real estate, other than money market securities secured by real estate or interests therein, or money market securities issued by companies which invest in real estate or interests therein, commodities or commodity contracts, interests in oil, gas or other mineral exploration or development programs; except that the Fund may engage in currency or other financial futures contracts and related options transactions; (11) purchase any securities on margin; (12) make short sales of securities or maintain a short position or write, purchase or sell puts, calls, straddles, spreads or combinations thereof; (13) invest in securities of issuers, other than agencies and instrumentalities of the U.S. Government, having a record, together with predecessors, of less than three years of continuous operation if more than 5% of the Fund's assets would be invested in such securities; (14) purchase or retain securities of an issuer if those officers or Trustees of the Fund or Keystone who individually own more than 1/2% of the outstanding securities of such issuer, together own more than 5% of the securities of such issuer; and (15) act as an underwriter of securities. In order to comply with regulations adopted by the Securities and Exchange Commission relating to money market funds, the Fund will apply the 5% limit of assets invested in the securities of any one issuer, set forth in the third investment restriction above, to 100% of the Fund's assets. The Fund intends to follow policies of the Securities and Exchange Commission as they are adopted from time to time with respect to illiquid securities, including, at this time (1) treating as illiquid securities which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Fund has valued such securities on its books and (2) limiting its holdings of such securities to less than 10% of net assets. If a percentage limit is satisfied at the time of investment or borrowing, a later increase or decrease resulting from a change in the value of a security or a decrease in Fund assets is not a violation of the limit. While not a fundamental policy of the Fund, and in order to maintain its registration in one state, the Fund will not pledge or hypothecate more than 10% of its assets. - ------------------------------------------------------------------------------- VALUATION AND REDEMPTION OF SECURITIES - ------------------------------------------------------------------------------- Current value for the Fund's portfolio securities is determined in the following manner: 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 and money market investments maturing in more than sixty days for which market quotations are readily available are valued at current market value. The money market securities in which the Fund invests are traded primarily in the over-the-counter market and are valued at the mean between most recent bid and asked prices or yield equivalent as obtained from dealers that make markets in such securities. Investments for which market quotations are not readily available, or for which the markets establishing the most recent bid and asked prices are closed or inactive, are valued at fair value as determined pursuant to procedures established in good faith by the Fund's Board of Trustees. The Fund has obligated itself to redeem for cash all shares presented for redemption by any one shareholder in any 90-day period up to the lesser of $250,000 or 1% of the Fund's net assets at the beginning of such period. - ------------------------------------------------------------------------------- DISTRIBUTIONS AND TAXES - ------------------------------------------------------------------------------- Net income of the Fund (net investment income plus realized and unrealized gain (loss) on investments) is determined as of the close of trading on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time for the purpose of pricing Fund shares) on each day that the Exchange is open for trading (or at such other times as the Trustees may determine). The net income so determined is thereupon declared as a dividend. Dividends are distributed on the last business day of each month in the form of additional, full and fractional shares at the rate of one share for each $1.00 distributed or, at the election of the shareholder, in cash. - ------------------------------------------------------------------------------- YIELD QUOTATIONS - ------------------------------------------------------------------------------- The current yield of each class of the Fund, as it appears here and as it may appear from time to time in advertisements, is calculated by determining the net change exclusive of capital changes (all realized and unrealized gains and losses) in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, is subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then multiplying the base period return by (365/7) and carrying the resulting current yield figure to the nearest hundredth of one percent. The determination of net change in account value reflects the value of additional shares purchased with the dividends from the original share and dividends declared on both the original share and any such additional shares and all fees charged to shareholder accounts in proportion to the length of the base period and the average account size of a class. If realized and unrealized gains and losses were included in the calculation of the current yield, the current yield of a class of the Fund might vary materially from that reported in advertisements. For the seven day period ended June 30, 1995, the current yields of Class A, Class B and Class C shares were 4.88%, 3.87% and 3.88%, respectively. In addition to the current yield of a class, its effective yield may appear, from time to time, in advertisements. The effective yield will be calculated by compounding the unannualized base period return by adding 1, raising the sum to a power equal to 365 divided by 7, subtracting 1 from the result and carrying the resulting effective yield figure to the nearest hundredth of one percent. For the seven day period ended June 30, 1995, the effective yields of Class A, Class B and Class C shares were 5.00%, 3.94% and 3.96%, respectively. The current and effective yields, as quoted in such advertisements, will not be based on information as of a date more than fourteen days prior to the date of their publication. Each yield will vary depending on market conditions. Principal is not insured. Each yield also depends on the quality, maturity and type of instruments held in the Fund and operating expenses. The advertisements will include, among other things, the length of and the date of the last day in the base period used in computing the quotation. The yield of any investment is generally a function of quality and maturity, type of investment and operating expenses. The current yield of a class of the Fund will fluctuate from time to time and is not necessarily representative of future results. Current yield information is useful in reviewing the Fund's performance, but because current yield will fluctuate, such information may not provide a basis for comparison with bank deposits or other investments that pay a fixed yield for a stated period of time. An investor's principal is not guaranteed by the Fund. - ------------------------------------------------------------------------------- SALES CHARGES - ------------------------------------------------------------------------------- GENERAL Generally, the Fund offers three classes of shares. Class A shares are offered at net asset value without a sales charge ("No Load Option"). Class B shares purchased on or after June 1, 1995 are subject to a contingent deferred sales charge if redeemed during the 72 month period commencing with and including the month of purchase. Class B shares purchased prior to June 1, 1995 are subject to a contingent deferred sales charge upon redemption during the four calendar years following the year of purchase ("Back End Load Option"). Class B shares purchased on or after June 1, 1995 that have been outstanding eight years from and including the month of purchase will automatically convert to Class A shares without the imposition of a sales charge or exchange fee. Class B shares purchased prior to June 1, 1995 that have been outstanding during seven calendar years will similarly convert to Class A shares. (Conversion of Class B shares represented by stock certificates will require the return of the stock certificates to Keystone Investor Resource Center, Inc., the Fund's transfer and dividend disbursing agent ("KIRC").) Class B shares purchased on or after June 1, 1995 cannot be exchanged for Keystone Capital Preservation and Income Fund Class B shares during the 24 month period commencing with and including the month of purchase. Class C shares are sold subject to a contingent deferred sales charge payable upon redemption within one year after purchase ("Level Load Option"). Class C shares are available only through dealers who have entered into special distribution agreements with the Principal Underwriter. The prospectus contains a general description of how investors may buy shares of the Fund and a description of applicable contingent deferred sales charges. CONTINGENT DEFERRED SALES CHARGE In order to reimburse the Fund for certain expenses relating to the sale of its shares, a contingent deferred sales charge is imposed at the time of redemption of certain Fund shares (other than Class A shares), as follows: CLASS B SHARES With respect to Class B shares purchased on or after June 1, 1995, the Fund, with certain exceptions, will impose a deferred sales charge as a percentage of the lesser of net asset value or net cost of such Class B shares redeemed during succeeding twelve-month periods as follows: 5% during the first twelve month period; 4% during the second twelve month period; 3% during the third twelve month period; 3% during the fourth twelve month period; 2% during the fifth twelve month period; and 1% during the sixth twelve month period. No deferred sales charge is imposed on amounts redeemed thereafter. With respect to Class B shares sold prior to June 1, 1995, the Fund, with certain exceptions, will impose a deferred sales charge of 3.00% on shares redeemed during the calendar year of purchase and during the first calendar year after purchase; 2.00% on shares redeemed during the second calendar year after purchase; and 1.00% on shares redeemed during the third calendar year after purchase. No deferred sales charge is imposed on amounts redeemed thereafter. When imposed, the deferred sales charge is deducted from the redemption proceeds otherwise payable to you. The deferred sales charge is retained by the Principal Underwriter. Amounts received by the Principal Underwriter under the Class B Distribution Plans are reduced by deferred sales charges retained by the Principal Underwriter. See "Calculation of Contingent Deferred Sales Charge" below. CLASS C SHARES With certain exceptions, the Fund will impose a deferred sales charge of 1% on shares redeemed within one year after the date of purchase. No deferred sales charge is imposed on amounts redeemed thereafter. When imposed, the deferred sales charge is deducted from the redemption proceeds otherwise payable to you. The deferred sales charge is retained by the Principal Underwriter. See "Calculation of Contingent Deferred Sales Charge" below. CALCULATION OF CONTINGENT DEFERRED SALES CHARGE Any contingent deferred sales charge imposed upon the redemption of Class B or Class C shares is a percentage of the lesser of (1) the net asset value of the shares redeemed or (2) the net cost of such shares. No contingent deferred sales charge is imposed when you redeem amounts derived from (1) increases in the value of your account above the net cost of such shares; (2) certain shares with respect to which the Fund did not pay a commission on issuance, including shares acquired through reinvestment of dividend income and capital gains distributions; (3) Class C shares held during more than one year from date of purchase; or (4) Class B shares held during more than four consecutive calendar years or more than 72 months, as the case may be. Upon request for redemption, shares not subject to the contingent deferred sales charge will be redeemed first. Thereafter, shares held the longest will be the first to be redeemed. There is no contingent deferred sales charge when the shares of a class are exchanged for the shares of the same class of another Keystone America Fund. Moreover, when shares of one such class of a fund have been exchanged for shares of another such class of a fund, the calendar year of the purchase of the shares of the fund exchanged into is assumed to be the year shares tendered for exchange were originally purchased. WAIVER OF DEFERRED SALES CHARGE No contingent deferred sales charge is imposed on a redemption of shares of the Fund in the event of (1) death or disability of the shareholder; (2) a lump-sum distribution from a benefit plan qualified under the Employee Retirement Income Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA plans if the shareholder is at least 59 1/2 years old; (4) involuntary redemptions of accounts having an aggregate net asset value of less than $1,000; (5) automatic withdrawals under an automatic withdrawal plan of up to 1 1/2% per month of the shareholder's initial account balance; (6) withdrawals consisting of loan proceeds to a retirement plan participant; (7) financial hardship withdrawals made by a retirement plan participant; or (8) withdrawals consisting of returns of excess contributions or excess deferral amounts made to a retirement plan participant. - ------------------------------------------------------------------------------- DISTRIBUTION PLANS - ------------------------------------------------------------------------------- Rule 12b-1 under the 1940 Act permits investment companies, such as the Fund, to use their assets to bear expenses of distributing their shares if they comply with various conditions, including adoption of a distribution plan containing certain provisions set forth in Rule 12b-1. The Fund's Class A, B and C Distribution Plans have been approved by the Fund's Board of Trustees, including a majority of the Trustees who were not interested persons of the Fund as defined in the 1940 Act ("Independent Trustees") and the Trustees who had no direct or indirect financial interest in the Distribution Plans or any agreement related thereto (the "Rule 12b-1 Trustees" who are the same as the Independent Trustees). The National Association of Securities Dealers, Inc. ("NASD") limits the amount that the Fund may pay annually in distribution costs for sale of its shares and shareholder service fees. The rule limits annual expenditures to 1% of the aggregate average daily net asset value of its shares, of which 0.75% may be used to pay such distribution costs and 0.25% may be used to pay shareholder service fees. NASD rules limit the aggregate amount that the Fund may pay for such distribution costs to 6.25% of gross share sales since the inception of the 12b-1 Plan, plus interest at the prime rate plus 1% on such amounts (less any contingent deferred sales charges paid by shareholders to the Principal Underwriter). CLASS A DISTRIBUTION PLAN The Class A Distribution Plan provides that the Fund may expend daily amounts at an annual rate, which is currently limited to up to 0.25% of the Fund's average daily net asset value attributable to Class A shares, to finance any activity that is primarily intended to result in the sale of Class A shares, including without limitation, expenditures consisting of payments to a principal underwriter of the Fund (currently the Principal Underwriter) to enable the Principal Underwriter to pay or to have paid to others who sell Class A shares a service or other fee, at such intervals as the Principal Underwriter may determine, in respect of Class A shares maintained by such recipients outstanding on the books of the Fund for specified periods. Amounts paid by the Fund 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 net asset value of Class A shares maintained by such recipients outstanding on the books of the Fund for specified periods. CLASS B DISTRIBUTION PLANS The Fund has adopted Distribution Plans for its Class B shares that provide that the Fund may expend daily amounts at an annual rate of up to 1.00% of the Fund's average daily net asset value attributable to Class B shares to finance any activity that is primarily intended to result in the sale of Class B shares, including, without limitation, expenditures consisting of payments to a principal underwriter of the Fund (currently the Principal Underwriter) (1) to enable the Principal Underwriter to pay to others (dealers) commissions in respect of Class B shares since inception of the Distribution Plan; and (2) to enable the Principal Underwriter to pay or to have paid to others a service fee, at such intervals as the Principal Underwriter may determine, in respect of Class B shares previously maintained by such recipients outstanding on the books of the Fund for specified periods. The Principal Underwriter generally reallows to brokers or others a commission 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 receives service fees at an annual rate of 0.25% of the average daily net asset value of such Class B share maintained by the recipient outstanding on the books of the Fund for specified periods. In connection with financing its distribution costs, including commission advances to dealers and others, the Principal Underwriter has sold to a financial institution substantially all of its 12b-1 fee collection rights and contingent deferred sales charge collection rights in respect of Class B shares sold during the two-year period commencing approximately June 1, 1995. The Fund has agreed not to reduce the rate of payment of 12b-1 fees in respect of such Class B shares unless it terminates such shares' Distribution Plan completely. If it terminates such Distribution Plan, the Fund may be subject to possible adverse distribution consequences. The Principal Underwriter intends, but is not obligated, to continue to pay or accrue distribution charges incurred in connection with each Class B Distribution Plan that exceed current annual payments permitted to be received by the Principal Underwriter from the Fund. The Principal Underwriter intends to seek full payment of such charges from the Fund (together with annual interest thereon at the prime rate plus one percent) at such time in the future as, and to the extent that, payment thereof by the Fund would be within the permitted limits. If the Fund's Independent Trustees authorize such payments, the effect would be to extend the period of time during which the Fund incurs the maximum amount of costs allowed by a Class B Distribution Plan. If a Class B Distribution Plan is terminated, the Principal Underwriter will ask the Independent Trustees to take whatever action they deem appropriate under the circumstances with respect to payment of such amounts. CLASS C DISTRIBUTION PLAN The Class C Distribution Plan provides that the Fund may expend daily amounts at an annual rate of up to 1.00% of the Fund's average daily net asset value attributable to Class C shares to finance any activity that is primarily intended to result in the sale of Class C shares, including, without limitation, expenditures consisting of payments to a principal underwriter of the Fund (currently the Principal Underwriter) (1) to enable the Principal Underwriter to pay to others (dealers) commissions in respect of Class C shares since inception of the Distribution Plan; and (2) to enable the Principal Underwriter to pay or to have paid to others a service fee, at such intervals as the Principal Underwriter may determine, in respect of Class C shares maintained by such recipients outstanding on the books of the Fund for specified periods. The Principal Underwriter generally reallows to brokers or others a commission 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 sold. Beginning approximately fifteen months after purchase, brokers or others receive a commission at an annual rate of 0.75% (subject to NASD rules) plus service fees at the annual rate of 0.25% of the average daily net asset value of each Class C share maintained by the recipients outstanding on the books of the Fund for specified periods. DISTRIBUTION PLANS - GENERAL Each of the Distribution Plans may be terminated at any time by vote of the Fund's Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting shares of the respective class of the Fund. Any change in a Distribution Plan that would materially increase the distribution expenses provided for in the Distribution Plan requires shareholder approval. Otherwise, the Distribution Plans may be amended by the Trustees, including the Rule 12b-1 Trustees. The total amounts paid by the Fund under the foregoing arrangements may not exceed the maximum Distribution Plan limit specified above, and the amounts and purposes of expenditures under a Distribution Plan must be reported to the Rule 12b-1 Trustees quarterly. The Rule 12b-1 Trustees may require or approve changes in the implementation or operation of a Distribution Plan, and may also require that total expenditures by the Fund under a Distribution Plan be kept within limits lower than the maximum amount permitted by a Distribution Plan as stated above. During the year ended June 30, 1995, the Fund paid the Principal Underwriter $343,747, $119,037 and $70,834 in Distribution Plan fees for Class A, Class B and Class C shares, respectively, which represented 0.09%, 1.00% and 1.00%, respectively, of the average net assets of each Class. Whether any expenditure under a Distribution Plan is subject to a state expense limit will depend upon the nature of the expenditure and the terms of the state law, regulation or order imposing the limit. A portion of the Fund's Distribution Plan expenses may be includable in the Fund's total operating expenses for purposes of determining compliance with state expense limits. While a Distribution Plan is in effect, the Fund will be required to commit the selection and nomination of candidates for Independent Trustees to the discretion of the Independent Trustees. The Independent Trustees of the Fund have determined that the sales of the Fund's shares resulting from payments under the Distribution Plans have benefited the Fund. - ------------------------------------------------------------------------------- TRUSTEES AND OFFICERS - ------------------------------------------------------------------------------- The Trustees and officers of the Fund, together with their principal occupations and some of their affiliations over the last five years, are listed below: *ALBERT H. ELFNER, III: President, Chief Executive Officer and Trustee of the Fund; Chairman of the Board, President, Director and Chief Executive Officer of Keystone Investments, Inc. (formerly named Keystone Group, Inc.) ("Keystone Investments"); President, Chief Executive Officer and Trustee or Director of all 30 funds in the Keystone Investments Family of Funds; Director and Chairman of the Board, Chief Executive Officer and Vice Chairman of Keystone Investment Management Company (formerly named Keystone Custodian Funds, Inc.) ("Keystone"); Chairman of the Board and Director of Keystone Institutional Company, Inc. ("Keystone Institutional") (formerly named Keystone Investment Management Corporation), and Keystone Fixed Income Advisors ("KFIA"); Director, Chairman of the Board, Chief Executive Officer and President of Keystone Management, Inc. ("Keystone Management"), Keystone Software Inc. ("Keystone Software"); Director and President of Hartwell Keystone Advisers, Inc. ("Hartwell Keystone"), Keystone Asset Corporation, Keystone Capital Corporation, and Keystone Trust Company; Director of the Principal Underwriter, KIRC, and Fiduciary Investment Company, Inc. ("FICO"); Director and Vice President of Robert Van Partners, Inc.; Director of Boston Children's Services Association; Trustee of Anatolia College, Middlesex School, and Middlebury College; Member, Board of Governors, New England Medical Center; and former Trustee of Neworld Bank. FREDERICK AMLING: Trustee of the Fund; Trustee or Director of all other Keystone Investments Funds; Professor, Finance Department, George Washington University; President, Amling & Company (investment advice); Member, Board of Advisers, Credito Emilano (banking); and former Economics and Financial Consultant, Riggs National Bank. CHARLES A. AUSTIN III: Trustee of the Fund; Trustee or Director of all other Keystone Investments Funds; Investment Counselor to Appleton Partners, Inc.; former Managing Director, Seaward Management Corporation (investment advice) and former Director, Executive Vice President and Treasurer, State Street Research & Management Company (investment advice). *GEORGE S. BISSELL: Chairman of the Board and Trustee of the Fund; Director of Keystone Investments; Chairman of the Board and Trustee or Director of all other Keystone Investments Funds; Director and Chairman of the Board of Hartwell Keystone; Chairman of the Board and Trustee of Anatolia College; Trustee of University Hospital (and Chairman of its Investment Committee); former Chairman of the Board and Chief Executive Officer of Keystone Investments; and former Chief Executive Officer of the Fund. EDWIN D. CAMPBELL: Trustee of the Fund; Trustee or Director of all other Keystone Investments Funds; Executive Director, Coalition of Essential Schools, Brown University; Director and former Executive Vice President, National Alliance of Business; former Vice President, Educational Testing Services; and former Dean, School of Business, Adelphi University. CHARLES F. CHAPIN: Trustee of the Fund; Trustee or Director of all other Keystone Investments Funds; former Group Vice President, Textron Corp.; and former Director, Peoples Bank (Charlotte, N.C). LEROY KEITH, JR.: Trustee of the Fund; Trustee or Director of all other Keystone Investments Funds; Director of Phoenix Total Return Fund and Equifax, Inc.; Trustee of Phoenix Series Fund, Phoenix Multi-Portfolio Fund and The Phoenix Big Edge Series Fund; and former President, Morehouse College. K. DUN GIFFORD: Trustee of the Fund; Trustee or Director of all other Keystone Investments Funds; Chairman of the Board, Director and Executive Vice President, The London Harness Company; Managing Partner, Roscommon Capital Corp.; Trustee, Cambridge College; Chairman Emeritus and Director, American Institute of Food and Wine; Chief Executive Officer, Gifford Gifts of Fine Foods; Chairman, Gifford, Drescher & Associates (environmental consulting); President, Oldways Preservation and Exchange Trust (education); and former Director, Keystone Investments and Keystone. F. RAY KEYSER, JR.: Trustee of the Fund; Trustee or Director of all other Keystone Investments Funds; Of Counsel, Keyser, Crowley & Meub, P.C.; Member, Governor's (VT) Council of Economic Advisers; Chairman of the Board and Director, Central Vermont Public Service Corporation and Hitchcock Clinic; Director, Vermont Yankee Nuclear Power Corporation, Vermont Electric Power Company, Inc., Grand Trunk Corporation, Central Vermont Railway, Inc., S.K.I. Ltd., Sherburne Corporation, Union Mutual Fire Insurance Company, New England Guaranty Insurance Company, Inc. and the Investment Company Institute; former Governor of Vermont; former Director and President, Associated Industries of Vermont; former Chairman and President, Vermont Marble Company; former Director of Keystone; and former Director and Chairman of the Board, Green Mountain Bank. DAVID M. RICHARDSON: Trustee of the Fund; Trustee or Director of all other Keystone Investments Funds; Executive Vice President, DHR International, Inc. (executive recruitment); former Senior Vice President, Boyden International Inc. (executive recruitment); and Director, Commerce and Industry Association of New Jersey, 411 International, Inc. and J & M Cumming Paper Co. RICHARD J. SHIMA: Trustee of the Fund; Trustee or Director of all other Keystone Investments Funds; Chairman, Environmental Warranty, Inc., and Consultant, Drake Beam Morin, Inc. (executive outplacement); Director of Connecticut Natural Gas Corporation, Trust Company of Connecticut, Hartford Hospital, Old State House Association and Enhanced Financial Services, Inc.; Member, Georgetown College Board of Advisors; Chairman, Board of Trustees, Hartford Graduate Center; Trustee, Kingswood-Oxford School and Greater Hartford YMCA; former Director, Executive Vice President and Vice Chairman of The Travelers Corporation; and former Managing Director of Russell Miller, Inc. ANDREW J. SIMONS: Trustee of the Fund; Trustee or Director of all other Keystone Investments Funds; Partner, Farrell, Fritz, Caemmerer, Cleary, Barnosky & Armentano, P.C.; President, Nassau County Bar Association; former Associate Dean and Professor of Law, St. John's University School of Law. EDWARD F. GODFREY: Senior Vice President of the Fund; Senior Vice President of all other Keystone Investments Funds; Director, Senior Vice President, Chief Financial Officer and Treasurer of Keystone Investments, the Principal Underwriter, Keystone Asset Corporation, Keystone Capital Corporation, Keystone Trust Company; Treasurer of Keystone Institutional, Robert Van Partners, Inc., and FICO; Treasurer and Director of Keystone Management, Keystone Software, and Hartwell Keystone; Vice President and Treasurer of KFIA; and Director of KIRC. JAMES R. McCALL: Senior Vice President of the Fund; Senior Vice President of all other Keystone Investments Funds; and President of Keystone. KEVIN J. MORRISSEY: Treasurer of the Fund; Treasurer of all other Keystone Investments Funds; Vice President of Keystone Investments; Assistant Treasurer of FICO and Keystone; and former Vice President and Treasurer of KIRC. CHRISTOPHER P. CONKEY: Vice President of the Fund; Vice President of certain other Keystone Investments Funds; and Senior Vice President of Keystone. ROSEMARY D. VAN ANTWERP: Senior Vice President and Secretary of the Fund; Senior Vice President and Secretary of all other Keystone Investments Funds; Senior Vice President, General Counsel and Secretary of Keystone; Senior Vice President, General Counsel, Secretary and Director of the Principal Underwriter, Keystone Management and Keystone Software; Senior Vice President and General Counsel of Keystone Institutional; Senior Vice President, General Counsel and Director of FICO and KIRC; Senior Vice President and Secretary of Hartwell Keystone and Robert Van Partners, Inc.; Vice President and Secretary of KFIA; Senior Vice President, General Counsel and Secretary of Keystone Investments, Keystone Asset Corporation, Keystone Capital Corporation and Keystone Trust Company. * This Trustee may be considered an "interested person" within the meaning of the 1940 Act. Mr. Elfner and Mr. Bissell are "interested persons" by virtue of their positions as officers and/or Directors of Keystone Investments and several of its affiliates including Keystone, the Principal Underwriter and KIRC. Mr. Elfner and Mr. Bissell own shares of Keystone Investments. Mr. Elfner is Chairman of the Board, Chief Executive Officer and Director of Keystone Investments. Mr. Bissell is a Director of Keystone Investments. During the fiscal year ended June 30, 1995, no Trustee affiliated with Keystone or any officer received any direct remuneration from the Fund. During this same period the nonaffiliated Trustees received a total of $21,456 in retainers and fees. For the twelve month period ended June 30, 1995, fees paid to Independent Trustees on a complex wide basis were approximately $______. As of July 31, 1995, the Trustees and officers of the Fund beneficially owned less than 1% of the Fund's then outstanding Class A shares and none of the Fund's then outstanding Class B and Class C shares. The address of all Trustees and officers of the Fund and the address of the Fund is 200 Berkeley Street, Boston, Massachusetts 02116-5034. - ------------------------------------------------------------------------------- DECLARATION OF TRUST - ------------------------------------------------------------------------------- The Fund is organized as a Massachusetts business trust established under a Declaration of Trust dated May 22, 1975, as amended and restated on December 1, 1985 pursuant to a First Supplemental Declaration of Trust (the "Declaration of Trust"). The Fund is similar in most respects to a business corporation. The principal distinction between the Fund and a corporation relates to the shareholder liability described below. A copy of the Declaration of Trust is filed as an exhibit to the Registration Statement of which this statement of additional information is a part. This summary is qualified in its entirety by reference to the Declaration of Trust. SHAREHOLDER LIABILITY Pursuant to certain decisions of the Supreme Judicial Court of Massachusetts, shareholders of such a trust may, under certain circumstances, be held personally liable as partners for the obligations of the trust. Even if, however, the Fund were held to be a partnership, the possibility of the shareholders incurring financial loss for that reason appears remote because the Fund's Declaration of Trust contains an express disclaimer of shareholder liability for obligations of the Fund and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Fund or the Trustees. In addition, the Declaration of Trust provides for indemnification out of the trust property for any shareholder held personally liable for the obligations of the Fund. VOTING RIGHTS Shareholders elected Trustees at a meeting held on July 27, 1993. No further meetings of shareholders for the purpose of electing Trustees will be held, except where required by law, unless and until such time as less than a majority of the Trustees holding office have been elected by shareholders. At such time, the Trustees then in office will call a shareholders' meeting for election of Trustees. Except as set forth above or otherwise required by law, the Trustees shall continue to hold office, and may appoint successor Trustees. Any Trustee may be removed from office (1) at any time by two-thirds vote of the Trustees; (2) by a majority vote of Trustees when a Trustee becomes mentally or physically incapacitated; and (3) at a special meeting of shareholders by a two-thirds vote of the outstanding shares. Any Trustee may also voluntarily resign from office. Voting rights are not cumulative. The holders of more than 50% of the shares voting in the election of Trustees can, if they choose to do so, elect all of the Trustees of the Fund, in which event the holders of the remaining shares will be unable to elect any person as a Trustee. Under the Declaration of Trust the Fund does not hold annual meetings. Shares are entitled to one vote per share. Shares generally vote together as one class on all matters. Classes of shares have equal voting rights except that each class of shares has exclusive voting rights with respect to its Distribution Plan. No amendment may be made to the Declaration of Trust, however, that adversely affects any class of shares without the approval of a majority of the shares of that class. Shares have non-cumulative voting rights. LIMITATIONS OF TRUSTEES' LIABILITY The Declaration of Trust provides that a Trustee shall be liable only for his own willful defaults and, if reasonable care has been exercised in the selection of officers, agents, employees or investment advisers, shall not be liable for any neglect or wrongdoing of any such person; provided, however, that nothing in the Declaration of Trust shall protect a Trustee against any liability for his willful misfeasance, bad faith, gross negligence or reckless disregard of his duties. - ------------------------------------------------------------------------------- INVESTMENT MANAGER - ------------------------------------------------------------------------------- Subject to the general supervision of the Fund's Board of Trustees, Keystone Management, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034, serves as investment manager to the Fund and is responsible for the overall management of the Fund's business and affairs. Keystone Management, organized in 1989, is a wholly-owned subsidiary of Keystone, and its directors and principal executive officers have been affiliated with Keystone, a seasoned investment adviser, for a number of years. Keystone Management also serves as investment manager to each of the funds in the Keystone Fund Family and to certain other funds in the Keystone Investments Family of Funds. Except as otherwise noted below, pursuant to its Management Agreement with the Fund and subject to the supervision of the Fund's Board of Trustees, Keystone Management manages and administers the operation of the Fund, and manages the investment and reinvestment of the Fund's assets in conformity with the Fund's investment objectives and restrictions. The Management Agreement stipulates that Keystone Management shall provide office space, all necessary office facilities, equipment and personnel in connection with its services under the Management Agreement and pay or reimburse the Fund for the compensation of Fund officers and Trustees who are affiliated with the investment manager and will pay all expenses of Keystone Management incurred in connection with the provision of its services. All charges and expenses other than those specifically referred to as being borne by Keystone Management will be paid by the Fund, including, but not limited to, custodian charges and expenses; bookkeeping and auditors' charges and expenses; transfer agent charges and expenses; fees of Independent Trustees; brokerage commissions, brokers' fees and expenses; issue and transfer taxes; costs and expenses under Distribution Plans; taxes and trust fees payable to governmental agencies; the cost of share certificates; fees and expenses of the registration and qualification of the Fund and its shares with the Securities and Exchange Commission (sometimes referred to herein as the "SEC" or the "Commission") or under state or other securities laws; expenses of preparing, printing and mailing prospectuses, statements of additional information, notices, reports and proxy materials to shareholders of the Fund; expenses of shareholders' and Trustees' meetings; charges and expenses of legal counsel for the Fund and for the Trustees of the Fund on matters relating to the Fund; charges and expenses of filing annual and other reports with the SEC and other authorities; and all extraordinary charges and expenses of the Fund. The Management Agreement permits Keystone Management to enter into an agreement with Keystone or another investment adviser under which Keystone or such other investment adviser, as investment adviser, will provide substantially all the services to be provided by Keystone Management under the Management Agreement. The Management Agreement also permits Keystone Management to delegate to Keystone or another investment adviser substantially all of the investment manager's rights, duties and obligations under the Agreement. Services performed by Keystone Management include (1) performing research and planning with respect to (a) the Fund's qualification as a regulated investment company under Subchapter M of the Code, (b) tax treatment of the Fund's portfolio investments, (c) tax treatment of special corporate actions (such as reorganizations), (d) state tax matters affecting the Fund, and (e) the Fund's distributions of income and capital gains; (2) preparing the Fund's federal and state tax returns; and (3) providing services to the Fund's shareholders in connection with federal and state taxation and distributions of income and capital gains. The Fund pays Keystone Management a fee for its services at the annual rate of: (1) 0.50% of the average daily value of the net assets of the Fund on the first $500,000,000 of such assets; plus (2) 0.45% of the average daily value of the net assets of the Fund on such assets which exceed $500,000,000 and are less than $1,000,000,000; plus (3) 0.40% of the average daily value of the net assets of the Fund on such assets which are $1,000,000,000 or more. The fee is calculated on a calendar-day basis, accrued as of the close of each business day and paid monthly. As a continuing condition of registration of shares in a state, Keystone Management has agreed to reimburse the Fund annually for certain operating expenses incurred by the Fund in excess of certain percentages of the Fund's average daily net assets. Keystone Management is not required, however, to make such reimbursement to the extent it would result in the Fund's inability to qualify as a regulated investment company under provisions of the Internal Revenue Code. This condition may be modified or eliminated in the future. The Fund is subject to certain state annual expense limitations, the most restrictive of which is as follows: 2.5% of the first $30 million of Fund average net assets; 2.0% of the next $70 million of Fund average net assets; and 1.5% of Fund average net assets over $100 million. Capital charges and certain expenses, including a portion of the Fund's Distribution Plan expenses, are not included in the calculation of the state expense limitation. This limitation may be modified or eliminated in the future. The Management Agreement continues in effect from year to year only if approved at least annually by the Fund's Board of Trustees or by a vote of a majority of the outstanding shares, and such renewal has been approved by the vote of a majority of the Independent Trustees cast in person at a meeting called for the purpose of voting on such approval. The Management Agreement may be terminated, without penalty, on 60 days' written notice by the Fund's Board of Trustees or by a vote of a majority of outstanding shares. The Management Agreement will terminate automatically upon its "assignment" as that term is defined in the 1940 Act. For additional discussion of fees paid to Keystone Management, see "Investment Adviser" below. - ------------------------------------------------------------------------------- INVESTMENT ADVISER - ------------------------------------------------------------------------------- Pursuant to its Management Agreement with the Fund, Keystone Management has delegated its investment management functions, except for certain administrative and management services, to Keystone and has entered into an Advisory Agreement, with Keystone under which Keystone will provide investment advisory and management services to the Fund. Keystone, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034, has provided investment advisory and management services to investment companies and private accounts since it was organized in 1932. Keystone is a wholly-owned subsidiary of Keystone Investments located at 200 Berkeley Street, Boston, Massachusetts 02116-5034. Keystone Investments is a corporation predominantly owned by current and former members of management of Keystone and its affiliates. The shares of Keystone Investments common stock beneficially owned by management are held in a number of voting trusts, the trustees of which are George S. Bissell, Albert H. Elfner, III, Edward F. Godfrey and Ralph J. Spuehler, Jr. Keystone Investments provides accounting, bookkeeping, legal, personnel and general corporate services to Keystone Management, Keystone, their affiliates and the Keystone Investments Family of Funds. Pursuant to the Advisory Agreement, Keystone will receive for its services an annual fee representing 85% of the management fee received by Keystone Management under its Management Agreement with the Fund. Pursuant to the Advisory Agreement with Keystone Management and subject to the supervision of the Fund's Board of Trustees, Keystone manages and administers the operations of the Fund, and manages the investment and reinvestment of the Fund's assets in conformity with the Fund's investment objectives and restrictions. The Advisory Agreement stipulates that Keystone shall provide office space, all necessary office facilities, equipment and personnel in connection with its services under the Advisory Agreement and pay or reimburse the Fund for the compensation of Fund officers and Trustees who are affiliated with the investment manager and will pay all expenses of Keystone incurred in connection with the provisions of its services. All charges and expenses other than those specifically referred to as being borne by Keystone will be paid by the Fund, including, but not limited to, custodian charges and expenses; bookkeeping and auditors' charges and expenses; transfer agent charges and expenses; fees of Independent Trustees; brokerage commissions, brokers' fees and expenses; issue and transfer taxes; costs and expenses under the Distribution Plans; taxes and trust fees payable to governmental agencies; the cost of share certificates; fees and expenses of the registration and qualification of the Fund and its shares with the SEC or under state or other securities laws; expenses of preparing, printing and mailing prospectuses, statements of additional information, notices, reports and proxy materials to shareholders of the Fund; expenses of shareholders' and Trustees' meetings; charges and expenses of legal counsel for the Fund and for the Trustees of the Fund on matters relating to the Fund; charges and expenses of filing annual and other reports with the SEC and other authorities; and all extraordinary charges and expenses of the Fund. During the year ended June 30, 1993, the Fund paid or accrued to Keystone Management investment management and administrative fees of $1,050,015, which represented 0.50% of the Fund's average net assets. Of such amount, $892,513 was paid to Keystone for its services to the Fund pursuant to the Advisory Agreement with Keystone Management. During the year ended June 30, 1994, the Fund paid or accrued to Keystone Management investment management and administrative services fees of $1,407,708, which represented 0.50% of the Fund's average net assets. Of such amount paid to Keystone Management, $1,196,552 was paid to Keystone for its services to the Fund. During the year ended June 30, 1995, the Fund paid or accrued to Keystone Management investment management and administrative fees of $1,923,870, which represented 0.50% of the Fund's average net assets. Of such amount, $1,635,290 was paid to Keystone for its services to the Fund pursuant to the Advisory Agreement with Keystone Management. - ------------------------------------------------------------------------------- PRINCIPAL UNDERWRITER - ------------------------------------------------------------------------------- The Fund has entered into Principal Underwriting Agreements, ("Principal Underwriting Agreements") with the Principal Underwriter, a wholly-owned subsidiary of Keystone. The Principal Underwriter, as agent, has agreed to use its best efforts to find purchasers for the shares. The Principal Underwriter may retain and employ representatives to promote distribution of the shares and may obtain orders from brokers, dealers and others, acting as principals, for sales of shares to them. The Principal Underwriting Agreements provide that the Principal Underwriter will bear the expense of preparing, printing and distributing advertising and sales literature and prospectuses used by it. In its capacity as principal underwriter, the Principal Underwriter may receive payments from the Fund pursuant to the Fund's Distribution Plans. All subscriptions and sales of shares by the Principal Underwriter are at the offering price of the shares in accordance with the provisions of the Declaration of Trust, By-Laws, the current prospectus and statement of additional information of the Fund. All orders are subject to acceptance by the Fund and the Fund reserves the right in its sole discretion to reject any order received. Under the Principal Underwriting Agreements, the Fund is not liable to anyone for failure to accept any order. The Principal Underwriter, as agent, currently offers shares of the Fund to investors in those states in which the shares of the Fund are qualified and in which the Principal Underwriter is qualified as a broker-dealer. The Principal Underwriting Agreements provide that the Principal Underwriter may accept orders for shares of the Fund at net asset value since no sales commission or load is charged to the investor. From time to time, if in the Principal Underwriter's judgment it could benefit sales of Fund shares, the Principal Underwriter may use its discretion in providing to selected dealers promotional materials and selling aids including, but not limited to, personal computers, related software and Fund data files. The Principal Underwriting Agreements provide that they will remain in effect as long as their terms and continuance are approved by a majority of the Fund's Independent Trustees at least annually at a meeting called for that purpose, and if their continuance is approved annually by vote of a majority of Trustees, or by vote of a majority of the outstanding shares. The Principal Underwriting Agreement may be terminated, without penalty, on 60 days' written notice by the Fund's Board of Trustees or by a vote of a majority of outstanding shares. The Principal Underwriting Agreement will terminate automatically upon its "assignment" as that term is defined in the 1940 Act. - ------------------------------------------------------------------------------- BROKERAGE - ------------------------------------------------------------------------------- It is the policy of the Fund, in effecting transactions in portfolio securities, to seek best execution of orders at the most favorable prices. The determination of what may constitute best execution and price in the execution of a securities transaction by a broker involves a number of considerations including, without limitation, the overall direct net economic result to the Fund, involving both price paid or received and any commissions and other costs paid, the efficiency with which the transaction is effected, the ability to effect the transaction at all where a large block is involved, the availability of the broker to stand ready to execute potentially difficult transactions in the future and the financial strength and stability of the broker. Management weighs such considerations in determining the overall reasonableness of brokerage commissions paid. Subject to the foregoing, a factor in the selection of brokers is the receipt of research services, such as analyses and reports concerning issuers, industries, securities, economic factors and trends and other statistical and factual information. Any such research and other statistical and factual information provided by brokers to the Fund or Keystone is considered to be in addition to and not in lieu of services required to be performed by Keystone Management under the Management Agreement or Keystone under the Advisory Agreement with Keystone Management. The cost, value and specific application of such information are indeterminable and cannot be practically allocated among the Fund and other clients of Keystone who may indirectly benefit from the availability of such information. Similarly, the Fund may indirectly benefit from information made available as a result of transactions effected for such other clients. The Fund expects that purchases and sales of money market instruments usually will be principal transactions. Money market instruments are normally purchased directly from the issuer or from an underwriter or market maker for the securities. There usually will be no brokerage commissions paid by the Fund for such purchases. Purchases from underwriters will include the underwriting commission or concession, and purchases from dealers serving as market makers will include the spread between the bid and asked prices. Where transactions are made in the over-the-counter market, the Fund will deal with primary market makers unless more favorable prices are otherwise obtainable. The Fund may participate, if and when practicable, in group bidding for the purchase directly from an issuer of certain securities for the Fund's portfolio in order to take advantage of the lower purchase price available to members of such a group. Investment decisions for the Fund are made independently by Keystone Management or Keystone from those of the other funds and investment accounts managed by Keystone Management or Keystone. It may frequently develop that the same investment decision is made for more than one fund. Simultaneous transactions are inevitable when the same security is suitable for the investment objective of more than one account. When two or more funds or accounts are engaged in the purchase or sale of the same security, the transactions are allocated as to amount