-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DteR7Gw10gmsNIYRDBLya96HdDyDiDSNyfnd76uYFo50xd5lCN9ulS5mtROYK5Vw HopGMAcyrgcHw/mqYFFSsw== 0000950168-97-002396.txt : 19970822 0000950168-97-002396.hdr.sgml : 19970822 ACCESSION NUMBER: 0000950168-97-002396 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970821 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE LIQUID TRUST CENTRAL INDEX KEY: 0000005384 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046196129 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02521 FILM NUMBER: 97667446 BUSINESS ADDRESS: STREET 1: 200 BERLELEY ST CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6173383200 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN LIQUID TRUST DATE OF NAME CHANGE: 19830523 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN LIQUITY FUND INC DATE OF NAME CHANGE: 19751102 N-30D 1 KEYSTONE LIQUID TRUST FUND N-30D 60818 PAGE 1 KEYSTONE LIQUID TRUST Dear Shareholders: We are pleased to have the opportunity to provide the annual report, which is also the final report, for Keystone Liquid Trust, covering the fiscal year through June 30, 1997. PERFORMANCE For the 12-month period that ended on June 30, 1997, your Fund provided the following results: Class A Shares returned 4.57%. Class B Shares returned 3.60% Class C Shares returned 3.61%. We believe your Fund performed well, consistent with its objective of providing monthly income while preserving capital and maintaining liquidity. MERGER Effective July 31, 1997, Keystone Liquid Trust was acquired by, or effectively merged with, Evergreen Money Market Fund in a tax-free transaction for investors. Shareholders of Keystone Liquid Trust now are shareholders of Evergreen Money Market Fund. We believe Evergreen Money Market Fund, with its solid record, is an excellent fund for shareholders who had chosen Keystone Liquid Trust. We thank you for your investment in, and support of, Keystone Liquid Trust. Sincerely, /s/ Albert H. Elfner, III (Photo of Albert (Photo of George Albert H. Elfner, III H. Elfner, III S. Bissell CHAIRMAN appears here) appears here) KEYSTONE INVESTMENT MANAGEMENT COMPANY /s/ George S. Bissell George S. Bissell CHAIRMAN OF THE BOARD KEYSTONE FUNDS ALBERT H. ELFNER, III GEORGE S. BISSELL
August 1997 PAGE 2 KEYSTONE LIQUID TRUST SCHEDULE OF INVESTMENTS-- JUNE 30, 1997
PRINCIPAL MARKET AMOUNT VALUE BANKERS' ACCEPTANCE-- (2.2%) (COST-- $4,988,333) $ 5,000,000 CoreStates Bank, N.A., 7/16/97..................... $ 4,988,354 CERTIFICATES OF DEPOSIT-- (17.2%) 5,000,000 ABN-AMRO Bank, New York, Yankee CD, 5.68%, 7/22/97.............. 5,000,065 5,000,000 Bank of New York, CD, 5.93%, 9/3/97............... 4,999,999 5,000,000 Commerzbank, New York, Yankee CD, 5.67%, 9/18/97.............. 4,998,931 2,000,000 Credit Suisse, CD, 5.45%, 8/14/97.............. 1,999,360 5,000,000 Deutsche Bank AG, New York, CD, 5.91%, 3/17/98.......... 4,996,451 3,000,000 Deutsche Bank, Yankee CD, 5.52%, 7/28/97.............. 2,999,475 3,000,000 Deutsche Bank, Yankee CD, 5.56%, 7/17/97.............. 2,999,963 5,000,000 Northern Trust Co., CD, 5.96%, 6/17/98.............. 4,999,825 5,000,000 Rabobank Nederland NV, Yankee CD, 5.78%, 12/8/97.............. 4,999,835 1,000,000 Rabobank Nederland NV, Yankee CD, 5.99%, 3/24/98.............. 999,733 TOTAL CERTIFICATES OF DEPOSIT (COST-- $39,000,390)........................... 38,993,637 COMMERCIAL PAPER-- (67.7%) 5,000,000 ABN-AMRO North America Finance Co., 7/9/97................. 4,993,674 10,000,000 Abbott Laboratories, Inc., 7/31/97..................... 9,954,167 5,000,000 American Express Credit Corp., 8/29/97..................... 4,954,521 5,000,000 American Express Credit Corp., 9/12/97..................... 4,943,425 3,000,000 Ameritech Corp., 9/25/97 (a)......................... 2,960,082 8,000,000 Ameritech Corp., 10/6/97...... 