in accordance with a formula which is equitable to each fund or account. It is recognized that in some cases this system could have a detrimental effect on the price or volume of the security as far as the Fund is concerned. In other cases, however, it is believed that the ability of the Fund to participate in volume transactions will produce better executions for the Fund. The policy of the Fund with respect to brokerage is and will be reviewed by the Fund's Board of Trustees from time to time. Because of the possibility of further regulatory developments affecting the securities exchanges and brokerage practices generally, the foregoing practices may be changed, modified or eliminated. In no instance will portfolio securities be purchased from or sold to Keystone Management, Keystone, the Principal Underwriter or any of their "affiliated persons", as said term is defined in the 1940 Act and rules and regulations issued thereunder. The Fund paid no brokerage commissions during its last three fiscal years. - ------------------------------------------------------------------------------- ADDITIONAL INFORMATION - ------------------------------------------------------------------------------- State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, is the custodian of all securities and cash of the Fund (the "Custodian"). The Custodian performs no investment management functions for the Fund, but, in addition to its custodial services, is responsible for accounting and related recordkeeping on behalf of the Fund. KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110, Certified Public Accountants, are the independent auditors for the Fund. KIRC, located at 101 Main Street, Cambridge, Massachusetts 02142-1519, is a wholly-owned subsidiary of Keystone and acts as transfer agent and dividend disbursing agent for the Fund. Except as otherwise stated in its prospectus or required by law, the Fund reserves the right to change the terms of the offer stated in its prospectus without shareholder approval, including the right to impose or change fees for services provided. No dealer, salesman or other person is authorized to give any information or to make any representation not contained in the Fund's prospectus, this statement of additional information or in supplemental sales literature issued by the Fund or the Principal Underwriter, and no person is entitled to rely on any information or representation not contained therein. The Fund's prospectus and this statement of additional information omit certain information contained in the registration statement filed with the SEC, which may be obtained from the SEC's principal office in Washington, D.C. upon payment of the fee prescribed by the rules and regulations promulgated by the SEC. As of July 31, 1995, there were no shareholders of record owning 5% or more of the Fund's outstanding Class A shares. As of July 31, 1995, Granville D. Grimes, Charitable Remainder Uni-Trust 7-2, P.O. Box 1035, Decatur, AL 35601 owned 11.075% of the outstanding Class B shares. As of July 31, 1995, Michael Richer, 16 St. James Place, Palm Beach Gardens, FL 33418 owned 6.514% of the outstanding Class C shares; Melinda Frohling, TTEE, U/A DTD 08/02/91, Melinda Frohling Living Trust, 20 Hillsdale Drive, Newport Beach, CA 92660, owned 5.599% of the outstanding Class C shares; David Katz and Thomas Doyle TTS, U/A DTD 08/02/76, Western, Wisconsin Urology SC, PSP Account B, 3203 Stein Blvd., Eau Claire, WI 54701, owned 5.017% of the outstanding Class C shares. - -------------------------------------------------------------------------------- APPENDIX - -------------------------------------------------------------------------------- MONEY MARKET INSTRUMENTS The Fund's investments in commercial paper will consist of issues rated at the time of investment A-1, by Standard & Poor's Corporation ("S&P"), PRIME-1 OR PRIME-2 by Moody's Investors Service, Inc. ("Moody's") or F-1 OR F-2 by Fitch Investors Service, Inc. ("Fitch"). COMMERCIAL PAPER RATINGS STANDARD & POOR'S RATINGS Commercial paper rated A-1 by S&P has the following characteristics: Liquidity ratios are adequate to meet cash requirements. The issuer's long-term senior debt is rated A or better, although in some cases BBB credits may be allowed. The issuer has access to at least two additional channels of borrowing. Basic earnings and cash flow have an upward trend with allowance made for unusual circumstances. Typically, the issuer's industry is well established and the issuer has a strong position within the industry. MOODY'S RATINGS The rating PRIME-1 is the highest commercial paper rating assigned by Moody's. Among the factors considered by Moody's in assigning ratings are the following: (1) evaluation of the management of the issuer; (2) economic evaluation of the issuer's industry or industries and an appraisal of speculative type risks which may be inherent in certain areas; (3) evaluation of the issuer's products in relation to competition and customer acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over a period of ten years; (7) financial strength of a parent company and the relationships which exist with the issuer; and (8) recognition by the management of obligations which may be present or may arise as a result of public preparations to meet such obligations. Relative strength or weakness of the above factors determines how the issuer's commercial paper is rated within various categories. FITCH'S RATINGS The rating F-1 is the highest rating assigned by Fitch. Among the factors considered by Fitch in assigning this rating are: (1) the issuer's liquidity; (2) its standing in the industry; (3) the size of its debt; (4) its ability to service its debt; (5) its profitability; (6) its return on equity; (7) its alternative sources of financing; and (8) its ability to access the capital markets. Analysis of the relative strength or weakness of these factors and others determines whether an issuer's commercial paper is rated F-1. UNITED STATES GOVERNMENT SECURITIES Securities issued or guaranteed by the United States Government include a variety of Treasury securities that differ only in their interest rates, maturities and dates of issuance. Treasury bills have maturities of one year or less. Treasury notes have maturities of one-to-ten years and Treasury bonds generally have maturities of greater than ten years at the date of issuance. Securities issued or guaranteed by the United States Government or its agencies or instrumentalities include direct obligations of the United States Treasury and securities issued or guaranteed by the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Government National Mortgage Association, General Services Administration, Central Bank for Cooperatives, Federal Home Loan Banks, Federal Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Maritime Administration, The Tennessee Valley Authority, District of Columbia Armory Board and Federal National Mortgage Association. Some obligations of United States Government agencies and instrumentalities, such as Treasury bills and Government National Mortgage Association pass-through certificates, are supported by the full faith and credit of the United States; others, such as securities of Federal Home Loan Banks, by the right of the issuer to borrow from the Treasury; still others, such as bonds issued by the Federal National Mortgage Association, a private corporation, are supported only by the credit of the instrumentality. Because the United States Government is not obligated by law to provide support to an instrumentality it sponsors, the Fund will invest in the securities issued by such an instrumentality only when Keystone determines that the credit risk with respect to the instrumentality does not make its securities unsuitable investments. United States Government securities will not include international agencies or instrumentalities in which the United States Government, its agencies or instrumentalities participate, such as the World Bank, the Asian Development Bank or the InterAmerican Development Bank, or issues insured by the Federal Deposit Insurance Corporation. CERTIFICATES OF DEPOSIT Certificates of deposit are receipts issued by a bank in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to the bearer of the receipt on the date specified on the certificate. The certificate usually can be traded in the secondary market prior to maturity. Certificates of deposit will be limited to U.S. dollar-denominated certificates of U.S. banks, including their branches abroad, and of U.S. branches of foreign banks, which are members of the Federal Reserve System or the Federal Deposit Insurance Corporation, and have at least $1 billion in assets as of the date of their most recently published financial statements. The Fund will not acquire time deposits or obligations issued by the International Bank for Reconstruction and Development, the Asian Development Bank or the Inter-American Development Bank. Additionally, the Fund does not currently intend to purchase foreign securities (except to the extent that certificates of deposit of foreign branches of U.S. banks may be deemed foreign securities) or purchase certificates of deposit, bankers' acceptances or other similar obligations issued by foreign banks (except certificates of deposit of certain U.S. branches of foreign banks). BANKERS' ACCEPTANCES Bankers' acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain funds to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then "accepted" by the bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an earning asset or it may be sold in the secondary market at the going rate of discount for a specific maturity. Although maturities for acceptances can be as long as 270 days, most acceptances have maturities of six months or less. Bankers' acceptances acquired by the Fund must have been accepted by U.S. commercial banks, including foreign branches of U.S. commercial banks, having total assets at the time of purchase in excess of $1 billion and must be payable in U.S. dollars. 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 KEYSTONE LIQUID TRUST PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits Item 24(a). FINANCIAL STATEMENTS All financial statements listed below are included in Registrant's Statement of Additional Information. Schedule of Investments June 30, 1995 Financial Highlights Year ended June 30, 1995 Statement of Assets and Liabilities June 30, 1995 Statement of Operations Year ended June 30, 1995 Statements of Changes in Net Assets Two years ended June 30, 1995 Notes to Financial Statements Independent Auditors' Report dated July 28, 1995 Item 24(b) Exhibits (1) A copy of Registrant's Declaration of Trust dated December 1, 1985, as supplemented is filed herewith. (2) A copy of the Registrant's By-Laws, as amended, is filed herewith. (3) Not applicable. (4) A specimen of the security issued by the Fund was filed with Post-Effective Amendment No. 1 to Registration Statement No. 2-51914/811-2521 as Exhibit 24(b)(4) and is incorporated by reference herein. (5)(A) A copy of the Management Agreement between Registrant and Keystone Management, Inc. is filed herewith. (B) A copy of the Advisory Agreement between Keystone Management, Inc. and Keystone Investment Management Company (formerly named Keystone Custodian Funds, Inc.) is filed herewith. (6)(A) Copies of the Principal Underwriting Agreements between Registrant and Keystone Investment Distributors Company (formerly named Keystone Distributors, Inc.) are filed herewith. A copy of the form of Dealer Agreement used by Keystone Investment Distributors Company was filed with Post-Effective Amendment No. 43 to Registration Statement No. 2-51914/811-2521 as Exhibit 24(b)(6)(A) and is incorporated by reference herein. (7) Not applicable. (8) A copy of the Custodian, Fund Accounting and Recordkeeping Agreements, as amended between Registrant and State Street Bank and Trust Company is filed herewith. (9) Not applicable. (10) An opinion and consent of counsel as to the legality of securities registered by the Fund was filed with Registrant's Rule 24f-2 Notice on August 18, 1995 and is incorporated by reference herein. (11) Consent as to the use of opinion of the Independent Auditors Report is filed herewith. (12) Not applicable. (13) Not applicable. (14) Not applicable. (15) Copies of Registrant's Distribution Plans adopted pursuant to Rule 12b-1 are filed herewith. (16) A schedule for computation of the effective and current yields is filed herewith. (17) Financial Data Schedules are filed herewith as Exhibit 27. (18) A copy of the form of Registrant's Multiple Class Plan adopted pursuant to Rule 18f-3 was filed with Post-Effective No. 49 to Registration Statement No. 2-51914/811-2521 as Exhibit 24(b)(18) and is incorporated by reference herein. (19) Powers of Attorney are filed herewith. Item 25. Persons Controlled by or under Common Control with Registrant Not applicable. Item 26. Number of Holders of Securities Number of Record Title of Class Holders as of July 31, 1995 -------------- --------------------------- Shares of Beneficial Class A - 15,103 Interest, without par Class B - 539 value Class C - 258 Item 27. Indemnification Provisions for the indemnification of the Registrant's Trustees and officers are contained in Article VIII of Registrant's Declaration of Trust, as supplemented, a copy of which is filed herewith and incorporated by reference herein. Provisions for the indemnification of Keystone Investment Management Company, Registrant's investment adviser, are contained in Section 4 of the Advisory Agreement, by and between Keystone Management, Inc. and Keystone Investment Management Company, a copy of which is filed herewith and incorporated by reference herein. Provisions for the indemnification of Keystone Investment Distributors Company, Registrant's principal underwriter, are contained in Section 9 of the Principal Underwriting Agreements (for Class B-1 and B-2 Shares) by and between Registrant and Keystone Investment Distributors Company, copies of which are filed herewith and incorporated by reference herein. Item 28. Businesses and Other Connections of Investment Advisers The following tables list the names of the various officers and directors of Keystone Management, Inc. and Keystone Investment Management Company, Registrant's investment manager and adviser, respectively, and their respective positions. For each named individual, the tables list, for at least the past two fiscal years, (i) any other organizations (excluding investment advisory clients) with which the officer and/or director has had or has substantial involvement; and (ii) positions held with such organizations. LIST OF OFFICERS AND DIRECTORS OF KEYSTONE MANAGEMENT, INC. Position with Keystone Name Management, Inc. Other Business Affiliations - ---- ------------------ --------------------------- Albert H. Chairman of Chairman of the Board, Elfner, III the Board, Chief Executive Officer, Chief Executive President and Director: Officer, President Keystone Investments, Inc. and Director Keystone Investment Distributors Company Keystone Software, Inc. Keystone Asset Corporation Keystone Capital Corporation Keystone Investments Family of Mutual Funds Chairman of the Board and Director: Keystone Investment Management Corporation Keystone Fixed Income Advisers, Inc. President and Director: Keystone Trust Company Director or Trustee: Fiduciary Investment Company, Inc. Keystone Investor Resource Center, Inc. Robert Van Partners, Inc. Boston Children's Services Association Associate Fiduciary Investment Company, Inc. Middlesex School Middlebury College Keystone Investment Distributors, Inc. Former Trustee or Director: Neworld Bank Edward F. Treasurer and Director Senior Vice President Godfrey Chief Financial Officer, Treasurer and Director: Keystone Investments, Inc. Keystone Investment Management Company Keystone Investment Distributors Company Treasurer: Keystone Investment Management Corporation Keystone Software, Inc. Fiduciary Investment Company, Inc. Treasurer and Director: Hartwell Keystone Advisers, Inc. Senior Vice President: Keystone Investments Family of Mutual Funds Ralph J. Spuehler, Jr. Director President and Director: Keystone Investment Distributors Company Director: Keystone Investor Resource Center, Inc. Keystone Investment Management Company Senior Vice President and Director: Keystone Investments, Inc. Treasurer: Hartwell Emerging Growth Fund Hartwell Growth Fund Former President: Keystone Management, Inc. Former Treasurer: Keystone Investments, Inc. The Kent Funds Keystone Investment Management Company Rosemary D. Van Senior Vice Senior Vice President, Antwerp President, General Counsel and General Counsel Director: and Secretary Fiduciary Investment Company, Inc. Keystone Investments, Inc. Keystone Investor Resource Center, Inc. Keystone Investment Distributors Company Keystone Software, Inc. Senior Vice President and General Counsel: Keystone Investment Management Corporation Senior Vice President and Secretary: Hartwell Keytone Advisers, Inc. Vice President and Secretary: Keystone Fixed Income Advisers, Inc. Former Assistant Secretary: The Kent Funds Kevin Morrissey Assistant Treasurer Vice President: Keystone Investments, Inc. Assistant Treasurer: Fiduciary Investment Company, Inc. Former Assistant Treasurer: The Kent Funds J. Kevin Kenely Vice President and Vice President and Controller: Controller Keystone Invesments, Inc. Keystone Investment Management Company Keystone Management Distributors Company Keystone Investment Management Corporation Hartwell Keystone Advisers, Inc. Fiduciary Investment Company, Inc. Keystone Software, Inc. Jean Susan Assistant Vice President and Counsel: Loewenberg Secretary Keystone Investments, Inc. Vice President and Secretary: Keystone Trust Company Secretary: Keystone Investor Resource Center, Inc. Clerk: Keystone Investment Management Corporation Fiduciary Investment Company, Inc. Assistant Secretary: Keystone Asset Corporation Keystone Capital Corporation Keystone Fixed Income Advisers, Inc. Keystone Investments Family of Mutual Funds Hartwell Keystone Advisers, Inc. Keystone Software, Inc. Keystone Investment Distributors Company Keystone Investment Management Company Michael A. Thomas Vice President Vice President: Keystone Investments, Inc. LIST OF OFFICERS AND DIRECTORS OF KEYSTONE INVESTMENT MANAGEMENT COMPANY Position with Keystone Investment Name Management Company Other Business Affiliations - ---- ------------------ --------------------------- Albert H. Chairman of Chairman of the Board, Elfner, III the Board, Chief Executive Officer, Chief Executive President and Director: Officer, Vice Keystone Investments, Inc. Chairman and Keystone Management, Inc. Director Keystone Software, Inc. Keystone Asset Corporation Keystone Capital Corp. Chairman of the Board and Director: Keystone Fixed Income Advisers, Inc. Keystone Institutional Company, Inc. President and Director: Keystone Trust Company Director or Trustee: Fiduciary Investment Company, Inc. Keystone Investment Distributors Company Keystone Investor Resource Center, Inc. Robert Van Partners, Inc. Boston Children's Services Associates Middlesex School Middlebury College Formerly Trustee: Neworld Bank Philip M. Byrne Director President and Director: Keystone Institutional Company, Inc. Senior Vice President: Keystone Investments, Inc. Herbert L. Senior Vice None Bishop, Jr. President Donald C. Dates Senior Vice None President Gilman Gunn Senior Vice None President Edward F. Director, Director, Senior Vice Godfrey Senior Vice President President, Chief Financial Officer and Treasurer and Treasurer: Chief Financial Keystone Investments, Inc. Officer Keystone Investment Distributors Company Treasurer: Keystone Institutional Company, Inc. Keystone Management, Inc. Keystone Software, Inc. Fiduciary Investment Company, Inc. James R. McCall Director and None President Ralph J. Director President and Director: Spuehler, Jr. Keystone Investment Distributors Company Senior Vice President and Director: Keystone Investments, Inc. Keystone Investor Resource Center, Inc. Keystone Management, Inc. Formerly President: Keystone Management, Inc. Formerly Treasurer: The Kent Funds Keystone Investments, Inc. Keystone Investment Management Company Rosemary D. Senior Vice General Counsel, Senior Van Antwerp President, Vice President and General Counsel Secretary: and Secretary Keystone Investments, Inc. Senior Vice President and General Counsel: Keystone Institutional Company, Inc. Senior Vice President, General Counsel and Director: Keystone Investor Resource Center, Inc. Fiduciary Investment Company, Inc. Keystone Investment Distributors Company Keystone Management, Inc. Keystone Software, Inc. Senior Vice President and Secretary: Hartwell Keystone Advisers, Inc. Vice President and Secretary: Keystone Fixed Income Advisers, Inc. Formerly Assistant Secretary: The Kent Funds John Addeo Vice President None Harry Barr Vice President None Robert K. Vice President None Baumback Betsy A. Blacher Senior Vice None President Francis X. Claro Vice President None Kristine R. Vice President None Cloyes Christopher P. Senior Vice None Conkey President Richard Cryan Senior Vice None President Maureen E. Senior Vice None Cullinane President George E. Dlugos Vice President None Antonio T. Docal Vice President None Christopher R. Senior Vice None Ely President Robert L. Hockett Vice President None Sami J. Karam Vice President None Donald M. Keller Senior Vice None President George J. Kimball Vice President None JoAnn L. Lydon Vice President None John C. Vice President None Madden, Jr. Stephen A. Marks Vice President None Eleanor H. Marsh Vice President None Walter T. Senior Vice None McCormick President Barbara McCue Vice President None Stanley M. Niksa Vice President None Robert E. O'Brien Vice President None Margery C. Parker Vice President None William H. Vice President None Parsons Daniel A. Rabasco Vice President None David L. Smith Vice President None Kathy K. Wang Vice President None Judith A. Warners Vice President None J. Kevin Kenely Vice President None Joseph J. Vice President None Decristofaro Jean Susan Assistant Vice President and Loewenberg Secretary Counsel: Keystone Investments, Inc. Vice President and Secretary: Keystone Trust Company Secretary: Keystone Investor Resource Center, Inc. Assistant Secretary: Keystone Asset Corporation Keystone Capital Corporation Keystone Investment Distributors Company Keystone Fixed Income Advisers, Inc. Keystone Management, Inc. Keystone Software, Inc. Hartwell Keystone Advisers, Inc. Clerk: Keystone Institutional Company, Inc. Fiduciary Investment Company, Inc. Assistant Secretary: Hartwell Keystone Advisers, Inc. Keystone Investment Distributors Company Colleen L. Assistant Assistant Secretary: Mette Secretary Keystone Investment Distributors Company Keystone Investments, Inc. Kevin J. Assistant Vice President: Morrissey Treasurer Keystone Investments, Inc. Assistant Treasurer: Fiduciary Investment Company, Inc. Formerly Assistant Treasurer: The Kent Funds Item 29. Principal Underwriter (a) Keystone Investment Distributors Company, which acts as Registrant's principal underwriter, also acts as principal underwriter for the following entities: Keystone Quality Fund (B-1) Keystone Diversified Bond Fund (B-2) Keystone High Income Bond Fund (B-4) Keystone Balanced Fund (K-1) Keystone Strategic Growth Fund (K-2) Keystone Growth and Income Fund (S-1) Keystone Mid-Cap Growth Fund (S-3) Keystone Small Company Growth Fund (S-4) Keystone Capital Preservation and Income Fund Keystone Fund for Total Return Keystone Global Opportunities Fund Keystone Government Securities Fund Keystone Hartwell Growth Fund Keystone America Hartwell Emerging Growth Fund, Inc. Keystone Intermediate Term Bond Fund Keystone Omega Fund Keystone Strategic Income Fund Keystone State Tax Free Fund Keystone State Tax Free Fund-Series II Keystone Tax Free Income Fund Keystone World Bond Fund Keystone Fund of the Americas Keystone International Fund Keystone Precious Metals Holdings, Inc. Keystone Strategic Development Fund Keystone Tax Exempt Trust Keystone Tax Free Fund (b) For information with respect to each officer and director of Registrant's acting principal underwriter, see the following pages. Position with Keystone Investment Name Distributors Company Positions with Registrant - ---- --------------------- ------------------------- Ralph J. Spuehler* Director, President None Edward F. Godfrey* Director, Senior Vice Senior Vice President, Treasurer President and Chief Financial Officer Rosemary D. Van Antwerp* Director, Senior Vice Senior Vice President, General President Counsel and Secretary and Secretary Albert H. Elfner, III* Director President Charles W. Carr* Senior Vice President None Peter M. Delehanty* Senior Vice President None J. Kevin Kenely* Vice President and None Controller C. Kenneth Molander Divisional Vice None 8 King Edward Drive President Londenderry, NH 03053 David S. Ashe Regional Manager and None 32415 Beaconsfield Vice President Birmingham, MI 48025 David E. Achzet Regional Vice None 60 Lawn Avenue President Greenway 27 Stamford, CT 06902 William L. Carey, Jr. Regional Manager and None 4 Treble Lane Vice President Malvern, PA 19355 John W. Crites Regional Manager and None 2769 Oakland Circle W. Vice President Aurora, CO 80014 Richard J. Fish Regional Vice None 309 West 90th Street President New York, NY 10024 Michael E. Gathings Regional Manager and None 245 Wicklawn Way Vice President Roswell, GA 30076 Robert G. Holz, Jr. Regional Manager and None 313 Meadowcrest Drive Vice President Richardson, Texas 75080 Todd L. Kobrin Regional Manager and None 20 Iron Gate Vice President Metuchen, NJ 08840 Ralph H. Johnson Regional Manager and None 345 Masters Court, #2 Vice President Walnut Creek, CA 94598 Juliana Perkins Regional Manager and None 2348 West Adrian Street Vice President Newbury Park, CA 91320 Matthew D. Twomey Regional Manager and None 9627 Sparrow Court Vice President Ellicott City, MD 21042 Mitchell I. Weiser Regional Manager and None 7031 Ventura Court Vice President Parkland, FL 33067 Welden L. Evans Regional Banking None 490 Huntcliff Green Officer and Vice Atlanta, GA 30350 President Russell A. Haskell* Vice President None John M. McAllister* Vice President None Gregg A. Mahalich Vice President None 14952 Richards Drive W. Minnetonka, MN 55345 Robert J. Matson * Vice President None Burton Robbins Vice President None 1586 Folkstone Terrace Westlake Village, CA 91361 Thomas E. Ryan, III* Vice President None Peter Willis* Vice President None Raymond P. Ajemian* Manager and Vice None President Joan M. Balchunas* Assistant Vice None President Thomas J. Gainey* Assistant Vice None President Eric S. Jeppson* Assistant Vice None President Julie A. Robinson* Assistant Vice None President Peter M. Sullivan Assistant Vice None 21445 Southeast 35th Way President Issaquah, WA 98027 Jean S. Loewenberg* Assistant Secretary Assistant Secretary Colleen L. Mette* Assistant Secretary Assistant Secretary Dorothy E. Bourassa* Assistant Secretary Assistant Secretary *Located at 200 Berkeley Street, Boston, Massachusetts 02116-5034 Item 29(c). - Not applicable Item 30. Location of Accounts and Records 200 Berkeley Street Boston, Massachusetts 02116-5034 Keystone Investor Resource Center, Inc. 101 Main Street Cambridge, Massachusetts 02142-1519 State Street Bank and Trust Company 1776 Heritage Drive Quincy, Massachusetts 02171 Data Vault, Inc. 331 Sharp Slot Road Swansea, Massachusetts 02777 Item 31. Management Services Not Applicable. Item 32. Undertakings Registrant hereby undertakes to furnish each person to whom a copy of the Registrant's prospectus is delivered with a copy of the Registrant's latest annual report to shareholders, upon request and without charge. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, in The Commonwealth of Massachusetts, on the 31st day of August, 1995. KEYSTONE LIQUID TRUST By:/s/ George S. Bissell George S. Bissell* Chairman of the Board *By:/s/James M. Wall James M. Wall** Attorney-in-Fact Pursuant to the requirements of the Securities Act of 1933, this Amendment to Registrant's Registration Statement has been signed below by the following persons in the capacities indicated on the 31st day of August, 1995. SIGNATURES TITLE - ---------- ----- /s/ George S. Bissell Chairman of the Board and Trustee - ------------------------- George S. Bissell* /s/ Albert H. Elfner, III Chief Executive Officer, President and Trustee - ------------------------- Albert H. Elfner, III /s/ Kevin J. Morrissey Treasurer (Principal Financial - ------------------------- and Accounting Officer) Kevin J. Morrissey* *By:/s/ James M. Wall ------------------------------ James M. Wall** Attorney-in-Fact SIGNATURES TITLE - ---------- ------ /s/ Frederick Amling Trustee - ------------------------- Frederick Amling* /s/ Charles A. Austin, III Trustee - -------------------------- Charles A. Austin, III* /s/ Edwin D. Campbell Trustee - -------------------------- Edwin D. Campbell* /s/ Charles F. Chapin Trustee - -------------------------- Charles F. Chapin* /s/ K. Dun Gifford Trustee - -------------------------- K. Dun Gifford* /s/ Leroy Keith, Jr. Trustee - -------------------------- Leroy Keith, Jr.* /s/ F. Ray Keyser, Jr. Trustee - -------------------------- F. Ray Keyser, Jr.* /s/ David M. Richardson Trustee - -------------------------- David M. Richardson* /s/ Richard J. Shima Trustee - -------------------------- Richard J. Shima* /s/ Andrew J. Simons Trustee - -------------------------- Andrew J. Simons* *By:/s/ James M. Wall -------------------------- James M. Wall** Attorney-in-Fact **James M. Wall, by signing his name hereto, does hereby sign this document on behalf of each of the above-named individuals pursuant to powers of attorney duly executed by such persons and attached hereto as Exhibit 24(b)(19). INDEX TO EXHIBITS Page Number In Sequential Exhibit Number Exhibit Numbering System - ------------- --------- ---------------- 1 Declaration of Trust, as supplemented 2 By-Laws, as amended 4 Specimen Stock Certificate(1) 5 (A) Management Agreement (B) Advisory Agreement 6 (A) Underwriting Agreements, as amended Dealers Agreement(2) 8 Custodian Agreement, Fund Accounting and Recordkeeping Agreement, as amended 10 Opinion and Consent of Counsel(3) 11 Independent Auditors' Consent 15 Class A, B and C Distribution Plans 16 Current and Effective Yield Schedules 17 Financial Data Schedules 18 Multiple Class Plan(4) 19 Powers of Attorney - ------------------- (1) Incorporated herein by reference to Post-Effective Amendment No. 43 to Registration Statement No. 2-51914/811-2521. (2) Incorporated herein by reference to Post-Effective Amendment No. 43 to Registration Statement No. 2-51914/811-2521. (3) Incorporated herein by reference to Registrant's August 18, 1995 24f-2 filing. (4) Incorporated herein by reference to Post-Effective Amendment No. 49 to Registration Statement No. 2-51914/811-2521. EX-99.24(B)(1) 2 DECLARATION OF TRUST, AS SUPPLEMENTED EXHIBIT 99.24(b)(1) DECLARATION OF TRUST, AS SUPPLEMENTED KEYSTONE LIQUID TRUST FIRST SUPPLEMENTAL DECLARATION OF TRUST Dated December 1, 1985 FIRST SUPPLEMENTAL DECLARATION OF TRUST, made December 1, 1985 by George S. Bissell, Everett P. Pope, Peter K. Simonds, Knight Edwards, Philip B. Harley, Leroy Keith, Jr., David M. Richardson, Andrew J. Simons and Russel R. Taylor (hereinafter with their successors referred to as "Trustees") as Trustees of KEYSTONE LIQUID TRUST, a Massachusetts business trust established under a Declaration of Trust dated May 22, 1975 and Amended and Restated July 14, 1975 (the "Declaration"). WHEREAS, Section 13.1 of Article XIII of the Declaration provides that if authorized by vote of a majority or other percentage of the Shares as there specified, a majority of the Trustees may alter or amend the Declaration by signing a Declaration of Trust Supplemental thereto; and WHEREAS, the Trustees and the holder of the Shares have duly authorized further amendment of the declaration as provided in this First Supplemental Declaration of Trust so as to amend and restate the Declaration in its entirety; NOW, THEREFORE, the Declaration is amended and restated to read in its entirety as follows: ARTICLE I NAME AND DEFINITIONS Section 1. Name. This trust shall hereafter be known as "KEYSTONE LIQUID TRUST". Section 2. Definitions. Whenever used herein, unless otherwise required by the context or specifically provided (a) The terms "Affiliated Person", "Assignment", "Commission", "Interested Person" and "Principal Underwriter" shall have the meanings given them in the 1940 Act; (b) The "Trust" refers to KEYSTONE LIQUID TRUST; (c) "Declaration of Trust" means this Supplemental Declaration of Trust as Amended or restated from time to time; (d) "Majority Shareholder Vote" means the vote of a majority of Shares entitled to vote on a matter at a meeting or a special meeting of shareholders not less than the "vote of a majority" as defined in the 1940 Act; (e) "Net Asset Value Per Share" means the net asset value per share of the Trust determined in the manner provided or authorized in Article VI, Section 5; (f) "Shareholder" means a record owner of Shares of the Trust: (g) "Shares" means the equal proportionate units of interest into which the beneficial interest in the Trust shall be divided from time to time or, if more than one class of Shares is authorized by the Trustees, the equal proportionate units into which each class of Shares shall be divided from time to time, and includes where appropriate such fractions of a Share as the Trustees may from time to time authorize as well as a whole Share; (h) "Trustees" refers to the Trustee or Trustees of the Trust named or elected in accordance with Article IV and where appropriate means a majority or other portion of them acting in accordance with this Declaration of Trust or the By-Laws of the Trust; and (i) The "1940 Act" refers to the Investment Company Act of 1940 and the Rules and Regulations thereunder, all as amended from time to time. ARTICLE II PURPOSE OF TRUST The purpose of the Trust is to provide investors a continuous source of managed investments. ARTICLE III BENEFICIAL INTEREST Section 1. Shares of Beneficial Interest. The beneficial interest in the Trust shall at all times be divided into transferable Shares, without par value, each of which shall represent an outstanding, none having priority or preference over another, except to the extent modified by the Trustees under the provisions of this section. The number of Shares which may be issued is unlimited. The Trustees may from time to time divide or combine the outstanding Shares into a greater or lesser number without thereby changing the proportionate beneficial interest in the Trust. Contributions to the Trust may be accepted for, and Shares shall be redeemed as, whole Shares and/or fractions. From time to time as they deem appropriate, the Trustees may create additional classes ("Classes") and/or series ("Series") of instrument ("Original Series"). References in this Declaration of Trust to Shares of the Trust shall apply to each such Series of restrictions of a Class) to each such Class of Shares, except to the extent modified by the Trustees under the provisions of this Section. Any additional Series of Shares created hereunder shall represent the beneficial interest in the assets (and related liabilities) allocated by the trustees to such series of Shares and acquired by the Trust only after creation of the respective Series of Shares and only on the account of such Series. If the Trustees create any additional Series of Shares hereunder, then the Original Series shall be deemed a separate Series of Shares. Upon creation of each Series of Shares, the Trustees may designate it appropriately and determine the investment policies with respect to the assets allocated to such Series of Shares, redemption rights, dividend policies, conversion rights, liquidation rights, voting rights, and such other rights and restrictions as the Trustees deem appropriate, to the extent not inconsistent with the provisions of this Declaration of Trust. The Trustees may divide any Series including the Original Series) into more than one Class of Shares. Upon creation of each additional Class of Shares the Trustees may designate it appropriately and determine its rights and restrictions (including redemption rights, dividend rights, conversion rights, liquidation rights, voting rights, and such other rights and restrictions as the Trustees deem appropriate). Section 2. Ownership of Shares. The Ownership of Shares shall be recorded in the books of the Trust or a transfer agent or a similar agent. The Trustees may make such rules as they consider appropriate for the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer agent or similar agent, as the case may be, shall be conclusive as to who are the holders of shares of each Class or Series and as to the number of Shares of each Class or Series held from time to time by each. Section 3. Investments in the Trust. The Trustees shall accept investments in the Trust from such persons and on such terms and, subject to any requirements of law, for such consideration as the Trustees from time to time authorize and may cease offering shares to the public at any time. After such acceptance, the number of shares of the appropriate Series to represent the contribution may in the Trustees' discretion be considered as outstanding and the amount receivable by the Trustees on account of the contribution may be treated as an asset of the Series. After the initial investment in the Trust, Shares (including Shares which may have been redeemed or repurchased by the Trust) may be issued or sold at a price which will net the Trust, before paying any taxes in connection with such issue or sale, not less than the Net Asset Value per Share thereof; provided, however, that the Trustees may in their discretion impose a sales charge upon investments in the Trust. Section 4. No Preemptive Rights. Shareholders shall have no preemptive or other right to subscribe to any additional shares or other securities issued by the Trust. Section 5. Provisions Relating to Series of Shares. Whenever no Shares of Series are outstanding, then the Trustees may abolish such Series (or any Class of Shares of a Series for which there are no outstanding Shares.) Whenever more than one Series of Shares is outstanding, then the following provisions shall apply: (a) Assets Belonging to Each Series. All consideration received by a Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings and proceeds thereof, and any funds derived from any reinvestment of such proceeds, shall irrevocably belong to that Series for all purposes, subject only to the rights of creditors, and shall be so recorded upon the books of the Trust. In the event there are assets, income, earnings, and proceeds thereof which are not readily identifiable as belonging to a particular Series, then the Trustees shall allocate such items to the various Series then existing, in such manner and on such basis as they in their sole discretion, deem fair and equitable. The amount of each such item allocated to a particular Series by the Trustees shall then belong to that Series, and each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes. (b) Liabilities belonging to Each Series. The assets belonging to each particular series shall be charged with the liabilities, expenses, costs and reserves of the Trust attributable to that Series; and any general liabilities, expenses, costs and reserves of the Trust which are not readily identifiable as attributable to a particular Series shall be allocated by the Trustees to the various Series then existing, in such manner and on such basis as they, in their sole discretion, deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes. (c) Series Shares, Dividends and Liquidation. Each share of each respective Class of a Series shall have the same rights and pro rata beneficial interest in the assets and liabilities of the Series as any other such Share. Any dividends paid on the Shares of any Series shall only be payable from and to the extent of the assets (net of liabilities) belonging to that Series. In the event of liquidation of a Series, only the assets (less provision for liabilities) of that Series shall be distributed to the holders of the Shares of that Series. (d) Voting by Series. Except as provided in this section or as limited by the rights and restrictions of any Class, each Share of the Trust may vote with and in the same manner as any other Share on matters submitted to a vote of the Shareholders, without differentiation among votes from the separate Series; provided, however, that (i) as to any matter with respect to which a separate vote of any Series is required by the 1940 Act or would be required under the Massachusetts Business Corporation Law if the Trust were a Massachusetts business corporation, such requirement as to a separate vote by the Series shall apply in lieu of the voting described above herein; (ii) in the event that the separate vote requirements referred to in (i) above apply with respect to one or more Series, then, subject to (iii) below, the shares of all other Series shall vote without differentiation among their votes; and (iii) as to any matter which does not affect the interest of a particular Series, only the holders of Shares of the one or more affected Series shall be entitled to vote. Section 6. Limitation of Personal Liability. The Trustees shall have no power to bind any Shareholder personally or to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the shareholder may at any time personally agree to pay by way of subscription to any Shares or otherwise. Every note, bond, contract or other undertaking issued by or on behalf of the Trust or the Trustees relating to the Trust shall include a recitation limiting the obligation represented thereby to the Trust and its assets (but the omission of such a recitation shall not operate to bind any Shareholder). ARTICLE IV THE TRUSTEES Section 1. Election of Trustees. At the Special Meeting in Lieu of Annual Meeting in 1985, the Shareholders shall elect a Board of Trustees. Section 2. Term of Office of Trustees. After election, each Trustee shall hold office during the lifetime of this Trust, or until the election of his or her successor at a meeting of Shareholders; except (a) that any Trustee may resign his or her trust by written instrument signed by him or her and delivered to the other Trustees which shall take effect upon such delivery or upon such later date as in specified therein; (b) that any Trustee may be removed at any time by written instrument signed by at least two-thirds of the number of Trustees prior to such removal, specifying the date when such removal shall become effective; (c) that no Trustee may continue to serve after he or she has passed his or her seventieth birthday; (d) that any Trustee who requests in writing to be retired or who has become mentally or physically incapacitated may be retired by written instrument signed by a majority of the other Trustees, specifying the date of his or her retirement; and (e) a Trustee may be removed at any special meeting of Shareholders of the Trust by a vote of a majority of the outstanding Shares entitled to vote. Section 3. Termination of Service and Appointment of Trustees. In case of the death, resignation, retirement, removal or mental or physical incapacity of any of the Trustees, or in case a vacancy shall, by reason of an increase in number, or for any other reason, exist, the remaining Trustees shall fill such vacancy by appointing for the remaining term of the predecessor Trustee such other person as they in their discretion shall see fit. Such appointment shall be effected by the signing of a written instrument by a majority of the Trustees in office. An appointment of a Trustee may be made by the Trustees then in office in anticipation of a vacancy to occur by reason of retirement, resignation or increase in number of Trustees effective at a later date, provided that such appointment shall become effective only at or after the effective date of such retirement, resignation or increase in number of Trustees. As soon as any Trustee so appointed shall have accepted this Trust, the Trust estate shall vest in the new Trustee or Trustees, together with the continuing Trustees, without any further act or conveyance, and he or she shall be deemed a Trustee hereunder. Any appointment authorized by this Section 3 is subject to the provisions of Section 16(a) of the 1940 Act. Section 4. Number of Trustees. The number of Trustees serving hereunder at any time shall be determined by the Trustees themselves, but shall not be less than three (3) or more than fifteen (15). Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is filled or while any Trustee is absent from the Commonwealth of Massachusetts or, if not a domiciliary of Massachusetts, is absent from his state of domicile, or is physically or mentally incapacitated, the other Trustee shall have all the powers hereunder and the certificate signed by a majority of the other Trustees of such vacancy, absence or incapacity, shall be conclusive, provided, however, that no vacancy which reduces the number of Trustees below three (3) shall remain unfilled for a period longer than six calendar months. Section 5. Effect of Death, Resignation, etc. of a Trustee. The death, resignation, retirement, removal, or mental or physical incapacity of the Trustees, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust. Section 6. Management of the Trust. Subject to the provisions of this Declaration of Trust, the business and affairs of the Trust shall be managed by the Trustees, and they shall have all powers necessary and desirable to carry out that responsibility. Without limiting the foregoing, the Trustees may adopt By-Laws not inconsistent with this Declaration of Trust providing for the conduct of the business of the Trust and may amend and repeal them to the extent that they do not reserve that right to the shareholders; they may fill vacancies in or add to their own number and may elect and remove such officers and appoint and terminate such agents as they consider appropriate; they may appoint from their own number and terminate any one or more committees; they may employ one or more custodians of the assets of the Trust and may authorize such custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities, retain a transfer agent or a Shareholder servicing agent, or both, provide for the distribution of Shares by the Trust, through one or more principal underwriters or otherwise, set record dates, and in general delegate such authority as they consider desirable to any officers of the Trust and committees of the Trustees and to any agent or employee, custodian or underwriter. Without limiting the foregoing, the Trustees in addition to all powers granted by law shall have power and authority: (a) To invest and reinvest cash, and to hold cash uninvested, without in any wise being bound or limited by any present or future law or custom in regard to investments by Trustees. (b) To sell, exchange, lend, pledge, mortgage, hypothecate or lease any or all of the assets of the Trust; (c) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such persons or persons such power and discretion with relation to securities or property as the Trustees shall deem proper; (d) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities; (e) To hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form; or in its own name or in the name of a custodian or subcustodian or a nominee or nominees or otherwise; (f) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or concern any security of which is held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or concern and to pay calls or subscriptions with respect to any security held in the Trust; (g) To join with other security holders in acting through a committee, depository, voting Trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depository or Trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depository or Trustee as the Trustees shall deem proper; (h) To compromise, arbitrate, or otherwise adjust claims in favor of or against the Trust for any matter in controversy, including but not limited to claims for taxes; and (i) To borrow funds. The Trustees shall not be required to obtain any court order to deal with any assets of the Trust or take any other action hereunder. Section 7. Ownership of Assets of the Trust. The assets of the Trust shall be held separate and apart from any assets now or hereafter held in any capacity other than as Trustee hereunder by the Trustees or by any successor Trustees. All of the assets of the Trust shall at all times by considered as vested in the Trustees. No Shareholder shall be deemed to have a severable ownership in any individual asset of the Trust or any right of partition or possession thereof, but each Shareholder shall have a proportionate undivided beneficial interest in the assets of the Class of Shares of which he is holder. Section 8. Payment of Expenses. The Trustees shall pay or cause to be paid out of the principal or income of the Trust, or partly out of principal and partly out of income, as they deem fair, all expenses, charges, taxes and liabilities incurred or arising in connection with the Trust, or in connection with the management thereof, including but not limited to the Trustees' compensation and such expenses and charges for the services of the Trust's investment adviser or manager, administrator, auditor, counsel, custodian, transfer agent, shareholder servicing agent, and such other agents or independent contractors and such other expenses and charges as the Trustees may deem necessary or proper to incur. Section 9. Investment Management and Other Services. Subject to a favorable majority Shareholder Vote, the Trustees may enter into a contract with any person or persons, including any firm, corporation, trust or association in which any Trustee, shareholder or officer of the Trust may be interested, to act as investment advisers and/or managers of the Trust and to provide such investment advice and/or management as the Trustees may from time to time consider appropriate (the "Adviser"). Any such contract may authorize the Adviser to determine from time to time what securities shall be acquired, held or disposed of by the Trust and what portion of assets of the Trust shall be held uninvested and to take, on behalf of the Trust, actions which the Adviser deems necessary to implement the investment policies of the Trust, including the placement of all orders for the purchase, sale or loan of portfolio securities for the Trust's account with brokers or dealers or others selected by the Adviser and the giving of instructions to the custodian of the Trust's assets as to deliveries of securities and payments of cash for the account of the Trust. Subject to a favorable majority Shareholder Vote, the adviser may enter into an agreement to retain at its own expense any person in which any Trustee, shareholder or officer of the Trust may be interested, to provide the Trust investment advice and/or management and any person or persons so retained may be granted all authority which has been granted to the Adviser under the contract which the Adviser entered in to pursuant to the preceding paragraph. The Trustees may enter into a contract with any person or persons including any firm, corporation, trust or association in which any Trustee, Shareholder or officer of the Trust be interested, to act as principal underwriter for the Shares. ARTICLE V SHAREHOLDERS' VOTING POWERS AND MEETINGS Section 1. Voting Powers. The Shareholders shall have power to vote (i) for the election or removal of Trustees as provided in Article IV, Section 1, (ii) with respect to any Adviser or person whom the Adviser may retain to provide the Trust investment advice and/or management as provided in Article IV, Section 9, (iii) with respect to any amendment of this Declaration of Trust as provided in Article IX, Section 7, (iv) to the same extent as the stockholders of a Massachusetts business corporation, as to whether or not a court action, proceeding or claim should be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders, and (v) with respect to such additional matters relating to the Trust as may be required by law, by this Declaration of Trust, or the by-Laws of the Trust or any registration of the Trust with the Commission or any state, or as the Trustees may consider desirable. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to exercise of the proxy the Trust receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of providing invalidity shall rest on the challenger. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, this Declaration of Trust or any By-Laws of the Trust to be taken by Shareholders. Section 2. Meetings. Meetings of Shareholders shall be held as specified in Article IV, Section 1 and in the By-Laws at the principal office of the Trust or such other place as the Trustees may designate. Special meetings of the Shareholders may be called by the Trustees or such other person or persons as may be specified in the By-Laws and shall be called by the Trustees upon the written request of Shareholders owning at least 25% of the outstanding Shares entitled to vote. Shareholders shall be entitled to at least seven days' notice of any meeting. Section 3. Quorum and Required Vote. Except as otherwise provided by law, to constitute a quorum for the transaction of business at a Shareholders' meeting there must be present in person or by proxy, holders of one fourth of the total number of Shares of the Trust then outstanding and entitled to vote at the meeting, but any lesser number shall be sufficient for adjournment and any adjourned session or sessions may be held within 90 days after the date set for the original meeting without the necessity of further notice. Subject to any applicable requirements of law, a majority of the Shares entitled to vote on a question shall decide such questions and a plurality of the Shares entitled to vote thereon shall elect a Trustee, except when a larger vote is required by any provision of this Declaration of Trust, the By-Laws of the Trust or any applicable provision of law. Section 4. Action by Written Consent. Any action required or permitted to be taken at any meeting may be taken without a meeting, if a consent in writing, setting forth such action is signed by all the Shareholders entitled to vote on the subject matter thereof and such consent is filed with the records of the Trust. Section 5. Additional Provisions. The By-Laws may include further provisions for Shareholders' votes and meetings and related matters. ARTICLE VI DISTRIBUTIONS AND REDEMPTIONS Section 1. Distributions. The Trustees may, but need not, each year distribute to the Shareholders of each Series an amount approximately equal to the Net Income of such Series as defined in Section 2 of Article VI determined by the Trustees or as they may authorize and as herein provided, and the Trustees may from time to time distribute such additional amounts as they may determine to Shareholders. The Trustees shall have full discretion to determine which items shall be treated as income and which items as capital and their determination shall be binding upon the Shareholders. Distributions of each year's Net Income may be made in one or more payments, which shall be in Shares, in cash, or otherwise and on a date or dates and as of a record date or dates determined by the Trustees. Each distribution pursuant to this Section 1 shall be made ratably according to the number of Shares of the Series held by the several Shareholders of such Series on the record date for such distribution. Section 2. Determination of Net Income. The "Net Income" of each Series shall consist of all interest income accrued on portfolio assets of that Series less all actual and accrued expenses and liabilities chargeable (in accordance with Section 5 of this Article VI) against the income of that Series determined in accordance with good accounting practices. Interest income shall include discount earned (including both original issue and market discount) on discount paper accrued ratably to the date of maturity. Such Net Income shall be determined as of such time as the Trustees may determine on each business day (as determined by the Trustees) and all the Net Income of each Series which is a positive amount, since the last determination of Net Income of that Series, minus any direct charges to Shareholders approved by the Trustees and of which the Shareholders have been previously notified, so determined shall be declared as a dividend. If, for any reason, the Net Income of a Series determined at any time is a negative amount, the pro-rate share of each Shareholder os such negative amount shall constitute a liability of such Shareholder of that Series to the Trust which shall be paid at such times and in such Series to the Trust which shall be paid at such times and in such manner as the Trustees may determine out of the accrued dividend account of such Shareholder, by reducing the number of Shares of such Series in the account of such Shareholder or otherwise. As of any time other than the time determined by the Trustees pursuant to the preceding paragraph, the Trustees may cause the Net Income since the last determination to be determined in a similar manner and the Trustees may fix the time when such redetermined or adjusted Net Income shall become effective. Section 3. Redemptions. Upon offer by any Shareholder of all or part of the Shares held by the Shareholder for redemption hereunder, in accordance with such methods, upon such terms and subject to such conditions as the Trustees may from time to time determine, the Trustees shall redeem the Shares so offered by distributing to the Shareholder the Net Asset Value per Share thereof next determined. The Trust shall have the right at its option and at any time to redeem the Shares of any Shareholder for their Net Asset Value per Share if the Shareholder owns Shares of a Series having an aggregate net asset value of less than such minimum amount as the Trustees may from time to time prescribe. With respect to all Shares, or any Series of Shares, the right to redemption or the date for payment may, however, be delayed or suspended by the Trustees if there is an extraordinary closing or restriction of trading on the New York Stock Exchange as determined under rules and regulations of the Commission, or an emergency exists as a result of which it is not reasonably practicable for the Trust to dispose of securities or fairly to determine the value of its net assets, or as the Commission may permit. The completion of such distribution on redemption of Shares shall constitute a full discharge of the Trust and Trustees with respect to such Shares, and the Trustees may require that any certificate or certificates issued by the Trust to evidence the ownership of the Shares shall be surrendered to the Trustees for cancellation or notation. Shares so redeemed shall be cancelled or held by the Trust for reissue, as the Trustees may from time to time determine. Section 4. Payment in Kind. Subject to any generally applicable limitation imposed by the Trustees, any distribution on redemption may, if authorized by the Trustees, be made wholly or partly in kind, instead of in cash. Such distribution in kind shall be made by distributing investments constituting, in the opinion of the Trustees, a fair representation of the various types of securities then held by the Series of Shares being redeemed (but not necessarily including a portion of each particular investment) and in each case having an aggregate value equal to the amount of cash instead of which such distribution in kind is made. Section 5. Determination of Net Asset Value per Share. The Net Asset Value per Share of each Series shall be computed as of the close of trading on the New York Stock Exchange on each day on which such Exchange is open by determining the value of all the investments of such Series, adding any other assets of such Series, subtracting all liabilities of such Series and dividing the result by the number of Shares of such Series outstanding. Current value for portfolio securities shall be determined as follows. Securities that are traded on an established exchange shall be valued on the basis of the last sales price on the exchange where primarily traded prior to the time of the valuation. Securities traded in the over-the-counter market and for which complete quotations are readily available shall be valued at the mean of the bid and asked prices at the time of valuation. Subject to instructions of the Board of Trustees, the trust shall value the following at prices deemed in good faith to be fair: (1) Securities (including restricted securities) for which complete quotations are not readily available, (2) listed securities if in the Trustees' opinion the last sales price does not reflect a current market value or if no sale occurred, and (3) other assets. The fair value for listed securities will normally be the mean between the closing bid and asked prices on the exchange or primary market, where available. Money market or short-term tax free securities for which market quotations are readily available shall be valued at prices which, in the opinion of the person making the determination, most nearly represents the market value of such securities which may, but need not, be the most recent bid price obtained from one or more of the market markers for such securities. Other securities and assets shall be valued at fair value as determined by or pursuant to the direction of the Trustees, which in the case of short-term debt obligations, commercial paper and repurchase agreements may, but need not be, on the basis of quoted yields for securities of comparable maturity, quality and type, or on the basis of amortized cost. Expenses and liabilities of the trust shall be accrued each day. The manner of determining the Net Asset Value per Share may from time to time be altered if necessary or desirable in the trustees' judgment to conform to any other method prescribed or permitted by any applicable law or regulation. The Net Asset Value per Share of any Series may be computed as of such other times as the Trustees may determine and in such event the Net Asset Value per Share of such Series may, but need not, be determined by adjusting the Net Asset Value per Share of such Series last determined pursuant to this Section in such manner (based upon changes in selected security prices determined by the Trustees to be relevant to the Series or in averages or in other standard and readily ascertainable market data since the last determination) as is deemed adequate to reflect a fair approximate estimate of the probable change in Net Asset Value per Share of such Series which has occurred since such last determination. In determination of Net Asset Value per Share and Net Income of any Series, liabilities may include such reserves for taxes, estimated accrued expenses and contingencies as the Trustees or their designates may in their sole discretion deem fair and reasonable and attributable to such Series under the circumstances. No accruals shall be made in respect of taxes on unrealized appreciation of securities owned unless the Trustees shall otherwise determine. Dividends payable by the Trust shall be deducted as at the time of but immediately prior to the determination of Net Asset Value per Share on the record date therefor or as the Trustees shall otherwise determine. Determination of Net Asset Value per Share so made in good faith and pursuant to the provisions of the 1940 Act shall be binding on all parties concerned. Section 6. Constant Net Asset Value; Reduction of Outstanding Shares. The Trustees shall have the power to determine the Net Income (including unrealized gains and losses on the portfolio assets) of each Series of the Trust, which is commonly known as a money market Series, once on each business day and at each such determination declare such Net Income as dividends of each Series with the result that Net Asset Value per Share of each Series of the Trust shall remain at a constant dollar value. The determination of Net Income and the resultant declaration and payment of dividends shall be set forth in the Prospectus of the Trust currently effective under the Securities Act of 1933, as amended. Fluctuations in value will be reflected in the number of outstanding Shares in each Shareholder's account. If there is a net loss in a Series, the Trust will first offset such amount against dividends of such Series accrued during the month in each Shareholder account. To the extent that such a net loss would exceed such accrued dividends, the Trust will reduce the number of its outstanding Shares of such Series in an amount equal to the amount by which the net loss exceeds accrued dividends by having each Shareholder of such Series contribute to the Trust's capital his pro rata portion of the total number of Shares of such Series required to be cancelled in order to permit the Net Asset Value per Shares of such Series of the Trust to be maintained at a constant dollar value. Each Shareholder of such Series will be deemed to have agreed to such contribution in these circumstances by his investment in the Trust. The purpose of the foregoing procedure is to permit the Net Asset Value per Share of each Series of the Trust to be maintained at a constant dollar value per Share. The Trustees, by resolution, may discontinue or amend the practice of maintaining the Net Asset Value per Share of each Series at a constant dollar amount at any time and such modification shall be evidenced by appropriate changes in the Prospectus. Section 7. Automatic Redemption from Small Accounts. The Trustees shall have the power to redeem shares at a redemption price determined in accordance with Section 5 of this Article if at any time the total investment in such account does not have a value of at least $1,000. Before redeeming such Shares, Shareholders will be notified that the value of their account is less than $1,000 and be allowed 60 days to make an additional investment to bring the total value of their account to $1,000 or more. Section 8. Power to Modify Foregoing Procedures. Notwithstanding any of the foregoing provisions of this Article VI, the Trustees may prescribe, in their absolute discretion, such other bases and times for determining the Net asset Value per Share of each Series of the Trust's Shares or Net Income, or the declaration and payment of dividends and distributions as they may deem necessary or desirable to enable the Trust to comply with any provision of the 1940 Act, or any rule or regulation thereunder, including any rule or regulation adopted pursuant to Section 22 of the 1940 Act by the Commission or any securities association registered under the Securities Exchange Act of 1934, or any order of exemption issued by said Commission, all as in effect now or as hereafter amended or modified. ARTICLE VII COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES Section 1. Compensation. The Trustees shall be entitled to reasonable compensation from the Trust; they may fix the amount of their compensation. Section 2. Limitation of Liability. Provided they have exercised reasonable care in their selection, the Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee or Adviser of the Trust nor shall any Trustee be responsible for the act or omission of any other Trustee, but nothing herein contained shall protect any Trustee against any liability to which he would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Every note, bond, contract, instrument, certificate, share or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been executed or done only in their or his capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. ARTICLE VIII INDEMNIFICATION Section 1. Trustees, Officers, etc. The Trust shall indemnify each of its Trustees and officers and any persons who serve at the Trust's request as Directors, officers or Trustees of another organization in which the Trust has any interest as a shareholder, creditor or otherwise (hereinafter referred to as a "Covered Person") against all liabilities and expenses, including but not limited to, amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by any such person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such person may be or may have been involved as a party or otherwise or with which such person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Trustee or officer or Director, except with respect to any matter as to which such Covered Person shall have been finally adjudicated in any such action, suit or other proceeding not to have acted in good faith in the reasonable belief that such Covered Person's action was in the best interests of the Trust and except that no person shall be indemnified against any liability to the Trust or its Shareholders to which such Covered Person shall otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of office. Expenses, including counsel fees so incurred by any Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), disposition of any such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Covered Person, secured by an appropriate deposit or a surety bond approved by independent legal counsel for the Trust, to repay amounts so paid to the Trust if it is ultimately determined that indemnification of such expenses is not authorized under this Article. Except as otherwise provided by law, the Trust shall have power to purchase and maintain insurance on behalf of a Covered Person against any liability asserted against him and incurred by him in his capacity as a Covered Person, or arising out of his status as such, whether or not the Trust would have the power to indemnify him against the liability under the provisions of this Section. Section 2. Compromise Payment. As to any matter disposed of by a compromise payment by any Covered Person referred to in Section 1 above, pursuant to a consent decree or otherwise, no such indemnification either for such payment or for any other expenses shall be provided unless such compromise shall be approved as in the best interests of the Trust, after notice that it involved such indemnification, (a) by a disinterested majority of the Trustees then in office; or (b) by a majority of the disinterested Trustees then in office; or (c) by any disinterested person or persons to whom the questions may be referred by the Trustees, provided that in the case of approval pursuant to clause (b) or (c) there has been obtained an opinion in writing of independent legal counsel to the effect that such Covered Person appears to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust and that such indemnification would not protect such person against any liability to the Trust to which such person would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of office; or (d) by vote of Shareholders holding a majority of the Shares entitled to vote thereon, exclusive of any Shares beneficially owned by any interested Covered Person. Approval by the Trustees pursuant to clause (a) or (b) or any disinterested person or persons pursuant to clause (c) of this Section shall not prevent the recovery from any Covered Person of any amount paid to such person in accordance with either of such clauses as indemnification is such person is subsequently adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that such person's action was in the best interests of the Trust or to have been liable to the Trust or its Shareholders by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of office. Section 3. Indemnification Note Exclusive. The rights of indemnification hereby provided shall not be exclusive or affect any other rights to which any such Covered Person may be entitled. As used in this Article VIII, the Term "Covered Person" shall include such person's heirs, executors and administrators, an "Interested Covered Person" is one against whom the action, suit or other proceeding in question or another action, suit or other proceeding on the same or similar grounds is then or has been pending, and a "Disinterested Person" is a person against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or has been pending. Nothing contained in this Article shall affect any rights to indemnification to which personnel of the Trust other than Trustees and officers or other persons may be entitled by contract or otherwise under law. Section 4. Shareholders. In case any Shareholder or former Shareholder shall be held to be personally liable solely by reason of his being or having been a Shareholder and not because of his acts or omissions or for some other reason, the Shareholder or former Shareholder (or his heirs, executors, administrators or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets of the Trust to be held harmless from and indemnified against all loss and expense arising from such liability. ARTICLE IX MISCELLANEOUS Section 1. Trust Not a Partnership. It is hereby expressly declared that a trust and not a partnership is created hereby. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally either the Trust's Trustees or officers or any Shareholders. All persons extending credit to, contracting with or having any claim against the Trust shall look only to the assets of the Trust for payment under such credit, contract or claim, and neither the Shareholders nor the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Nothing in this Declaration of Trust shall protect any Trustee against any liability to which such Trustee would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee hereunder. Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety. The exercise by the Trustees of their powers and discretions hereunder in good faith and with reasonable care under the circumstances then prevailing, shall be binding upon everyone interested. Subject to the provisions of Section 1 of this Article IX, a Trustee shall be liable for his own wilful defaults, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust, and subject to the provisions of said Section 1 shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. Section 3. Liability of Third Person Dealing with Trustees. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees pursuant hereto or to see to the application of any payments made or property transferred to the Trust or upon its order. Section 4. Termination of Trust. (a) This Trust shall continue without limitation of time but subject to the provisions of paragraphs (b), (c) and (d) of this Section 4. (b) Subject to a Majority Shareholder Vote, the Trustees, may merge, consolidate, or sell and convey the assets of the Trust including its goodwill to another trust or corporation organized under the laws of any state of the United States, which is a diversified open-end management investment company as defined in the 1940 Act, for an adequate consideration which may include the assumption of all outstanding obligations taxes and other liabilities, accrued or contingent, of the Trust and which may include shares of beneficial interest or stock of such trust or corporation. Upon making provision for the payment of all such liabilities, by such assumption or otherwise, the Trustees shall distribute the net proceeds of the transaction ratably among the holders of the Shares of the Trust then outstanding. (c) Subject to a Majority Shareholder Vote, the Trustees may at any time sell and convert into money all the assets of the Trust. Either the Trustees, or the Shareholders of a Series acting by a Majority Shareholder Vote, may at any time sell and convert into money all the assets of a Series. Upon making provision for the payment of all outstanding obligations, taxes and other liabilities, accrued or contingent, of the Trust or Series, as the case may abe, the Trustees shall distribute the remaining assets of the Trust or Series ratably among the holders of the outstanding Shares or Series, the assets allocated to Series of Shares to be distributed ratably among the holders of such Series. (d) Upon completion of the distribution of the remaining proceeds or the remaining assets as provided in paragraphs (b) and (c), the Trust shall terminate and the Trustees shall be discharged of any and all further liabilities and duties hereunder and the rights, title and interest of all parties shall be canceled and discharged. Section 5. Filing of Copies, References, Headings. The original or a copy of this instrument and of each Declaration of Trust supplemental hereto or Amendment hereof shall be kept at the office of the Trust where it may be inspected by any Shareholders. A copy of this instrument and of each such Supplemental Declaration of Trust or Amendment shall be filed by the Trust with the Massachusetts Secretary of State and the Boston City Clerk, as well as any other governmental office where such filing may from time to time be required. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any Supplemental Declaration of Trust or Amendments have been made, and as to any matters in connection with the Trust hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such Supplemental Declaration of Trust or Amendment. In this instrument or in any such amendment or Supplemental Declaration of Trust, references to this instrument, and all expressions such as "herein," "hereof," and "hereunder," shall be deemed to refer to this instrument as amended or affected by any such Supplemental Declaration of Trust or Amendment. Headings are placed herein for convenience of reference only and in case of any conflict, the text of this instrument, rather than the headings, shall control. This instrument may be executed in any number of counterparts each of which shall be deemed an original. Section 6. Applicable Law. The Trust set forth in this instrument is made in the Commonwealth of Massachusetts, and it is created under and is to be governed by and construed and administered according to the laws of such Commonwealth. The Trust shall be of the type commonly called a Massachusetts business trust, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a Trust. Section 7. Amendments. This Declaration of Trust may be altered or amended at any time by a instrument in writing signed by a majority of the Trustees when authorized so to do by vote of shareholders holding a majority of the Shares entitled to vote or by any larger vote which may be required by applicable law in any particular case except that Amendments having the purpose of changing the name of the Trust or of supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision contained herein shall not require authorization by Shareholder vote. Copies of the Supplemental Declaration of Trust shall be filed as specified in Section 5 of this Article IX. IN WITNESS WHEREOF, the undersigned have hereto set their hands and seals in the City of Boston, Massachusetts, for themselves and their assigns, as of the day and year first above written. /S/ George S. Bissell /S/ Leroy Keith, Jr. - ---------------------------------- ---------------------------------- George S. Bissell Leroy Keith, Jr. /S/ Everett P. Pope /S/ David M. Richardson - ---------------------------------- ---------------------------------- Everett P. Pope David M. Richardson /S/ Peter K. Simonds /S/ Andrew J. Simons - ---------------------------------- ---------------------------------- Peter K. Simonds Andrew J. Simons /S/ Knight Edwards /S/ Russel R. Taylor - ---------------------------------- ---------------------------------- Knight Edwards Russel R. Taylor /S/ Philip B. Harley - ---------------------------------- Philip B. Harley EX-99.24(B)(2) 3 BY LAWS, AS AMENDED Exhibit 99.24(b)(2) BY-LAWS, AS AMENDED KEYSTONE LIQUID TRUST AMENDMENT NUMBER 1 TO BY-LAWS Article V of the By-Laws of the Trust is hereby amended to include a Section 5.4 to read as follows: " Section 5.4 Retirement of Trustees. Effective with the election of Trustees at the 1983 Annual Meeting of Shareholders of the Trust, no person shall be eligible for election as a Trustee if at the time of such election he has passed his seventieth birthday." In all other respects the By-Laws are unchanged. DATED: June 17, 1982 #101605D2 AMERICAN LIQUID TRUST BY-LAWS These By-laws are made and adopted pursuant to Section 9.7 of the Declaration of Trust establishing AMERICAN LIQUID TRUST, dated May 14, 1975, as from time to time amended, restated or modified (the "Declaration"). All words and terms capitalized in these By-Laws shall have the meaning or meanings set forth for such words or terms in the Declaration. If any term or provision of these By-Laws shall be in conflict with any term or provision of the Declaration, the terms and provisions of the Declaration shall be controlling. ARTICLE I SHAREHOLDERS' MEETING AND RECORD DATES Section 1.1 General. All meetings of the Shareholders shall be held, pursuant to written notice, within or without the Commonwealth of Massachusetts and on such day and at such time as the Trustees shall designate. Notice shall be given by mail not less than ten (10) nor more than sixty (60) days prior to the day named for the meeting, and shall be deemed to have been properly given to a Shareholder when deposited in the United States mail with first class postage prepaid or in a telegraph office with charges prepaid, directed to his address as given to a transfer agent to such other officer or agent of the Trust as shall keep the register for entry thereon. A certificate or affidavit by the Secretary or an assistant secretary or a transfer agent shall be prima facie evidence of the giving of any notice required by the Declaration. Section 1.2 Notice of Adjournments. Upon adjournment of any meeting of Shareholders, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted thereat, other than by announcement at the meeting at which such adjournment is taken. At any adjourned meeting at which a quorum shall be present or represented, only such business may be transacted which might have been transacted at the meeting originally called. If after the adjournment, the Trustees fix a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each Shareholder of record on the new record date entitled by law to receive such notice. Section 1.3 Chariman. The Chairman shall act as chairman at all meetings of the Shareholders; in his absence, the President shall act as chairman; and in the absence of the Chairman and the President, the Trustee or Trustees present at each meeting may elect a temporary chairman for the meeting, who may be one of themselves. Section 1.4 Proxies; Voting. Shareholders may vote at any meeting, or by consent in writing without a meetig pursuant to Section 8.8 of the delcaration, either in person or by proxy. Every proxy shall be executed in writing by the shareholder, or by his d uly authorized attorney-in-fact, with each full share represented at the meeting being entitled to one vote and fractional shares to fractional votes. A proxy unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until notice therof has been given to the Secretary, or such othe officer or agent of the Trust as the Secretary may direct. No proxy shall be valid after eleven (11) months from the date of its execution, unles a longer time is expressly stated in such proxy, but in no event shall a proxy, unless coupled with an interest, be voted on after three (3) years from the date of its execution. Proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary or to such other officer or agent of the Trust as the Secretary may direct. Section 1.5 Closing of Transfer Books and Fixing Record Dates. For the purpose of determining the Shareholders who are entitled to notice of or to vote or act at any meeting, including any adjournment thereof, or who are entitled to participate in any dividend or distribution, or for any other proper purpose, the Trustees may from time to time close the transfer books or fix a record date in the manner proviced in Section 8.4, or Section 10.1, as appropriate, of the Declaration. If the Trustees do not prior to any meeting of Shareholders so fix a record date or close the transfer books, then the record date shall be the close of business on the day next preceding the date of mailing of notice of the meeting or, in the case of a dividend or other distribution resolution is adopted, or on such later day as the Trustees may determine. Section 1.6 Inspectors of Election. In advance of any meeting of Shareholders, the Trustees may appoint Inspectors of election, who may but need not be Shareholders, to act at such meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the Chairman of any such meeting may, and upon the request of any shareholder or his proxy shall, make such appointment at the meeting. The number of Inspectors shall be either one (1) or three (3). If appointed at the meeting on the request of one or more Shareholders or proxies, a majority of Shares present shall determine whether one or three Inspectors are to be appointed, but failure to allow such determination by the Shareholders or proxies shall not affect the validity of the appointment of Inspectors of Election. In case any person appointed as Inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment made the Trustees in advance of the convening of the meeting, or at the meeting by the person acting as chairman. The Inspectors of Election shall determine the number of shares outstanding, the Shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies; shall receive votes, ballots or consents; shall hear and determine all challenges and questions in any way arising in connection with the right to vote; shall count and tabulate all votes or consents, determine the results, and do such other acts as may be proper to conduct the election or vote with impartiality and fairness to all Shareholders. If there are three Inspectors of Election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. On request of the chairman of the meeting, or of any Shareholder or his proxy, the Inspectors of Election shall make a written report of any challenge or question or matter determined by them and execute a certificate of any fact found by them. ARTICLE II TRUSTEES Section 2.1 Annual Meetings. The Trustees shall hold an annual meeting for the election of officers and the transaction of other business which may come before such meeting as soon as practicable after the annual meeting of Shareholders, at the place where the Shareholders' meeting was held or at such other place as may be fixed by resolution or the consent in writing of all the Trustees. Section 2.2 Regular Meetings. Regular meetings of the Trustees may be held at such time and place as the Trustees may by resolution from time to time determine without call or notice. If any day fixed for a regular meeting shall be a legal holiday in the Commonwealth of Massachusetts or the place designated for regular meetings, then the meeting shall be held at the same hour and place on the next secceeding business day. Section 2.3 Special Meetings. Special Meetings of the Trustees shall be held upon the call of the Chairman, the President, or the Secretary, or any two Trustees, at such time, on such day, and at such place, as shall be designated in the notice of the meeting. Section 2.4 Notice of Special Meetings. Notice of any special meeting, specifying the place, day and hour of the meeting, shall be given to a Trustee either personally or by sending a copy thereof through the mail, with first class postage prepaid, or by telegram, charges prepaid, to his address appearing on the books of the Trust or supplied by him to the Trust for the purpose of notice, at least forty-eight (48) hours, prior to the time named for such meeting. If the notice is sent by mail or by telegraph, it shal be deemed to have been given to the person entitled thereto when deposited in the United States mail, postage prepaid, or with a telegraph office, charges prepaid, for transmission to such person. Notice by telephone shall constitute personal delivery for these purposes. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Trustees need be stated in the notice or waiver of notice of such meeting, and no notice need be given of action proposed to be taken by unanimous consent. Section 2.5 Waiver of Notice. Whenever any notice is required by the Declaration or these By-Laws to be given to a Trustees, a waiver thereof in writing, whether signed by him before or after the meeting, shall be deemed equivalent to the giving of due notice. Attendance of any Trustee at any meeting shall constitute a waiver of notice of such meeting except where such Trustee attends the meeting for the express purpose of objecting to the transaction of any business becauase the meeting was not lawfully called or convened. Section 2.6 Adjournment. Adjournment or adjournments of any meeting may be taken, and it shall not be necessary to give a any notice of the adjdourned meeting or of the business to be transacted thereat other than by announcement at the meeting at which such adjournment is taken. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting originally called. Section 2.7 Executive Committee. Subject to the provisions of section 3.4 hereof, the Trustees may, by resolution adopted by a majority thereof, designate one or more of their number to constitute an Executive Committee, and may designate one or more of their number as alternate members of the Executive Committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in such resolution and the Declaration, shall have and exercise the authority of the Trustees in the management of the business and affairs of the Trust and the management and disposition of Trust Property. Vacancies in the membership of the committee shall be filled by the Trustees. In the absence or disqualification of any member of such committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another Trustee to act at the meeting in the place of any such absent or disqualified member. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Trustees. Section 2.8 Chairman; Records. The Chairman shall act as chairman at all meeting of the Trustees; in his absence the President shall act as chairman; in the abasence of the chairman and President, the Ttrustees present may elect one of their number to act as temporary chairman. The results of all actions taken at ameeting of the Trustees, or by written consent of the Trustees without a meeting, shall be recorded by the Secretary. ARTICLE III OFFICER, AGENTS AND EMPLOYEES Section 3.1 Officers of the Trust. The officers of the Trust shall be a Chairman and a President, chosen from among the Trustees, and a Secretary and a Treasurer, or persons who shall act as such, chosen from among the Trustees or otherwise, regardless of the name or title by which they may be designated, elected or appointed. A Vice-Chairman, Executive Vice-President, one or more Vice-Presidents, Comptroller, one or more Assistant Secretaries and Assistant Treasurers, and such other officers or agents as the Trustees shall deem necessary or appropriate to carry out the business of the Trust also may be elected or appointed. Any two or more offices may be held by the same person, except those of President and Secretary and provided that no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is rquired to be executed, acknowledged or verified by two or more officers. In addition to the powers and duties perscribed by the Declaration and these By-Laws, the officers and assistant officers shall have such authority and shall perform such duties as from time to time shall be prescribed by the Trustees. The officers and assistant officers of the Trust shall hold office until their successors are chosen and have equalified, unless their term of office is sooner terminated, by death, resignation or removal. The Trustees may amend the title of any officer or assistant officer or create a new office, by utilizing a word or words descriptive of his powers or the general character of his duties. If the office of any officer or assistant officer become vacant for any reason, the vacancy may be filled by the Trustees at any time. Section 3.2 Removal of Officers, Agents or Employees. Any officer, assistant officer, agent or employee may be removed or his authority revoked at any time, with or without cause, by a majority of the Trustees, whenever in their judgment the best interests of the Trust will be served thereby, but such removal or revocation shall be without prejudice to the rights, if any, of the person so removed to receive compensation or other benefits in accordance wth the terms of existing contracts. Any agent or employee likewise may be removed by the President or Chairman or, subject to the supervision of the President or Chairman, by the person having authority with respect to the appointment of such agent or employee. Any officer may resign at any time by written notice signed by such officer and delivered or mailed to the Chairman, President, or Secretary, and such resignation shall take effect upon receipt by the Chairman, President, or Secretary, or at a later date according to the terms of such notice. Section 3.3 Bonds and Surety. Any officer may be required by the Trustees to be bonded for the faithful performance of his duties in such amount and with such sureties as the Trustees may determine. Section 3.4 Chairman and President; Powers and Duties. The Chairman shall, if present, preside at all meetings of the shareholders and of the Trustees. He shall be the chief executive officer of the Trust and shall exercise and perform such other powers and duties as may from time to time be assigned to him by the Trustees. Subject to such supervisory powers, if any, as may be given by the Trustees to the Chairman, the President shall be the chief operating officer of the Trust and, subject to the control of the Trustees and the Chairman, shall have general supervision, direction and control of the business of the Trust and of its employees and shall exercise such general powers of management as are usually vested in the office of president of a Massachusetts business corporation. In the absence of the Chairman, the President shall preside at all meetings of the Shareholders and of the Trustees. Subject to direction of the Trustees, the Chairman and the President shall each have power in the name and on behalf of the Trust to execute any and all loan documents, contracts, agreements, deeds, mortgages, and other instruments in writing, and to employ and discharge employees and agents of the Trust. Unless otherwise directed by the Trustees, the Chairman and the President shall each have full authority and power, on behalf of all of the Trustees, to attend and to act and to vote, on behalf of the Trust at any meetings of business organizations in which the Trust holds an interest, or to confer such powers upon any other persons, by executing any proxies duly authorizing such persons. The Chairman and the President shall have such further authorities and duties as the Trustees shall from time to time determine and shall be, ex officio, members of the Executive Committee and of all standing committees (if any) appointed by the Trustees. Section 3.5 Executive Vice-President; Vice President; Powers and Duties. The Executive Vice-President, if any, shall in the absence or disability of the President, perform all the duties of the President, and when so acting shall have all the powers and be subject to all of the restrictions upon the President. In the absence or disability of the Executive Vice-President, the Vice-President shall perform all of the duties of the Executive Vice-President, and when so acting shall have all the powers of and be subject to all of the restrictions upon the Executive Vice-President. If there be more than one Vice-President, their seniority in performing such duties and exercising such powers shall be in order of their rank as fixed by the Trustees, or, if more than one and not ranked, then by deterination of the Trustees, or, in the absence of such determination, by the order in which they were first elected. Subject to the direction of the Trustees, and of the Chairman and the President, each Vice-President shall have the power in the name and on behalf of the Trust to execute any and all loan documents, contracts, agreements, deeds, mortgages and other instruments in writing, and, in addition, shall have such other duties and powers as shall be designated from time to time by the Trustees or the President and as general usage appertain to the office. Section 3.6 Secretary; Powers and Duties. The Secretary shall keep the minutes of all meetings of, and record all votes of, Shareholders, Trustees and the exective or other committees, if any. He shall give, or cause to be given, as required by the declaration or these By-Laws, notice of meetings of the Shareholders and of the Trustees, and shall perform such other duties as may be prescribed by the Trustees, the Chairman, or the President. He shall keep in safe custody the seal of the Trust, and may affix the same, or, if permitted, a facsimile thereof, to any instrument executed by the Trust and attest the seal and the signature or signatures of the officer or officers executing such instrument on behalf of the Trust. The Secretary shall also perform any other duties commonly incident to such officer in a Massachusetts business corporation, and shall have such other authorities and duties as the Trustees, the Chairman of the President shall from time to time determine. Section 3.7 Treasurer; Powers and Duties. Except as otherwise directed by the Trustees, the Treasurer shall have the general supervision of the monies, funds, securities, notes receivable and other valuable papers and documents of the Trust, and shall have an exercise under the supervision of the Trustees and of the Chairman and President all powers and duties normally incident to his office. He may endorse for deposit or collection all notes, checks and other instruments payable to the Trust or to its order. He shall deposit all funds of the Trust in such depositories as the Trustees shall designate. He shall be responsible for such disbursement of the funds of the Trust as may be ordered by the Trustees, or the Chairman or the President. He shall keep accurate account of the books of the Trust's transactions which shall be the property of the Trust, and which, together with all other property of the Trust in his possession, shall be subject at all times to the inspection and control of the Trustees. Unless the Trustees shall otherwise determine, the Treasurer shall be the principal financial and accounting officer of the Trust. He shall have such other duties and authorities as the Trustees, the Chairman or the President shall from time to time determine. Notwithstanding anything to the contrary herein contained, the Trustees may authorize the Investment Adviser, the Custodian, or the Transfer Agent to maintain bank accounts and deposit and disburse funds of the Trust on behalf of the Trust. Section 3.8 Delegation of Officers' Duties. The Trustees may elect, or authorize the Chairman to appoint or elect, such other officers and assistant officers as they shall from time to time determine to be necessary or desirable in order to conduct the business of the Trust. Assistant officers shall act generally in the absence of the officer whom they assist, shall assist that officer in the duties of his office and shall have such other duties and authority as may be conferred upon them by the Trustees or delegated to them by the chairman or Prsident. In case of the absence or disability of any officer or assistant officer of the Trust or for any other reason that the Trustees may deem sufficient, the Trustees may delegate or authorize the delegation of his powers or duties, for the time being, to any person. ARTICLE IV SHARES Section 4.1 Share Certificates. Every Shareholder shall, upon written request to the Secretary of the Trust, be entitled to receive a certificate in such form as the Trustees shall from time to time approve, specifying the number of full Shares held by such Shareholder; provided, however, that no certificate shall be issued for a fractional Share. Every certificate shall bear the signature of the Chairman or President and of the Secretary or Treasurer, and shall be sealed with the seal of the Trust. Whenever a certificate is countersigned by a transfer agent, one or both of the officers' signatures and the seal may be in facsimile, engrved or printed. In case any officer or transfer agent who has signed or whose facsimile signature appears on any share certificate shall have ceased to be such because of death, resignation or otherwise, before the certificate is issued, it may be issued by the Trust with the same effect as if he had not ceased to be such prior to or on the date of its issue. There shall be filed with each transfer agent a copy of the form of certificate so approved by the Trustees, certified by the Chairman or the Secretary, and such form shall continue to be used unless and until the Trustees approve some other form. Section 4.2 Legend. In furtherance of the provisions of Section 6.7 of the Declaration, each certificate evidencing Shares shall contain a legend imiprinted thereon to the following effect, or such other legend as the trustees may from time to time adopt. " Provisions Relating to Redemption and Prohibition of Transfer of Shares. " If necessary to effect compliance by the Trust with certain requirements of the Internal Revenue Code, the shares represented by this certificate are subject to redemption by the Trustees of the Trust and the transfer thereof may be prohibited under the terms and conditions set forth in the Declaration. The Shares represented by this certificate are also subject to redmeption by the Trustees pursuant to the provisions set forth in the Declaration for the reduction of outstanding Shares in order to maintain a constant net asset value per Share. The Trust will furnish a copy of such terms, conditions and provisions to the registered holder of this certificate upon request and without charge." ARTICLE V MISCELLANEOUS Section 5.1 Depositories. The funds of the Trust shall be deposited in such depositories as the Trustees shall designate in accordance with the provisions of the Declaration, and shall be drawn out on checks, drafts or other orders signed by such officer, officers, agent or agents (including the Aviser), as the Trustees may from time to time authorize. Section 5.2 Signatures. All contracts and other instruments shall be executed on behalf of the Trust by such officer, officers, agent or agents, as provided in the Declaration or these By-Laws or as the Trustees may from time to time by resolution provide. Section 5.3 Seal. The seal of the Trust shall have inscribed thereon the words "American Liquid Trust, a Massachusetts Voluntary Association, Common Seal, 1975." Such seal may be used by causing it or a facsimile thereof, to be impressed or affixed or in any manner repoduced and attested as if it had been impressed and attested manually. ARTICLE VI AMENDMENT OF BY-LAWS Section 6.1 Amendment and Repeal of By-Laws. In accordance with Section 9.7 of the Declaration, the Trustees have the power to alter, amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the Trustees with respect to the By-Laws shall be taken by an affirmative vote of a majority of the Trustees. The Trustees shall in no event adopt By-Laws which are in conflict with the Declaration, and any apparent inconsistency shall be construed in favor of the related provisions in the Declaration. * * * * * * The Declaration of Trust establishing American Liquid Trust, dated May 14, 1975, a copy of which, together with all amendments thereto (the "Declaration"), is on file in the office of the Secretary of the Commonwealth of Massachusetts, provides that the name "American Liquid Trust" refers to the Trustees under the Declaration collectively as Trustees, but not as individuals or personally; and no Trustee, shareholder, officer, employee or agent of American Liquid Trust shall be held to any personal liability, nor shall resort be had to their private property for the satisfaction of any obligation or claim or otherwise in connection with affairs of said American Liquid Trust but the Trust Property only shall be liable. #101605cc EX-99.24(B)(5)(A) 4 MANAGEMENT AGREEMENT MANAGEMENT AGREEMENT AGREEMENT made this 19th day of August, 1993 by and between KEYSTONE LIQUID TRUST, a Massachusetts business trust (the "Fund"), and KEYSTONE MANAGEMENT, INC., a Nevada corporation (the "Manager"). WITNESSETH: WHEREAS, the Fund was established in Massachusetts by a Declaration of Trust filed on May 22, 1975, amended and restated on July 14, 1975, and amended on January 15, 1979, as further amended and/or restated from time to time (the "Declaration of Trust"); WHEREAS, the Fund is authorized to issue an unlimited number of shares of beneficial interest, $.10 par value (the "Shares"); WHEREAS, the Fund has a Registration Statement under the Securities Act of 1933, as amended (the "1933 Act"), effective with the Securities and Exchange Commission covering certain of its Shares to be offered to the public and the Fund may sell additional securities or otherwise raise additional capital; WHEREAS, the Fund has qualified as a registered investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and intends to maintain its qualification as a regulated investment company as defined in Sections 851 and 852 of the Internal Revenue Code of 1986, as amended (the "Code"), and to invest its funds in the investments permitted by the Declaration of Trust; WHEREAS, the Fund desires to avail itself of the experience, sources of information, advice and assistance of the Manager and to have the Manager undertake the duties and responsibilities hereinafter set forth, on behalf of and subject to the supervision of the Trustees of the Fund, as provided herein; and WHEREAS, the Manager is willing to undertake to render such services, subject to the supervision of the Trustees, on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants herein contained, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. DUTIES OF THE MANAGER (a) The Manager agrees, as more fully set forth herein, to act as the investment adviser to the Fund with respect to the investment of its assets. Subject to the direction and control of the Board of Trustees of the Fund, the Manager shall: (i) supervise continuously the investment program of the Fund and the composition of its portfolio; (ii) determine what securities shall be purchased or sold by the Fund; and (iii) arrange for the purchase and sale of securities held in the portfolio of the Fund. (b) The Manager shall give the Fund the benefit of its judgment and effort in rendering services hereunder, but the Manager shall not be liable for any loss sustained by reason of the adoption of any investment policy or the purchase, sale or retention of any security, whether or not such purchase, sale or retention shall have been based upon its own investigation and research or upon investigation and research made by any other individual, firm or corporation, if such purchase, sale or retention shall have been made and such other individual, firm or corporation shall have been selected with due care and in good faith. Nothing herein contained shall, however, be construed to protect the Manager against any liability to the Fund or its security holders by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement. (c) Nothing in this Agreement shall prevent the Manager or any officer or Director thereof from acting as investment adviser or manager for any other person, firm or corporation and shall not in any way limit or restrict the Manager or any of its Directors, officers, stockholders or employees from buying, selling or trading any securities for its or their own accounts or for the accounts of others for whom it or they may be acting; provided, however, that the Manager expressly represents that it will undertake no activities which, in its judgment, will affect adversely the performance of its obligations to the Fund under this Agreement. Directors, officers, employees and agents of the Manager or of affiliated persons of the Manager may serve as Trustees, officers, employees or agents of the Fund. However, at least a majority of the Trustees of the Fund shall not be affiliated with the Manager; provided, if at any time more than 49% of the total number of Trustees shall be affiliates of the Manager because of the death, resignation, removal or change in affiliation of a Trustee who is not such an affiliate, such requirement shall not be applicable for a period of 60 days, during which time a majority of all the Trustees then in office shall appoint as Trustee such number of persons who are not affiliates of the Manager as shall be sufficient to comply with the above requirements. The Fund and the Manager shall at all times endeavor to comply with such requirements, but failure to do so shall not affect the validity or effectiveness of any action of the Fund or of the Manager under this Agreement. (d) Anything in this Agreement to the contrary notwithstanding, the Manager shall refrain from any action which, in its reasonable judgment or in the judgment of the Trustees of which the Manager has written notice, would affect adversely the status of the Fund as a regulated investment company as defined in the Code, which would violate any law, rule or regulation of any governmental body or agency having jurisdiction over the Fund or its securities or which would not be permitted by the Declaration of Trust. 