7,879,504 PRINCIPAL MARKET AMOUNT VALUE COMMERCIAL PAPER-- CONTINUED $ 5,000,000 Associates Corp. of North America, 8/20/97............ $ 4,960,201 750,000 Associates Corp. of North America, 11/15/97........... 751,732 5,000,000 Bayerische Landesbank, 7/28/97..................... 4,979,337 5,000,000 Bell Atlantic Financial Services, Inc., 7/7/97...... 4,995,392 5,000,000 Bell Atlantic Financial Services, Inc., 7/14/97..... 4,990,106 5,000,000 Coca-Cola Co., 8/25/97........ 4,957,833 5,000,000 DuPont (E.I.) deNemours & Co., 7/10/97..................... 4,992,792 5,000,000 DuPont (E.I.) deNemours & Co., 7/21/97..................... 4,984,500 5,000,000 Ford Motor Credit Co., 8/5/97...................... 4,973,167 5,000,000 Ford Motor Credit Co., 9/12/97..................... 4,943,019 2,000,000 Ford Motor Credit Co., 10/28/97.................... 1,962,779 5,000,000 General Electric Capital Corp., 7/23/97.............. 4,982,604 5,000,000 General Electric Capital Corp., 9/25/97.............. 4,933,111 5,000,000 Heinz (H.J.) Co., 7/21/97..... 4,984,722 5,395,000 Kellogg Co., 7/15/97.......... 5,383,461 5,000,000 Kellogg Co., 8/8/97........... 4,970,972 5,000,000 Merrill Lynch & Co., Inc., 7/7/97...................... 4,995,317 5,000,000 Merrill Lynch & Co., Inc., 10/15/97.................... 4,916,967 5,000,000 Minnesota Mining & Manufacturing, Co., 7/29/97..................... 4,978,378 5,000,000 Minnesota Mining & Manufacturing, Co., 8/22/97..................... 4,958,954 5,000,000 Nestle Capital Corp., 7/3/97...................... 4,998,486 5,000,000 Nestle Capital Corp., 8/26/97..................... 4,956,911 5,000,000 Pfizer Inc., 7/10/97.......... 4,993,150 5,000,000 Proctor & Gamble Co., 8/14/97..................... 4,965,016 5,000,000 UBS Finance Delaware, Inc., 7/14/97..................... 4,990,033 TOTAL COMMERCIAL PAPER (COST-- $153,193,136).......................... 153,184,313
PAGE 3 SCHEDULE OF INVESTMENTS-- JUNE 30, 1997
PRINCIPAL MARKET AMOUNT VALUE U.S. GOVERNMENT (AND AGENCY) ISSUES-- (8.8%) $ 5,000,000 FHLMC Discount Notes, 9/2/97.. $ 4,952,050 5,000,000 FHLMC Discount Notes, 2/26/98 (b)......................... 4,997,943 5,000,000 FNMA Discount Notes, 10/2/97.. 4,929,346 5,000,000 FNMA Discount Notes, 2/13/98 (b)................. 4,999,434 TOTAL U.S. GOVERNMENT (AND AGENCY) ISSUES (COST-- $19,880,364)........................... 19,878,773 MATURITY MARKET VALUE VALUE REPURCHASE AGREEMENT-- (10.2%) (COST-- $23,085,000) $23,088,873 Keystone Joint Repurchase Agreement (Investments in repurchase agreements, in a joint trading account, 6.04%, dated 6/30/97, due 7/1/97) (c).... $ 23,085,000
TOTAL INVESTMENTS-- (COST-- $240,147,223) 106.1% 240,130,077 OTHER ASSETS AND LIABILITIES-- NET (6.1) (13,864,774) NET ASSETS 100.0% $226,265,303
(a) 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. (b) Security is a variable or floating rate instrument with periodic demand features. The Fund is entitled to full payment of principal and accrued interest upon surrendering the security to the issuing agent according to the terms of the demand features. (c) The repurchase agreements are fully collateralized by U.S. government and/or agency obligations based on market prices at June 30, 1997. LEGEND OF PORTFOLIO ABBREVIATIONS FHLMC-- Federal Home Loan Mortgage Corporation FNMA-- Federal National Mortgage Association SEE NOTES TO FINANCIAL STATEMENTS. PAGE 4 KEYSTONE LIQUID TRUST FINANCIAL HIGHLIGHTS-- CLASS A SHARES (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED JUNE 30, 1997 1996 1995 1994 1993 1992 1991 1990 1989 NET ASSET VALUE BEGINNING OF YEAR $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 .0447 .0464 .0454 .0235 .0230 .0386 .0634 .0760 .0786 Net realized and unrealized gain (loss) on investments .0001 (.0001) 0 0 (.0001) .0003 0 0 .0001 Total from investment operations .0448 .0463 .0454 .0235 .0229 .0389 .0634 .0760 .0787 Less distributions to shareholders (.0448) (.0463) (.0454) (.0235) (.0229) (.0389) (.0634) (.0760) (.0787) NET ASSET VALUE END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 TOTAL RETURN 4.57% 4.73% 4.63% 2.37% 2.31% 3.96% 6.47% 7.81% 8.18% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses 1.02% 0.98% 0.92% 1.02% 1.11% 1.10% 0.92% 1.00% 1.00% Total expenses excluding indirectly paid expenses 0.99% 0.95% -- -- -- -- -- -- -- Net investment income 4.45% 4.66% 4.42% 2.50% 2.29% 3.99% 6.51% 7.53% 7.88% NET ASSETS END OF YEAR (THOUSANDS) $214,828 $332,796 $245,308 $398,617 $189,167 $227,115 $400,597 $406,306 $475,640 1988 NET ASSET VALUE BEGINNING OF YEAR $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income .0597 Net realized and unrealized gain (loss) on investments (.0001) Total from investment operations .0596 Less distributions to shareholders (.0596) NET ASSET VALUE END OF YEAR $1.00 TOTAL RETURN 6.31% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses 1.00% Total expenses excluding indirectly paid expenses -- Net investment income 5.99% NET ASSETS END OF YEAR (THOUSANDS) $461,032
SEE NOTES TO FINANCIAL STATEMENTS PAGE 5 FINANCIAL HIGHLIGHTS-- CLASS B SHARES (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
FEBRUARY 1, 1993 (DATE OF INITIAL YEAR ENDED JUNE 30, PUBLIC OFFERING) TO 1997 1996 1995 1994 JUNE 30, 1993 NET ASSET VALUE BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income .0353 .0369 .0362 .0142 .0047 Net realized and unrealized gain (loss) on investments .0001 0 0 0 (.0001) Total from investment operations .0354 .0369 .0362 .0142 .0046 Less distributions to shareholders (.0354) (.0369) (.0362) (.0142) (.0046) NET ASSET VALUE END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 TOTAL RETURN(A) 3.60% 3.76% 3.68% 1.43% 0.46% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses 1.95% 1.91% 1.84% 1.85% 2.15%(b) Total expenses excluding indirectly paid expenses 1.92% 1.88% -- -- -- Net investment income 3.52% 3.73% 3.66% 1.84% 1.08%(b) NET ASSETS END OF YEAR (THOUSANDS) $7,424 $10,042 $7,281 $11,198 $241
(a) Excluding applicable sales charges. (b) Annualized. SEE NOTES TO FINANCIAL STATEMENTS. PAGE 6 KEYSTONE LIQUID TRUST FINANCIAL HIGHLIGHTS-- CLASS C SHARES (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
FEBRUARY 1, 1993 (DATE OF INITIAL YEAR ENDED JUNE 30, PUBLIC OFFERING) TO 1997 1996 1995 1994 JUNE 30, 1993 NET ASSET VALUE BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income .0355 .0370 .0362 .0142 .0045 Net realized and unrealized gain (loss) on investments 0 (.0001) 0 0 (.0002) Total from investment operations .0355 .0369 .0362 .0142 .0043 Less distributions to shareholders (.0355) (.0369) (.0362) (.0142) (.0043) NET ASSET VALUE END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 TOTAL RETURN(A) 3.61% 3.75% 3.68% 1.43% 0.43% RATIOS/SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSETS: Total expenses 1.96% 1.94% 1.82% 1.86% 2.09%(b) Total expenses excluding indirectly paid expenses 1.94% 1.91% -- -- -- Net investment income 3.55% 3.72% 3.52% 1.97% 1.01%(b) NET ASSETS END OF YEAR (THOUSANDS) $4,013 $3,285 $4,112 $6,599 $34
(a) Excluding applicable sales charges. (b) Annualized. SEE NOTES TO FINANCIAL STATEMENTS. PAGE 7 STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997
ASSETS Investments at market value: Securities (identified cost -- $217,062,223) $217,045,077 Repurchase agreement (identified cost -- $23,085,000) 23,085,000 Total investments 240,130,077 Cash 531 Receivable for Fund shares sold 4,200,720 Interest receivable 761,151 Prepaid expenses and other assets 51,549 Total assets 245,144,028 LIABILITIES Payable for Fund shares redeemed 18,735,074 Distributions to shareholders 72,009 Due to related parties 14,052 Distribution fees payable 3,026 Accrued expenses and other liabilities 54,564 Total liabilities 18,878,725 NET ASSETS $226,265,303 NET ASSETS REPRESENTED BY Class A Shares ($1.00 a share on 214,828,230 shares outstanding) $214,828,230 Class B Shares ($1.00 a share on 7,423,829 shares outstanding) 7,423,829 Class C Shares ($1.00 a share on 4,013,244 shares outstanding) 4,013,244 $226,265,303 NET ASSET VALUE AND OFFERING PRICE PER SHARE (CLASS A, B AND C) $ 1.00
STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 1997
INVESTMENT INCOME Interest $15,084,042 EXPENSES Management fee $1,386,249 Transfer agent fees 762,230 Distribution Plan expenses 378,433 Custodian fees 182,380 Registration and filing fees 158,299 Trustees' fees and expenses 36,242 Administrative services 33,538 Professional fees 33,198 Other 3,536 Total expenses 2,974,105 Less: Expenses paid indirectly (76,381) Net expenses 2,897,724 Net investment income 12,186,318 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investments 3,091 Net change in unrealized appreciation (depreciation) on investments 24,597 Net realized and unrealized gain on investments 27,688 Net increase in net assets resulting from operations $12,214,006
SEE NOTES TO FINANCIAL STATEMENTS PAGE 8 KEYSTONE LIQUID TRUST STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 1997 1996 OPERATIONS Net investment income $ 12,186,318 $ 12,563,580 Net realized gain on investments 3,091 4,475 Net change in unrealized appreciation (depreciation) on investments 24,597 (39,780) Net increase in net assets resulting from operations 12,214,006 12,528,275 DISTRIBUTIONS TO SHAREHOLDERS Class A Shares (11,694,559) (12,043,595) Class B Shares (382,781) (383,777) Class C Shares (136,666) (100,903) Total distributions to shareholders (12,214,006) (12,528,275) CAPITAL SHARE TRANSACTIONS Class A Shares (117,967,441) 87,487,588 Class B Shares (2,618,245) 2,760,515 Class C Shares 727,846 (826,275) Net increase (decrease) in net assets resulting from capital share transactions (119,857,840) 89,421,828 Total increase (decrease) in net assets (119,857,840) 89,421,828 NET ASSETS Beginning of year 346,123,143 256,701,315 End of year $ 226,265,303 $346,123,143
SEE NOTES TO FINANCIAL STATEMENTS. PAGE 9 NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES Keystone Liquid Trust (the "Fund") is a Massachusetts business trust for which Keystone Investment Management Company ("Keystone"), a subsidiary of First Union Corporation ("First Union"), is the Investment Adviser and Manager. The Fund is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified, open-end management investment company. The Fund offers Class A, Class B and Class C shares. Class A, Class B and Class C shares are sold without an initial sales charge. Class B and Class C shares pay a higher ongoing distribution fee than Class A. Class B shares are sold subject to a contingent deferred sales charge that is payable upon redemption and decreases depending on how long the shares have been held. Class C shares are sold subject to a contingent deferred sales charge payable on shares redeemed within one year after the month of purchase. Class B shares purchased after January 1, 1997 will automatically convert to Class A shares after seven years. Class B shares purchased prior to January 1, 1997 retain their existing conversion rights. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles, which require management to make estimates and assumptions that affect amounts reported herein. Actual results could differ from these estimates. A. 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 that are held on the sixtieth day prior to maturity are valued at amortized cost (market value on the sixtieth day adjusted for amortization of premium or accretion of discount), which, when combined with accrued interest approximates market. B. REPURCHASE AGREEMENTS The Fund may invest in repurchase agreements. Securities pledged as collateral for repurchase agreements are held by the custodian on the Fund's behalf. The Fund monitors the adequacy of the collateral daily and will require the seller to provide additional collateral in the event the market value of the securities pledged falls below the carrying value of the repurchase agreement, including accrued interest. The Fund will only enter into repurchase agreements with banks and other financial institutions which are deemed by the investment advisor to be creditworthy pursuant to guidelines established by the Board of Trustees. Pursuant to an exemptive order issued by the Securities and Exchange Commission, the Fund, along with certain other funds managed by Keystone, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are fully collateralized by U.S. Treasury and/or federal agency obligations. C. REVERSE REPURCHASE AGREEMENTS The Fund enters into reverse repurchase agreements with qualified third-party broker-dealers. Interest on the value of reverse repurchase agreements is based upon competitive market rates at the time of issuance. At the time the Fund enters into a reverse repurchase agreement, it will establish and maintain a segregated account with its custodian containing liquid assets having a value not less than the repurchase price (including accrued interest). If the counterparty to the transaction is rendered insolvent, the ultimate realization of the securities to be repurchased by the Fund may be delayed or limited. PAGE 10 KEYSTONE LIQUID TRUST D. SECURITY TRANSACTIONS AND INVESTMENT INCOME Securities transactions are accounted for no later than one business day after the trade date. Realized gains and losses are computed on the identified cost basis. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums. E. DISTRIBUTIONS Distributions for the Fund are declared daily and paid monthly from the total of net investment income, plus realized and unrealized gain (loss) on investments. Distributions to shareholders are recorded at the close of business on the ex-dividend date. F. FEDERAL INCOME TAXES The Fund has qualified and intends to continue to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended (the "Code"). Thus, the Fund will not incur any federal income tax liability since it is expected to distribute all of its net investment company taxable income, net tax-exempt income and net capital gains, if any, to its shareholders. The Fund also intends to avoid any excise tax liability by making the required distributions under the Code. Accordingly, no provision for federal income taxes is required. To the extent that realized capital gains can be offset by capital loss carryforwards, it is the Fund's policy not to distribute such gains. G. CLASS ALLOCATIONS Income, expenses (other than class specific expenses) and realized and unrealized gains and losses are prorated among the classes based on the relative net assets of each class. Currently, class specific expenses are limited to expenses incurred under the Distribution Plans for each class. 2. CAPITAL SHARE TRANSACTIONS The Fund has an unlimited number of shares of beneficial interest with no par value authorized. Shares of beneficial interest of the Fund are currently divided into Class A, Class B and Class C. Since the Fund sold, redeemed and reinvested shares at $1.00 net asset value, the shares and dollar amount are the same. Transactions in shares of the Fund were as follows:
YEAR ENDED JUNE 30, 1997 1996 CLASS A Shares sold 1,115,974,093 1,105,810,542 Shares issued in reinvestment of distributions 10,558,337 9,604,322 Shares redeemed (1,244,499,871) (1,027,927,276) Net increase (decrease) (117,967,441) 87,487,588 CLASS B Shares sold 32,548,370 31,488,209 Shares issued in reinvestment of distributions 346,049 306,930 Shares redeemed (35,512,664) (29,034,624) Net increase (decrease) (2,618,245) 2,760,515 CLASS C Shares sold 7,074,014 7,581,549 Shares issued in reinvestment of distributions 132,185 94,829 Shares redeemed (6,478,353) (8,502,653) Net increase (decrease) 727,846 (826,275)