2. ALLOCATION OF EXPENSES (a) The Fund agrees that it will bear all expenses of its organization, including all costs of its registration under the 1940 Act and the registration and qualification of the Fund and its Shares in order to offer and sell the Shares in compliance with federal and state securities laws. (b) The Manager agrees that it will furnish the Fund, at the Manager's expense, office space, trading and other facilities, equipment and clerical personnel for management of the Fund's affairs and will pay all compensation of employees, officers, and Trustees of the Fund who are affiliated persons of the Manager or any investment adviser retained by the Manager. The Manager agrees to bear costs of sales literature and advertising exclusive of expenses of preparing, printing and mailing prospectuses, reports, notices and proxy material to shareholders of the Fund. The Fund shall bear all other costs and expenses including, but not limited to: (i) interest and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv) compensation and expenses of its Trustees and officers other than those affiliated with the Manager or any investment adviser retained by the Manager; (v) legal, audit and accounting expenses; (vi) fees and expenses of a custodian and transfer agent or shareholder servicing agent; (vii) expenses incident to the issuance of its Shares, including issuance on the payment of, or reinvestment of, dividends; (viii) fees and expenses incident to the registration and qualification of the Fund and its Shares for distribution under federal and state securities laws; (ix) expenses of preparing, printing and mailing prospectuses, reports, notices and proxy material to shareholders of the Fund; (x) all other expenses incidental to holding meetings of the Fund's shareholders; and (xi) such nonrecurring expenses as may arise, including litigation affecting the Fund and the legal obligations with respect to which the Fund may have to indemnify its officers and Trustees. 3. COMPENSATION OF THE MANAGER The Fund agrees to pay the Manager and the Manager agrees to accept as full compensation for all services rendered to the Fund by the Manager pursuant to this Agreement, an annual management fee payable monthly and computed at the annual rate of (i) .5 of 1% of the average daily value of the net assets of the Fund on the first $500,000,000 of such assets; plus (ii) .45% of 1% of the average daily value of the net assets of the Fund on such assets which exceed $500,000,000 and are less than $1,000,000,000; plus (iii) .4 of 1% of the average daily value of the net assets of the Fund on such assets which are $1,000,000,000 or more. The management fee shall be computed and accrued as of the close of each business day. 4. INVESTMENT ADVISER The Manager may enter into an agreement to retain, at its own expense, Keystone Custodian Funds, Inc. or any other firm or firms ("Adviser") to provide the Fund all of the services to be provided by the Manager hereunder, if such agreement is approved as required by law. Such agreement may delegate to such Adviser all of Manager's rights, obligations and duties hereunder. 5. DURATION AND TERMINATION (a) This Agreement shall continue in effect until July 1, 1994 and thereafter as long as such continuance is approved annually in the manner provided in the 1940 Act. (b) This Agreement may be terminated by the Manager at any time without penalty upon giving the Fund sixty (60) days' written notice and may be terminated by the Fund at any time without penalty upon giving the Manager sixty (60) days' written notice, provided, that such termination by the Fund shall be directed or approved by the vote of a majority of its Trustees in office at the time or by the vote of the holders of a majority (as defined in the 1940 Act) of the voting securities of the Fund at the time outstanding and entitled to vote. This Agreement shall terminate automatically in the event of its "assignment" (as defined in the 1940 Act). 6. AMENDMENT This Agreement shall not be modified or terminated except by an instrument in writing signed by both parties hereto or their respective successors. 7. GOVERNING LAW The provisions of this Agreement shall be governed, construed and enforced in accordance with the laws of The Commonwealth of Massachusetts. 8. TRUSTEES AND SHAREHOLDERS NOT LIABLE This Agreement is made on behalf of the Fund by an officer or Trustee of the Fund, not individually, but solely as an officer or Trustee under the Declaration of Trust, and the obligations under this Agreement are not binding upon, nor shall resort be had to the private property of any of the Trustees, shareholders, officers, employees or agents of the Fund personally, but shall bind only the Fund's property. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers and their seals to be hereunder affixed, all as of the day and year first above written. KEYSTONE LIQUID TRUST By: /s/James R. McCall -------------------------- Title: Vice President KEYSTONE MANAGEMENT, INC. By: /s/Albert H. Elfner, III -------------------------- Title: President EX-99.24(B)(5)(B) 5 ADVISORY AGREEMENT ADVISORY AGREEMENT AGREEMENT made this 19th day of August, 1993 by and between KEYSTONE MANAGEMENT, INC., a Nevada Corporation (the "Manager"), and KEYSTONE CUSTODIAN FUNDS, INC., a Delaware corporation (the "Adviser"). WITNESSETH: WHEREAS, KEYSTONE LIQUID TRUST (the "Fund") was established in Massachusetts by a Declaration of Trust filed on May 22, 1975, amended and restated on July 14, 1975, and amended on January 15, 1979, as further amended and/or restated from time to time (the "Declaration of Trust"); WHEREAS, the Fund is authorized to issue an unlimited number of shares of beneficial interest, $.10 par value (the "Shares"); WHEREAS, the Fund has a Registration Statement under the Securities Act of 1933, as amended (the "1933 Act"), effective with the Securities and Exchange Commission covering certain of its Shares to be offered to the public and the Fund may sell additional securities or otherwise raise additional capital; WHEREAS, the Fund has qualified as a registered investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and intends to maintain its qualification as a regulated investment company as defined in Sections 851 and 852 of the Internal Revenue Code of 1986, as amended (the "Code"), and to invest its funds in the investments permitted by the Declaration of Trust; WHEREAS, the Manager desires to avail the Fund and itself of the experience, sources of information, advice and assistance of the Adviser and to have the Adviser undertake the duties and responsibilities hereinafter set forth (with the exception of certain managerial and administrative services to be provided by the Manager), on behalf of the Fund and its Trustees and subject to the supervision of the Trustees of the Fund and the Manager, as provided herein; and WHEREAS, the Adviser is willing to undertake to render such services, subject to the supervision of the Trustees, on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants herein contained, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. DUTIES OF THE ADVISER (a) The Adviser agrees, as more fully set forth herein, to act as the investment adviser to the Fund with respect to the investment of its assets. Subject to the direction and control of the Board of Trustees of the Fund, and the Manager, the Adviser shall: (i) supervise continuously the investment program of the Fund and the composition of its portfolio; (ii) determine what securities shall be purchased or sold by the Fund; and (iii) arrange for the purchase and sale of securities held in the portfolio of the Fund. (b) The Adviser shall give the Fund and the Manager the benefit of its judgment and effort in rendering services hereunder, but the Adviser shall not be liable for any loss sustained by reason of the adoption of any investment policy or the purchase, sale or retention of any security, whether or not such purchase, sale or retention shall have been based upon its own investigation and research or upon investigation and research made by any other individual, firm or corporation, if such purchase, sale or retention shall have been made and such other individual, firm or corporation shall have been selected with due care and in good faith. Nothing herein contained shall, however, be construed to protect the Adviser against any liability to the Fund, its security holders or the Manager by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under this Agreement. (c) Nothing in this Agreement shall prevent the Adviser or any officer or Director thereof from acting as investment adviser or manager for any other person, firm or corporation and shall not in any way limit or restrict the Adviser or any of its Directors, officers, stockholders or employees from buying, selling or trading any securities for its or their own accounts or for the accounts of others for whom it or they may be acting; provided, however, that the Adviser expressly represents that it will undertake no activities which, in its judgment, will affect adversely the performance of its obligations to the Fund under this Agreement. Directors, officers, employees and agents of the Adviser or of affiliated persons of the Adviser may serve as Trustees, officers, employees or agents of the Fund. However, at least a majority of the Trustees of the Fund shall not be affiliated with the Adviser; provided, if at any time more than 49% of the total number of Trustees shall be affiliates of the Adviser because of the death, resignation, removal or change in affiliation of a Trustee who is not such an affiliate, such requirement shall not be applicable for a period of 60 days, during which time a majority of all the Trustees then in office shall appoint as Trustee such number of persons who are not affiliates of the Adviser as shall be sufficient to comply with the above requirements. The Fund and the Adviser shall at all times endeavor to comply with such requirements, but failure to do so shall not affect the validity or effectiveness of any action of the Fund or of the Adviser under this Agreement. (d) Anything in this Agreement to the contrary notwithstanding, the Adviser shall refrain from any action which, in its reasonable judgment or in the judgment of the Trustees or the Manager of which the Adviser has written notice, would affect adversely the status of the Fund as a regulated investment company as defined in the Code, which would violate any law, rule or regulation of any governmental body or agency having jurisdiction over the Fund or its securities or which would not be permitted by the Declaration of Trust. 2. ALLOCATION OF EXPENSES (a) The Manager represents and warrants that the Fund has agreed that it will bear all expenses of its organization, including all costs of its registration under the 1940 Act and the registration and qualification of the Fund and its Shares in order to offer and sell the Shares in compliance with federal and state securities laws. (b) The Adviser agrees that it will furnish the Fund, at the Adviser's expense, office space, trading and other facilities, equipment and clerical personnel for management of the Fund's affairs and will pay all compensation of employees, officers, and Trustees of the Fund who are affiliated persons of the Adviser or the Manager. The Adviser agrees to bear costs of sales literature and advertising exclusive of expenses of preparing, printing and mailing prospectuses, reports, notices and proxy material to shareholders of the Fund. The Fund shall bear all other costs and expenses including, but not limited to: (i) interest and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv) compensation and expenses of its Trustees and officers other than those affiliated with the Adviser or the Manager; (v) legal, audit and accounting expenses; (vi) fees and expenses of a custodian and transfer agent or shareholder servicing agent; (vii) expenses incident to the issuance of its Shares, including issuance on the payment of, or reinvestment of, dividends; (viii) fees and expenses incident to the registration and qualification of the Fund and its Shares for distribution under federal and state securities laws; (ix) expenses of preparing, printing and mailing prospectuses, reports, notices and proxy material to shareholders of the Fund; (x) all other expenses incidental to holding meetings of the Fund's shareholders; and (xi) such nonrecurring expenses as may arise, including litigation affecting the Fund and the legal obligations with respect to which the Fund may have to indemnify its officers and Trustees. 3. COMPENSATION OF THE ADVISER (a) For its services (as described in Section 1) for the preceding month, the Adviser will receive on the first business day of each month a fee which is 85% of the management fee paid by the Fund to the Manager for the preceding month. (b) The management fee shall be computed and accrued as of the close of each business day. If and when this Agreement terminates, any compensation payable hereunder for the period ending with the date of such termination shall be payable upon such termination. Amounts payable hereunder shall be promptly paid when due. 4. LIABILITY OF THE ADVISER The Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or the Manager in connection with the performance of this Agreement, except a loss resulting from the Adviser's willful misfeasance, bad faith, gross negligence or from reckless disregard by it of its obligations and duties under this Agreement. Any person, even though also an officer, Director, partner, employee, or agent of the Adviser, who may be or become an officer, Trustee, employee or agent of the Fund or the Manager, shall be deemed, when rendering services to the Fund or the Manager or acting on any business of the Fund or the Manager, (other than services or business in connection with the Adviser's duties hereunder), to be rendering such services to or acting solely for the Fund or the Manager, as the case may be, and not as an officer, Director, partner, employee, or agent or one under the control or direction of the Adviser even though paid by it. The Manager agrees to indemnify and hold the Adviser harmless from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, and any state and foreign securities and blue sky laws, as amended from time to time) and expenses, including (without limitation) attorneys' fees and disbursements, arising directly or indirectly from any action or thing which the Adviser takes or does or omits to take or do hereunder provided that the Adviser shall not be indemnified against any liability to the Fund or to its shareholders (or any expenses incident to such liability) arising out of a breach of fiduciary duty with respect to the receipt of compensation for services, willful misfeasance, bad faith, or gross negligence on the part of the Adviser in the performance of its duties, or from reckless disregard by it of its obligations and duties under this Agreement. 5. DURATION AND TERMINATION (a) This Agreement shall continue in effect until July 1, 1994 and thereafter as long as such continuance is approved annually in the manner provided in the 1940 Act. (b) This Agreement may be terminated by the Adviser at any time without penalty upon giving the Fund and the Manager sixty (60) days' written notice and may be terminated by the Fund or the Manager at any time without penalty upon giving the Adviser sixty (60) days' written notice, provided, that such termination by the Fund shall be directed or approved by the vote of a majority of its Trustees in office at the time or by the vote of the holders of a majority (as defined in the 1940 Act) of the voting securities of the Fund at the time outstanding and entitled to vote. This Agreement shall terminate automatically in the event of its "assignment" (as defined in the 1940 Act). 6. AMENDMENT This Agreement shall not be modified or terminated except by an instrument in writing signed by both parties hereto or their respective successors. 7. GOVERNING LAW The provisions of this Agreement shall be governed, construed and enforced in accordance with the laws of The Commonwealth of Massachusetts. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers and their corporate seals to be hereunder affixed, all as of the day and year first above written. KEYSTONE MANAGEMENT, INC. By: /S/ George S. Bissell ---------------------------- Title: Chairman of the Board KEYSTONE CUSTODIAN FUNDS, INC. By: /S/ Albert H. Elfner, III ---------------------------- Title: President EX-99.24(B)(6)(A) 6 UNDERWRITING AGREEMENTS, AS AMENDED EXHIBIT 99.24(b)(6)(A) PRINCIPAL UNDERWRITING AGREEMENT KEYSTONE LIQUID TRUST AGREEMENT made this 19th day of August, 1993 by and between Keystone Liquid Trust (the "Fund"), and Keystone Distributors, Inc., a Delaware corporation (the "Principal Underwriter"). It is hereby mutually agreed as follows: 1. The Fund hereby appoints Principal Underwriter a Principal Underwriter pursuant to the terms of the 12b-1 Plan most recently adopted by the Fund ("12b-1 Plan") and a Principal Underwriter of the shares of beneficial interest of the Fund (the "Shares") as an independent contractor upon the terms and conditions hereinafter set forth. Except as the Fund may from time to time agree, Principal Underwriter will act as agent for the Fund and not as principal. 2. Principal Underwriter will use its best efforts to find purchasers for the Shares and in so doing may retain and employ representatives to promote distribution of the Shares and may obtain orders from brokers, dealers or others for sales of Shares to them. No such representative, dealer or broker shall have any authority to act as agent for the Fund; such dealer or broker shall act only as principal in the sale of Shares. 3. All sales of Shares by Principal Underwriter shall be at the applicable public offering price determined in the manner set forth in the prospectus and/or statement of additional information of the Fund current at the time of the Fund's acceptance of the order for Shares. All orders shall be subject to acceptance by the Fund and the Fund reserves the right in its sole discretion to reject any order received. The Fund shall not be liable to anyone for failure to accept any order. 4. On all sales of Shares, the Fund shall receive the current net asset value and Principal Underwriter shall be entitled to receive payments in accordance with the 12b-1 Plan and as set forth in the then current prospectus and/or statement of additional information of the Fund and to receive the sales charges, including contingent deferred sales charges, as set forth in the then current prospectus and/or statement of additional information of the Fund. Principal Underwriter may reallow all or a part of the 12b-1 payments and the sales charges to such brokers, dealers or other persons as Principal Underwriter may determine. 5. Payment for Shares shall be in New York or Boston Clearing House funds received by Principal Underwriter within ten (10) business days after notice of acceptance of the purchase order and notice of the amount of the applicable public offering price has been given to the purchaser. If such payment is not received within such ten-day period, the Fund reserves the right, without further notice, forthwith to cancel its acceptance of any such order. The Fund shall pay such issue taxes as may be required by law in connection with the issue of the Shares. 6. Principal Underwriter shall not make, or permit any representative, broker or dealer to make, in connection with any sale or solicitation of a sale of the Shares, any representations concerning the Shares except those contained in the then current prospectus and/or statement of additional information covering the Shares and in printed information approved by the Fund as information supplemental to such prospectus and/or statement of additional information. Copies of the then current prospectus and/or statement of additional information and any such printed supplemental information will be supplied by the Fund to Principal Underwriter in reasonable quantities upon request. 7. Principal Underwriter agrees to comply with the rules of Fair Practice of the National Association of Securities Dealers, Inc. 8. The Fund appoints Principal Underwriter as its agent to accept orders for redemptions and repurchases of Shares at values and in the manner determined in accordance with the then current prospectus and/or statement of additional information of the Fund. 9. Principal Underwriter covenants and agrees that it will in all respects duly conform with all state and federal laws and regulations applicable to the sale of the Shares and will indemnify and hold harmless the Fund and each person who has been, is or may hereafter be a Trustee or officer of the Fund against expenses reasonably incurred by any of them in connection with any claim or in connection with any action, suit or proceeding to which any of them may be a party, which arises out of or is alleged to arise out of any misrepresentation or omission to state a material fact on the part of Principal Underwriter or any other person for whose acts Principal Underwriter is responsible, or is alleged to be responsible unless such misrepresentation or omission was made in reliance upon written information furnished by the Fund. The term "expenses" includes amounts paid in satisfaction of judgments or in settlement. The foregoing right in indemnification shall be in addition to any other rights to which the Fund or any such Trustee or officer may be entitled as a matter of law. 10. The Fund agrees to execute such papers and to do such acts and things as shall from time to time be reasonably requested by Principal Underwriter for the purpose of qualifying the Shares for sale under the so-called "blue sky" laws of any state or for registering and maintaining the registration of the Fund and of the Shares under the Federal Securities Act of 1933, as amended ("1933 Act"), and the Federal Investment Company Act of 1940, as amended ("1940 Act"). Principal Underwriter shall bear the expense of preparing, printing and distributing advertising and sales literature and prospectuses and statements of additional information used by it (but not the expenses of registering Shares under the 1933 Act and the 1940 Act, qualifying Shares for sale under the so-called "blue sky" laws of any state and the preparation and printing of prospectuses and statements of additional information and reports required to be filed with the Securities and Exchange Commission by such Acts and the direct expenses of the issue of Shares). 11. The Principal Underwriter shall provide to the Board of Trustees of the Fund in connection with the 12b-1 Plan, not less than quarterly, a written report of the amounts expended pursuant to such 12b-1 Plan and the purpose for which such expenditures were made. 12. Unless sooner terminated or continued as provided below, the term of this Agreement shall begin on the date hereof and expire after one year. This Agreement shall continue in effect after such term if its continuance is specifically approved by a majority of the Trustees of the Fund and a majority of the 12b-1 Trustees referred to in the 12b-1 Plan of the Fund ("Rule 12b-1 Directors") at least annually in accordance with the 1940 Act and the rules and regulations thereunder. This Agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Rule 12b-1 Directors or by a vote of a majority of the Fund's outstanding shares on not more than sixty days' written notice to any other party to the Agreement; and shall terminate automatically in the event of its assignment (as defined in the 1940 Act). 13. It is expressly agreed that this Agreement is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of this Agreement are not binding upon the Trustees or shareholders of the Fund individually but only the assets of the Trust are bound. 14. This Agreement shall be construed in accordance with the laws of The Commonwealth of Massachusetts. All sales hereunder are to be made, and title to the Shares shall pass, in Boston, Massachusetts. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their respective officers therunto duly authorized at Boston, Massachusetts, on the day and year first written above. KEYSTONE LIQUID TRUST By: --------------------------- Title: KEYSTONE DISTRIBUTORS, INC. By: --------------------------- Title: #10160191 FIRST AMENDMENT TO PRINCIPAL UNDERWRITING AGREEMENT OF KEYSTONE LIQUID TRUST FIRST AMENDMENT (the "Amendment") made as of the 31st day of May 1995 to AGREEMENT (the "Agreement") made the 19th day of August 1993 by and between Keystone Liquid Trust, a Massachusetts business trust, ("Fund"), and Keystone Investment Distributors Company, a Delaware corporation (the "Principal Underwriter"). 1. This Amendment is made by the Fund, individually and/or on behalf of its series if any, referred to above in the title of this Amendment, to which series, if any, this Amendment shall relate, as applicable (the "Fund"). The Fund and the Principal Underwriter mutually agree that Section 1 of the Agreement is amended as follows: " 1. The Fund hereby appoints the Principal Underwriter a principal underwriter of the Class A and Class C shares of beneficial interest of the Fund ("Shares") as an independent contractor upon the terms and conditions hereinafter set forth. Except as the Fund may from time to time agree, the Principal Underwriter will act as agent for the Fund and not as principal." 2. In all other respects the Agreement is unchanged. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their respective officers thereunto duly authorized at Boston, Massachusetts on the day and year first written above. KEYSTONE LIQUID TRUST By: --------------------------- Title: KEYSTONE INVESTMENT DISTRIBUTORS COMPANY By: --------------------------- Title: #100C0222 PRINCIPAL UNDERWRITING AGREEMENT FOR CLASS B-1 SHARES OF KEYSTONE LIQUID TRUST AGREEMENT made this 31st day of May 1995 by and between Keystone Liquid Trust, a Massachusetts business trust, ("Fund"), and Keystone Investment Distributors Company, a Delaware corporation (the "Principal Underwriter"). The Fund, individually and/or on behalf of its series, if any, referred to above in the title of this Agreement, to which series, if any, this Agreement shall relate, as applicable (the "Fund"), may act as the distributor of certain securities of which it is the issuer pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"). Accordingly, it is hereby mutually agreed as follows: 1. The Fund hereby appoints the Principal Underwriter a principal underwriter of the Class B-1 shares of beneficial interest of the Fund ("B-1 Shares") as an independent contractor upon the terms and conditions hereinafter set forth. The general term "Shares" as used herein has the same meaning as is provided therefor in Schedule I hereto. Except as the Fund may from time to time agree, the Principal Underwriter will act as agent for the Fund and not as principal. 2. The Principal Underwriter will use its best efforts to find purchasers for the B-1 Shares and to promote distribution of the B-1 Shares and may obtain orders from brokers, dealers or other persons for sales of B-1 Shares to them. No such dealer, broker or other person shall have any authority to act as agent for the Fund; such dealer, broker or other person shall act only as principal in the sale of B-1 Shares. 3. Sales of B-1 Shares by Principal Underwriter shall be at the public offering price determined in the manner set forth in the prospectus and/or statement of additional information of the Fund current at the time of the Fund's acceptance of the order for B-2 Shares. All orders shall be subject to acceptance by the Fund and the Fund reserves the right in its sole discretion to reject any order received. The Fund shall not be liable to anyone for failure to accept any order. 4. On all sales of B-1 Shares the Fund shall receive the current net asset value. The Fund shall pay the Principal Underwriter Distribution Fees (as defined in Section 14 hereof), as commissions for the sale of B-1 Shares and other Shares, which shall be paid in conjunction with distribution fees paid to the Principal Underwriter by other classes of Shares of the Fund to the extent required in order to comply with Section 14 hereof, and shall pay over to the Principal Underwriter CDSCs (as defined in Section 14 hereof) as set forth in the Fund's current prospectus and statement of additional information, and as required by Section 14 hereof. The Principal Underwriter shall also receive payments consisting of shareholder service fees ("Service Fees") at the rate of .25% per annum of the average daily net asset value of the Class B-1 Shares. The Principal Underwriter may allow all or a part of said Distribution Fees and CDSCs received by it (not paid to others as hereinafter provided) to such brokers, dealers or other persons as Principal Underwriter may determine. 5. Payment to the Fund for B-1 Shares shall be in New York or Boston Clearing House funds received by the Principal Underwriter within three business days after notice of acceptance of the purchase order and the amount of the applicable public offering price has been given to the purchaser. If such payment is not received within such period, the Fund reserves the right, without further notice, forthwith to cancel its acceptance of any such order. The Fund shall pay such issue taxes as may be required by law in connection with the issue of the B-1 Shares. 6. The Principal Underwriter shall not make in connection with any sale or solicitation of a sale of the B-1 Shares any representations concerning the B-1 Shares except those contained in the then current prospectus and/or statement of additional information covering the Shares and in printed information approved by the Fund as information supplemental to such prospectus and statement of additional information. Copies of the then current prospectus and statement of additional information and any such printed supplemental information will be supplied by the Fund to the Principal Underwriter in reasonable quantities upon request. 7. The Principal Underwriter agrees to comply with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. (as defined in the Purchase and Sale Agreement, dated as of May 31, 1995 (the "Purchase Agreement"), between the Principal Underwriter, Citibank, N.A. and Citicorp North America, Inc., as agent (the "Rules of Fair Practice")). 8. The Fund appoints the Principal Underwriter as its agent to accept orders for redemptions and repurchases of B-1 Shares at values and in the manner determined in accordance with the then current prospectus and/or statement of additional information of the Fund. 9. The Fund agrees to indemnify and hold harmless the Principal Underwriter, its officers and Directors and each person, if any, who controls the Principal Underwriter within the meaning of Section 15 of the Securities Act of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and expenses (including the cost of any legal fees incurred in connection therewith) which the Principal Underwriter, its officers, Directors or any such controlling person may incur under the 1933 Act, under any other statute, at common law or otherwise, arising out of or based upon a. any untrue statement or alleged untrue statement of a material fact contained in the Fund's registration statement, prospectus or statement of additional information (including amendments and supplements thereto) or b. any omission or alleged omission to state a material fact required to be stated in the Fund's registration statement, prospectus or statement of additional information necessary to make the statements therein not misleading, provided, however, that insofar as losses, claims, damages, liabilities or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance and in conformity with information furnished to the Fund by the Principal Underwriter for use in the Fund's registration statement, prospectus or statement of additional information, such indemnification is not applicable. In no case shall the Fund indemnify the Principal Underwriter or its controlling person as to any amounts incurred for any liability arising out of or based upon any action for which the Principal Underwriter, its officers and Directors or any controlling person would otherwise be subject to liability by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties or by reason of the reckless disregard of its obligations and duties under this Agreement. 10. The Principal Underwriter agrees to indemnify and hold harmless the Fund, its officers and Trustees and each person, if any, who controls the Fund within the meaning of Section 15 of the 1933 Act against any loss, claims, damages, liabilities and expenses (including the cost of any legal fees incurred in connection therewith) which the Fund, its officers, Directors or any such controlling person may incur under the 1933 Act, under any other statute, at common law or otherwise arising out of the acquisition of any Shares by any person which (a) may be based upon any wrongful act by the Principal Underwriter or any of its employees or representatives, or (b) may be based upon any untrue statement or alleged untrue statement of a material fact contained in the Fund's registration statement, prospectus or statement of additional information (including amendments and supplements thereto), or any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon information furnished or confirmed in writing to the Fund by the Principal Underwriter. 11. The Fund agrees to execute such papers and to do such acts and things as shall from time to time be reasonably requested by the Principal Underwriter for the purpose of qualifying the B-1 Shares for sale under the so-called "blue sky" laws of any state or for registering B-1 Shares under the 1933 Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal Underwriter shall bear the expenses of preparing, printing and distributing advertising, sales literature, prospectuses, and statements of additional information to holders of B-1 Shares, and the direct expenses of the issue of B-1 Shares. 12. The Principal Underwriter shall, at the request of the Fund, provide to the Board of Trustees or Directors (together herein called the "Directors") of the Fund in connection with sales of B-1 Shares not less than quarterly a written report of the amounts received from the Fund therefor and the purpose for which such expenditures by the Fund were made. 13. The term of this Agreement shall begin on the date hereof and, unless sooner terminated or continued as provided below, shall expire after one year. This Agreement shall continue in effect after such term if its continuance is specifically approved by a majority of the outstanding voting securities of Class B-1 of the Fund or by a majority of the Directors of the Fund and a majority of the Directors who are not parties to this Agreement or "interested persons", as defined in the Investment Company Act of 1940 (the "1940 Act"), of any such party and who have no direct or indirect financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-1 Shares or in any agreements related to the plan at least annually in accordance with the 1940 Act and the rules and regulations thereunder. This Agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Directors of the Fund, or a majority of such Directors who are not parties to this Agreement or "interested persons", as defined in the 1940 Act, of any such party and who have no direct or indirect financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-1 Shares or in any agreement related to the plan or by a vote of a majority of the outstanding voting securities of Class B-1 on not more than sixty days written notice to any other party to the agreement; and shall terminate automatically in the event of its assignment (as defined in the 1940 Act), which shall not include assignment of the Principal Underwriter's (as hereinafter defined) provided for hereunder and/or rights related to such Allocable Portions. 14. The provisions of this Section 14 shall be applicable to the extent necessary to enable the Fund to comply with the obligation of the Fund to pay the Principal Underwriter its Allocable Portion of Distribution Fees paid in respect of Shares while the Fund is required to do so pursuant the Principal Underwriting Agreement, of even date herewith, in respect of Class B-2 Shares, and shall remain in effect so long as any payments are required to be made by the Fund pursuant to the irrevocable payment instruction (as defined in the Purchase Agreement (the "Irrevocable Payment Instruction")). 14.1 The Fund shall pay to the Principal Underwriter the Principal Underwriter's Allocable Portion (as hereinafter defined) of a fee (the "Distribution Fee") at the rate of .75% per annum of the average daily net asset value of the Shares, subject to the limitation on the maximum aggregate amount of such fees under the Rules of Fair Practice as applicable to such Distribution Fee on the date hereof. 14.2 The Principal Underwriter's Allocable Portion of Distribution Fees paid by the Fund in respect of Shares shall be equal to the portion of the Asset Based Sales Charge allocable to Distributor Shares (as defined in Schedule I hereto to this Agreement) in accordance with Schedule I hereto. The Fund agrees to cause its transfer agent to maintain the records and arrange for the payments on behalf of the Fund at the times and in the amounts and to the accounts required by Schedule I hereto, as the same may be amended from time to time. It is acknowledged and agreed that by virtue of the operation of Schedule I hereto the Principal Underwriter's Allocable Portion of Distribution Fees paid by the Fund in respect of Shares, may, to the extent provided in Schedule I hereto, take into account Distribution Fees payable by the Fund in respect of other existing and future classes and/or sub-classes of shares of the Fund which would be treated as "Shares" under Schedule I hereto. The Fund will limit amounts paid to any subsequent principal underwriters of Shares to the portion of the Asset Based Sales Charge paid in respect of Shares which is allocable to Post-distributor Shares (as defined in Schedule I hereto) in accordance with Schedule I hereto. The Fund's payments to the Principal Underwriter in consideration of its services in connection with the sale of B-1 Shares shall be the Distribution Fees attributable to B-1 Shares which are Distributor Shares (as defined in Schedule I hereto) and all other amounts constituting the Principal Underwriter's Allocable Portion of Distribution Fees shall be the Distribution Fees related to the sale of other Shares which are Distributor Shares (as defined in Schedule I hereto). The Fund shall cause its transfer agent and sub-transfer agents to withhold from redemption proceeds payable to holders of Shares on redemption thereof the contingent deferred sales charges payable upon redemption thereof as set forth in the then current prospectus and/or statement of additional information of the Fund ("CDSCs") and to pay over to the Principal Underwriter The Principal Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which shall be equal to the portion thereof allocable to Distributor Shares (as defined in Schedule I hereto) in accordance with Schedule I hereto. 14.3 The Principal Underwriter shall be considered to have completely earned the right to the payment of its Allocable Portion of the Distribution Fee and the right to payment over to it of its' Allocable Portion of the CDSC in respect of Shares as provided for hereby upon the completion of the sale of each Commission Share (as defined in Schedule I hereto) taken into account as a Distributor Share in computing the Principal Underwriter's Allocable Portion in accordance with Schedule I hereto. 14.4 Except as provided in Section 14.5 hereof in respect of Distribution Fees only, the Fund's obligation to pay the Principal Underwriter the Distribution Fees and to pay over to the Principal Underwriter CDSCs provided for hereby shall be absolute and unconditional and shall not be subject to dispute, offset, counterclaim or any defense whatsoever (it being understood that nothing in this sentence shall be deemed a waiver by the Fund of its right separately to pursue any claims it may have against the Principal Underwriter and enforce such claims against any assets (other than the Principal Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs (the "Collection Rights") of the Principal Underwriter). 14.5 Notwithstanding anything in this Agreement to the contrary, the Fund shall pay to the Principal Underwriter its Allocable Portion of Distribution Fees provided for hereby notwithstanding its termination as Principal Underwriter for the Shares or any termination of this Agreement and such payment of such Distribution Fees, and that obligation and the method of computing such payment, shall not be changed or terminated except to the extent required by any change in applicable law, including, without limitation, the 1940 Act, the Rules promulgated thereunder by the Securities and Exchange Commission and the Rules of Fair Practice, in each case enacted or promulgated after June 1, 1995, or in connection with a Complete Termination (as hereinafter defined). For the purposes of this Section 14.5, "Complete Termination" means a termination of the Fund's Rule 12b-1 plan for B-2 Shares involving the cessation of payments of the Distribution Fees, and the cessation of payments of distribution fees pursuant to every other Rule 12b-1 plan of the Fund for every existing or future B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the offering of every existing or future B-Class-of-Shares, which conditions shall be deemed satisfied when they are first complied with hereafter and so long thereafter as they are complied with prior to the earlier of (i) the date upon which all of the B-2 Shares which are Distributor Shares pursuant to Schedule I hereto shall have been redeemed or converted or (ii) June 1, 2005. For purposes of this Section 14.5, the term B-Class-of-Shares means each of the B-1 Class of Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of shares of the Fund hereafter issued which would be treated as Shares under Schedule I hereto or which has substantially similar economic characteristics to the B-1 or B-2 Classes of Shares taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of the shares of such class. The parties agree that the existing C Class of Shares of the Fund does not have substantially similar economic characteristics to the B-1 or B-2 Classes of Shares taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares. For purposes of clarity the parties to this agreement hereby state that they intend that a new installment load class of shares which may be authorized by amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it has economic characteristics substantially similar to the economic characteristics of the existing B-1 or B-2 Classes of Shares taking into account the total sale charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares and will not be considered to be a B-Class-of-Shares if it has economic characteristics substantially similar to the economic characteristics of the existing C Class of shares of the Fund taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares. 14.6 The Principal Underwriter may assign any part of its Allocable Portions and obligations of the Fund related thereto (but not the Principal Underwriter's obligations to the Fund provided for in this Agreement) to any person (an "Assignee") and any such assignment shall be effective as to the Fund upon written notice to the Fund by the Principal Underwriter. In connection therewith the Fund shall pay all or any amounts in respect of its Allocable Portions directly to the Assignee thereof as directed in a writing by the Principal Underwriter in the Irrevocable Payment Instruction, as the same may be amended from time to time with the consent of the Fund, and the Fund shall be without liability to any person if it pays such amounts when and as so directed, except for underpayments of amounts actually due, without any amount payable as consequential or other damages due to such underpayment and without interest except to the extent that delay in payment of Distribution Fees and CDSCs results in an increase in the maximum Sales Charge allowable under the Rules of Fair Practice, which increases daily at a rate of prime plus one percent per annum. 14.7 The Fund will not, to the extent it may otherwise be empowered to do so, change or waive any CDSC with respect to B-1 Shares, except as provided in the Fund's prospectus or statement of additional information without the Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding anything to the contrary in this Agreement or any termination of this Agreement or the Principal Underwriter as principal underwriter for the Shares of the Fund, the Principal Underwriter shall be entitled to be paid its Allocable Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-1 Shares is terminated and whether or not any such termination is a Complete Termination, as defined above. 15. This Agreement shall be construed in accordance with the laws of The Commonwealth of Massachusetts. All sales hereunder are to be made, and title to the Shares shall pass, in Boston, Massachusetts. 16. The Fund is a Massachusetts business trust established under a Declaration of Trust, as it may be amended from time to time. The obligations of the Fund are not personally binding upon, nor shall recourse be had against the private property of any of the Trustees, shareholders, officers, employees or agents of the Fund, but only the property of the Fund shall be bound. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their respective officers thereunto duly authorized at Boston, Massachusetts, on the day and year first written above. KEYSTONE LIQUID TRUST By:___________________________ Title: KEYSTONE INVESTMENT DISTRIBUTORS, INC. By:___________________________ Title: 191250.c1 SCHEDULE I TO PRINCIPAL UNDERWRITING AGREEMENT FOR CLASS B-1 SHARES OF KEYSTONE LIQUID TRUST TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES Amounts (in respect of Asset Based Sales Charges (as hereinafter defined) and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined) of each Fund (as hereinafter defined) shall be allocated between Distributor Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter defined) of such Fund in accordance with the rules set forth in clauses (B) and (C). Clause (B) sets forth the rules to be followed by the Transfer Agent for each Fund and the record owner of each Omnibus Account (as hereinafter defined) in maintaining records relating to Distributor Shares and Post-distributor Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for each Fund and the record owner of each Omnibus Account in determining what portion of the Asset Based Sales Charge (as hereinafter defined) payable in respect of each class of Shares of such Fund and what portion of the CDSC (as hereinafter defined) payable by the holders of Shares of such Fund is attributable to Distributor Shares and Post-distributor Shares, respectively. (A) DEFINITIONS: Generally, for purposes of this Schedule I, defined terms shall be used with the meaning assigned to them in the Agreement, except that for purposes of the following rules the following definitions are also applicable: "Agreement" shall mean the Principal Underwriting Agreement for Class B-1 Shares of the Instant Fund dated as of June 1, 1995 between the Instant Fund and the Distributor. "Asset Based Sales Charge" shall have the meaning set forth in Section 26(b)(8)(C) of the Rules of Fair Practice it being understood that for purposes of this Exhibit I such term does not include the Service Fee. "Business Day" shall mean any day on which the banks and the New York Stock Exchange are not authorized or required to close in New York City. "Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a Dividend in respect of such Share which is designated by such Fund as being a "capital gain dividend" as such term is defined in Section 852 of the Internal Revenue Code of 1986, as amended. "CDSC" shall mean with respect to any Fund, the contingent deferred sales charge payable, either directly or by withholding from the proceeds of the redemption of the Shares of such Fund, by the shareholders of such Fund on any redemption of Shares of such Fund in accordance with the Prospectus relating to such Fund. "Commission Share" shall mean, in respect of any Fund, a Share of such Fund issued under circumstances where a CDSC would be payable upon the redemption of such Share if such CDSC is not waived or shall have not otherwise expired. "Date of Original Purchase" shall mean, in respect of any Commission Share of any Fund, the date on which such Commission Share was first issued by such Fund; provided, that if such Share is a Commission Share and such Fund issued the Commission Share (or portion thereof) in question in connection with a Free Exchange for a Commission Share (or portion thereof) of another Fund, the Date of Original Purchase for the Commission Share (or portion thereof) in question shall be the date on which the Commission Share (or portion thereof) of the other Fund was first issued by such other Fund (unless such Commission Share (or portion thereof) was also issued by such other Fund in a Free Exchange, in which case this proviso shall apply to that Free Exchange and this application shall be repeated until one reaches a Commission Share (or portion thereof) which was issued by a Fund other than in a Free Exchange). "Distributor" shall mean Keystone Investment Distributors Company, its successors and assigns. "Distributor's Account" shall mean the account of the Distributor, account no. 9903-584-2, ABA No. 011 0000 28, entitled "General Account" maintained with State Street Bank & Trust Company or such other account as the Distributor may designate in a notice to the Transfer Agent. "Distributor Inception Date" shall mean, in respect of any Fund, the date identified as the date Shares of such Fund are first sold by the Distributor. "Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund, the date identified as the last sale of a Commission Share during the period the Distributor served as principal underwriter under the Agreement. "Distributor Shares" shall mean, in respect of any Fund, all Shares of such Fund the Month of Original Purchase of which occurs on or after the Inception Date for such Fund and on or prior to the Distributor Last Sale Cut-off Date in respect of such Fund. "Dividend" shall mean, in respect of any Share of any Fund, any dividend or other distribution by such Fund in respect of such Share. "Free Exchange" shall mean any exchange of a Commission Share (or portion thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of another Fund (the "Issuing Fund"), under any arrangement which defers the exchanging Shareholder's obligation to pay the CDSC in respect of the Commission Share (or portion thereof) of the Redeeming Fund so exchanged until the later redemption of the Share (or portion thereof) of the Issuing Fund received in such exchange. "Free Share" shall mean, in respect of any Fund, each Share of such Fund other than a Commission Share, including, without limitation: (i) Shares issued in connection with the automatic reinvestment of Capital Gain Dividends or Other Dividends by such Fund, (ii) Special Free Shares issued by such Fund and (iii) Shares (or portion thereof) issued by such Fund in connection with an exchange whereby a Free Share (or portion thereof) of another Fund is redeemed and the Net Asset Value of such redeemed Free Share (or portion thereof) is invested in such Shares (or portion thereof) of such Fund. "Fund" shall mean each of the regulated investment companies or series or portfolios of regulated investment companies identified in Schedule II to the Irrevocable Payment Instruction, as the same may be amended from time to time in accordance with the terms thereof. "Instant Fund" shall mean Keystone Liquid Trust. "ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer agent. "Month of Original Purchase" shall mean, in respect of any Share of any Fund, the calendar month in which such Share was first issued by such Fund; provided, that if such Share is a Commission Share and such Fund issued the Commission Share (or portion thereof) in question in connection with a Free Exchange for a Commission Share (or portion thereof) of another Fund, the Month of Original Purchase for the Commission Share (or portion thereof) in question shall be the calendar month in which the Commission Share (or portion thereof) of the other Fund was first issued by such other Fund (unless such Commission Share (or portion thereof) was also issued by such other Fund in a Free Exchange, in which case this proviso shall apply to that Free Exchange and this application shall be repeated until one reaches a Commission Share (or portion thereof) which was issued by a Fund other than in a Free Exchange); provided, further, that if such Share is a Free Share and such Fund issued such Free Share in connection with the automatic reinvestment of dividends in respect of other Shares of such Fund, the Month of Original Purchase of such Free Share shall be deemed to be the Month of Original Purchase of the Share in respect of which such dividend was paid; provided, further, that if such Share is a Free Share and such Fund issued such Free Share in connection with an exchange whereby a Free Share (or portion thereof) of another Fund is redeemed and the Net Asset Value of such redeemed Free Share (or portion thereof) is invested in a Free Share (or portion thereof) of such Fund, the Month of Original Issue of such Free Share shall be the Month of Original Issue of the Free Share of such other Fund so redeemed (unless such Free Share of such other Fund was also issued by such other Fund in such an exchange, in which case this proviso shall apply to that exchange and this application shall be repeated until one reaches a Free Share which was issued by a Fund other than in such an exchange); and provided, finally, that for purposes of this Schedule I each of the following periods shall be treated as one calendar month for purposes of applying the rules of this Schedule I to any Fund: (i) the period of time from and including the Distributor Inception Date for such Fund to and including the last day of the calendar month in which such Distributor Inception Date occurs; (ii) the period of time commencing with the first day of the calendar month in which the Distributor Last Sale Cutoff Date in respect of such Fund occurs to and including such Distributor Last Sale Cutoff Date; and (iii) the period of time commencing on the day immediately following the Distributor Last Sale Cutoff Date in respect of such Fund to and including the last day of the calendar month in which such Distributor Last Sale Cut-off Date occurs. "Omnibus Account" shall mean any Shareholder Account the record owner of which is a registered broker-dealer which has agreed with the Transfer Agent to provide sub-transfer agent functions relating to each Sub-shareholder Account within such Shareholder Account as contemplated by this Schedule I in respect of each of the Funds. "Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect of each Omnibus Account, the Business Day next following the twentieth day of each calendar month for the calendar month immediately preceding such date so long as the record owner is able to allocate the Asset Based Sales Charge accruing in respect of Shares of any Fund as contemplated by this Schedule I no more frequently than monthly; provided, that at such time as the record owner of such Omnibus Account is able to provide information sufficient to allocate the Asset Based Sales Charge accruing in respect of such Shares of such Fund owned of record by such Omnibus Account as contemplated by this Schedule I on a weekly or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date as in the case of Asset Based Sales Charges accruing in respect of Shareholder Accounts other than Omnibus Accounts, as the case may be. "Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus Account, the third Business Day of each calendar week for the calendar week immediately preceding such date so long as the record owner of such Omnibus Account is able to allocate the CDSCs accruing in respect of any Shares of any Fund as contemplated by this Schedule I for no more frequently than weekly; provided, that at such time as the record owner of such Shares of such Fund owned of record by such Omnibus Account is able to provide information sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement Date for such Omnibus Account shall be a daily date as in the case of CDSCs accruing in respect of Shareholder Accounts other than Omnibus Accounts. "Original Purchase Amount" shall mean, in respect of any Commission Share of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date), on the Date of Original Purchase in respect of such Commission Share, by such Shareholder Account or Sub-shareholder Account for such Commission Share; provided, that if such Fund issued the Commission Share (or portion thereof) in question in connection with a Free Exchange for a Commission Share (or portion thereof) of another Fund, the Original Purchase Amount for the Commission Share (or portion thereof) in question shall be the Original Purchase Amount in respect of such Commission Share (or portion thereof) of such other Fund (unless such Commission Share (or portion thereof) was also issued by such other Fund in a Free Exchange, in which case this proviso shall apply to that Free Exchange and this application shall be repeated until one reaches a Commission Share (or portion thereof) which was issued by a Fund other than in a Free Exchange). "Other Dividend" shall mean in respect of any Share, any Dividend paid in respect of such Share other than a Capital Gain Dividend. "Post-distributor Shares" shall mean, in respect of any Fund, all Shares of such Fund the Month of Original Purchase of which occurs after the Distributor Last Sale Cut-off Date for such Fund. "Program Agent" shall mean Citicorp North America, Inc., as Program Agent under the Purchase Agreement, and its successors and assigns in such capacity. "Purchase Agreement" shall mean that certain Purchase and Sale Agreement dated as of May 31, 1995, among Keystone Investment Distributors Company, as Seller, Citibank, N.A., as Purchaser, and Citicorp North America, Inc., as Program Agent. "Share" shall mean in respect of any Fund any share of the classes of shares specified in Schedule II to the Irrevocable Payment Instruction opposite the name of such Fund, as the same may be amended from time to time by notice from the Distributor and the Program Agent to the Fund and the Transfer Agent; provided, that such term shall include, after the Distributor Last Sale Cut-off Date, a share of a new class of shares of such Fund: (i) with respect to each record owner of Shares which is not treated in the records of each Transfer Agent and Sub-transfer Agent for such Fund as an entirely separate and distinct class of shares from the classes of shares specified Schedule II to the Irrevocable Payment Instruction or (ii) the shares of which class may be exchanged for shares of another Fund of the classes of shares specified on Schedule II to the Irrevocable Payment Instruction of any class existing on or prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on which can be reinvested in shares of the classes specified on Schedule II to the Irrevocable Payment Instruction under the automatic dividend reinvestment options; or (iv) which is otherwise treated as though it were of the same class as the class of shares specified on Schedule II to the Irrevocable Payment Instruction. "Shareholder Account" shall have the meaning set forth in clause (B)(1) hereof. "Special Free Share" shall mean, in respect of any Fund, a Share (other than a Commission Share) issued by such Fund other than in connection with the automatic reinvestment of Dividends and other than in connection with an exchange whereby a Free Share (or portion thereof) of another Fund is redeemed and the Net Asset Value of such redeemed Share (or portion thereof) is invested in a Share (or portion thereof) of such Fund. "Sub-shareholder Account" shall have the meaning set forth in clause (B)(1) hereof. "Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the record owner thereof. (B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND AND THE RECORD OWNER OF EACH OMNIBUS ACCOUNT: The Transfer Agent shall maintain Shareholder Accounts, and shall cause each record owner of each Omnibus Account to maintain Sub-shareholder Accounts, each in accordance with the following rules: (1) SHAREHOLDER ACCOUNTS AND SUB-SHAREHOLDER ACCOUNTS. The Transfer Agent shall maintain a separate account (a "Shareholder Account") for each record owner of Shares of each Fund. Each Shareholder Account (other than Omnibus Accounts) will represent a record owner of Shares of such Fund, the records of which will be kept in accordance with this Schedule I. In the case of an Omnibus Account, the Transfer Agent shall require that the record owner of the Omnibus Account maintain a separate account (a "Sub-shareholder Account") for each record owner of Shares which are reflected in the Omnibus Account, the records of which will be kept in accordance with this Schedule I. Each such Shareholder Account and Sub-shareholder Account shall relate solely to Shares of such Fund and shall not relate to any other class of shares of such Fund. (2) COMMISSION SHARES. For each Shareholder Account (other than an Omnibus Account), the Transfer Agent shall maintain daily records of each Commission Share of such Fund which records shall identify each Commission Share of such Fund reflected in such Shareholder Account by the Month of Original Purchase of such Commission Share. For each Omnibus Account, the Transfer Agent shall require that the Sub-transfer Agent in respect thereof maintain daily records of such Sub-shareholder Account which records shall identify each Commission Share of such Fund reflected in such Sub-shareholder Account by the Month of Original Purchase; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall maintain daily records of Sub-shareholder Accounts which identify each Commission Share of such Fund reflected in such Sub-shareholder Account by the Date of Original Purchase. Each such Commission Share shall be identified as either a Distributor Share or a Post-distributor Share based upon the Month of Original Purchase of such Commission Share (or in the case of a Sub-shareholder Account within the ML Omnibus Account, based upon the Date of Original Purchase). (3) FREE SHARES. The Transfer Agent shall maintain daily records of each Shareholder Account (other than an Omnibus Account) in respect of any Fund so as to identify each Free Share (including each Special Free Share) reflected in such Shareholder Account by the Month of Original Purchase of such Free Share. In addition, the Transfer Agent shall require that each Shareholder Account (other than an Omnibus Account) have in effect separate elections relating to reinvestment of Capital Gain Dividends and relating to reinvestment of Other Dividends in respect of any Fund. Either such Shareholder Account shall have elected to reinvest all Capital Gain Dividends or such Shareholder Account shall have elected to have all Capital Gain Dividends distributed. Similarly, either such Shareholder Account shall have elected to reinvest all Other Dividends or such Shareholder Account shall have elected to have all Other Dividends distributed. The Transfer Agent shall require that the Sub-transfer Agent in respect of each Omnibus Account maintain daily records for each Sub-shareholder Account in the manner described in the immediately preceding paragraph for Shareholder Accounts (other than Omnibus Accounts); provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall not be obligated to conform to the foregoing requirements. Each Sub-shareholder Account shall also have in effect Dividend reinvestment elections as described in the immediately preceding paragraph. The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus Account shall identify each Free Share as either a Distributor Share or a Post-distributor Share based upon the Month of Original Purchase of such Free Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, the Transfer Agent shall require such Sub-transfer Agent to identify each Free Share of a given Fund in the ML Omnibus Account as a Distributor Share, or Post-distributor Share, as follows: (a) Free Shares of such Fund which are outstanding on the Distributor Last Sale Cut-off Date for such Fund shall be identified as Distributor Shares. (b) Free Shares of such Fund which are issued (whether or not in connection with an exchange for a Free Share of another Fund) to the ML Omnibus Account during any calendar month (or portion thereof) after the Distributor Last Sale Cut-off Date for such Fund shall be identified as Distributor Shares in a number computed as follows: A X (B/C) where: A = Free Shares of such Fund issued to the ML Omnibus Account during such calendar month (or portion thereof) B = Number of Commission Shares and Free Shares of such Fund in the ML Omnibus Account identified as Distributor Shares and outstanding as of the close of business in the last day of the immediately preceding calendar month (or portion thereof) C = Total number of Commission Shares and Free Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof). (c) Free Shares of such Fund which are issued (whether or not in connection with an exchange for a free share of another Fund) to the ML Omnibus Account during any calendar month (or portion thereof) after the Distributor Last Sale Cut-off Date for such Fund shall be identified as Post-distributor Shares in a number computed as follows: (A X (B/C) where: A = Free Shares of such Fund issued to the ML Omnibus Account during such calendar month (or portion thereof) B = Number of Commission Shares and Free Shares of such Fund in the ML Omnibus Account identified as Post-distributor Shares and outstanding as of the close of business in the last day of the immediately preceding calendar month (or portion thereof) C = Total number of Commission Shares and Free Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof). (d) Free Shares of such Fund which are redeemed (whether or not in connection with an exchange for Free Shares of another Fund or in connection with the conversion of such Shares into a Class A Share of such Fund) from the ML Omnibus Account in any calendar month (or portion thereof) after the Distributor Last Sale Cut-off Date for such Fund shall be identified as Distributor Shares in a number computed as follows: A X (B/C) Where: A = Free Shares of such Fund which are redeemed (whether or not in connection with an exchange for Free Shares of another Fund or in connection with the conversion of such Shares into a class A share of such Fund) from the ML Omnibus Account during such calendar month (or portion thereof) B = Free Shares of such Fund in the ML Omnibus Account identified as Distributor Shares and outstanding as of the close of business on the last day of the immediately preceding calendar month. C = Total number of Free Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month. (e) Free Shares of such Fund which are redeemed (whether or not in connection with an exchange for Free Shares of another Fund or in connection with the conversion of such Shares into a class A share of such Fund) from the ML Omnibus Account in any calendar month (or portion thereof) after the Distributor Last Sale Cut-off Date for such Fund shall be identified as Post-distributor Shares in a number computed as follows: A X (B/C) where: A = Free Shares of such Fund which are redeemed (whether or not in connection with an exchange for Free Shares of another Fund or in connection with the conversion of such Shares into a class A share of such Fund) from the ML Omnibus Account during such calendar month (or portion thereof) B = Free Shares of such Fund in the ML Omnibus Account identified as Post-distributor Shares and outstanding as of the close of business on the last day of the immediately preceding calendar month. C = Total number of Free Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month. (4) APPRECIATION AMOUNT AND COST ACCUMULATION AMOUNT. The Transfer Agent shall maintain on a daily basis in respect of each Shareholder Account (other than Omnibus Accounts) a Cost Accumulation Amount representing the total of the Original Purchase Amounts paid by such Shareholder Account for all Commission Shares reflected in such Shareholder Account as of the close of business on each day. In addition, the Transfer Agent shall maintain on a daily basis in respect of each Shareholder Account (other than Omnibus Accounts) sufficient records to enable it to compute, as of the date of any actual or deemed redemption or Free Exchange of a Commission Share reflected in such Shareholder Account an amount (such amount an "Appreciation Amount") equal to the excess, if any, of the Net Asset Value as of the close of business on such day of the Commission Shares reflected in such Shareholder Account minus the Cost Accumulation Amount as of the close of business on such day. In the event that a Commission Share (or portion thereof) reflected in a Shareholder Account is redeemed or under these rules is deemed to have been redeemed (whether in a Free Exchange or otherwise), the Appreciation Amount for such Shareholder Account shall be reduced, to the extent thereof, by the Net Asset Value of the Commission Share (or portion thereof) redeemed, and if the Net Asset Value of the Commission Share (or portion thereof) being redeemed equals or exceeds the Appreciation Amount, the Cost Accumulation Amount will be reduced to the extent thereof, by such excess. If the Appreciation Amount for such Shareholder Account immediately prior to any redemption of a Commission Share (or portion thereof) is equal to or greater than the Net Asset Value of such Commission Share (or portion thereof) deemed to have been tendered for redemption, no CDSCs will be payable in respect of such Commission Share (or portion thereof). The Transfer Agent shall require that the Sub-transfer Agent in respect of each Omnibus Account maintain on a daily basis in respect of each Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation Amount and sufficient records to enable it to compute, as of the date of any actual or deemed redemption or Free Exchange of a Commission Share reflected in such Sub-shareholder Account an Appreciation Amount in accordance with the preceding paragraph and to apply the same to determine whether a CDSC is payable (as though such Sub-shareholder Account were a Shareholder Account other than an Omnibus Account; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall maintain for each Sub-shareholder Account a separate Cost Accumulation Amount and a separate Appreciation Amount for each Date of Original Purchase of any Commission Share which shall be applied as set forth in the preceding paragraph as if each Date of Original Purchase were a separate Month of Original Purchase. (5) NASD CAP. On the date the distribution fees paid in respect of any class of Shares equals the maximum amount thereon under the Rules of Fair Practice, in respect of such class, all outstanding Shares of such class of such Fund shall be converted into Class A shares of such Fund and will be deemed to have been redeemed for their Net Asset Value for purposes of this Schedule I. (6) IDENTIFICATION OF REDEEMED SHARES. If a Shareholder Account (other than an Omnibus Account) tenders a Share of a Fund for redemption (other than in connection with an exchange of such Share for a Share of another Fund or in connection with the conversion of such Share pursuant to a Conversion Feature), such tendered Share will be deemed to be a Free Share if there are any Free Shares reflected in such Shareholder Account immediately prior to such tender. If there is more than one Free Share reflected in such Shareholder Account immediately prior to such tender, such tendered Share will be deemed to be the Free Share with the earliest Month of Original Purchase. If there are no Free Shares reflected in such Shareholder Account immediately prior to such tender, such tendered Share will be deemed to be the Commission Share with the earliest Month of Original Purchase reflected in such Shareholder Account. If a Sub-shareholder Account reflected in an Omnibus Account tenders a Share for redemption (other than in connection with an Exchange of such Share for a Share of another Fund or in connection with the conversion of such Share pursuant to a Conversion Feature), the Transfer Agent shall require that the record owner of each Omnibus Account supply the Transfer Agent sufficient records to enable the Transfer Agent to apply the rules of the preceding paragraph to such Sub-shareholder Account (as though such Sub-shareholder Account were a Shareholder Account other than an Omnibus Account); provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall not be required to conform to the foregoing rules regarding Free Shares (and the Transfer Agent shall account for such Free Shares as provided in (3) above) but shall apply the foregoing rules to each Commission Share with respect to the Date of Original Purchase of any Commission Share as though each such Date were a separate Month of Original Purchase. (7) IDENTIFICATION OF EXCHANGED SHARES. When a Shareholder Account (other than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for redemption where the proceeds of such redemption are to be automatically reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange (whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund: (1) such Shareholder Account will be deemed to have tendered Shares (or portions thereof) of the Redeeming Fund with each Month of Original Purchase represented by Shares of the Redeeming Fund reflected in such Shareholder Account immediately prior to such tender in the same proportion that the number of Shares of the redeeming Fund with such Month of Original Purchase reflected in such Shareholder immediately prior to such tender bore to the total number of Shares of the Redeeming Fund reflected in such Shareholder Account immediately prior to such tender, and on that basis the tendered Shares of the Redeeming Fund will be identified as Distributor Shares or Post-distributor Shares; (2) such Shareholder Account will be deemed to have tendered Commission Shares (or portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of each category (i.e., Distributor Shares or Post-distributor Shares) in the same proportion that the number of Commission Shares or Free Shares (as the case may be) of the Redeeming Fund in such category reflected in such Shareholder Account bore to the total number of Shares of the Redeeming Fund in such category reflected in such Shareholder Account immediately prior to such tender, (3) the Shares (or portions thereof) of the Issuing Fund issued in connection with such exchange will be deemed to have the same Months of Original Purchase as the Shares (or portions thereof) of the Redeeming Fund so tendered and will be categorized as Distributor Shares and Post-distributor Shares accordingly, and (4) the Shares (or portions thereof) of each Category of the Issuing Fund issued in connection with such exchange will be deemed to be Commission Shares and Free Shares in the same proportion that the Shares of such Category of the Redeeming Fund were Commission Shares and Free Shares. The Transfer Agent shall require that each record owner of an Omnibus Account maintain records relating to each Sub-shareholder Account in such Omnibus Account sufficient to apply the foregoing rules to each such Sub-shareholder Account (as though such Sub-shareholder Account were a Shareholder Account other than an Omnibus Account); provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall not be required to conform to the foregoing rules relating to Free Shares (and the Sub-transfer Agent shall account for such Free Shares as provided in (3) above) and shall apply a first-in-first-out procedure (based upon the Date of Original Purchase) to determine which Commission Shares (or portions thereof) of a Redeeming Fund were redeemed in connection with an exchange. (8) IDENTIFICATION OF CONVERTED SHARES. The Transfer Agent records maintained for each Shareholder Account (other than an Omnibus Account) will treat each Commission Share of a Fund as though it were redeemed at its Net Asset Value on the date such Commission Share converts into a class A share of such Fund in accordance with an applicable Conversion Feature applied with reference to its Month of Original Purchase and will treat each Free Share of such Fund with a given Month of Original Purchase as though it were redeemed at its Net Asset Value when it is simultaneously converted to a class A share at the time the Commission Shares of such Fund with such Month of Original Purchase are so converted. The Transfer Agent shall require that each record owner of an Omnibus Account maintain records relating to each Sub-shareholder Account in such Omnibus Account sufficient to apply the foregoing rules to each such Sub-shareholder Account (as though such Sub-shareholder Account were a Shareholder Account other than an Omnibus Account) ; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall apply the foregoing rules to Commission Shares with reference to the Date of Original Issue of each Commission Share (as though each such date were a separate Month of Original Issue) and shall not be required to apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall account for such Free Shares as provided in (3) above). (C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCS AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES: The Transfer Agent shall use the following rules to allocate the amounts of Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares between Distributor Shares and Post-distributor Shares: (1) RECEIVABLES CONSTITUTING CDSCS: CDSCs will be treated as relating to Distributor Shares or Post-distributor Shares depending upon the Month of Original Purchase of the Commission Share the redemption of which gives rise to the payment of a CDSC by a Shareholder Account. The Transfer Agent shall cause each Sub-transfer Agent to apply the foregoing rule to each Sub-shareholder Account based on the records maintained by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall apply the foregoing rules to each Sub-shareholder Account with respect to the Date of Original Purchase of any Commission Share as though each such date were a separate Month of Original Purchase. (2) RECEIVABLES CONSTITUTING ASSET BASED SALES CHARGES: The Asset Based Sales Charges accruing in respect of each Shareholder Account (other than an Omnibus Account) shall be allocated to each Share reflected in such Shareholder Account as of the close of business on such day on an equal per share basis. For example, the Asset Based Sales Charges attributable to Distributor Shares on any day shall be computed and allocated as follows: A X (B/C) where: A. = Total amount of Asset Based Sales Charge accrued in respect of such Shareholder Account (other than an Omnibus Account) on such day. B. = Number of Distributor Shares reflected in such Shareholder Account (other than an Omnibus Account) on the close of business on such day C. = Total number of Distributor Shares and Post-Distributor Shares reflected in such Shareholder Account (other than an Omnibus Account) and outstanding as of the close of business on such day. The Portion of the Asset Based Sales Charges of such Fund accruing in respect of such Shareholder Account for such day allocated to Post-distributor Shares will be obtained using the same formula but substituting for "B" the number of Post-distributor Shares, as the case may be, reflected in such Shareholder Account and outstanding on the close of business on such day. The foregoing allocation formula may be adjusted from time to time by notice to the Fund and the transfer agent for the Fund from the Seller and the Program Agent pursuant to Section 8.18 of the Purchase Agreement. The Transfer Agent shall, based on the records maintained by the record owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in respect of each Omnibus Account on each day among all Sub-shareholder Accounts reflected in such Omnibus Account on an equal per share basis based upon the total number of Distributor Shares and Post-distributor Shares reflected in each such Sub-shareholder Account as of the close of business on such day. In addition, the Transfer Agent shall apply the foregoing rules to each Sub-shareholder Account (as though it were a Shareholder Account other than an Omnibus Account), based on the records maintained by the record owner, to allocate the Asset Based Sales Charge so allocated to any Sub-shareholder Account among the Distributor Shares and Post-distributor Shares reflected in each such Sub-shareholder Account in accordance with the rules set forth in the preceding paragraph; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capacity to apply the rules of this Schedule I as applicable to Sub-shareholder Accounts other than ML Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge accruing in respect of Shares of any Fund in the ML Omnibus Account during any calendar month (or portion thereof) among Distributor Shares and Post-distributor Shares as follows: (a) The portion of such Asset Based Sales Charge allocable to Distributor Shares shall be computed as follows: A X ((B + C)/2) ----------- ((D + E)/2) where: A = Total amount of Asset Based Sales Charge accrued during such calendar month (or portion thereof) in respect of Shares of such Fund in the ML Omnibus Account B = Shares of such Fund in the ML Omnibus Account and identified as Distributor Shares and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof), times Net Asset Value per Share as of such time C = Shares of such Fund in the ML Omnibus Account and identified as Distributor Shares and outstanding as of the close of business on the last day of such calendar month (or portion thereof), times Net Asset Value per Share as of such time D = Total number of Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof), times Net Asset Value per Share as of such time. E = Total number of Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of such calendar month (or portion thereof), times Net Asset Value per Share as of such time. (b) The portion of such Asset Based Sales Charge allocable to Post-distributor Shares shall be computed as follows: A X ((B + C)/2) ----------- ((D + E)/2) where: A = Total amount of Asset Based Sales Charge accrued during such calendar month (or portion thereof) in respect of Shares of such Fund in the ML Omnibus Account B = Shares of such Fund in the ML Omnibus Account and identified as Post-distributor Shares and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof), times Net Asset Value per Share as of such time C = Shares of such Fund in the ML Omnibus Account and identified as Post-distributor Shares and outstanding as of the close of business on the last day of such calendar month (or portion thereof), times Net Asset Value per Share as of such time D = Total number of Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof), times Net Asset Value per Share as of such time. E = Total number of Shares of such Fund in the ML Omnibus Account outstanding as of the close of business on the last day of such calendar month, times Net Asset Value per Share as of such time. (3) PAYMENTS ON BEHALF OF EACH FUND. On the close of business on each day the Transfer Agent shall cause payment to be made of the amount of the Asset Based Sales Charge and CDSCs accruing on such day in respect of the Shares of such Fund owned of record by Shareholder Accounts (other than Omnibus Accounts) by two separate wire transfers, directly from accounts of such Fund as follows: 1. The Asset Based Sales Charge and CDSCs accruing in respect of Shareholder Accounts other than Omnibus Accounts and allocable to Distributor Shares in accordance with the preceding rules shall be paid to the Distributor's Account, unless the Distributor otherwise instructs the Fund in any irrevocable payment instruction; and 2. The Asset Based Sales Charges and CDSCs accruing in respect of Shareholder Accounts other than Omnibus Accounts and allocable to Post-distributor Shares in accordance with the preceding rules shall be paid in accordance with direction received from any future distributor of Shares of the Instant Fund. On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund shall cause the applicable Sub-transfer Agent to cause payment to be made of the amount of the CDSCs accruing during the period to which such Omnibus CDSC Settlement Date relates in respect of the Shares of such Fund owned of record by each Omnibus Account by two separate wire transfers directly from the account of such Fund maintained by such Transfer Agent, as follows: 1. The CDSCs accruing in respect of such Omnibus Account and allocable to Distributor Shares in accordance with the preceding rules shall be paid to the Distributor's Account, unless the Distributor otherwise instructs the Fund in any irrevocable payment instruction; and 2. The CDSCs accruing in respect of such Omnibus Account and allocable to Post-distributor Shares in accordance with the preceding rules shall be paid in accordance with direction received from any future distributor of Shares of the Instant Fund. On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent for each Fund shall cause payment to be made of the amount of the Asset Based Sales Charge accruing for the period to which such Omnibus Asset Based Sales Charge Settlement Date relates in respect of the Shares of such Fund owned of record by each Omnibus Account by two separate wire transfers directly from accounts of such Fund as follows: 1. The Asset Based Sales Charge accruing in respect of such Omnibus Account and allocable to Distributor Shares shall be paid to the Distributor's Collection Account, unless the Distributor otherwise instructs the Fund in any irrevocable payment instruction; and 2. The Asset Based Sales Charge accruing in respect of such Omnibus Account and allocable to Post-Distributor Shares shall be paid in accordance with direction received from any future distributor of Shares of the Instant Fund. 191281.c1 PRINCIPAL UNDERWRITING AGREEMENT FOR CLASS B-2 SHARES OF KEYSTONE LIQUID TRUST AGREEMENT made this 31st day of May 1995 by and between Keystone liquid Trust, a Massachusetts business trust, ("Fund"), and Keystone Investment Distributors Company, a Delaware corporation (the "Principal Underwriter"). The Fund, individually and/or on behalf of its series, if any, referred to above in the title of this Agreement, to which series, if any, this Agreement shall relate, as applicable (the "Fund"), may act as the distributor of certain securities of which it is the issuer pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act"). Accordingly, it is hereby mutually agreed as follows: 1. The Fund hereby appoints the Principal Underwriter a principal underwriter of the Class B-2 shares of beneficial interest of the Fund ("B-2 Shares") as an independent contractor upon the terms and conditions hereinafter set forth. The general term "Shares" as used herein has the same meaning as is provided therefor in Schedule I hereto. Except as the Fund may from time to time agree, the Principal Underwriter will act as agent for the Fund and not as principal. 2. The Principal Underwriter will use its best efforts to find purchasers for the B-2 Shares and to promote distribution of the B-2 Shares and may obtain orders from brokers, dealers or other persons for sales of B-2 Shares to them. No such dealer, broker or other person shall have any authority to act as agent for the Fund; such dealer, broker or other person shall act only as principal in the sale of B-2 Shares. 3. Sales of B-2 Shares by Principal Underwriter shall be at the public offering price determined in the manner set forth in the prospectus and/or statement of additional information of the Fund current at the time of the Fund's acceptance of the order for B-2 Shares. All orders shall be subject to acceptance by the Fund and the Fund reserves the right in its sole discretion to reject any order received. The Fund shall not be liable to anyone for failure to accept any order. 4. On all sales of B-2 Shares the Fund shall receive the current net asset value. The Fund shall pay the Principal Underwriter Distribution Fees (as defined in Section 14 hereof), as commissions for the sale of B-2 Shares and other Shares, which shall be paid in conjunction with distribution fees paid to the Principal Underwriter by other classes of Shares of the Fund to the extent required in order to comply with Section 14 hereof, and shall pay over to the Principal Underwriter CDSCs (as defined in Section 14 hereof) as set forth in the Fund's current prospectus and statement of additional information, and as required by Section 14 hereof. The Principal Underwriter shall also receive payments consisting of shareholder service fees ("Service Fees") at the rate of .25% per annum of the average daily net asset value of the Class B-2 Shares. The Principal Underwriter may allow all or a part of said Distribution Fees and CDSCs received by it (not paid to others as hereinafter provided) to such brokers, dealers or other persons as Principal Underwriter may determine. 5. Payment to the Fund for B-2 Shares shall be in New York or Boston Clearing House funds received by the Principal Underwriter within three business days after notice of acceptance of the purchase order and the amount of the applicable public offering price has been given to the purchaser. If such payment is not received within such period, the Fund reserves the right, without further notice, forthwith to cancel its acceptance of any such order. The Fund shall pay such issue taxes as may be required by law in connection with the issue of the B-2 Shares. 6. The Principal Underwriter shall not make in connection with any sale or solicitation of a sale of the B-2 Shares any representations concerning the B-2 Shares except those contained in the then current prospectus and/or statement of additional information covering the Shares and in printed information approved by the Fund as information supplemental to such prospectus and statement of additional information. Copies of the then current prospectus and statement of additional information and any such printed supplemental information will be supplied by the Fund to the Principal Underwriter in reasonable quantities upon request. 7. The Principal Underwriter agrees to comply with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. (as defined in the Purchase and Sale Agreement, dated as of May 31, 1995 (the "Purchase Agreement"), between the Principal Underwriter, Citibank, N.A. and Citicorp North America, Inc., as agent (the "Rules of Fair Practice")). 8. The Fund appoints the Principal Underwriter as its agent to accept orders for redemptions and repurchases of B-2 Shares at values and in the manner determined in accordance with the then current prospectus and/or statement of additional information of the Fund. 9. The Fund agrees to indemnify and hold harmless the Principal Underwriter, its officers and Directors and each person, if any, who controls the Principal Underwriter within the meaning of Section 15 of the Securities Act of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and expenses (including the cost of any legal fees incurred in connection therewith) which the Principal Underwriter, its officers, Directors or any such controlling person may incur under the 1933 Act, under any other statute, at common law or otherwise, arising out of or based upon a. any untrue statement or alleged untrue statement of a material fact contained in the Fund's registration statement, prospectus or statement of additional information (including amendments and supplements thereto) or b. any omission or alleged omission to state a material fact required to be stated in the Fund's registration statement, prospectus or statement of additional information necessary to make the statements therein not misleading, provided, however, that insofar as losses, claims, damages, liabilities or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance and in conformity with information furnished to the Fund by the Principal Underwriter for use in the Fund's registration statement, prospectus or statement of additional information, such indemnification is not applicable. In no case shall the Fund indemnify the Principal Underwriter or its controlling person as to any amounts incurred for any liability arising out of or based upon any action for which the Principal Underwriter, its officers and Directors or any controlling person would otherwise be subject to liability by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties or by reason of the reckless disregard of its obligations and duties under this Agreement. 10. The Principal Underwriter agrees to indemnify and hold harmless the Fund, its officers and Trustees and each person, if any, who controls the Fund within the meaning of Section 15 of the 1933 Act against any loss, claims, damages, liabilities and expenses (including the cost of any legal fees incurred in connection therewith) which the Fund, its officers, Directors or any such controlling person may incur under the 1933 Act, under any other statute, at common law or otherwise arising out of the acquisition of any Shares by any person which (a) may be based upon any wrongful act by the Principal Underwriter or any of its employees or representatives, or (b) may be based upon any untrue statement or alleged untrue statement of a material fact contained in the Fund's registration statement, prospectus or statement of additional information (including amendments and supplements thereto), or any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon information furnished or confirmed in writing to the Fund by the Principal Underwriter. 11. The Fund agrees to execute such papers and to do such acts and things as shall from time to time be reasonably requested by the Principal Underwriter for the purpose of qualifying the B-2 Shares for sale under the so-called "blue sky" laws of any state or for registering B-2 Shares under the 1933 Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal Underwriter shall bear the expenses of preparing, printing and distributing advertising, sales literature, prospectuses, and statements of additional information. The Fund shall bear the expense of registering B-2 Shares under the 1933 Act and the Fund under the 1940 Act, qualifying B-2 Shares for sale under the so-called "blue sky" laws of any state, the preparation and printing of prospectuses, statements of additional information and reports required to be filed with the Securities and Exchange Commission and other authorities, the preparation, printing and mailing of prospectuses and statements of additional information to holders of B-2 Shares, and the direct expenses of the issue of B-2 Shares. 12. The Principal Underwriter shall, at the request of the Fund, provide to the Board of Trustees or Directors (together herein called the Directors) of the Fund in connection with sales of B-2 Shares not less than quarterly a written report of the amounts received from the Fund therefor and the purpose for which such expenditures by the Fund were made. 13. The term of this Agreement shall begin on the date hereof and, unless sooner terminated or continued as provided below, shall expire after one year. This Agreement shall continue in effect after such term if its continuance is specifically approved by a majority of the outstanding voting securities of Class B-2 of the Fund or by a majority of the Directors of the Fund and a majority of the Directors who are not parties to this Agreement or "interested persons", as defined in the Investment Company Act of 1940 (the "1940 Act"), of any such party and who have no direct or indirect financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-2 Shares or in any agreements related to the plan at least annually in accordance with the 1940 Act and the rules and regulations thereunder. This Agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Directors of the Fund, or a majority of such Directors who are not parties to this Agreement or "interested persons", as defined in the 1940 Act, of any such party and who have no direct or indirect financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-2 Shares or in any agreement related to the plan or by a vote of a majority of the outstanding voting securities of Class B-2 on not more than sixty days written notice to any other party to the agreement; and shall terminate automatically in the event of its assignment (as defined in the 1940 Act), which shall not include assignment of the Principal Underwriter's (as hereinafter defined) provided for hereunder and/or rights related to such Allocable Portions. 14. The provisions of this Section 14 shall be applicable to the extent necessary to enable the Fund to comply with the obligation of the Fund to pay the Principal Underwriter its Allocable Portion of Distribution Fees paid in respect of Shares while the Fund is required to do so pursuant the Principal Underwriting Agreement, of even date herewith, in respect of Class B-2 Shares, and shall remain in effect so long as any payments are required to be made by the Fund pursuant to the irrevocable payment instruction (as defined in the Purchase Agreement (the "Irrevocable Payment Instruction")). 14.1 The Fund shall pay to the Principal Underwriter the Principal Underwriter's Allocable Portion (as hereinafter defined) of a fee (the "Distribution Fee") at the rate of .75% per annum of the average daily net asset value of the Shares, subject to the limitation on the maximum aggregate amount of such fees under the Rules of Fair Practice as applicable to such Distribution Fee on the date hereof. 14.2 The Principal Underwriter's Allocable Portion of Distribution Fees paid by the Fund in respect of Shares shall be equal to the portion of the Asset Based Sales Charge allocable to Distributor Shares (as defined in Schedule I hereto to this Agreement) in accordance with Schedule I hereto. The Fund agrees to cause its transfer agent to maintain the records and arrange for the payments on behalf of the Fund at the times and in the amounts and to the accounts required by Schedule I hereto, as the same may be amended from time to time. It is acknowledged and agreed that by virtue of the operation of Schedule I hereto the Principal Underwriter's Allocable Portion of Distribution Fees paid by the Fund in respect of Shares, may, to the extent provided in Schedule I hereto, take into account Distribution Fees payable by the Fund in respect of other existing and future classes and/or sub-classes of shares of the Fund which would be treated as "Shares" under Schedule I hereto. The Fund will limit amounts paid to any subsequent principal underwriters of Shares to the portion of the Asset Based Sales Charge paid in respect of Shares which is allocable to Post-distributor Shares (as defined in Schedule I hereto) in accordance with Schedule I hereto. The Fund's payments to the Principal Underwriter in consideration of its services in connection with the sale of B-2 Shares shall be the Distribution Fees attributable to B-2 Shares which are Distributor Shares (as defined in Schedule I hereto) and all other amounts constituting the Principal Underwriter's Allocable Portion of Distribution Fees shall be the Distribution Fees related to the sale of other Shares which are Distributor Shares (as defined in Schedule I hereto). The Fund shall cause its transfer agent and sub-transfer agents to withhold from redemption proceeds payable to holders of Shares on redemption thereof the contingent deferred sales charges payable upon redemption thereof as set forth in the then current prospectus and/or statement of additional information of the Fund ("CDSCs") and to pay over to the Principal Underwriter The Principal Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which shall be equal to the portion thereof allocable to Distributor Shares (as defined in Schedule I hereto) in accordance with Schedule I hereto. 14.3 The Principal Underwriter shall be considered to have completely earned the right to the payment of its Allocable Portion of the Distribution Fee and the right to payment over to it of its' Allocable Portion of the CDSC in respect of Shares as provided for hereby upon the completion of the sale of each Commission Share (as defined in Schedule I hereto) taken into account as a Distributor Share in computing the Principal Underwriter's Allocable Portion in accordance with Schedule I hereto. 14.4 Except as provided in Section 14.5 hereof in respect of Distribution Fees only, the Fund's obligation to pay the Principal Underwriter the Distribution Fees and to pay over to the Principal Underwriter CDSCs provided for hereby shall be absolute and unconditional and shall not be subject to dispute, offset, counterclaim or any defense whatsoever (it being understood that nothing in this sentence shall be deemed a waiver by the Fund of its right separately to pursue any claims it may have against the Principal Underwriter and enforce such claims against any assets (other than the Principal Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs (the "Collection Rights") of the Principal Underwriter). 14.5 Notwithstanding anything in this Agreement to the contrary, the Fund shall pay to the Principal Underwriter its Allocable Portion of Distribution Fees provided for hereby notwithstanding its termination as Principal Underwriter for the Shares or any termination of this Agreement and such payment of such Distribution Fees, and that obligation and the method of computing such payment, shall not be changed or terminated except to the extent required by any change in applicable law, including, without limitation, the 1940 Act, the Rules promulgated thereunder by the Securities and Exchange Commission and the Rules of Fair Practice, in each case enacted or promulgated after May 31, 1995, or in connection with a Complete Termination (as hereinafter defined). For the purposes of this Section 14.5, "Complete Termination" means a termination of the Fund's Rule 12b-1 plan for B-2 Shares involving the cessation of payments of the Distribution Fees, and the cessation of payments of distribution fees pursuant to every other Rule 12b-1 plan of the Fund for every existing or future B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the offering of every existing or future B-Class-of-Shares, which conditions shall be deemed satisfied when they are first complied with hereafter and so long thereafter as they are complied with prior to the earlier of (i) the date upon which all of the B-2 Shares which are Distributor Shares pursuant to Schedule I hereto shall have been redeemed or converted or (ii) June 1, 2005. For purposes of this Section 14.5, the term B-Class-of-Shares means each of the B-1 Class of Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of shares of the Fund hereafter issued which would be treated as Shares under Schedule I hereto or which has substantially similar economic characteristics to the B-1 or B-2 Classes of Shares taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of the shares of such class. The parties agree that the existing C Class of Shares of the Fund does not have substantially similar economic characteristics to the B-1 or B-2 Classes of Shares taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares. For purposes of clarity the parties to this agreement hereby state that they intend that a new installment load class of shares which may be authorized by amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it has economic characteristics substantially similar to the economic characteristics of the existing B-1 or B-2 Classes of Shares taking into account the total sale charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares and will not be considered to be a B-Class-of-Shares if it has economic characteristics substantially similar to the economic characteristics of the existing C Class of shares of the Fund taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares. 14.6 The Principal Underwriter may assign any part of its Allocable Portions and obligations of the Fund related thereto (but not the Principal Underwriter's obligations to the Fund provided for in this Agreement) to any person (an "Assignee") and any such assignment shall be effective as to the Fund upon written notice to the Fund by the Principal Underwriter. In connection therewith the Fund shall pay all or any amounts in respect of its Allocable Portions directly to the Assignee thereof as directed in a writing by the Principal Underwriter in the Irrevocable Payment Instruction, as the same may be amended from time to time with the consent of the Fund, and the Fund shall be without liability to any person if it pays such amounts when and as so directed, except for underpayments of amounts actually due, without any amount payable as consequential or other damages due to such underpayment and without interest except to the extent that delay in payment of Distribution Fees and CDSCs results in an increase in the maximum Sales Charge allowable under the Rules of Fair Practice, which increases daily at a rate of prime plus one percent per annum. 14.7 The Fund will not, to the extent it may otherwise be empowered to do so, change or waive any CDSC with respect to B-2 Shares, except as provided in the Fund's prospectus or statement of additional information without the Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding anything to the contrary in this Agreement or any termination of this Agreement or the Principal Underwriter as principal underwriter for the Shares of the Fund, the Principal Underwriter shall be entitled to be paid its Allocable Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-2 Shares is terminated and whether or not any such termination is a Complete Termination, as defined above. 15. This Agreement shall be construed in accordance with the laws of The Commonwealth of Massachusetts. All sales hereunder are to be made, and title to the Shares shall pass, in Boston, Massachusetts. 16. The Fund is a Massachusetts business trust established under a Declaration of Trust, as it may be amended from time to time. The obligations of the Fund are not personally binding upon, nor shall recourse be had against the private property of any of the Trustees, shareholders, officers, employees or agents of the Fund, but only the property of the Fund shall be bound. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their respective officers thereunto duly authorized at Boston, Massachusetts, on the day and year first written above. KEYSTONE LIQUID TRUST By:_______________________ Title: KEYSTONE INVESTMENT DISTRIBUTORS, INC. By:_______________________ Title: 191251.c1 SCHEDULE I TO PRINCIPAL UNDERWRITING AGREEMENT FOR CLASS B-2 SHARES OF KEYSTONE LIQUID TRUST TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES Amounts (in respect of Asset Based Sales Charges (as hereinafter defined) and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined) of each Fund (as hereinafter defined) shall be allocated between Distributor Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter defined) of such Fund in accordance with the rules set forth in clauses (B) and (C). Clause (B) sets forth the rules to be followed by the Transfer Agent for each Fund and the record owner of each Omnibus Account (as hereinafter defined) in maintaining records relating to Distributor Shares and Post-distributor Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for each Fund and the record owner of each Omnibus Account in determining what portion of the Asset Based Sales Charge (as hereinafter defined) payable in respect of each class of Shares of such Fund and what portion of the CDSC (as hereinafter defined) payable by the holders of Shares of such Fund is attributable to Distributor Shares and Post-distributor Shares, respectively. (A) DEFINITIONS: Generally, for purposes of this Schedule I, defined terms shall be used with the meaning assigned to them in the Agreement, except that for purposes of the following rules the following definitions are also applicable: "Agreement" shall mean the Principal Underwriting Agreement for Class B-2 Shares of the Instant Fund dated as of June 1, 1995 between the Instant Fund and the Distributor. "Asset Based Sales Charge" shall have the meaning set forth in Section 26(b)(8)(C) of the Rules of Fair Practice it being understood that for purposes of this Exhibit I such term does not include the Service Fee. "Business Day" shall mean any day on which the banks and the New York Stock Exchange are not authorized or required to close in New York City. "Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a Dividend in respect of such Share which is designated by such Fund as being a "capital gain dividend" as such term is defined in Section 852 of the Internal Revenue Code of 1986, as amended. "CDSC" shall mean with respect to any Fund, the contingent deferred sales charge payable, either directly or by withholding from the proceeds of the redemption of the Shares of such Fund, by the shareholders of such Fund on any redemption of Shares of such Fund in accordance with the Prospectus relating to such Fund. "Commission Share" shall mean, in respect of any Fund, a Share of such Fund issued under circumstances where a CDSC would be payable upon the redemption of such Share if such CDSC is not waived or shall have not otherwise expired. "Date of Original Purchase" shall mean, in respect of any Commission Share of any Fund, the date on which such Commission Share was first issued by such Fund; provided, that if such Share is a Commission Share and such Fund issued the Commission Share (or portion thereof) in question in connection with a Free Exchange for a Commission Share (or portion thereof) of another Fund, the Date of Original Purchase for the Commission Share (or portion thereof) in question shall be the date on which the Commission Share (or portion thereof) of the other Fund was first issued by such other Fund (unless such Commission Share (or portion thereof) was also issued by such other Fund in a Free Exchange, in which case this proviso shall apply to that Free Exchange and this application shall be repeated until one reaches a Commission Share (or portion thereof) which was issued by a Fund other than in a Free Exchange). "Distributor" shall mean Keystone Investment Distributors Company, its successors and assigns. "Distributor's Account" shall mean the account of the Distributor, account no. 9903-584-2, ABA No. 011 0000 28, entitled "General Account" maintained with State Street Bank & Trust Company or such other account as the Distributor may designate in a notice to the Transfer Agent. "Distributor Inception Date" shall mean, in respect of any Fund, the date identified as the date Shares of such Fund are first sold by the Distributor. "Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund, the date identified as the last sale of a Commission Share during the period the Distributor served as principal underwriter under the Agreement. "Distributor Shares" shall mean, in respect of any Fund, all Shares of such Fund the Month of Original Purchase of which occurs on or after the Inception Date for such Fund and on or prior to the Distributor Last Sale Cut-off Date in respect of such Fund. "Dividend" shall mean, in respect of any Share of any Fund, any dividend or other distribution by such Fund in respect of such Share. "Free Exchange" shall mean any exchange of a Commission Share (or portion thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of another Fund (the "Issuing Fund"), under any arrangement which defers the exchanging Shareholder's obligation to pay the CDSC in respect of the Commission Share (or portion thereof) of the Redeeming Fund so exchanged until the later redemption of the Share (or portion thereof) of the Issuing Fund received in such exchange. "Free Share" shall mean, in respect of any Fund, each Share of such Fund other than a Commission Share, including, without limitation: (i) Shares issued in connection with the automatic reinvestment of Capital Gain Dividends or Other Dividends by such Fund, (ii) Special Free Shares issued by such Fund and (iii) Shares (or portion thereof) issued by such Fund in connection with an exchange whereby a Free Share (or portion thereof) of another Fund is redeemed and the Net Asset Value of such redeemed Free Share (or portion thereof) is invested in such Shares (or portion thereof) of such Fund. "Fund" shall mean each of the regulated investment companies or series or portfolios of regulated investment companies identified in Schedule II to the Irrevocable Payment Instruction, as the same may be amended from time to time in accordance with the terms thereof. "Instant Fund" shall mean Keystone Liquid Trust. "ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer agent. "Month of Original Purchase" shall mean, in respect of any Share of any Fund, the calendar month in which such Share was first issued by such Fund; provided, that if such Share is a Commission Share and such Fund issued the Commission Share (or portion thereof) in question in connection with a Free Exchange for a Commission Share (or portion thereof) of another Fund, the Month of Original Purchase for the Commission Share (or portion thereof) in question shall be the calendar month in which the Commission Share (or portion thereof) of the other Fund was first issued by such other Fund (unless such Commission Share (or portion thereof) was also issued by such other Fund in a Free Exchange, in which case this proviso shall apply to that Free Exchange and this application shall be repeated until one reaches a Commission Share (or portion thereof) which was issued by a Fund other than in a Free Exchange); provided, further, that if such Share is a Free Share and such Fund issued such Free Share in connection with the automatic reinvestment of dividends in respect of other Shares of such Fund, the Month of Original Purchase of such Free Share shall be deemed to be the Month of Original Purchase of the Share in respect of which such dividend was paid; provided, further, that if such Share is a Free Share and such Fund issued such Free Share in connection with an exchange whereby a Free Share (or portion thereof) of another Fund is redeemed and the Net Asset Value of such redeemed Free Share (or portion thereof) is invested in a Free Share (or portion thereof) of such Fund, the Month of Original Issue of such Free Share shall be the Month of Original Issue of the Free Share of such other Fund so redeemed (unless such Free Share of such other Fund was also issued by such other Fund in such an exchange, in which case this proviso shall apply to that exchange and this application shall be repeated until one reaches a Free Share which was issued by a Fund other than in such an exchange); and provided, finally, that for purposes of this Schedule I each of the following periods shall be treated as one calendar month for purposes of applying the rules of this Schedule I to any Fund: (i) the period of time from and including the Distributor Inception Date for such Fund to and including the last day of the calendar month in which such Distributor Inception Date occurs; (ii) the period of time commencing with the first day of the calendar month in which the Distributor Last Sale Cutoff Date in respect of such Fund occurs to and including such Distributor Last Sale Cutoff Date; and (iii) the period of time commencing on the day immediately following the Distributor Last Sale Cutoff Date in respect of such Fund to and including the last day of the calendar month in which such Distributor Last Sale Cut-off Date occurs. "Omnibus Account" shall mean any Shareholder Account the record owner of which is a registered broker-dealer which has agreed with the Transfer Agent to provide sub-transfer agent functions relating to each Sub-shareholder Account within such Shareholder Account as contemplated by this Schedule I in respect of each of the Funds. "Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect of each Omnibus Account, the Business Day next following the twentieth day of each calendar month for the calendar month immediately preceding such date so long as the record owner is able to allocate the Asset Based Sales Charge accruing in respect of Shares of any Fund as contemplated by this Schedule I no more frequently than monthly; provided, that at such time as the record owner of such Omnibus Account is able to provide information sufficient to allocate the Asset Based Sales Charge accruing in respect of such Shares of such Fund owned of record by such Omnibus Account as contemplated by this Schedule I on a weekly or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date as in the case of Asset Based Sales Charges accruing in respect of Shareholder Accounts other than Omnibus Accounts, as the case may be. "Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus Account, the third Business Day of each calendar week for the calendar week immediately preceding such date so long as the record owner of such Omnibus Account is able to allocate the CDSCs accruing in respect of any Shares of any Fund as contemplated by this Schedule I for no more frequently than weekly; provided, that at such time as the record owner of such Shares of such Fund owned of record by such Omnibus Account is able to provide information sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement Date for such Omnibus Account shall be a daily date as in the case of CDSCs accruing in respect of Shareholder Accounts other than Omnibus Accounts. "Original Purchase Amount" shall mean, in respect of any Commission Share of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date), on the Date of Original Purchase in respect of such Commission Share, by such Shareholder Account or Sub-shareholder Account for such Commission Share; provided, that if such Fund issued the Commission Share (or portion thereof) in question in connection with a Free Exchange for a Commission Share (or portion thereof) of another Fund, the Original Purchase Amount for the Commission Share (or portion thereof) in question shall be the Original Purchase Amount in respect of such Commission Share (or portion thereof) of such other Fund (unless such Commission Share (or portion thereof) was also issued by such other Fund in a Free Exchange, in which case this proviso shall apply to that Free Exchange and this application shall be repeated until one reaches a Commission Share (or portion thereof) which was issued by a Fund other than in a Free Exchange). "Other Dividend" shall mean in respect of any Share, any Dividend paid in respect of such Share other than a Capital Gain Dividend. "Post-distributor Shares" shall mean, in respect of any Fund, all Shares of such Fund the Month of Original Purchase of which occurs after the Distributor Last Sale Cut-off Date for such Fund. "Program Agent" shall mean Citicorp North America, Inc., as Program Agent under the Purchase Agreement, and its successors and assigns in such capacity. "Purchase Agreement" shall mean that certain Purchase and Sale Agreement dated as of May 31, 1995, among Keystone Investment Distributors Company, as Seller, Citibank, N.A., as Purchaser, and Citicorp North America, Inc., as Program Agent. "Share" shall mean in respect of any Fund any share of the classes of shares specified in Schedule II to the Irrevocable Payment Instruction opposite the name of such Fund, as the same may be amended from time to time by notice from the Distributor and the Program Agent to the Fund and the Transfer Agent; provided, that such term shall include, after the Distributor Last Sale Cut-off Date, a share of a new class of shares of such Fund: (i) with respect to each record owner of Shares which is not treated in the records of each Transfer Agent and Sub-transfer Agent for such Fund as an entirely separate and distinct class of shares from the classes of shares specified Schedule II to the Irrevocable Payment Instruction or (ii) the shares of which class may be exchanged for shares of another Fund of the classes of shares specified on Schedule II to the Irrevocable Payment Instruction of any class existing on or prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on which can be reinvested in shares of the classes specified on Schedule II to the Irrevocable Payment Instruction under the automatic dividend reinvestment options; or (iv) which is otherwise treated as though it were of the same class as the class of shares specified on Schedule II to the Irrevocable Payment Instruction. "Shareholder Account" shall have the meaning set forth in clause (B)(1) hereof. "Special Free Share" shall mean, in respect of any Fund, a Share (other than a Commission Share) issued by such Fund other than in connection with the automatic reinvestment of Dividends and other than in connection with an exchange whereby a Free Share (or portion thereof) of another Fund is redeemed and the Net Asset Value of such redeemed Share (or portion thereof) is invested in a Share (or portion thereof) of such Fund. "Sub-shareholder Account" shall have the meaning set forth in clause (B)(1) hereof. "Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the record owner thereof. (B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND AND THE RECORD OWNER OF EACH OMNIBUS ACCOUNT: The Transfer Agent shall maintain Shareholder Accounts, and shall cause each record owner of each Omnibus Account to maintain Sub-shareholder Accounts, each in accordance with the following rules: (1) SHAREHOLDER ACCOUNTS AND SUB-SHAREHOLDER ACCOUNTS. The Transfer Agent shall maintain a separate account (a "Shareholder Account") for each record owner of Shares of each Fund. Each Shareholder Account (other than Omnibus Accounts) will represent a record owner of Shares of such Fund, the records of which will be kept in accordance with this Schedule I. In the case of an Omnibus Account, the Transfer Agent shall require that the record owner of the Omnibus Account maintain a separate account (a "Sub-shareholder Account") for each record owner of Shares which are reflected in the Omnibus Account, the records of which will be kept in accordance with this Schedule I. Each such Shareholder Account and Sub-shareholder Account shall relate solely to Shares of such Fund and shall not relate to any other class of shares of such Fund. (2) COMMISSION SHARES. For each Shareholder Account (other than an Omnibus Account), the Transfer Agent shall maintain daily records of each Commission Share of such Fund which records shall identify each Commission Share of such Fund reflected in such Shareholder Account by the Month of Original Purchase of such Commission Share. For each Omnibus Account, the Transfer Agent shall require that the Sub-transfer Agent in respect thereof maintain daily records of such Sub-shareholder Account which records shall identify each Commission Share of such Fund reflected in such Sub-shareholder Account by the Month of Original Purchase; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall maintain daily records of Sub-shareholder Accounts which identify each Commission Share of such Fund reflected in such Sub-shareholder Account by the Date of Original Purchase. Each such Commission Share shall be identified as either a Distributor Share or a Post-distributor Share based upon the Month of Original Purchase of such Commission Share (or in the case of a Sub-shareholder Account within the ML Omnibus Account, based upon the Date of Original Purchase). (3) FREE SHARES. The Transfer Agent shall maintain daily records of each Shareholder Account (other than an Omnibus Account) in respect of any Fund so as to identify each Free Share (including each Special Free Share) reflected in such Shareholder Account by the Month of Original Purchase of such Free Share. In addition, the Transfer Agent shall require that each Shareholder Account (other than an Omnibus Account) have in effect separate elections relating to reinvestment of Capital Gain Dividends and relating to reinvestment of Other Dividends in respect of any Fund. Either such Shareholder Account shall have elected to reinvest all Capital Gain Dividends or such Shareholder Account shall have elected to have all Capital Gain Dividends distributed. Similarly, either such Shareholder Account shall have elected to reinvest all Other Dividends or such Shareholder Account shall have elected to have all Other Dividends distributed. The Transfer Agent shall require that the Sub-transfer Agent in respect of each Omnibus Account maintain daily records for each Sub-shareholder Account in the manner described in the immediately preceding paragraph for Shareholder Accounts (other than Omnibus Accounts); provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall not be obligated to conform to the foregoing requirements. Each Sub-shareholder Account shall also have in effect Dividend reinvestment elections as described in the immediately preceding paragraph. The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus Account shall identify each Free Share as either a Distributor Share or a Post-distributor Share based upon the Month of Original Purchase of such Free Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, the Transfer Agent shall require such Sub-transfer Agent to identify each Free Share of a given Fund in the ML Omnibus Account as a Distributor Share, or Post-distributor Share, as follows: (a) Free Shares of such Fund which are outstanding on the Distributor Last Sale Cut-off Date for such Fund shall be identified as Distributor Shares. (b) Free Shares of such Fund which are issued (whether or not in connection with an exchange for a Free Share of another Fund) to the ML Omnibus Account during any calendar month (or portion thereof) after the Distributor Last Sale Cut-off Date for such Fund shall be identified as Distributor Shares in a number computed as follows: A X (B/C) where: A = Free Shares of such Fund issued to the ML Omnibus Account during such calendar month (or portion thereof) B = Number of Commission Shares and Free Shares of such Fund in the ML Omnibus Account identified as Distributor Shares and outstanding as of the close of business in the last day of the immediately preceding calendar month (or portion thereof) C = Total number of Commission Shares and Free Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof). (c) Free Shares of such Fund which are issued (whether or not in connection with an exchange for a free share of another Fund) to the ML Omnibus Account during any calendar month (or portion thereof) after the Distributor Last Sale Cut-off Date for such Fund shall be identified as Post-distributor Shares in a number computed as follows: (A X (B/C) where: A = Free Shares of such Fund issued to the ML Omnibus Account during such calendar month (or portion thereof) B = Number of Commission Shares and Free Shares of such Fund in the ML Omnibus Account identified as Post-distributor Shares and outstanding as of the close of business in the last day of the immediately preceding calendar month (or portion thereof) C = Total number of Commission Shares and Free Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof). (d) Free Shares of such Fund which are redeemed (whether or not in connection with an exchange for Free Shares of another Fund or in connection with the conversion of such Shares into a Class A Share of such Fund) from the ML Omnibus Account in any calendar month (or portion thereof) after the Distributor Last Sale Cut-off Date for such Fund shall be identified as Distributor Shares in a number computed as follows: A X (B/C) Where: A = Free Shares of such Fund which are redeemed (whether or not in connection with an exchange for Free Shares of another Fund or in connection with the conversion of such Shares into a class A share of such Fund) from the ML Omnibus Account during such calendar month (or portion thereof) B = Free Shares of such Fund in the ML Omnibus Account identified as Distributor Shares and outstanding as of the close of business on the last day of the immediately preceding calendar month. C = Total number of Free Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month. (e) Free Shares of such Fund which are redeemed (whether or not in connection with an exchange for Free Shares of another Fund or in connection with the conversion of such Shares into a class A share of such Fund) from the ML Omnibus Account in any calendar month (or portion thereof) after the Distributor Last Sale Cut-off Date for such Fund shall be identified as Post-distributor Shares in a number computed as follows: A X (B/C) where: A = Free Shares of such Fund which are redeemed (whether or not in connection with an exchange for Free Shares of another Fund or in connection with the conversion of such Shares into a class A share of such Fund) from the ML Omnibus Account during such calendar month (or portion thereof) B = Free Shares of such Fund in the ML Omnibus Account identified as Post-distributor Shares and outstanding as of the close of business on the last day of the immediately preceding calendar month. C = Total number of Free Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month. (4) APPRECIATION AMOUNT AND COST ACCUMULATION AMOUNT. The Transfer Agent shall maintain on a daily basis in respect of each Shareholder Account (other than Omnibus Accounts) a Cost Accumulation Amount representing the total of the Original Purchase Amounts paid by such Shareholder Account for all Commission Shares reflected in such Shareholder Account as of the close of business on each day. In addition, the Transfer Agent shall maintain on a daily basis in respect of each Shareholder Account (other than Omnibus Accounts) sufficient records to enable it to compute, as of the date of any actual or deemed redemption or Free Exchange of a Commission Share reflected in such Shareholder Account an amount (such amount an "Appreciation Amount") equal to the excess, if any, of the Net Asset Value as of the close of business on such day of the Commission Shares reflected in such Shareholder Account minus the Cost Accumulation Amount as of the close of business on such day. In the event that a Commission Share (or portion thereof) reflected in a Shareholder Account is redeemed or under these rules is deemed to have been redeemed (whether in a Free Exchange or otherwise), the Appreciation Amount for such Shareholder Account shall be reduced, to the extent thereof, by the Net Asset Value of the Commission Share (or portion thereof) redeemed, and if the Net Asset Value of the Commission Share (or portion thereof) being redeemed equals or exceeds the Appreciation Amount, the Cost Accumulation Amount will be reduced to the extent thereof, by such excess. If the Appreciation Amount for such Shareholder Account immediately prior to any redemption of a Commission Share (or portion thereof) is equal to or greater than the Net Asset Value of such Commission Share (or portion thereof) deemed to have been tendered for redemption, no CDSCs will be payable in respect of such Commission Share (or portion thereof). The Transfer Agent shall require that the Sub-transfer Agent in respect of each Omnibus Account maintain on a daily basis in respect of each Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation Amount and sufficient records to enable it to compute, as of the date of any actual or deemed redemption or Free Exchange of a Commission Share reflected in such Sub-shareholder Account an Appreciation Amount in accordance with the preceding paragraph and to apply the same to determine whether a CDSC is payable (as though such Sub-shareholder Account were a Shareholder Account other than an Omnibus Account; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall maintain for each Sub-shareholder Account a separate Cost Accumulation Amount and a separate Appreciation Amount for each Date of Original Purchase of any Commission Share which shall be applied as set forth in the preceding paragraph as if each Date of Original Purchase were a separate Month of Original Purchase. (5) NASD CAP. On the date the distribution fees paid in respect of any class of Shares equals the maximum amount thereon under the Rules of Fair Practice, in respect of such class, all outstanding Shares of such class of such Fund shall be converted into Class A shares of such Fund and will be deemed to have been redeemed for their Net Asset Value for purposes of this Schedule I. (6) IDENTIFICATION OF REDEEMED SHARES. If a Shareholder Account (other than an Omnibus Account) tenders a Share of a Fund for redemption (other than in connection with an exchange of such Share for a Share of another Fund or in connection with the conversion of such Share pursuant to a Conversion Feature), such tendered Share will be deemed to be a Free Share if there are any Free Shares reflected in such Shareholder Account immediately prior to such tender. If there is more than one Free Share reflected in such Shareholder Account immediately prior to such tender, such tendered Share will be deemed to be the Free Share with the earliest Month of Original Purchase. If there are no Free Shares reflected in such Shareholder Account immediately prior to such tender, such tendered Share will be deemed to be the Commission Share with the earliest Month of Original Purchase reflected in such Shareholder Account. If a Sub-shareholder Account reflected in an Omnibus Account tenders a Share for redemption (other than in connection with an Exchange of such Share for a Share of another Fund or in connection with the conversion of such Share pursuant to a Conversion Feature), the Transfer Agent shall require that the record owner of each Omnibus Account supply the Transfer Agent sufficient records to enable the Transfer Agent to apply the rules of the preceding paragraph to such Sub-shareholder Account (as though such Sub-shareholder Account were a Shareholder Account other than an Omnibus Account); provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall not be required to conform to the foregoing rules regarding Free Shares (and the Transfer Agent shall account for such Free Shares as provided in (3) above) but shall apply the foregoing rules to each Commission Share with respect to the Date of Original Purchase of any Commission Share as though each such Date were a separate Month of Original Purchase. (7) IDENTIFICATION OF EXCHANGED SHARES. When a Shareholder Account (other than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for redemption where the proceeds of such redemption are to be automatically reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange (whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund: (1) such Shareholder Account will be deemed to have tendered Shares (or portions thereof) of the Redeeming Fund with each Month of Original Purchase represented by Shares of the Redeeming Fund reflected in such Shareholder Account immediately prior to such tender in the same proportion that the number of Shares of the redeeming Fund with such Month of Original Purchase reflected in such Shareholder immediately prior to such tender bore to the total number of Shares of the Redeeming Fund reflected in such Shareholder Account immediately prior to such tender, and on that basis the tendered Shares of the Redeeming Fund will be identified as Distributor Shares or Post-distributor Shares; (2) such Shareholder Account will be deemed to have tendered Commission Shares (or portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of each category (i.e., Distributor Shares or Post-distributor Shares) in the same proportion that the number of Commission Shares or Free Shares (as the case may be) of the Redeeming Fund in such category reflected in such Shareholder Account bore to the total number of Shares of the Redeeming Fund in such category reflected in such Shareholder Account immediately prior to such tender, (3) the Shares (or portions thereof) of the Issuing Fund issued in connection with such exchange will be deemed to have the same Months of Original Purchase as the Shares (or portions thereof) of the Redeeming Fund so tendered and will be categorized as Distributor Shares and Post-distributor Shares accordingly, and (4) the Shares (or portions thereof) of each Category of the Issuing Fund issued in connection with such exchange will be deemed to be Commission Shares and Free Shares in the same proportion that the Shares of such Category of the Redeeming Fund were Commission Shares and Free Shares. The Transfer Agent shall require that each record owner of an Omnibus Account maintain records relating to each Sub-shareholder Account in such Omnibus Account sufficient to apply the foregoing rules to each such Sub-shareholder Account (as though such Sub-shareholder Account were a Shareholder Account other than an Omnibus Account); provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall not be required to conform to the foregoing rules relating to Free Shares (and the Sub-transfer Agent shall account for such Free Shares as provided in (3) above) and shall apply a first-in-first-out procedure (based upon the Date of Original Purchase) to determine which Commission Shares (or portions thereof) of a Redeeming Fund were redeemed in connection with an exchange. (8) IDENTIFICATION OF CONVERTED SHARES. The Transfer Agent records maintained for each Shareholder Account (other than an Omnibus Account) will treat each Commission Share of a Fund as though it were redeemed at its Net Asset Value on the date such Commission Share converts into a class A share of such Fund in accordance with an applicable Conversion Feature applied with reference to its Month of Original Purchase and will treat each Free Share of such Fund with a given Month of Original Purchase as though it were redeemed at its Net Asset Value when it is simultaneously converted to a class A share at the time the Commission Shares of such Fund with such Month of Original Purchase are so converted. The Transfer Agent shall require that each record owner of an Omnibus Account maintain records relating to each Sub-shareholder Account in such Omnibus Account sufficient to apply the foregoing rules to each such Sub-shareholder Account (as though such Sub-shareholder Account were a Shareholder Account other than an Omnibus Account) ; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall apply the foregoing rules to Commission Shares with reference to the Date of Original Issue of each Commission Share (as though each such date were a separate Month of Original Issue) and shall not be required to apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall account for such Free Shares as provided in (3) above). (C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCS AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES: The Transfer Agent shall use the following rules to allocate the amounts of Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares between Distributor Shares and Post-distributor Shares: (1) RECEIVABLES CONSTITUTING CDSCS: CDSCs will be treated as relating to Distributor Shares or Post-distributor Shares depending upon the Month of Original Purchase of the Commission Share the redemption of which gives rise to the payment of a CDSC by a Shareholder Account. The Transfer Agent shall cause each Sub-transfer Agent to apply the foregoing rule to each Sub-shareholder Account based on the records maintained by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capability to conform to the foregoing requirements, such Sub-transfer Agent shall apply the foregoing rules to each Sub-shareholder Account with respect to the Date of Original Purchase of any Commission Share as though each such date were a separate Month of Original Purchase. (2) RECEIVABLES CONSTITUTING ASSET BASED SALES CHARGES: The Asset Based Sales Charges accruing in respect of each Shareholder Account (other than an Omnibus Account) shall be allocated to each Share reflected in such Shareholder Account as of the close of business on such day on an equal per share basis. For example, the Asset Based Sales Charges attributable to Distributor Shares on any day shall be computed and allocated as follows: A X (B/C) where: A. = Total amount of Asset Based Sales Charge accrued in respect of such Shareholder Account (other than an Omnibus Account) on such day. B. = Number of Distributor Shares reflected in such Shareholder Account (other than an Omnibus Account) on the close of business on such day C. = Total number of Distributor Shares and Post-Distributor Shares reflected in such Shareholder Account (other than an Omnibus Account) and outstanding as of the close of business on such day. The Portion of the Asset Based Sales Charges of such Fund accruing in respect of such Shareholder Account for such day allocated to Post-distributor Shares will be obtained using the same formula but substituting for "B" the number of Post-distributor Shares, as the case may be, reflected in such Shareholder Account and outstanding on the close of business on such day. The foregoing allocation formula may be adjusted from time to time by notice to the Fund and the transfer agent for the Fund from the Seller and the Program Agent pursuant to Section 8.18 of the Purchase Agreement. The Transfer Agent shall, based on the records maintained by the record owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in respect of each Omnibus Account on each day among all Sub-shareholder Accounts reflected in such Omnibus Account on an equal per share basis based upon the total number of Distributor Shares and Post-distributor Shares reflected in each such Sub-shareholder Account as of the close of business on such day. In addition, the Transfer Agent shall apply the foregoing rules to each Sub-shareholder Account (as though it were a Shareholder Account other than an Omnibus Account), based on the records maintained by the record owner, to allocate the Asset Based Sales Charge so allocated to any Sub-shareholder Account among the Distributor Shares and Post-distributor Shares reflected in each such Sub-shareholder Account in accordance with the rules set forth in the preceding paragraph; provided, that until the Sub-transfer Agent in respect of the ML Omnibus Account develops the data processing capacity to apply the rules of this Schedule I as applicable to Sub-shareholder Accounts other than ML Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge accruing in respect of Shares of any Fund in the ML Omnibus Account during any calendar month (or portion thereof) among Distributor Shares and Post-distributor Shares as follows: (a) The portion of such Asset Based Sales Charge allocable to Distributor Shares shall be computed as follows: A X ((B + C)/2) ----------- ((D + E)/2) where: A = Total amount of Asset Based Sales Charge accrued during such calendar month (or portion thereof) in respect of Shares of such Fund in the ML Omnibus Account B = Shares of such Fund in the ML Omnibus Account and identified as Distributor Shares and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof), times Net Asset Value per Share as of such time C = Shares of such Fund in the ML Omnibus Account and identified as Distributor Shares and outstanding as of the close of business on the last day of such calendar month (or portion thereof), times Net Asset Value per Share as of such time D = Total number of Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof), times Net Asset Value per Share as of such time. E = Total number of Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of such calendar month (or portion thereof), times Net Asset Value per Share as of such time. (b) The portion of such Asset Based Sales Charge allocable to Post-distributor Shares shall be computed as follows: A X ((B + C)/2) ----------- ((D + E)/2) where: A = Total amount of Asset Based Sales Charge accrued during such calendar month (or portion thereof) in respect of Shares of such Fund in the ML Omnibus Account B = Shares of such Fund in the ML Omnibus Account and identified as Post-distributor Shares and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof), times Net Asset Value per Share as of such time C = Shares of such Fund in the ML Omnibus Account and identified as Post-distributor Shares and outstanding as of the close of business on the last day of such calendar month (or portion thereof), times Net Asset Value per Share as of such time D = Total number of Shares of such Fund in the ML Omnibus Account and outstanding as of the close of business on the last day of the immediately preceding calendar month (or portion thereof), times Net Asset Value per Share as of such time. E = Total number of Shares of such Fund in the ML Omnibus Account outstanding as of the close of business on the last day of such calendar month, times Net Asset Value per Share as of such time. (3) PAYMENTS ON BEHALF OF EACH FUND. On the close of business on each day the Transfer Agent shall cause payment to be made of the amount of the Asset Based Sales Charge and CDSCs accruing on such day in respect of the Shares of such Fund owned of record by Shareholder Accounts (other than Omnibus Accounts) by two separate wire transfers, directly from accounts of such Fund as follows: 1. The Asset Based Sales Charge and CDSCs accruing in respect of Shareholder Accounts other than Omnibus Accounts and allocable to Distributor Shares in accordance with the preceding rules shall be paid to the Distributor's Account, unless the Distributor otherwise instructs the Fund in any irrevocable payment instruction; and 2. The Asset Based Sales Charges and CDSCs accruing in respect of Shareholder Accounts other than Omnibus Accounts and allocable to Post-distributor Shares in accordance with the preceding rules shall be paid in accordance with direction received from any future distributor of Shares of the Instant Fund. On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund shall cause the applicable Sub-transfer Agent to cause payment to be made of the amount of the CDSCs accruing during the period to which such Omnibus CDSC Settlement Date relates in respect of the Shares of such Fund owned of record by each Omnibus Account by two separate wire transfers directly from the account of such Fund maintained by such Transfer Agent, as follows: 1. The CDSCs accruing in respect of such Omnibus Account and allocable to Distributor Shares in accordance with the preceding rules shall be paid to the Distributor's Account, unless the Distributor otherwise instructs the Fund in any irrevocable payment instruction; and 2. The CDSCs accruing in respect of such Omnibus Account and allocable to Post-distributor Shares in accordance with the preceding rules shall be paid in accordance with direction received from any future distributor of Shares of the Instant Fund. On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent for each Fund shall cause payment to be made of the amount of the Asset Based Sales Charge accruing for the period to which such Omnibus Asset Based Sales Charge Settlement Date relates in respect of the Shares of such Fund owned of record by each Omnibus Account by two separate wire transfers directly from accounts of such Fund as follows: 1. The Asset Based Sales Charge accruing in respect of such Omnibus Account and allocable to Distributor Shares shall be paid to the Distributor's Collection Account, unless the Distributor otherwise instructs the Fund in any irrevocable payment instruction; and 2. The Asset Based Sales Charge accruing in respect of such Omnibus Account and allocable to Post-Distributor Shares shall be paid in accordance with direction received from any future distributor of Shares of the Instant Fund. 190801.c1 EX-99.24(B)(8) 7 CUSTODIAN, FUND ACCOUNT. & RECORD. AGREEMENTS EXHIBIT 99.24(b)(8) CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENTS, AND AMENDMENTS THERETO CUSTODIAN AND RECORDKEEPING AGREEMENT BY AND BETWEEN AMERICAN LIQUID TRUST AND STATE STREET BANK AND TRUST COMPANY Agreement made as of this 31st day of December, 1979 by and between AMERICAN LIQUID TRUST, a Massachusetts business trust, having it principal place of business at 99 High Street, Boston, Massachusetts 02110, (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts banking corporation, having its principal place of business at 225 Franklin Street, Boston, Massachusetts 02110 ("State Street"). WITNESSETH THAT: In consideration of the mutual agreements herein contained, the Fund and State Street agree as follows: I. DEPOSITORY The Fund hereby appoints State Street as its Depository subject to the provisions hereof. The Fund shall delivery to State Street certified or authenticated copies of its Declaration of Trust, By-Laws, all amendments thereto, a certified copy of the resolution of its board of directors appointing State Street to act in the capacities covered by this Agreement and authorizing the signing of this Agreement and copies of such resolutions of its board of trustees, contracts and other documents as may be reasonably required by State Street in performance of its duties hereunder. II. CUSTODIAN 1. The Fund appoints State Street as its Custodian, subject to the provisions hereof. State Street hereby accepts such appointment as Custodian. As such Custodian, State Street shall retain all securities and cash now owned or hereafter acquired by the Fund, and the Fund shall deliver and pay or cause to be delivered and paid to State Street, as Custodian, all securities and cash now owned or hereafter acquired by the Fund during the period of this Agreement. 