3. SECURITIES TRANSACTIONS At June 30, 1997, the cost of investments for federal income tax purposes was $240,147,223. Gross unrealized appreciation of investments was $4,022 and gross unrealized depreciation of investments was $21,168, resulting in net unrealized depreciation of $17,146 for federal income tax purposes. PAGE 11 The average daily balance of reverse repurchase agreements outstanding during the year ended June 30, 1997 was $9,950,000 at a weighted average interest rate of 5.025%. The maximum amount of borrowing during the year ended June 30, 1997 was $9,952,778 (including accrued interest). 4. DISTRIBUTION PLANS Since December 11, 1996, Evergreen Keystone Distributor, Inc. ("EKD"), a wholly-owned subsidiary of The BISYS Group Inc. ("BISYS"), has served as principal underwriter to the Fund. Prior to December 11, 1996, Evergreen Keystone Investment Services, Inc. ("EKIS"), a wholly-owned subsidiary of Keystone, served as the Fund's principal underwriter. The Fund has adopted Distribution Plans for each class of shares as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit the Fund to reimburse its principal underwriter for costs related to selling shares of the Fund and for various other services. These costs, which consist primarily of commissions and services fees to broker-dealers who sell shares of the Fund, are paid by shareholders through expenses called "Distribution Plan expenses". Each class, currently pays a service fee equal to 0.25% of the average daily net asset of the class. Class B and Class C also presently pay distribution fees equal to 0.75% of the average daily net assets of the Class. Distribution Plan expenses are calculated daily and paid monthly. With respect to Class B and Class C shares, the principal underwriter may pay 12b-1 fees greater than the allowable annual amounts the Fund is permitted to pay. The Fund may reimburse the principal underwriter for such excess amounts in later years with annual interest at the prime rate plus 1.00%. During the year ended June 30, 1997, amounts paid to EKD and/or EKIS pursuant to each Fund's Class A, Class B and Class C Distribution Plans were $231,498, $108,489 and $38,446, respectively. 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, and subject to the discretion of the Independent Trustees, payments to EKIS and/or EKD may continue as compensation for services which had been provided while the Distribution Plan was in effect. EKD intends, but is not obligated, to continue to pay distribution costs that exceed the current annual payments from the Fund. EKD intends to seek full payment of such distribution costs from the Fund at such time in the future as, and to the extent that, payment thereof by the Class B or Class C shares would be within permitted limits. Contingent deferred sales charges paid by redeeming shareholders are paid to EKD or its predecessor. 5. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED TRANSACTIONS Keystone is the investment adviser and manager for the Fund. In return for providing investment management and administrative services to the Fund, the Fund pays Keystone a management fee that is calculated daily and paid monthly. The management fee is computed at an annual rate of 0.50%, and declining as net assets increase, to 0.40% per annum, to the average daily net asset value of the Fund. Effective January 1, 1997, BISYS became the sub-administrator to the Fund and is paid by Keystone for its services. Prior to December 11, 1996, Keystone Management Inc. ("KMI"), a wholly-owned subsidiary of Keystone, served as investment manager to the Fund and provided investment management and administrative services. Under an investment advisory