2. All securities delivered to State Street (other than in bearer form) shall be properly endorsed and in proper form for transfer into or in the name of the Fund, of a nominee of State Street for the exclusive use of the Fund, or of such other nominee as may be mutually agreed upon by State Street and the Fund. 3. As Custodian, State Street shall promptly: A. Safekeeping. Keep safely in a separate account the securities of the Fund, including without limitation all securities in bearer form, and on behalf of the Fund, receive delivery of certificates, including without limitation all securities in bearer form, for safekeeping and keep such certificates physically segregated at all times from those of any other person. State Street shall maintain records of all receipts, deliveries and locations of such securities, together with a current inventory thereof and shall conduct periodic physical inspections of certificates representing bonds and other securities held by it under this Agreement at least annually in such manner as State Street shall determine form time to time to be advisable in order to verify the accuracy of such inventory. State Street shall provide the Fund with copies of any reports of its internal count or other verification of the securities of the Fund held in its custody, including reports on its own system of internal accounting control. In addition, if and when independent certified public accountants retained by State Street shall count or otherwise verify the securities of the Fund held in State Street's custody, State Street shall provide the Fund with a copy of the report of such accountants. With respect to securities held by any agent or Sub-Custodian appointed pursuant to paragraph 6-C of section II hereof, State Street may rely upon certificates from such agent as to the holdings of such agent and from such Sub-Custodian as to the holdings of such Sub-Custodian, it being understood that such reliance in no way releases State Street of its responsibilities or liabilities under this Agreement. State Street shall promptly report to the Fund the results of such inspections, indicating any shortages or discrepancies uncovered thereby, and take appropriate action to remedy any such shortages or discrepancies. B. Use of a System for the central Handling of Securities. Notwithstanding any other provision of this Agreement, if in the best interest of the Fund, deposit all or any part of the securities owned by the Fund in the book-entry system of the Federal Reserve Banks (hereinafter called the "System") and to use the facilities of such system, all as provided under the provisions of Rule 17f-4 of the Investment Company Act of 1940, as amended. Without limiting the generality of such use, the following provisions shall apply thereto: (1) State Street may keep securities of the Fund in the system provided that such securities are represented in an account ("Account") of State Street's (or its agent or Sub-Custodian) in the system which shall not include any assets of State Street (or such agent or Sub-Custodian) other than assets held as fiduciary, custodian or otherwise for customers. The records of State Street (and such agents or Sub-Custodians) shall at all times during the regular business hours of State Street (or such agents or Sub-Custodians) be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the Securities and Exchange Commission. (2) State Street shall send to the Fund a confirmation of all transfers to or from the system for the account of the Fund. Where securities are transferred to the Fund's account, State Street shall, by book-entry or otherwise, identify as belonging to the Fund a quantity of securities in a fungible bulk of securities (i) registered in the name of State Street or its nominee or (ii) shown on State Street's account on the books of the appropriate Federal Reserve Bank. For this purpose, the term (confirmation" means advice or notice of transaction; it is not intended to require preparation by State Street of the confirmation required of broker-dealers under the Securities Exchange Act of 1934. (3) Anything to the contrary in this Agreement notwithstanding, State Street shall be liable to the Fund for any claim, liability, loss or expense, including attorney's fees, resulting to such Fund from use of the system by reason of any negligence, misfeasance or misconduct of State Street (or any of its agents or Sub-Custodians) or of any of its (or their) employees or from any failure of State Street (or any such agent or Sub-Custodian) to enforce effectively such rights as it (or they) may have against the system. At the election of the Fund, it shall be entitled to be subrogated to State Street, its agents or Sub-Custodians in any claim against the system or any other person which State Street, its agents or Sub-Custodians may have as a consequence of any such claim, liability, loss or expense if and to the extent that the Fund has not been made whole for such claim, liability, loss or expense. C. Registered Name, Nominee. Register securities of the Fund held by State Street in the name of the Fund, of a nominee of State Street for the exclusive use of the Fund, of such other nominees as may be mutually agreed upon, or of any mutually acceptable nominee of any agent or Sub-Custodian appointed pursuant to paragraph 6-C of section II hereof. D. Purchases. Upon receipt of proper instructions (as defined in paragraph 5-A of section II hereof; hereafter "proper instructions") and insofar as cash is available for the purpose, pay for and receive all securities purchased for the account of the Fund, payment being made only upon receipt of the securities by State Street (or any bank, banking firm, responsible commercial agent or trust company doing business in the United States and appointed pursuant to paragraph 6-C of section II hereof as State Street's agent or Sub-Custodian for this purpose, registered as provided in paragraph 3-C of section II hereof or in form for transfer satisfactory to State Street, or, in the case of repurchase agreements entered into between the Fund and a bank or a dealer, delivery of the securities either in certificate form or through an entry crediting State Street's account at the Federal Reserve Bank with such securities. All securities accepted by State Street shall be accompanied by payment of, or a "due bill" for, any dividends, interest or other distributions of the issuer, due the purchaser. In any and every case of a purchase of securities for the account of the Fund where payment is made by State Street in advance of receipt of the securities purchased, State Street shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by State Street except that in the case of repurchase agreements entered into by the Fund with a bank which is a member of the Federal Reserve System, State Street may transfer funds to the account of such bank prior to the receipt of written evidence that the securities subject to such repurchase agreement have been transferred by book-entry into a segregated nonproprietary account of State Street maintained with the Federal Reserve Bank of Boston, provided that such securities have in fact been so transferred by book-entry; and provided, further however, that State Street and the Fund agree to use their best efforts to insure receipt by State Street of copies of documentation for each such transaction as promptly as possible. E. Exchanges. Upon receipt of proper instructions, exchange securities, interim receipts or temporary securities held by it or by any agent or any Sub-Custodian appointed by it pursuant to paragraph 6-C of section II hereof for the account of the Fund for other securities alone or for other securities and cash, and expend cash insofar as cash is available in connection with any merger, consolidation, reorganization, recapitalization, split-up of shares changes of par value, conversion or in connection with the exercise of warrants, subscriptions or purchase rights, or otherwise, and deliver securities to the designated depository or other receiving agent in response to tender offers or similar offers to purchase received in writing; provided that in any such case the securities and/or cash to be received as a result of any such exchange, expenditure or delivery are to be delivered to State Street, its agents or Sub-Custodians. State Street shall give notice as provided under paragraph 4-L of section II hereof to the Fund in connection with any transaction specified in this paragraph and at the same time shall specify to the Fund whether such notice relates to securities held by an agent or Sub-Custodian appointed pursuant to paragraph 6-C of section II hereof, so that the Fund may issue to State Street proper instructions for State Street to act thereon prior to any expiration date (which shall be presumed to be two business days prior to such date unless State Street has previously advised the Fund of a different period). The Fund shall give to State Street full details of the time and method of submitting securities in response to any tender or similar offer, exercising any subscription or purchase right or making any exchange pursuant to this paragraph. When such securities are in the possession of an agent appointed by State Street pursuant to paragraph 6-C of section II hereof, the proper instructions referred to in the preceding sentence must be received by State Street in timely enough fashion (which shall be presumed to be three business days unless State Street has advised the Fund in writing of a different period) for State Street to notify the agent in sufficient time to permit such agent to act prior to any expiration date. When the securities are in the possession of a Sub-Custodian appointed pursuant to paragraph 6-C of section II hereof, the proper instructions must be received by the Sub-Custodian in timely enough fashion as previously advised in writing to the Fund by State Street or the Sub-Custodian to permit the Sub-Custodian to act prior to any expiration date. F. Sales. Upon receipt of proper instructions and upon receipt of full payment therefor, release and deliver securities which have been sold for the account of the Fund. At the time of delivery all such payments are to be made in cash, by a certified check upon or a treasurer's or cashier's check of a bank, by effective bank wire transfer through the Federal Reserve Wire System or, if appropriate, outside of the Federal Reserve Wire System and subsequent credit to the Fund's Custodian account, or, in the case of delivery through a stock clearing company, by book-entry credit by the stock clearing company in accordance with the then current "street" custom. G. Purchases by Issuer. Upon receipt of proper instructions, release and deliver securities owned by the Fund to the issuer thereof or its agent when such securities are called, redeemed retired or otherwise become payable; provided that in any such case, the cash or other consideration is to be delivered to State Street. H. Changes of Name and Denomination. Upon receipt of proper instructions, release and deliver securities owned by the Fund to the issuer thereof or its agent for transfer into the name of the Fund or of a nominee of State Street or of the Fund for the exclusive use of the Fund or for exchange for a different number of bonds, certificates, or other evidence representing the same aggregate face amount of number of units bearing the same interest rate, maturity date and call provisions, if any; provided that in any such case, the new securities are to be delivered to State Street. I. Street Delivery. In connection with delivery in New York City and upon receipt of proper instructions, which in the case of registered securities may be standing instructions, release securities owned by the Fund upon receipt of a written receipt for such securities to the broker selling the same for examination in accordance with the existing "street delivery" custom. In every instance either payment in full for such securities shall be made or such securities shall be returned to the Custodian that same day. In the event existing "street delivery" custom is modified, State Street shall obtain authorization from the board of directors of the Fund prior to any use of such modified "street delivery" custom. J. Release of Securities for Use as Collateral. Upon receipt of proper instructions, release securities belonging to the Fund to any bank or trust company for the purpose of pledge or hypothecation to secure any loan incurred by the Fund; provided, however, that securities shall be released only upon payment to State Street of the monies borrowed, except that in cases where additional collateral is required to secure a borrowing already made, subject to proper prior authorization from the Fund, further securities may be released for that purpose. Upon receipt of proper instructions, pay such loan upon redelivery to it of the securities pledged or hypothecated therefore and upon surrender of the note or notes evidencing the loan. K. Release or Delivery of Securities for Other Purposes. Upon receipt of proper instructions, release or deliver any securities held by it for the account of the Fund for any other purpose (in addition to those specified in paragraphs 3-E, 3-F, 3-G 3-H, 3-I ad 3-J of section II hereof) which the Fund declares is a proper corporate purpose pursuant to proper instructions. L. Proxies, Notices, Etc. State Street shall promptly forward upon receipt to the Fund all forms of proxies and all notices of meetings and any other notices or announcements affecting or relating to the securities, including without limitation notices relating to the class action claims and bankruptcy claims, and upon receipt of proper instructions execute and deliver or cause its nominee to execute and delivery such proxies or other authorizations as may be required. State Street, its nominee, its agents and Sub-Custodians shall not vote upon any of the securities or execute any proxy to vote thereon or give any consent or take any other action with respect thereto (except as otherwise herein provided) unless ordered to do so by proper instructions. State Street shall require its agents and Sub-Custodians appointed pursuant to paragraph 6-C of section II hereof to forward any such announcements and [sic] M. Miscellaneous. In general, attend to all nondiscretionary details in connection with the sale, exchange, substitution, purchase, transfer or other dealing with such securities or property of the Fund, except as otherwise directed by the Fund pursuant to proper instructions. State Street shall render to the Fund daily a report of all monies received or paid on behalf of the Fund, an itemized statement of the securities and cash for which it is accountable to the Fund under this Agreement and an itemized statement of security transactions which settled the day before and shall render to the Fund weekly an itemized statement of security transactions which failed to settle as scheduled. At the end of each week State Street shall provide a list of all security transactions that remain unsettled at such time. 4. Additionally, as Custodian, State Street shall promptly: A. Bank Account. Retain all cash of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940, as amended, in the banking department of State Street in a separate account or accounts in the name of the Fund, subject only to draft of order by State Street acting pursuant to the terms of this Agreement. If and when authorized by proper instructions in accordance with a vote of the board of directors of the Fund, State Street may open and maintain an additional account or accounts in such other bank or trust companies as may be designated by such instructions, such account or accounts, however, to be solely in the name of State Street in its capacity as Custodian and subject only to its draft or order in accordance with the terms of this Agreement. State Street shall furnish the Fund, not later than thirty (30) calendar days after the last business day of each month, a statement reflecting the current status of its internal reconciliation of the closing balance as of that day in all accounts described in this paragraph to the balance shown on the daily cash report for that day rendered to the Fund. B. Collections. Unless otherwise instructed by receipt of proper instructions, collect, receive and deposit in the bank account or accounts maintained pursuant to paragraph 4-A of section II hereof all income and other payments with respect to the securities held hereunder, execute ownership and other certificates and affidavits for all Federal and State tax purposes in connection with the collection of bond and note coupons, do all other things necessary or proper in connection with the collection of such income, and without waiving the generality of the foregoing: (1) Present for payment on the date of payment all coupons and other income items requiring presentation; (2) Present for payment all securities which may mature or be called, redeemed, retired or otherwise become payable on the date such securities become payable; (3) Endorse and deposit for collection, in the name of the Fund, checks, drafts or other negotiable instruments on the same day as received. In any case in which State Street does not receive any such due and unpaid income within a reasonable time after it has made proper demands for the same (which shall be presumed to consist of at least three demand letters and at least one telephonic demand), it shall so notify the Fund in writing, including copies of all demand letters, any written responses thereto, and memoranda of all oral responses thereto and to telephonic demands, and await proper instruction; the Custodian shall not be obligated to take legal action for collection unless and until reasonably indemnified to its satisfaction for the reasonable costs of such legal action for collection. It shall also notify the Fund as soon as reasonably practicable whenever income due on securities is not collected in due course. C. Sale of Shares of the Fund. Make such arrangements with the Transfer Agent of the Fund as will enable State Street to make certain it receives the cash consideration due to the Fund for shares of the Fund as may be issued or sold from time to time by the Fund, all in accordance with the Fund's Declaration of Trust and By-Laws, both as amended. In connection with such issuance of shares of the Fund, State Street shall make such arrangements with the transfer Agent as shall insure the timely notification to the Transfer Agent and to the Fund of the receipt of Federal funds by the Custodian by means of the Federal Reserve Wire System or of the receipt of funds by other bank wire transfers in payment for the issuance of such share. At 9:00 A.M. on the first business day after the deposit of a check into the Trust's account, State Street agrees to make Federal funds available to the Fund in the amount of the check. D. Dividends and Distributions. Upon receipt of proper instructions, release or otherwise apply cash insofar as cash is available for the purpose for payment of dividends or other distributions to shareholders of the Fund. E. Redemption of Shares of the Fund. From such funds as may be available for the purpose, but subject to the limitations of the Fund's Declaration of Trust and By-Laws, both as amended, and applicable resolutions of the board of directors of the Fund pursuant thereto, make funds available for payment to shareholders who have delivered to the Transfer Agent a request for redemption of their shares by the Fund pursuant to said Declaration of Trust and By-Laws, both as amended. In connection with the redemption of shares of the Fund pursuant to the Fund's Declaration of Trust and By-Laws, both as amended, State Street is authorized and directed upon receipt of proper instructions from the Transfer Agent for the Fund to make funds available for transfer through the Federal Reserve Wire System or by other bank wire to a commercial bank account designated by the redeeming shareholder. F. Stock Dividends, Rights, Etc. Receive and collect all stock dividends, rights and other items of like nature; and deal with the same pursuant to proper instructions relative thereto. F.[sic] Disbursements. Upon receipt of proper instructions, make of cause to be made, insofar as cash is available for the purpose, disbursements for the payment on behalf of the Fund of interest, taxes, advisory fees and operating expenses, including registration and qualification costs and other expenses of issuing and selling shares or changing its capital structure, whether or not such expenses shall be in whole or in part capitalized or treated as deferred expenses. G. Other Proper Corporate Purposes. Upon receipt of proper instructions, make or cause to be made, insofar as cash is available for the purpose, disbursements for any other purpose (in addition to the purposes specified in paragraphs 3-D, 3-E, 4-D, 4-E, and 4-G of this Agreement) which the Fund declares is a proper corporate purpose. H. Records. Create, maintain and retain all records relating to its activities and obligations under this Agreement in such manner as (a) shall meet the obligations of the Fund under the Investment Company Act of 1940, as amended, particularly Section 31 thereof and Rules 31a-1 and 31a-2 thereunder, under applicable federal and state tax laws and under any other law or administrative rules or procedures which may be applicable to the Fund, (b) as necessary to comply with the representations of Part I - Fund Custodian Services and Part II - Portfolio Pricing and Accounting of State Street's Response, dated May 1, 1979, as amended to Keystone Custodian Funds, Inc.'s and The Massachusetts Companies, Inc.'s Request for Proposal, dated March 19, 1979, as amended, (amendments since June 22, 1979 are set forth in Exhibit B) ("Parts I and II"), insofar as such representations relate to the creations, maintenance and retention of records for the Fund or (c) as reasonably requested from time to time by the Fund. All records maintained by State Street in connection with the performance of its duties under this Agreement shall remain the property of the Fund and in the event of termination of this Agreement shall be delivered in accordance with the terms of paragraph 8 below. I. Miscellaneous. Assist generally in the preparation of routine reports to holders of shares of the Fund, to the Securities and Exchange Commission, including forms N1-R and N1-Q, to State "Blue Sky" authorities, to others in the auditing of accounts and in other matters or like matters of like nature, as required to comply with the representations of Parts I and II insofar as such representations relate to the preparation of reports for the Fund and as otherwise reasonably requested by the Fund. K.[sic] Determination of Net Income. If requested by the Fund and upon receipt of proper instructions, which may be continuing instructions when deemed appropriate by the parties, State Street shall calculate daily the "net income" of the Fund in a manner consistent with the Fund's Declaration of Trust and in accordance with the then current prospectus of the Fund, and shall advise the Fund and the Transfer Agent daily of the total amount of such "net income". L. Services Under Parts I and Part II. In addition to the services specified herein, State Street shall perform those services set forth in Parts I and II, including without limitation general ledger accounting, daily Fund portfolio pricing and custodian services to the extent such services relate to the Fund; provided, however, that in the event that Parts I and II as they relate to the Fund are in conflict with the terms of this Agreement, the terms of this Agreement shall govern. 5. State Street and the Fund further agree as follows: A. Proper Instructions. State Street shall be deemed to have received proper instructions upon receipt of written instructions signed by the board of Trustees or by one or more person or persons as the Board of directors shall have from time to time authorized to give the particular class of instructions in questions. Different persons may be authorized to give instructions for different purposes. A copy of a resolution or action of the board of Trustees certified by the secretary or an assistant secretary of the Fund may be received and accepted by State Street as conclusive evidence of the instruction of the board of directors and/or the authority of any person or persons to act on behalf of the Fund and may be considered as in full force and effect until receipt of written notice to the contrary. Such instructions may be general or specific in terms. Oral instructions will be considered proper instructions if the Custodian reasonably believes them to have been given by a person authorized by the board of directors to give such oral instructions with respect to the class of instruction involved. The Fund shall cause all oral instructions to be confirmed in writing. B. Investments, Limitations. In performing its duties generally, and more particularly in connection with the purchase, sale and exchange of securities made by or for the Fund, State Street may take cognizance of the provisions of the Declaration of Trust and By-Laws of the Fund, both as amended; provided, however, that except as otherwise expressly provided herein, State Street may assume unless and until notified in writing to the contrary that instructions purporting to be proper instructions received by it are not in conflict with or in any way contrary to any provision of the Declaration of Trust and By-Laws of the Fund both as amended, or resolutions or proceedings of the board of Trustees of the Fund. 6. State Street and the Fund further agree as follows: A. Indemnification. State Street, as Depository and Custodian, shall be entitled to receive and act upon advice of counsel (who may be counsel for the Fund) and shall be without liability for any action reasonably taken or thing reasonably done pursuant to such advice; provided that such action is not in violation of applicable Federal or State laws or regulations or contrary to written instructions received from the Fund, and shall be indemnified by the Fund and without liability for any action taken or thing done by it in carrying out the terms and provisions of this Agreement in good faith and without negligence, misfeasance or misconduct. In order that the indemnification provision contained in this paragraph shall apply, however, if the Fund is asked to indemnify or save State Street harmless, the Fund shall be fully and promptly advised of all pertinent facts concerning the situation in question and State Street shall use all reasonable care to identify and notify the Fund fully and promptly concerning any situation which presents or appears likely to present the probability of such a claim for indemnification against the Fund. The Fund shall have the option to defend State Street against any claim which may be the subject of this indemnification, and in the event that the Fund so elects it will so notify State Street, and thereupon the Fund shall take over complete defense of the claim, and State Street shall initiate no further legal or other expenses for which it shall seek indemnification under this paragraph. State Street shall in no case confess any claim or make any compromise in any case in which the Fund will be asked to indemnify State Street except with the Fund's prior written consent. B. Expense Reimbursement. State Street shall be entitled to receive from the Fund on demand reimbursement for its cash disbursements, expenses and charges, excluding salaries and usual overhead expenses, as set forth on Schedule A. C. Appointment of Agent and Sub-Custodians. State Street, as Custodian, may appoint (and may remove) any other bank, trust company or responsible commercial agent as its agent to carry out such of the provisions of this Agreement as State Street may from time to time direct, and State Street, as Custodian, may from time to time employ one or more Sub-Custodians, but only in compliance with the terms and conditions set forth in the Fund's Declaration of Trust and By-Laws, both as amended; provided, however, that the appointment of any such agent of Sub-Custodian shall not relieve State Street of any of its responsibilities under this Agreement. D. Reliance on Documents. So long as and to the extent that it is in good faith and in the exercise of reasonable care, State Street, as Depository and Custodian, shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement, shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to constitute proper instructions under this Agreement and shall, accept as otherwise specifically provided in this Agreement, be entitled to receive as conclusive proof of any fact or matter required to be ascertained by it hereunder a certificate signed by the board of trustees, the secretary or an assistant secretary of the Fund or any other person expressly authorized by the board of trustees of the Fund. E. Access to Records. Subject to security requirements of State Street applicable to its own employees having access to similar records within State Street and such regulations as to the conduct of such monitors as may be reasonably imposed by State Street after prior consultation with an authorized officer of the Fund, books and records of State Street pertaining to its actions under this Agreement shall be open to inspection and audit at reasonable times by the directors of, attorneys for, auditors employed by the Fund or any other person as the board of directors shall direct. F. Record-Keeping. State Street shall maintain such records as shall enable the Fund to comply with the requirements of all Federal and State laws and regulations applicable to the Fund with respect to the matters covered by this Agreement and shall comply with the representations of Parts I and II as such representations relate to maintaining records of the Fund. 7. The Fund shall pay State Street for its services as Custodian such compensation as shall be as specified in the attached Exhibit A. Such compensation shall remain fixed for two years from the date hereof, unless this Agreement is terminated as provided in section 8A, and shall remain fixed for an additional year in the event of the Fund decides to continue this Agreement for such period; provided, however, that in the event either party terminates this Agreement as provided in section 8A State Street hereby guarantees and agrees that no new Agreement entered into between the parties shall require payment of compensation greater than that specified herein during such three year period. 8. State Street and the Fund further agree as follows: A. Effective Period, Termination, Amendment and Interpretive and Additional Provisions. This Agreement shall become effective as of the date of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated at any time by the Fund by an instrument in writing delivered or mailed, postage prepaid, to State Street and may be so terminated by State Street through notice to the Fund at any time after three years from the date hereof, or in the event of the Fund's substantial default under this Agreement which default continues, after notice to the Fund of such default, uncorrected for 30 days; provided, however, that in such event State Street shall remain as Custodian hereunder for a reasonable period thereafter if the Fund has used its best efforts and is unable to find a Successor Custodian, any such termination to take effect not sooner than sixty (60) days after the date of such delivery of mailing; provided, however, that the Fund shall not amend or terminate this Agreement in contravention of any applicable Federal or State laws or regulations, or any provision of the Declaration of Trust or By-Laws of the Fund, both as amended, and further provided, that the Fund may by action of its board of directors substitute another bank or trust company for State Street by giving notice as provided above to State Street. In connection with the operation of this Agreement, State Street and the Fund may agree from time to time on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement, any such interpretive or additional provision to be signed by both parties and annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable Federal or State laws or regulations, or any provision of the Fund's Declaration of Trust or By-Laws, both as amended. No interpretive provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement. B. Successor Custodian. Upon termination hereof or the inability of the Custodian to continue to serve hereunder, the Fund shall pay to State Street such compensation as may be due for services through the date of such termination and shall likewise reimburse State Street for its costs, expenses and disbursements incurred prior to such termination in accordance with paragraph 6-B of section II hereof and such reasonable costs, expenses and disbursements as may be incurred by State Street in connection with such termination. If a successor Custodian is appointed by the board of trustees of the Fund in accordance with section 11.1 of the Fund's Declaration of Trust, as amended, State Street shall, upon termination, deliver to such Successor Custodian at the office of State Street, properly endorsed and in proper form for transfer, all securities then held hereunder, all cash and other properties of the Fund deposited with or held by it hereunder. If no such Successor custodian is appointed, State Street shall, in like manner at its office, upon receipt of a certified copy of a resolution of the shareholders or board of trustees pursuant to section 11.1 of the Fund's Declaration of Trust as amended, deliver such securities, cash and other properties in accordance with such resolution. In the event that no written order designating a successor custodian or certified copy of a resolution of the shareholders or board of trustees shall have been delivered to State street on or before the date when such termination shall become effective, then State Street shall have the right to delivery to a bank or trust company doing business in Boston, Massachusetts of its own selection, having an aggregate capital, surplus and undivided profits as shown by its last published report, of not less than $2,000,000, all securities, cash and other properties held by State Street and all instruments held by State Street and all instruments held by it relative thereto and all other property held by it under this Agreement. Thereafter, such bank or trust company shall be the Successor of State Street under this Agreement and subject to the restrictions, limitations and other requirements of the Fund's Declaration of Trust and By-Laws, both as amended. In the event that securities, funds, and other properties remain in the possession of State Street after the date of termination hereof owing to failure of the fund to procure the certified copy above referred to, or of the board of directors to appoint a Successor Custodian, State Street shall be entitled to fair compensation for its services during such period and the provisions of this Agreement relating to the duties and obligations of State Street shall remain in full force and effect. C. Duplicate Records and Backup Facilities. State Street shall not be liable for loss of data, occurring by reason of circumstances beyond its control, including but not limited to acts of civil or military authority, national emergencies, fire, flood or catastrophe, acts of God, insurrection, war, riots, or failure of transportation, communication or power supply. However, State Street shall keep in a separate and safe place additional copies of all records required to be maintained pursuant to this Agreement or additional tapes, disks or other sources of information necessary to reproduce all such records, furthermore, at all times during this Agreement, State Street shall maintain a contractual arrangement whereby State Street will have a back-up computer facility available for its use in providing the services required hereunder in the event circumstances beyond State Street's control result in State Street not being able to process the necessary work at its principal computer facility, State Street shall, from time to time, upon request from the Fund provide written evidence and details of its arrangement for obtaining the use of such a back-up computer facility. State Street shall use its best efforts to minimize the likelihood of all damage, loss of data, delays and errors resulting from an uncontrollable event, and should such damage, loss of data, delays or errors occur, State Street shall use its best efforts to mitigate the effects of such occurrence. Representatives of the Fund shall be entitled to inspect the State Street premises and operating capabilities within reasonable business hours upon reasonable notice to State Street, and, upon request of such representative or representatives, State Street shall from time to time as appropriate, furnish to the Fund a letter setting forth the insurance coverage thereon. Any changes in such coverage which may occur and any claim relating to the Fund which State Street may have made under such insurance. D. Confidentiality. State Street agrees to treat all records and other information relative to the Fund confidentially and State Street on behalf of itself and its officers, employees, agents and Sub-Custodians agrees to keep confidential all such information, except after prior notification to and approval by the Fund (which approval shall not be unreasonably withheld and may not be withheld where State Street may be exposed to civil or criminal contempt proceedings), when requested to divulge such information by duly constituted authorities or when so requested by a properly authorized person. (a) State Street and the Fund agree that they, their officers, employees, agents and Sub-Custodians shall maintain all information disclosed to them by the other in connection with this Agreement in confidence and will not disclose any such information to any other person, nor use such information for their own benefit or for the benefit of third parties without the consent in writing of the other; provided, however, that each party shall have the right to use any such information for its own necessary internal purposes while this Agreement is in effect. The provisions of this Paragraph shall not apply to information which (i) is in or becomes part of the public domain, or (ii) is demonstrably known previously to the party to whom it is disclosed, or (iii) is independently developed outside this Agreement by the party to whom it is disclosed or (iv) is rightfully obtained from third parties by the party to whom it is disclosed. 9. The Fund shall not circulate any printed matter which contains any reference to State Street without the prior written approval of State Street, excepting solely such printed matter as merely identifies State Street as Depository or Custodian. The Fund will submit printed matter requiring approval to State Street in draft form, allowing sufficient time for review by State Street and its counsel prior to any deadline for printing. 10. In the event of a reorganization of the Fund through a merger, consolidation, sale of assets or other reorganization, State Street, at the request of the Fund, shall act as Custodian for shares of any investment company or other company obtained in any such reorganization by the Fund for distribution to those Fund shareholders whose shares are represented by certificates. The Fund shall give notice to each such shareholder of his right to exchange his Fund shares represented by certificates for shares held by the Custodian upon surrender to the Custodian of his certificates representing such Fund shares properly endorsed and in proper form for transfer. Upon the surrender of such Fund certificates State Street will issue a certificate or certificates to the surrendering shareholder for an appropriate number of shares held by State Street, unless such shareholder established an Open Account Plan or other similar account as that time in which case such shares will be credited to his or her account. State Street shall not be required to issue certificates for any fractional shares held by it. Instead, fractional interests in such shares shall be distributed to the shareholder in cash at their then current market value or, if the fractional share represents an interest in an investment company, it shall be redeemed by State Street at the then current redemption price for such shares and the proceeds of such redemption shall be distributed to such shareholder in cash. The Custodian shall not release to any shareholder any such shares held by it until such shareholder has properly surrendered for exchange his Fund shares represented by certificates. 11. This Agreement is executed and delivered in the Commonwealth of Massachusetts and shall be subject to and be construed in accordance with the laws of said Commonwealth. 12. Notices and other writings delivered or mailed postage prepaid to the Fund, c/o Keystone Custodian Funds, Inc., 99 High Street, 32nd Floor, Boston, Massachusetts 02110 or the State Street at 225 Franklin Street, Boston, Massachusetts 02110 or to such other address as the Fund or State Street may hereafter specify, shall be deemed to have been properly delivered or given hereunder to the respective address. 13. It is understood and is expressly stipulated that neither the holders of shares in the Fund nor its board of directors, officers or employees shall be personally liable hereunder, but only the assets of the Fund shall be bound. 14. This Agreement shall be binding on and shall inure to the benefit of the Fund and State Street and their respective successors or assigns. 15. State Street and the Fund hereby agree that Custodian Agreement, dated May 1, 1979 between them shall terminate upon the effectiveness of this Agreement. 16. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by a duly authorized officer as of the day and year first above written. ATTEST: AMERICAN LIQUID TRUST - -------------------------------- By:---------------------------------------- ATTEST: STATE STREET BANK AND TRUST COMPANY - --------------------------------- By:---------------------------------------- #101605d6 SCHEDULE A American Liquid Trust State Street Bank and Trust Company Custodian and Recordskeeping Fee Schedule 1. Annual Fee $18,000 II. Out-of-Pocket expenses A billing for the recovery of applicable out-of-pocket expenses will be made as of the end of each month. Out-of-pocket expenses include the following: Telephone Postage and insurance Courier service Legal fees Supplies related to Fund records Duplicating Transfer fees Wire Service ($2.00 in or out) Checkwriting service ($.35 per check) III. Additional Services Any modifications, innovations, improvements or other changes made by State Street in the services and reports which it provides to other customers receiving its custodial services without additional charges or fees shall be provided to the Fund at its request for no additional charge or fee. SCHEDULE B I. Operating Plan - Fund Custodian Services 1. Page 1 (a) Trade instructions by tape input compatible with the SPARK system will not be given. (b) System 34 terminals will not be provided for trade input. 2. Page 2 (a) Distributions will be charged against the custodian account and credited to the disbursement account on the payable date. (b) Reports - improved or new SPARK Reports will be made available to the Fund at its request for no additional cost, if made available at no additional cost to other customers of State Street. II. Fund Custodian Services A. Page 1 (1) The Fund will receive Custody and Full Accounting Services. B. Page 2 (1) Polaris Fund Inc. is not Keystone International Fund Inc. III. I. Custodian Reports A. Page 1 (2) Analytics - SPARK information reports - the Funds will receive none of these. IV. KM - SSB Reports Comparison A. Page 1 - MASSCO Report (1) (9) Different form with similar content to be prepared for Keystone Tax Free Fund (Massachusetts Fund for Tax Exempt Income) rather than Master Reserves Trust (MRT). (2) (12) To be prepared for all Funds. (3) (13) Trade Settlement Authorizations and all other reports as provided to the Keystone Funds will be provided MassCo Funds. (4) (26) Initial instructions in memo from Mr. Joseph Naples. Instructions may be changed from time to time by proper instructions. (5) (30) Letter to be supplied by Bradford Trust Company. (6) (31) Report to be supplied by Bradford Trust Company. B. Keystone Reports (1) (3) Information to be supplied by Open Order System. (2) (16) Will be prepared manually by State Street, Calculations to be based on initial instructions provided under (4) (26) memo. (3) (18) To be prepared by State Street. (4) (30) New SPARK Report to be provided the Funds. (5) (31) Pricing Quotes for foreign issues, restricted securities and private placements not otherwise available to State Street to be supplied by the Fund. (6) (46) KIMCO Reports unnecessary. (7) (58) State Street to prepare manually. (8) (57) Keystone to provide. (9) (70) New SPARK Report to be provided the Funds. (10) (73) SPARK Report to be provided the Funds (11) (74) New SPARK Report and hard copy tape to be provided the Funds. (12) (75) State Street to provide weekly report of fails for each Fund. (13) All new SPARK reports must be reviewed and accepted by the Funds before they will be considered to comply with State Street's Custodian, Portfolio Accounting and Recordskeeping Agreements with the Funds, such acceptance not to be unreasonably withheld. VI. Responses I. Fund Custodian Services (a) Page 2 Checkwriting privilege is $.35 per check - charged only for American Liquid Trust at this time. Other Fund agreements to be amended to include this charge if such privilege is ever offered to shareholders of other Funds. (b) Page 3 (6) Individuals responsible for Fund services may change as long as the quality of the personnel is maintained. (c) Page 6 (11) State Street is liable for the acts of its sub-custodians to the same extent that it is liable for the acts of its agents. II. Exhibits 1. Exhibits 1-2 (a) (6) Notices of corporate actions shall include, without limitation notices of class actions and bankruptcy actions in connection with issues held by the Funds. FIRST AMENDMENT TO CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT BY AND BETWEEN AMERICAN LIQUID TRUST AND STATE STREET BANK AND TRUST COMPANY This First Amendment to the Custodian, Fund Accounting and Recordkeeping Agreement by and between AMERICAN LIQUID TRUST (the "Fund") and STATE STREET BANK AND TRUST COMPANY ("State Street"), dated December 31, 1979 (the "Agreement") is made by and between the Fund and State Street as of December 31, 1982. In consideration of the mutual agreements contained herein, State Street and the fund hereby agree to amend the Agreement by replacing each of Section II, Paragraph 6(B), and Section II, Paragraph 7 with the following provisions: "6. B. Expense Reimbursement. State Street shall be entitled to receive from the Fund on demand reimbursement for its cash disbursements, expenses and charges, excluding salaries and usual overhead expenses, as set forth on the attached Schedule C." "7. The Fund shall pay State Street for its services as Custodian such compensation as shall be as specified in the attached Schedule C. Such compensation shall remain as provided in Schedule C until December 31, 1984, unless this Agreement is terminated as provided in section 8A; provided, however, that in the event either party terminates this Agreement as provided in section 8A State Street hereby guarantees and agrees that no new Agreement entered into between the parties shall require payment of compensation greater than that specified herein during such period." IT WITNESS WHEREOF, each of the parties hereto has caused this First Amendment to the Agreement to be executed in its name and on its behalf by a duly authorized officer as of the day and year first written above. AMERICAN LIQUID TRUST By:-------------------------------------- Attest:---------------------------- STATE STREET BANK AND TRUST COMPANY By:-------------------------------------- Attest:---------------------------- #101e0a6c SCHEDULE C STATE STREET BANK AND TRUST COMPANY CUSTODIAN FEE SCHEDULE AMERICAN LIQUID TRUST (EFFECTIVE 1/1/83) I. ADMINISTRATION Custody, Portfolio and Fund Accounting Service - Maintain custody of fund assets. Settle portfolio purchases and sales. Report buy and sell fails. Determine and collect portfolio income. Make cash disbursements and report cash transactions. Maintain investment ledgers, provide selected portfolio transactions, position and income reports. Maintain general ledger and capital stock accounts. Prepare daily trial balance. Calculate net asset value daily. Provide selected general ledger reports. Securities yield or market value quotations will be provided to State Street from a source designated by the Fund. The administration fee shown below is an annual charge, billed and payable monthly, based on average net assets and calculated in the same manner as the fund management fee. Annual Fee Fund Net Assets First $35 million 1/15 of 1% Next $65 million 1/30 of 1% Excess 1/100 of 1% No Minimum II. PORTFOLIO TRADES - For each line item processed All Trades $ 10.00 III. OUT-OF-POCKET EXPENSES A billing for the recovery of applicable out-of-pocket expenses will be made as of the end of each month. Out-of-pocket expenses include, but are not limited to the following: Telephone Wire charges ($3.65 per wire in and $3.50 out) Postage and insurance Courier service Legal fees Supplied related to fund records Rush transfer - $8 each Duplicating DTC Eligibility Books Transfer fees Sub-Custodian charges Price Waterhouse Audit Letter Check writing ($.50 per check) This fee schedule will terminate 12/31/83. SCHEDULE C STATE STREET BANK AND TRUST COMPANY CUSTODIAN FEE SCHEDULE AMERICAN LIQUID TRUST (EFFECTIVE 1/1/84) I. ADMINISTRATION Custody, Portfolio and Fund Accounting Service - Maintain custody of fund assets. Settle portfolio purchases and sales. Report buy and sell fails. Determine and collect portfolio income. Make cash disbursements and report cash transactions. Maintain investment ledgers, provide selected portfolio transactions, position and income reports. Maintain general ledger and capital stock accounts. Prepare daily trial balance. Calculate net asset value daily. Provide selected general ledger reports. Securities yield or market value quotations will be provided to State Street from a source designated by the Fund. The administration fee shown below is an annual charge, billed and payable monthly, based on average net assets and calculated in the same manner as the fund management fee. Annual Fee Fund Net Assets First $35 million 1/15 of 1% Next $65 million 1/30 of 1% Excess 1/100 of 1% No Minimum II. PORTFOLIO TRADES - For each line item processed All Trades $ 12.50 III. OUT-OF-POCKET EXPENSES A billing for the recovery of applicable out-of-pocket expenses will be made as of the end of each month. Out-of-pocket expenses include, but are not limited to the following: Telephone Wire charges ($3.65 per wire in and $3.50 out) Postage and insurance Courier service Legal fees Supplied related to fund records Rush transfer - $8 each Duplicating DTC Eligibility Books Transfer fees Sub-Custodian charges Price Waterhouse Audit Letter Check writing ($.50 per check) This fee schedule will terminate 12/31/84. THIRD AMENDMENT TO CUSTODIAN, FUND ACCOUNTING ND RECORDKEEPING AGREEMENT BY AND BETWEEN KEYSTONE LIQUID TRUST AND STATE STREET BANK AND TRUST COMPANY This Third Amendment to the Custodian, Fund Accounting and Recordkeeping Agreement by and between KEYSONE LIQUID TRUST, formerly known as American Liquid Trust, (the "Fund") and STATE STREET BANK AND TRUST COMPANY ("State Street"), dated December 31, 1979, amended January 1, 1982, and December 31, 1982 ("Agreement") is made by and between the Fund and State Street as of December 31, 1984. In consideration of the mutual agreements contained herein, State Street and the Fund hereby agree to amend the Agreement by replacing each of Section II, Paragraph 6(B), and Section II, Paragraph 7 with the following provisions: "6. B. Expense Reimbursement. State Street shall be entitled to receive from the Fund on demand reimbursement for its cash disbursements, expenses and charges, excluding salaries and usual overhead expenses, as set forth on the attached Schedule D. "7. The Fund shall pay State Street for its services as Custodian such compensations as shall be as specified in the attached Schedule D. Such compensation shall remain as provided in Schedule D until December 31, 1986, unless this Agreement is terminated as provided in section 8A; provided however, that in the event either party terminates this Agreement as provided in section 8A State Street hereby guarantees and agrees that no new Agreement entered into between the parties shall require payment during such period of compensation greater than that specified herein." IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the Agreement to be executed in its name and on its behalf by a duly authorized officer as of the day and year first written above. KEYSTONE LIQUID TRUST By:------------------------------------- Office:--------------------------------- Attest: - ------------------------------------ STATE STREET BANK AND TRUST COMPANY By:------------------------------------- Office:--------------------------------- Attest: - ------------------------------------ #101e016d SCHEDULE D STATE STREET BANK AND TRUST COMPANY CUSTODIAN FEE SCHEDULE AMERICAN LIQUID TRUST (EFFECTIVE 1/1/85) I. ADMINISTRATION Custody, Portfolio and Fund Accounting Service - Maintain custody of fund assets. Settle portfolio purchases and sales. Report buy and sell fails. Determine and collect portfolio income. Make cash disbursements and report cash transactions. Maintain investment ledgers, provide selected portfolio transactions, position and income reports. Maintain general ledger and capital stock accounts. Prepare daily trial balance. Calculate net asset value daily. Provide selected general ledger reports. Securities yield or market value quotations will be provided to State Street from a source designated by the Fund. The administration fee shown below is an annual charge, billed and payable monthly, based on average net assets and calculated in the same manner as the fund management fee. Annual Fee Fund Net Assets First $35 million 1/15 of 1% Next $65 million 1/30 of 1% Excess 1/100 of 1% No Minimum II. PORTFOLIO TRADES - For each line item processed (a) Depository Trust Company and Federal Reserve Book Entry System $ 12.25 (b) Physical delivery, options and all other trades $16.00 III. OUT-OF-POCKET EXPENSES A billing for the recovery of applicable out-of-pocket expenses will be made as of the end of each month. Out-of-pocket expenses include, but are not limited to the following: Telephone Wire charges ($3.65 per wire in and $3.50 out) Postage and insurance Courier service Legal fees Supplied related to fund records Rush transfer - $8 each Duplicating DTC eligibility books Transfer fees Sub-Custodian charges Price Waterhouse audit letter Check writing ($.50 per check) IV. ADDITIONAL ACCOUNTING AND REPORTING FUNCTIONS $150 per month This fee schedule will terminate 12/31/86. FOURTH AMENDMENT TO CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT BY AND BETWEEN KEYSTONE LIQUID TRUST AND STATE STREET BANK AND TRUST COMPANY This Fourth Amendment to the Custodian, Fund Accounting and Recordkeeping Agreement by and between KEYSTONE LIQUID TRUST ("Fund") and STATE STREET BANK AND TRUST COMPANY ("State Street"), dated December 31, 1979 and amended through December 31, 1984 ("Agreement") is made by and between the Fund and State Street as of September 1, 1988. In consideration of the mutual agreements contained herein, State Street and the Fund hereby agree to amend the Agreement as follows: 1. Section II, Paragraph 3(K) is amended by inserting the following language after Paragraph 3(J) and by renumbering existing Paragraph 3(K) as Paragraph 3(L): "K. Compliance with Applicable Rules and Regulations of The Options Clearing Corporation and National Securities or Commodities Exchanges or Commissions. Upon receipt of proper instructions, deliver securities in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 ("Exchange Act") and a member of the National Association of Securities Dealers, Inc.("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund; or, upon receipt of proper instructions deliver securities in accordance with the provisions of any agreement among the Fund, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund." 2. Existing Section II, Paragraph 3(L) is renumbered as Paragraph 3(M). 3. The following language is inserted after new Paragraph 3(M) as Paragraph 3(N) : "N. Segregated Account. The Custodian shall upon receipt of proper instructions, establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Paragraph 3(B) hereof, (i) in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv), for other proper corporate purposes, but only, in the case of clause (iv), upon receipt of, in addition to proper instructions, a certified copy of a resolution of the Board of Trustees signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes." 4. Existing Section II, Paragraphs 3(M) and 3(N) are renumbered as Paragraphs 3(O) and 3(P). 