agreement between KMI and Keystone, Keystone served as the investment adviser and provided investment advisory and management services to the Fund. In return for its services, Keystone received an annual fee equal to 85% of the management fee received by KMI. During the year ended June 30, 1997, the Fund paid or accrued to EKIS $33,538 for certain administrative services. PAGE 12 KEYSTONE LIQUID TRUST Evergreen Keystone Service Company ("EKSC"), a wholly-owned subsidiary of Keystone, serves as the transfer and dividend disbursing agent for the Fund. Officers of the Fund and affiliated Trustees receive no compensation directly from the Fund. As sub-administrator, BISYS provides the officers of the Fund. 6. EXPENSE OFFSET ARRANGEMENT The Fund has entered into an expense offset arrangement with its custodian. The assets deposited with the custodian under this expense offset arrangement could have been invested in income-producing assets. 7. MERGER On June 18, 1997, the Board of Trustees approved the acquisition of substantially all the Fund's assets and the assumption of the Fund's liabilities by Evergreen Money Market Fund in exchange for shares of Class A, B and C shares of Evergreen Money Market Fund. This transaction was approved by the Fund's shareholders at a special meeting held on July 14, 1997. PAGE 13 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, 1997, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the ten-year period then ended for Class A shares, and for each of the years in the four-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, 1997, 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, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods specified in the first paragraph above in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Boston, Massachusetts August 8, 1997 PAGE 14 KEYSTONE LIQUID TRUST OTHER INFORMATION-- MERGER WITH EVERGREEN MONEY MARKET FUND (UNAUDITED) On July 14, 1997, the Fund held a special meeting of its shareholders, the purpose of which was to approve an agreement and plan of reorganization providing for the acquisition of all the assets and the assumption of certain identified liabilities of the Fund by the Evergreen Money Market Fund. The plan also provided for the distribution of shares of the Evergreen Money Market Fund to shareholders of the Fund in liquidation of the Keystone Liquid Trust Fund. On May 16, 1997, the record date for the meeting, the Fund had 262,719,253 shares outstanding, of which 111,790,457 shares of were represented at the meeting. The vote at the meeting was as follows: Affirmative 103,959,746 Against 2,027,228 Abstain 5,803,483
The closing for the merger took place as of the close of business July 31, 1997. KEYSTONE FAMILY OF FUNDS (Diamond appears here) Balanced Fund (K-1) Diversified Bond Fund (B-2) Growth and Income Fund (S-1) High Income Bond Fund (B-4) International Fund Inc. Precious Metals Holdings, Inc. Quality Bond Fund (B-1) Small Company Growth Fund (S-4) Strategic Growth Fund (K-2) Tax Free Fund This report was prepared primarily for the information of the Fund's shareholders. It is authorized for distribution if preceded or accompanied by the Fund's current prospectus. The prospectus contains important information about the Fund including fees and expenses. Read it carefully before you invest or send money. For a free prospectus on other Evergreen Keystone funds, contact your financial adviser or call Evergreen Keystone. Evergreen Keystone (Evergreen tree appears here) FUNDS (Keystone logo appears here) P.O. Box 2121 Boston, Massachusetts 02106-2121 KLT-R Rev01 7/97 (Recycle logo appears here) KEYSTONE (Photo of older man and little boy on bike appears here) LIQUID TRUST Evergreen Keystone (Evergreen tree appears here) FUNDS (Keystone logo appears here) ANNUAL REPORT JUNE 30, 1997 -----END PRIVACY-ENHANCED MESSAGE-----