5. In all other respects the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by a duly authorized officer as of the day and year first above written. ATTEST: KEYSTONE LIQUID TRUST - --------------------------------- By:---------------------------------------- ATTEST: STATE STREET BANK AND TRUST COMPANY - --------------------------------- By:---------------------------------------- Vice President #1016018c FIFTH AMENDMENT TO CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT BY AND BETWEEN KEYSTONE LIQUID TRUST AND STATE STREET BANK AND TRUST COMPANY This Fifth Amendment to the Custodian, Fund Accounting and Recordkeeping Agreement by and between KEYSTONE LIQUID TRUST ("Fund") and STATE STREET BANK AND TRUST COMPANY ("State Street"), dated December 31, 1979 and amended through September 1, 1988 ("Agreement") is made by and between the Fund and State Street as of January 1, 1989. In consideration of the mutual agreements contained herein, State Street and the Fund hereby agree to amend the Agreement as follows: 1. Section 3-D of Section II entitled, Purchases is amended by concluding the first sentence of such paragraph with the following: "or, upon receipt by State Street of a facsimile copy of a letter of understanding with respect to a time deposit account of the Fund signed by any bank, whether domestic or foreign, and pursuant to Proper Instructions from the Fund as defined in Section 5-A, for transfer to the time deposit account of the Fund in such bank; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank." 2. Section II is amended by deleting existing Paragraph 7 and by inserting the following as Paragraphs 7 and 8: " 7. Lien on Assets. If the Fund requires State Street to advance cash or securities for any purpose or in the event that State Street or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefor and should the Fund fail to repay State Street promptly, State Street shall be entitled to utilize available cash and to dispose of the Fund assets to the extent necessary to obtain reimbursement; provided, however, that the total value of any property of any Portfolio of the Fund which at any time is security for any payment by State Street hereunder shall not exceed 15% of such Portfolio's total net asset value. 8. The Fund shall pay State Street for its services as Custodian such compensation as shall be specified in the attached Exhibit A. Such compensation shall remain fixed until December 31, 1989, unless this Agreement is terminated as provided in Section 8A." 3. In all other respects the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by a duly authorized officer as of the day and year first above written. ATTEST: KEYSTONE LIQUID TRUST - ------------------------------------ By:------------------------------------- ATTEST: STATE STREET BANK AND TRUST COMPANY - ------------------------------------ By:------------------------------------- Vice President #10160193 SIXTH AMENDMENT TO CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT BY AND BETWEEN KEYSTONE LIQUID TRUST AND STATE STREET BANK AND TRUST COMPANY This Sixth Amendment to the Custodian, Fund Accounting and Recordkeeping Agreement by and between KEYSTONE LIQUID TRUST ("Fund") and STATE STREET BANK AND TRUST COMPANY ("State Street"), dated December 31, 1979 and amended through January 1, 1989 ("Agreement"), is made by and between the Fund and State Street as of February __, 1990. In consideration of the mutual agreements contained herein, State Street and the Fund hereby agree to amend the Agreement as follows: 1. Section II is amended by deleting Paragraph 8 and by inserting the following as Paragraph 7A: " 7A. The Fund shall pay State Street for its services as Custodian such compensation as specified in the existing Schedule A. Such compensation shall remain fixed until March 31, 1990 unless this Agreement is terminated as provided in Paragraph 8A." 2. In all other respects the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by a duly authorized officer as of the day and year first above written. ATTEST: KEYSTONE LIQUID TRUST - ---------------------------------- By:---------------------------------------- ATTEST: STATE STREET BANK AND TRUST COMPANY - ---------------------------------- By:---------------------------------------- Vice President #10160192 SEVENTH AMENDMENT TO CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT BY AND BETWEEN KEYSTONE LIQUID TRUST AND STATE STREET BANK AND TRUST COMPANY This Seventh Amendment to the Custodian, Fund Accounting and Recordkeeping Agreement by and between KEYSTONE LIQUID TRUST, a Massachusetts business trust organized and existing under the laws of the Commonwealth of Massachusetts and having a principal place of business at 99 High Street, Boston, Massachusetts 02110 (hereinafter called the "Fund"), and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts 02110 (hereinafter called the "Custodian"). WHEREAS: The Fund and the Custodian are parties to a Custodian, Fund Accounting and Recordkeeping Agreement dated December 31, 1979, as most recently amended January 1, 1989 (the "Custodian Contract"); WHEREAS: The Fund desires that the Custodian issue a letter of credit (the "Letter of Credit") on behalf of the Fund for the benefit of ICI Mutual Insurance Company (the "Company") in accordance with the Continuing Letter of Credit and Security Agreement and that the Fund's obligations to the Custodian with respect to the Letter of Credit shall be fully collateralized at all times while the Letter of Credit is outstanding by, among other things, segregated assets of the Fund equal to 100% of the Fund's proportionate share of the face amount of the Letter of Credit; WHEREAS: the Custodian Contract provides for the establishment of segregated accounts for proper Fund purposes upon Proper Instructions (as defined in the Custodian Contract); and WHEREAS: The Fund and the Custodian desire to establish a segregated account to hold the collateral for the Fund's obligations to the Custodian with respect to the Letter of Credit and to amend the Custodian Contract to provide for the establishment and maintenance thereof: WITNESSETH: That in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto hereby amend the Custodian Contract as follows: 1. Capitalized terms used herein without definition shall have the meanings ascribed to them in the Custodian Contract. 2. The Fund hereby instructs the Custodian to establish and maintain a segregated account (the "Letter of Credit Custody Account") for and on behalf of the Fund as contemplated by [Section II, Paragraph 3N (iv) of the Custodian Contract] for the purpose of collateralizing the Fund's obligations under this Amendment to the Custodian Contract. 3. The Fund shall deposit with the Custodian and the Custodian shall hold in the Letter of Credit Custody Account cash, certificates of deposit, U.S. government securities or other high-grade debt securities owned by the Fund acceptable to the Custodian (collectively "Collateral Securities") equal to 100% of the Fund's proportionate share of the face amount which the Company may draw under the Letter of Credit. Upon receipt of such Collateral Securities in the Letter of Credit Custody Account, the Custodian shall issue the Letter of Credit to the Company. 4. The Fund hereby grants to the Custodian a security interest in the Collateral Securities from time to time in the Letter of Credit Custody Account (the "Collateral") to secure the performance of the Fund's obligations to the Custodian with respect to the Letter of Credit, including, without limitation, under Section 5-144(3) of the Uniform Commercial Code. The Fund shall register the pledge of Collateral and execute and deliver to the Custodian such powers and instruments of assignment as may be requested by the Custodian to evidence and perfect the limited interest in the Collateral granted hereby. 5. The Collateral Securities in the Letter of Credit Custody Account may be substituted or exchanged (including substitutions or exchanges which increase or decrease the aggregate value of the Collateral) only pursuant to Proper Instructions from the Fund after the Fund notifies the Custodian of the contemplated substitution or exchange and the Custodian agrees that such substitution or exchange is acceptable to the Custodian. 6. Upon any payment made pursuant to the Letter of Credit by the Custodian to the Company, the Custodian may withdraw from the Letter of Credit Custody Account Collateral Securities in an amount equal in value to the amount actually so paid. The Custodian shall have with respect to the Collateral so withdrawn all of the rights of a secured creditor under the Uniform Commercial Code as adopted in the Commonwealth of Massachusetts at the time of such withdrawal and all other rights granted or permitted to it under law. 7. The Custodian will transfer upon receipt all income earned on the Collateral to the Fund custody account unless the Custodian receives Proper Instructions from the Fund to the contrary. 8. Upon the drawing by the Company of all amounts which may become payable to it under the Letter of Credit and the withdrawal of all Collateral Securities with respect thereto by the Custodian pursuant to Section 6 hereof, or upon the termination of the Letter of Credit by the Fund with the written consent of the Company, the Custodian shall transfer any Collateral Securities then remaining in the Letter of Credit Custody Account to another fund custody account. 9. Collateral held in the Letter of Credit Custody Account shall be released only in accordance with the provisions of this Amendment to Custodian Contract. The Collateral shall at all times until withdrawn pursuant to Section 6 hereof remain the property of the Fund, subject only to the extent of the interest granted herein to the Custodian. 10. Notwithstanding any other termination of the Custodian Contract, the Custodian Contract shall remain in full force and effect with respect to the Letter of Credit Custody Account until transfer of all Collateral Securities pursuant to Section 8 hereof. 11. The Custodian shall be entitled to reasonable compensation for its issuance of the Letter of Credit and for its services in connection with the Letter of Credit Custody Account as agreed upon from time to time between the Fund and the Custodian. 12. The Custodian Contract as amended hereby shall be governed by, and construed and interpreted under, the laws of the Commonwealth of Massachusetts. 13. The parties agree to execute and deliver all such further documents and instruments and to take such further action as may be required to carry out the purposes of the Custodian Contract, as amended hereby. 14. Except as provided in this Amendment, the Custodian Contract shall remain in full force and effect, without amendment or modification, and all applicable provisions of the Custodian Contract, as amended hereby, shall govern the Letter of Credit Custody Account and the rights and obligations of the Fund and the Custodian under this Amendment to Custodian Contract. No provision of this Amendment to Custodian Contract shall be deemed to constitute a waiver of any rights of the Custodian under the Custodian Contract or under law. IN WITNESS WHEREOF, each of the parties has caused this Amendment to Custodian Contract to be executed in its name and behalf by its duly authorized representatives and its seal to be hereunder affixed as of the _____ day of February, 1990. ATTEST: KEYSTONE LIQUID TRUST By:------------------------------- By:---------------------------------------- ATTEST: STATE STREET BANK AND TRUST COMPANY By:------------------------------- By:---------------------------------------- Assistant Secretary Vice President #10160190 EX-99.24(B)(11) 8 INDEPEDENT AUDITORS CONSENT EXHIBIT 99.24(B)(11) CONSENT OF INDEPENDENT AUDITORS The Board of Trustees and Shareholders Keystone Liquid Trust We consent to the use of our report dated July 28, 1995, included herein and to the references to our firm under the captions "FINANCIAL HIGHLIGHTS" in the prospectus and "ADDITIONAL INFORMATION" in the statement of additional information. /S/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Boston, Massachusetts August 31, 1995 EX-99.24(B)(15) 9 CLASS A, B & C DISTRIBUTION PLANS Exhibit 99.24(b)(15) KEYSTONE LIQUID TRUST CLASS A DISTRIBUTION PLAN SECTION 1. Keystone Liquid Trust (the "Fund") may act as the distributor of securities of which it is the issuer pursuant to Rule 12-1 under the Investment Company Act of 1940 (the "Act") according to the terms of this Distribution Plan (the "Plan") SECTION 2. Amounts not exceeding in the aggregate a maximum amount equal to 0.35% of the average of the daily aggregate net asset value of Class A shares of the Fund during each fiscal year of the Fund elapsed after the inception of the Plan may be paid by the Fund to the Principal Underwriter at any time after the inception of the Plan in order to pay to the Principal Underwriter for efforts expended in respect of or in furtherance of sales of Class A shares of the Fund and to enable the Principal Underwriter to pay or to have paid to others who sell or have sold Class A shares, a maintenance or other fee, at such intervals as the Principal Underwriter may determine, in respect of Class A shares previously sold by any such others at any time and remaining outstanding during the period in respect of which such fee is or has been paid. SECTION 3. This Plan shall not take effect until it has been approved by a vote of at least a majority (as defined in the Act) of the outstanding Class A shares of the Fund. SECTION 4. This Plan shall not take effect until it has been approved together with any related agreements of the Fund by votes of the majority of both (a) the Trustees of the Fund and (b) those Trustees who are not "interested persons" of the Fund as defined in the 1940 Act and who have no direct or indirect financial interest in the operation of this Plan or any agreements of the Fund or any other person related to this Plan (the "Rule 12b-1 Directors"), cast in person at a meeting called for the purpose of voting on this Plan or such agreements. SECTION 5. Unless sooner terminated pursuant to Section 8, this Plan shall continue in effect for a period of one year from the date it takes effect and thereafter shall continue in effect so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in Section 4. SECTION 6. Any person authorized to direct the disposition of monies paid or payable by the Fund pursuant to this Plan or any related agreement shall provide to the Fund's Board and the Board shall review at least quarterly a written report of the amounts so expended and the purposes for which such expenditures were made. SECTION 7. This Plan may be terminated at any time by vote of a majority of the Rule 12b-1 Trustees, or by vote of a majority of the Fund's outstanding Class A shares. SECTION 8. Any agreement of the Fund related to this Plan shall be in writing, and shall provide: A. That such agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of a majority of the Fund's outstanding Class A shares on not more than sixty days written notice to any other party to the agreement; and B. That such agreement shall terminate automatically in the event of its assignment. SECTION 9. This Plan may not be amended to increase materially the amount of distribution expenses provided for in Section 2 hereof unless such amendment is approved in the manner provided in Section 3 hereof and no material amendment to the Plan shall be made unless approved in the manner provided for in Section 4 hereof. DISTRIBUTION PLAN FOR CLASS B-1 SHARES OF KEYSTONE LIQUID TRUST Section 1. Keystone Liquid Trust, individually and/or on behalf of its series, if any, referred to above in the title of this 12b-1 Plan (the "Plan"), to which series this Plan shall then relate, as applicable (the "Fund"), may act as the distributor of certain securities of which it is the issuer pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the terms of this Distribution Plan. Section 2. The Fund may expend daily amounts at an annual rate of up to 1.00% of the average daily net asset value of the Fund attributable to the Fund's Class B-1 shares (the "Shares"). Such amounts may be expended to finance any activity that is principally intended to result in the sale of Shares, including, without limitation, expenditures consisting of payments to a principal underwriter of the Fund or others as sales commissions or other compensation for services provided or to be provided ("Distribution Fees") or as reimbursement for expenses that are incurred or accrued at any time during which this Plan is in effect, together with interest on any such amounts, at rates approved by the Rule 12b-1 Directors (as defined below) in the manner referred to below, all whether or not this Plan has been otherwise terminated, if such payment of such expenditures is for services theretofore provided or for reimbursement of expenses theretofore incurred or accrued prior to termination of this Plan in other respects and if such payment is or has been so approved by such Rule 12b-1 Directors, or agreed to by the Fund with such approval, all subject to such specific implementation as such 12b-1 Directors may approve; provided that, at the time any such payment is made, whether or not this Plan has been otherwise terminated, the making of such payment will not cause the limitation upon such payments set forth in the preceding sentence to be exceeded. Without limiting the generality of the foregoing, the Fund may pay to, or on the order of, any person who has served from time to time as principal underwriter (a "Principal Underwriter") amounts for distribution services pursuant to a principal underwriting agreement or otherwise. No principal underwriting agreement or other agreement shall be an agreement related to this Plan, as referred to in Rule 12b-1 of the Securities and Exchange Commission, unless it specifically states that it is such a related agreement. Any such principal underwriting agreement may, but need not, provide that such Principal Underwriter may be paid for distribution services to Class B-1 Shares and/or other specified classes of shares of the Fund (together the B-Class-of-Shares ), a fee which may be designated a Distribution Fee and may be paid at a rate per annum up to .75% of the average daily net asset value of such B-Class-of-Shares of the Fund and may, but need not, also provide: (I) that a Principal Underwriter will be deemed to have fully earned its "Allocable Portion" of the Distribution Fee upon the sale of the Commission Shares (as defined in the Allocation Schedule) taken into account in determining its Allocable Portion; (II) that the Fund's obligation to pay such Principal Underwriter its Allocable Portion of the Distribution Fees shall be absolute and unconditional and shall not be subject to dispute, offset, counterclaim or any defense whatsoever (it being understood that such provision is not a waiver of the Fund's right to pursue such Principal Underwriter and enforce such claims against the assets of such Principal Underwriter other than its right to its Allocable Portion of the Distribution Fees and CDSCs (as defined below) (III) that the Fund's obligation to pay such Principal Underwriter its Allocable Portion of the Distribution Fees shall not be changed or terminated except to the extent required by any change in applicable law, including without limitation, the Investment Company Act of 1940, the Rules promulgated thereunder by the Securities and Exchange Commission and the Rules of Fair Practice of the National Association of Securities Dealers, Inc., in each case enacted or promulgated after June 1, 1995, or in connection with a "Complete Termination" (as hereinafter defined); (IV) that the Fund will not waive or change any contingent deferred sales charge ( CDSC ) in respect of the Distributor's Allocable Portion thereof, except as provided in the Fund's prospectus or statement of additional information without the consent of the Principal Underwriter or any assignee of such Principal Underwriter's rights to its Allocable Portion; (V) that the termination of the Principal Underwriter, the principal underwriting agreement or this Plan will not terminate such Principal Underwriter's rights to its Allocable Portion of the CDSCs; and (VI) that any Principal Underwriter may assign its rights to its Allocable Portion of the Distribution Fees and CDSCs (but not such Principal Underwriter's obligations to the Fund under its principal underwriting agreement) to raise funds to make expenditures described in Section 2 above and in connection therewith, and upon receipt of notice of such assignment, the Fund shall pay to the assignee such portion of the Principal Underwriter's Allocable Portion of the Distribution Fees and CDSCs so assigned. For purposes of such principal underwriting agreement, the term Allocable Portion of Distribution Fees as applied to any Principal Underwriter may mean the portion of the Distribution Fee allocable to Distributor Shares in accordance with the "Allocation Schedule" attached to such Principal Underwriter's principal underwriting agreement. For purposes of such principal underwriting agreement, the term Allocable Portion of CDSCs as applied to any Principal Underwriter may mean the portion of the CDSCs allocable to Distributor Shares in accordance with the Allocation Schedule attached to such Principal Underwriter's principal underwriting agreement. For purposes of such principal underwriting agreement, the term "Complete Termination" may mean a termination of this Plan involving the cessation of payments of the Distribution Fees thereunder, the cessation of payments of distribution fees pursuant to every other rule 12b-1 plan of the Fund for every existing or future B-Class-of-Shares and the cessation of the offering by the Fund of existing or future B-Class-of-Shares, which conditions shall be deemed to be satisfied when they are first complied with and so long thereafter as they are complied with prior to the earlier of (i) the date upon which all of the B-2 Shares which are Distributor Shares pursuant to the Allocation Schedule shall have been redeemed or converted or (ii) a specified date, after either of which times such conditions need no longer be complied with. For purposes of such principal underwriting agreement, the term "B-Class-of-Shares" may mean each of the B-1 Class of Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of shares of the Fund hereafter issued which would be treated as "Shares" under such Allocation Schedule or which has economic characteristics substantially similar to those of the B-1 or B-2 Classes of Shares taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of the shares of such classes. The parties may agree that the existing C Class of Shares of the Fund does not have substantially similar economic characteristics to the B-1 or B-2 Classes of Shares taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares. For purposes of clarity the parties to such principal underwriting agreement may state that they intend that a new installment load class of shares which may be authorized by amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it has economic characteristics substantially similar to the economic characteristics of the existing B-1 or B-2 Classes of Shares taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares and will not be considered to be a B-Class-of-Shares if it has economic characteristics substantially similar to the economic characteristics of the existing C Class of shares of the Fund taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares. For purposes of such principal underwriting agreement, "Allocation Schedule" may mean a schedule which shall be approved by Directors (as defined below) in connection with their required approval of such principal underwriting agreement as assigning to each Principal Underwriter of Shares the portion of the total Distribution Fees payable by the Fund under such principal underwriting agreement which has been earned by such Principal Underwriter to the extent necessary so that the continued payments thereof if such Principal Underwriter ceases to serve in that capacity does not penalize the Fund by requiring it to pay for services that have not been earned. Section 3. This Plan shall not take effect until it has been approved by a vote of at least a majority (as defined in the 1940 Act) of the outstanding Shares. Section 4. This Plan, and the specific implementation of expenditures provided for under this Plan, shall not take effect until this Plan, and such implementation, have been approved, together with any related agreements of the Fund, by votes of both (a) a majority of the Board of Trustees or Directors (together the Directors ) of the Fund and (b) a majority of those Directors of the Fund who are not "interested persons" of the Fund (as said term is defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or any agreements of the Fund or any other person related to this Plan (the "Rule 12b-1 Directors"), cast in person at a meeting called for the purpose of voting on this Plan or such agreements. Section 5. Unless sooner terminated pursuant to Section 7 hereof, this Plan shall continue in effect for a period of one year from the date it takes effect and thereafter shall continue in effect so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in Section 4 hereof, except that, if terminated except for payments provided to be made after termination of other aspects of this Plan, such payments may be made pursuant to approvals made, and or agreements approved, as provided above. Section 6. Any person authorized to direct the disposition of monies paid or payable by the Fund pursuant to this Plan or any related agreement shall provide to the Fund's Board of Directors, and the Board shall review, at least quarterly a written report of the amounts so expended and the purposes for which such expenditures were made. Section 7. This Plan may be terminated, in whole or in part, at any time by vote of a majority of the Rule 12b-1 Directors or by vote of a majority of the outstanding Shares, with the effects provided for in Section 2, as applicable. Section 8. Any agreement of the Fund related to this Plan shall be in writing, and shall provide as follows: (a) That such agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Rule 12b-1 Directors or by a vote of a majority of the outstanding Shares on not more than sixty days written notice to any other party to the agreement; and (b) That such agreement shall terminate automatically in the event of its assignment. Section 9. This Plan may not be amended to increase materially the amount of distribution expenses provided for in Section 2 hereof unless such amendment is approved in the manner provided in Section 3 hereof, and no material amendment to this Plan shall be made unless approved in the manner provided for in Section 4 hereof. DISTRIBUTION PLAN FOR CLASS B-2 SHARES OF KEYSTONE LIQUID TRUST Section 1. Keystone Liquid Trust, individually and/or on behalf of its series, if any, referred to above in the title of this 12b-1 Plan (the "Plan"), to which series this Plan shall then relate, as applicable (the Fund ), may act as the distributor of certain securities of which it is the issuer pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the terms of this Distribution Plan. Section 2. The Fund may expend daily amounts at an annual rate of up to 1.00% of the average daily net asset value of the Fund attributable to the Fund's Class B-2 shares (the "Shares"). Such amounts may be expended to finance any activity that is principally intended to result in the sale of Shares, including, without limitation, expenditures consisting of payments to a principal underwriter of the Fund or others as sales commissions or other compensation for services provided or to be provided ("Distribution Fees") or as reimbursement for expenses that are incurred or accrued at any time during which this Plan is in effect, together with interest on any such amounts, at rates approved by the Rule 12b-1 Directors (as defined below) in the manner referred to below, all whether or not this Plan has been otherwise terminated, if such payment of such expenditures is for services theretofore provided or for reimbursement of expenses theretofore incurred or accrued prior to termination of this Plan in other respects and if such payment is or has been so approved by such Rule 12b-1 Directors, or agreed to by the Fund with such approval, all subject to such specific implementation as such 12b-1 Directors may approve; provided that, at the time any such payment is made, whether or not this Plan has been otherwise terminated, the making of such payment will not cause the limitation upon such payments set forth in the preceding sentence to be exceeded. Without limiting the generality of the foregoing, the Fund may pay to, or on the order of, any person who has served from time to time as principal underwriter (a "Principal Underwriter") amounts for distribution services pursuant to a principal underwriting agreement or otherwise. No principal underwriting agreement or other agreement shall be an agreement related to this Plan, as referred to in Rule 12b-1 of the Securities and Exchange Commission, unless it specifically states that it is such a related agreement. Any such principal underwriting agreement may, but need not, provide that such Principal Underwriter may be paid for distribution services to Class B-2 Shares and/or other specified classes of shares of the Fund (together the B-Class-of-Shares ), a fee which may be designated a Distribution Fee and may be paid at a rate per annum up to .75% of the average daily net asset value of such B-Class-of-Shares of the Fund and may, but need not, also provide: (I) that a Principal Underwriter will be deemed to have fully earned its "Allocable Portion" of the Distribution Fee upon the sale of the Commission Shares (as defined in the Allocation Schedule) taken into account in determining its Allocable Portion; (II) that the Fund's obligation to pay such Principal Underwriter its Allocable Portion of the Distribution Fees shall be absolute and unconditional and shall not be subject to dispute, offset, counterclaim or any defense whatsoever (it being understood that such provision is not a waiver of the Fund's right to pursue such Principal Underwriter and enforce such claims against the assets of such Principal Underwriter other than its right to its Allocable Portion of the Distribution Fees and CDSCs (as defined below); (III) that the Fund's obligation to pay such Principal Underwriter its Allocable Portion of the Distribution Fees shall not be changed or terminated except to the extent required by any change in applicable law, including without limitation, the Investment Company Act of 1940, the Rules promulgated thereunder by the Securities and Exchange Commission and the Rules of Fair Practice of the National Association of Securities Dealers, Inc., in each case enacted or promulgated after June 1, 1995, or in connection with a "Complete Termination" (as hereinafter defined); (IV) that the Fund will not waive or change any contingent deferred sales charge ( CDSC ) in respect of the Distributor's Allocable Portion thereof, except as provided in the Fund's prospectus or statement of additional information without the consent of the Principal Underwriter or any assignee of such Principal Underwriter's rights to its Allocable Portion; (V) that the termination of the Principal Underwriter, the principal underwriting agreement or this Plan will not terminate such Principal Underwriter's rights to its Allocable Portion of the CDSCs; and (VI) that any Principal Underwriter may assign its rights to its Allocable Portion of the Distribution Fees and CDSCs (but not such Principal Underwriter's obligations to the Fund under its principal underwriting agreement) to raise funds to make expenditures described in Section 2 above and in connection therewith, and upon receipt of notice of such assignment, the Fund shall pay to the assignee such portion of the Principal Underwriter's Allocable Portion of the Distribution Fees and CDSCs so assigned. For purposes of such principal underwriting agreement, the term Allocable Portion of Distribution Fees as applied to any Principal Underwriter may mean the portion of the Distribution Fee allocable to Distributor Shares in accordance with the "Allocation Schedule" attached to such Principal Underwriter's principal underwriting agreement. For purposes of such principal underwriting agreement, the term Allocable Portion of CDSCs as applied to any Principal Underwriter may mean the portion of the CDSCs allocable to Distributor Shares in accordance with the Allocation Schedule attached to such Principal Underwriter's principal underwriting agreement. For purposes of such principal underwriting agreement, the term "Complete Termination" may mean a termination of this Plan involving the cessation of payments of the Distribution Fees thereunder, the cessation of payments of distribution fees pursuant to every other rule 12b-1 plan of the Fund for every existing or future B-Class-of-Shares and the cessation of the offering by the Fund of existing or future B-Class-of-Shares, which conditions shall be deemed to be satisfied when they are first complied with and so long thereafter as they are complied with prior to the earlier of (i) the date upon which all of the B-2 Shares which are Distributor Shares pursuant to the Allocation Schedule shall have been redeemed or converted or (ii) a specified date, after either of which times such conditions need no longer be complied with. For purposes of such principal underwriting agreement, the term "B-Class-of-Shares" may mean each of the B-1 Class of Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of shares of the Fund hereafter issued which would be treated as "Shares" under such Allocation Schedule or which has economic characteristics substantially similar to those of the B-1 or B-2 Classes of Shares taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of the shares of such classes. The parties may agree that the existing C Class of Shares of the Fund does not have substantially similar economic characteristics to the B-1 or B-2 Classes of Shares taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares. For purposes of clarity the parties to such principal underwriting agreement may state that they intend that a new installment load class of shares which may be authorized by amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it has economic characteristics substantially similar to the economic characteristics of the existing B-1 or B-2 Classes of Shares taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares and will not be considered to be a B-Class-of-Shares if it has economic characteristics substantially similar to the economic characteristics of the existing C Class of shares of the Fund taking into account the total sales charge, CDSC or other similar charges borne directly or indirectly by the holder of such shares. For purposes of such principal underwriting agreement, "Allocation Schedule" may mean a schedule which shall be approved by Directors (as defined below) in connection with their required approval of such principal underwriting agreement as assigning to each Principal Underwriter of Shares the portion of the total Distribution Fees payable by the Fund under such principal underwriting agreement which has been earned by such Principal Underwriter to the extent necessary so that the continued payments thereof if such Principal Underwriter ceases to serve in that capacity does not penalize the Fund by requiring it to pay for services that have not been earned. Section 3. This Plan shall not take effect until it has been approved by a vote of at least a majority (as defined in the 1940 Act) of the outstanding Shares. Section 4. This Plan, and the specific implementation of expenditures provided for under this Plan, shall not take effect until this Plan, and such implementation, have been approved, together with any related agreements of the Fund, by votes of both (a) a majority of the Board of Trustees or Directors (together the Directors ) of the Fund and (b) a majority of those Directors of the Fund who are not "interested persons" of the Fund (as said term is defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or any agreements of the Fund or any other person related to this Plan (the "Rule 12b-1 Directors"), cast in person at a meeting called for the purpose of voting on this Plan or such agreements. Section 5. Unless sooner terminated pursuant to Section 7 hereof, this Plan shall continue in effect for a period of one year from the date it takes effect and thereafter shall continue in effect so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in Section 4 hereof, except that, if terminated except for payments provided to be made after termination of other aspects of this Plan, such payments may be made pursuant to approvals made, and or agreements approved, as provided above. Section 6. Any person authorized to direct the disposition of monies paid or payable by the Fund pursuant to this Plan or any related agreement shall provide to the Fund's Board of Directors, and the Board shall review, at least quarterly a written report of the amounts so expended and the purposes for which such expenditures were made. Section 7. This Plan may be terminated, in whole or in part, at any time by vote of a majority of the Rule 12b-1 Directors or by vote of a majority of the outstanding Shares, with the effects provided for in Section 2, as applicable. Section 8. Any agreement of the Fund related to this Plan shall be in writing, and shall provide as follows: (a) That such agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Rule 12b-1 Directors or by a vote of a majority of the outstanding Shares on not more than sixty days written notice to any other party to the agreement; and (b) That such agreement shall terminate automatically in the event of its assignment. Section 9. This Plan may not be amended to increase materially the amount of distribution expenses provided for in Section 2 hereof unless such amendment is approved in the manner provided in Section 3 hereof, and no material amendment to this Plan shall be made unless approved in the manner provided for in Section 4 hereof. KEYSTONE LIQUID TRUST CLASS C DISTRIBUTION PLAN SECTION 1. Keystone Liquid Trust (the "Fund") may act as the distributor of securities of which it is the issuer pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the terms of this Distribution Plan ("Plan"). SECTION 2. The Fund may expend daily amounts at an annual rate of 1.00% of the average daily net asset value of the Fund attributable to the Fund's Class C shares to finance any activity that is principally intended to result in the sale of Class C shares, including, without limitation, expenditures consisting of payments to a principal underwriter of the Fund ("Principal Underwriter") or others as sales commissions or other compensation for their services that have been earned or as reimbursement for expenses that have been incurred or accrued at any time during which this Plan has been in effect together with interest at a rate approved from time to time by the Rule 12b-1 Trustees (as defined below) on any such amounts. SECTION 3. This Plan shall not take effect until it has been approved by a vote of at least a majority (as defined in the 1940 Act) of the outstanding Class C shares. SECTION 4. This Plan shall not take effect until it has been approved together with any related agreements of the Fund by votes of a majority of both (a) the Board of Trustees of the Fund and (b) those Trustees of the Fund who are not "interested persons" of the Fund (as said term is defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or any agreements of the Fund or any other person related to this Plan (the "Rule 12b-1 Trustees"), cast in person at a meeting called for the purpose of voting on this Plan or such agreements. SECTION 5. Unless sooner terminated pursuant to Section 7 hereof, this Plan shall continue in effect for a period of one year from the date it takes effect and thereafter shall continue in effect so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in Section 4 hereof. SECTION 6. Any person authorized to direct the disposition of monies paid or payable by the Fund pursuant to this Plan or any related agreement shall provide to the Fund's Board of Trustees/Directors and the Board shall review at least quarterly a written report of the amounts so expended and the purposes for which such expenditures were made. SECTION 7. This Plan may be terminated at any time by vote of a majority of the Rule 12b-1 Trustees/Directors or by vote of a majority of the outstanding Class C shares. SECTION 8. Any agreement of the Fund related to this Plan shall be in writing, and shall provide as follows: (a) That such agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Rule 12b-1 Trustees/Directors or by a vote of a majority of the outstanding Class C shares on not more than sixty days written notice to any other party to the agreement; and (b) That such agreement shall terminate automatically in the event of its assignment. SECTION 9. This Plan may not be amended to increase materially the amount of distribution expenses provided for in Section 2 hereof unless such amendment is approved in the manner provided in Section 3 hereof and no material amendment to this Plan shall be made unless approved in the manner provided for in Section 4 hereof. EX-99.24(B)(16) 10 CURRENT & EFFECTIVE YIELD SCHEDULES
EFFECTIVE YIELD FOR KLT 'CLASS A' (1) (2) (3) (4) (5) (6) 7-Day 30-Day EFFECTIVE EFFECTIVE 7 DAY 7 DAY YIELD 30 DAY YIELD BPR ROLLING YIELD 365/7 ROLLING 365/30 DATE DAILY DIVIDEND DIVIDEND (2)/7x365 [((2)+1) ]-1 DIVIDEND [((5)+1) ]-1 06/01/95 A 0.00013398 $0.000950 4.95% 5.08% $0.004075 5.07% 06/02/95 A 0.00013400 $0.000948 4.94% 5.06% $0.004073 5.07% 06/03/95 A 0.00013400 $0.000946 4.93% 5.05% $0.004072 5.07% 06/04/95 A 0.00013401 $0.000944 4.92% 5.04% $0.004069 5.06% 06/05/95 A 0.00013391 $0.000942 4.91% 5.03% $0.004066 5.06% 06/06/95 A 0.00013354 $0.000939 4.90% 5.02% $0.004063 5.06% 06/07/95 A 0.00013382 $0.000937 4.89% 5.01% $0.004061 5.05% 06/08/95 A 0.00013343 $0.000937 4.88% 5.00% $0.004058 5.05% 06/09/95 A 0.00013338 $0.000936 4.88% 5.00% $0.004056 5.05% 06/10/95 A 0.00013338 $0.000935 4.88% 5.00% $0.004054 5.05% 06/11/95 A 0.00013338 $0.000935 4.87% 4.99% $0.004052 5.04% 06/12/95 A 0.00013440 $0.000935 4.88% 5.00% $0.004050 5.04% 06/13/95 A 0.00013400 $0.000936 4.88% 5.00% $0.004049 5.04% 06/14/95 A 0.00013372 $0.000936 4.88% 5.00% $0.004047 5.04% 06/15/95 A 0.00013313 $0.000935 4.88% 5.00% $0.004044 5.03% 06/16/95 A 0.00013200 $0.000934 4.87% 4.99% $0.004041 5.03% 06/17/95 A 0.00013200 $0.000933 4.86% 4.98% $0.004037 5.02% 06/18/95 A 0.00013200 $0.000931 4.86% 4.97% $0.004034 5.02% 06/19/95 A 0.00013298 $0.000930 4.85% 4.97% $0.004032 5.02% 06/20/95 A 0.00013338 $0.000929 4.85% 4.96% $0.004030 5.01% 06/21/95 A 0.00013403 $0.000930 4.85% 4.96% $0.004027 5.01% 06/22/95 A 0.00013328 $0.000930 4.85% 4.96% $0.004024 5.01% 06/23/95 A 0.00013402 $0.000932 4.86% 4.98% $0.004022 5.00% 06/24/95 A 0.00013402 $0.000934 4.87% 4.99% $0.004020 5.00% 06/25/95 A 0.00013402 $0.000936 4.88% 5.00% $0.004018 5.00% 06/26/95 A 0.00013356 $0.000936 4.88% 5.00% $0.004015 5.00% 06/27/95 A 0.00013378 $0.000937 4.88% 5.00% $0.004013 4.99% 06/28/95 A 0.00013366 $0.000936 4.88% 5.00% $0.004011 4.99% 06/29/95 A 0.00013326 $0.000936 4.88% 5.00% $0.004008 4.99% 06/30/95 A 0.00013304 $0.000935 4.88% 5.00% $0.004005 4.98%
EFFECTIVE YIELD FOR KLT 'CLASS B' (1) (2) (3) (4) (5) (6) 7-Day 30-Day EFFECTIVE EFFECTIVE 7 DAY 7 DAY YIELD 30 DAY YIELD BPR ROLLING YIELD 365/7 ROLLING 365/30 DATE DAILY DIVIDEND DIVIDEND (2)/7x365 [((2)+1) ]-1 DIVIDEND [((5)+1) ]-1 06/01/95 B 0.00010728 $0.000762 3.97% 4.05% $0.003272 4.05% 06/02/95 B 0.00010717 $0.000760 3.96% 4.04% $0.003269 4.05% 06/03/95 B 0.00010717 $0.000758 3.95% 4.03% $0.003267 4.05% 06/04/95 B 0.00010718 $0.000756 3.94% 4.02% $0.003264 4.04% 06/05/95 B 0.00010719 $0.000754 3.93% 4.01% $0.003262 4.04% 06/06/95 B 0.00010670 $0.000752 3.92% 4.00% $0.003258 4.04% 06/07/95 B 0.00010752 $0.000750 3.91% 3.99% $0.003257 4.03% 06/08/95 B 0.00010653 $0.000749 3.91% 3.98% $0.003254 4.03% 06/09/95 B 0.00010643 $0.000749 3.90% 3.98% $0.003252 4.03% 06/10/95 B 0.00010643 $0.000748 3.90% 3.98% $0.003249 4.03% 06/11/95 B 0.00010643 $0.000747 3.90% 3.97% $0.003247 4.02% 06/12/95 B 0.00010848 $0.000749 3.90% 3.98% $0.003247 4.02% 06/13/95 B 0.00010719 $0.000749 3.91% 3.98% $0.003245 4.02% 06/14/95 B 0.00010648 $0.000748 3.90% 3.98% $0.003242 4.02% 06/15/95 B 0.00010553 $0.000747 3.89% 3.97% $0.003239 4.01% 06/16/95 B 0.00010513 $0.000746 3.89% 3.96% $0.003236 4.01% 06/17/95 B 0.00010513 $0.000744 3.88% 3.96% $0.003233 4.00% 06/18/95 B 0.00010514 $0.000743 3.87% 3.95% $0.003229 4.00% 06/19/95 B 0.00010594 $0.000741 3.86% 3.94% $0.003227 4.00% 06/20/95 B 0.00010565 $0.000739 3.85% 3.93% $0.003224 3.99% 06/21/95 B 0.00010703 $0.000740 3.86% 3.93% $0.003221 3.99% 06/22/95 B 0.00010522 $0.000739 3.85% 3.93% $0.003217 3.98% 06/23/95 B 0.00010603 $0.000740 3.86% 3.93% $0.003213 3.98% 06/24/95 B 0.00010603 $0.000741 3.86% 3.94% $0.003210 3.98% 06/25/95 B 0.00010604 $0.000742 3.87% 3.94% $0.003207 3.97% 06/26/95 B 0.00010614 $0.000742 3.87% 3.94% $0.003204 3.97% 06/27/95 B 0.00010642 $0.000743 3.87% 3.95% $0.003201 3.96% 06/28/95 B 0.00010636 $0.000742 3.87% 3.94% $0.003198 3.96% 06/29/95 B 0.00010576 $0.000743 3.87% 3.95% $0.003195 3.96% 06/30/95 B 0.00010522 $0.000742 3.87% 3.94% $0.003191 3.95%
EFFECTIVE YIELD FOR KLT 'CLASS C' (1) (2) (3) (4) (5) (6) 7-Day 30-Day EFFECTIVE EFFECTIVE 7 DAY 7 DAY YIELD 30 DAY YIELD BPR ROLLING YIELD 365/7 ROLLING 365/30 DATE DAILY DIVIDEND DIVIDEND (2)/7x365 [((2)+1) ]-1 DIVIDEND [((5)+1) ]-1 06/01/95 C 0.00010714 $0.000762 3.97% 4.05% $0.003269 4.05% 06/02/95 C 0.00010714 $0.000760 3.96% 4.04% $0.003267 4.05% 06/03/95 C 0.00010714 $0.000758 3.95% 4.03% $0.003265 4.05% 06/04/95 C 0.00010714 $0.000756 3.94% 4.02% $0.003262 4.04% 06/05/95 C 0.00010692 $0.000754 3.93% 4.01% $0.003259 4.04% 06/06/95 C 0.00010670 $0.000751 3.92% 3.99% $0.003256 4.03% 06/07/95 C 0.00010698 $0.000749 3.91% 3.98% $0.003253 4.03% 06/08/95 C 0.00010664 $0.000749 3.90% 3.98% $0.003251 4.03% 06/09/95 C 0.00010653 $0.000748 3.90% 3.98% $0.003249 4.03% 06/10/95 C 0.00010653 $0.000747 3.90% 3.97% $0.003247 4.02% 06/11/95 C 0.00010653 $0.000747 3.89% 3.97% $0.003245 4.02% 06/12/95 C 0.00010753 $0.000747 3.90% 3.97% $0.003243 4.02% 06/13/95 C 0.00010699 $0.000748 3.90% 3.97% $0.003242 4.02% 06/14/95 C 0.00010672 $0.000747 3.90% 3.97% $0.003239 4.01% 06/15/95 C 0.00010630 $0.000747 3.90% 3.97% $0.003237 4.01% 06/16/95 C 0.00010517 $0.000746 3.89% 3.96% $0.003233 4.01% 06/17/95 C 0.00010517 $0.000744 3.88% 3.96% $0.003230 4.00% 06/18/95 C 0.00010516 $0.000743 3.87% 3.95% $0.003227 4.00% 06/19/95 C 0.00010619 $0.000742 3.87% 3.94% $0.003226 4.00% 06/20/95 C 0.00010581 $0.000741 3.86% 3.94% $0.003223 3.99% 06/21/95 C 0.00010663 $0.000740 3.86% 3.93% $0.003220 3.99% 06/22/95 C 0.00010201 $0.000736 3.84% 3.91% $0.003213 3.98% 06/23/95 C 0.00010661 $0.000738 3.85% 3.92% $0.003210 3.98% 06/24/95 C 0.00010662 $0.000739 3.85% 3.93% $0.003207 3.97% 06/25/95 C 0.00010662 $0.000740 3.86% 3.94% $0.003205 3.97% 06/26/95 C 0.00010605 $0.000740 3.86% 3.93% $0.003202 3.97% 06/27/95 C 0.00010688 $0.000741 3.87% 3.94% $0.003199 3.96% 06/28/95 C 0.00010688 $0.000742 3.87% 3.94% $0.003197 3.96% 06/29/95 C 0.00010593 $0.000746 3.89% 3.96% $0.003194 3.96% 06/30/95 C 0.00010594 $0.000745 3.88% 3.96% $0.003191 3.95%
EX-99.24(B)(19) 11 POWERS OF ATTORNEY EXHIBIT 99.24(B)(19) POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and/or Chairman of the Board and Chief Executive Officer and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ George S. Bissell ------------------------------- George S. Bissell Director/Trustee, Chairman of the Board and Chief Executive Officer Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director, Trustee or officer and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ Albert H. Elfner, III ------------------------------- Albert H. Elfner, III Director/Trustee and President Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director, Trustee or officer and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ Kevin J. Morrissey ------------------------------- Kevin J. Morrissey Treasurer Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ Frederick Amling ------------------------------- Frederick Amling Director/Trustee Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ Charles A. Austin III ------------------------------- Charles A. Austin III Director/Trustee Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ Edwin D. Campbell ------------------------------- Edwin D. Campbell Director/Trustee Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ Charles F. Chapin ------------------------------- Charles F. Chapin Director/Trustee Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ K. Dun Gifford ------------------------------- K. Dun Gifford Director/Trustee Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ Leroy Keith, Jr. ------------------------------- Leroy Keith, Jr. Director/Trustee Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ F. Ray Keyser, Jr. ------------------------------- F. Ray Keyser, Jr. Director/Trustee Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ David M. Richardson ------------------------------- David M. Richardson Director/Trustee Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ Richard J. Shima ------------------------------- Richard J. Shima Director/Trustee Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ Andrew J. Simons ------------------------------- Andrew J. Simons Director/Trustee Dated: December __, 1994 POWER OF ATTORNEY I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T. Murphy, each of them singly, my true and lawful attorneys, with full power to them and each of them to sign for me and in my name in the capacity indicated below any and all registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all amendments thereto to be filed with the Securities and Exchange Commission for the purpose of registering from time to time all investment companies of which I am now or hereafter a Director or Trustee and/or Chief Executive Officer and for which Keystone Custodian Funds, Inc. serves as Adviser or Manager and registering from time to time the shares of such companies, and generally to do all such things in my name and in my behalf to enable such investment companies to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all requirements and regulations of the Securities and Exchange Commission thereunder, hereby ratifying and confirming my signature as it may be signed by my said attorneys to any and all registration statements and amendments thereto. /S/ Albert H. Elfner, III ------------------------------- Albert H. Elfner, III Director/Trustee, President and Chief Executive Officer Dated: January __, 1995 EX-27 12 FDS KEYSTONE LIQUID TRUST CLASS A
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING RECORDS. 101 KEYSTONE LIQUID TRUST CLASS A 12-MOS JUN-30-1995 JUL-01-1994 JUN-30-1995 251,069,777 251,067,814 7,006,072 61,558 0 258,135,444 0 0 1,434,129 1,434,129 0 245,308,083 245,308,083 398,617,047 0 0 0 0 0 245,308,083 0 19,543,073 0 (3,373,063) 16,170,010 (67) (1,094) 16,168,849 0 (16,168,849) 0 0 725,781,933 (892,973,139) 13,882,242 (153,308,964) 0 0 0 0 (1,829,020) 0 (3,373,063) 363,830,537 1.00 0.05 0.00 (0.05) 0.00 0.00 1.00 0.92 0 0
EX-27 13 FDS KEYSTONE LIQUID TRUST CLASS B
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING RECORDS. 102 KEYSTONE LIQUID TRUST CLASS B 12-MOS JUN-30-1995 JUL-01-1994 JUN-30-1995 251,069,777 251,067,814 7,006,072 61,558 0 258,135,444 0 0 1,434,129 1,434,129 0 7,281,559 7,281,559 11,197,588 0 0 0 0 0 7,281,559 0 654,485 0 (219,395) 435,090 (3) 421 435,508 0 (435,508) 0 0 30,267,166 (34,518,836) 335,641 (3,916,029) 0 0 0 0 (59,458) 0 (219,395) 11,827,355 1.00 0.04 0.00 (0.04) 0.00 0.00 1.00 1.84 0 0
EX-27 14 FDS KEYSTONE LIQUID TRUST CLASS C
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING RECORDS. 103 KEYSTONE LIQUID TRUST CLASS C 12-MOS JUN-30-1995 JUL-01-1994 JUN-30-1995 251,069,777 251,067,814 7,006,072 61,558 0 258,135,444 0 0 1,434,129 1,434,129 0 4,111,673 4,111,673 6,599,324 0 0 0 0 0 4,111,673 0 378,162 0 (128,913) 249,249 (1) (12) 249,236 0 (249,236) 0 0 11,924,336 (14,624,256) 212,269 (2,487,651) 0 0 0 0 (35,392) 0 (128,913) 7,044,792 1.00 0.04 0.00 (0.04) 0.00 0.00 1.00 1.82 0 0
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