KEYSTONE
INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL
CAPITALIZATION GROWTH FUND
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
AUGUST 31, 1997
[Evergreen Keystone Funds logo appears here]
<PAGE>
PAGE 1 62452B
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
Dear Shareholder:
We are pleased to report on the activities of Keystone Institutional Small
Capitalization Growth Fund for the six-month period that ended August 31, 1997.
PERFORMANCE
[Graph appears below with the following information:]
Grwoth of an investment in
Keystone Institutional Small Capitalization Growth Fund
(In Thousands)
Initial Investment Dividend Reinvestment
12/95 $10,000.00 $10,000.00
2/96 $10,980.00 $10,980.00
5/96 $12,060.00 $12,060.00
8/96 $10,870.00 $10,870.00
11/96 $11,550.00 $11,922.00
2/97 $11,280.00 $11,445.00
5/97 $11,590.00 $11,760.00
8/97 $13,000.00 $13,191.00
Your Fund produced a total return of 15.25% for the six-month period and 21.36%
for the twelve-month period which ended August 31, 1997.
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND PERFORMANCE
AS OF JUNE 30, 1997
AVERAGE ANNUAL TOTAL RETURNS
1 year 7.31%
5 years n/a
Since inception 14.87%
(inception date 12/28/95)
CUMULATIVE TOTAL RETURNS
1 year 7.31%
5 years n/a
Since inception 23.19%
(inception date 12/28/95)
INVESTMENT ENVIRONMENT
During the period, the stock market experienced a shift in leadership.
Large-company stocks, which were market leaders for more than two years, began
taking a back seat to small- and medium-sized company stocks. A rising U.S.
dollar and relatively high stock prices raised concerns about whether or not
large-company stocks would continue their upward momentum. In this environment,
investors found new opportunities in small-company stocks with strong earnings
potential and attractive prices.
INVESTMENT STRATEGY
Our strategy focused on investing in high-quality companies that were
attractively priced and that we believe have above average long-term growth
prospects. We identified selected companies with these characteristics in a
variety of economic sectors and industries, including technology, finance,
health care, energy and cyclicals.
Technology stocks accounted for 36% of net assets-- 16% were invested in
software companies, whose new products and services should continue to enhance
the productivity of American business, and 20% were invested in hardware
businesses that produce semiconductors, communications equipment and graphic or
video editing products.
-- CONTINUED--
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PAGE 2 62452B
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
We made relatively minor changes to the financial portion of the portfolio. We
cut back on some of the portfolio's bank stocks that had been strong performers,
and reinvested the proceeds from the sale of these stocks in insurance
companies. We believe that the insurance industry is poised for a period of
consolidation, which should enhance the earnings prospects for selected
businesses.
Healthcare stocks accounted for 9% of the portfolio's net assets on August 31,
l997. Our criteria for investing in this area emphasized companies that, through
new technology or services, have the potential to provide greater efficiencies
and reduce costs of medical procedures and services. For example, we added
Perclose, Inc. to the portfolio, a company that produces equipment that is used
in minimally invasive heart procedures. We also invested in Chattem, Inc., a
marketer of brand name dietary supplements. The nutritional supplement business
is in its infancy in the U.S., and we believe it could be at the beginning of a
period of long-term growth.
We also believe that energy services companies are at the beginning of a
long-term positive cycle. After several years of plentiful energy supply and
industry consolidation, energy-related companies are benefiting from greater
demand and reduced oil and gas supply.
Because our outlook for economic growth over the next several years is
positive, we increased the Fund's exposure to cyclical companies-- businesses
that tend to be sensitive to economic cycles. We added selected stocks that we
feel have superior earnings growth potential. An example is General Cable Corp.,
a manufacturer of wiring systems. This company's business is influenced by the
commercial building industry, which we believe is at the beginning of a growth
cycle.
OUTLOOK
We believe the long-term prospects for small-company stocks are positive. We
think the economy will continue to grow at a moderate pace and that interest
rates should remain relatively stable or decline slightly. This type of economic
backdrop tends to be rewarding for small companies that have the potential for
strong earnings growth and whose prices, despite a significant upturn over the
past six months, are still relatively low.
Sincerely,
/s/ Albert H. Elfner, III
Albert H. Elfner, III
CHAIRMAN AND PRESIDENT
KEYSTONE INVESTMENT MANAGEMENT COMPANY
/s/ Tom Holman
Tom Holman
VICE PRESIDENT AND PORTFOLIO MANAGER
[Photos of Albert H. Elfner, III and Tom Holman appear here]
October, 1997
Funds that invest in stocks of small companies, also called small-caps, involve
certain risks and, therefore, may not be appropriate for all investors. Although
they may offer the potential for greater long-term returns, they also may
experience greater price volatility due to their limited focus on a particular
industry, market, product or service, or because they invest in smaller, less
established companies.
<PAGE>
PAGE 3 62452C
SCHEDULE OF INVESTMENTS-- AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS-- 91.6%
<S> <C> <C> <C>
AUTOMOTIVE EQUIPMENT &
MANUFACTURING-- 1.5%
11,400 * Dura Automotive Systems, Inc.... $ 329,888
BANKS-- 5.0%
12,200 Hubco, Inc...................... 375,150
14,000 North Fork Bancorp, Inc......... 349,125
24,220 Sovereign Bancorp, Inc.......... 374,653
1,098,928
BUILDING, CONSTRUCTION & FURNISHINGS-- 6.3%
18,600 * Furniture Brands International,
Inc........................... 327,825
8,700 * General Cable Corp.............. 301,237
12,600 * Newpark Resources, Inc.......... 426,825
12,800 Oakwood Homes Corp.............. 347,200
1,403,087
BUSINESS EQUIPMENT & SERVICES-- 6.1%
10,900 * Billing Information Concepts
Corp.......................... 408,069
11,000 * Budget Group, Inc............... 323,125
13,050 * Equity Corp. International...... 300,966
9,800 Norrell Corp.................... 316,662
1,348,822
CHEMICAL & AGRICULTURAL PRODUCTS-- 1.5%
8,840 OM Group, Inc................... 323,765
CONSUMER PRODUCTS & SERVICES-- 2.3%
18,400 * Racing Champions Corp........... 284,050
7,000 Stanhome, Inc................... 227,500
511,550
DIVERSIFIED COMPANIES-- 0.4%
4,200 * Omniquip International, Inc..... 84,000
ELECTRICAL EQUIPMENT & SERVICES-- 5.0%
10,200 * Adflex Solutions, Inc........... 262,650
9,400 * Asyst Technologies, Inc......... 323,125
6,000 * Credence Systems Corp........... 282,187
3,900 * Lattice Semiconductor Corp...... 248,991
1,116,953
FINANCE & INSURANCE-- 4.1%
6,300 * Delphi Financial Group, Inc..... 276,019
10,000 * First Alliance Co............... 278,750
5,700 Legg Mason, Inc................. 351,975
906,744
<CAPTION>
SHARES VALUE
COMMON STOCKS-- CONTINUED
<S> <C> <C> <C>
HEALTHCARE PRODUCTS & SERVICES-- 9.0%
6,600 * Agouron Pharmaceuticals, Inc.... $ 289,987
11,500 * Amylin Pharmaceuticals, Inc..... 90,922
5,600 * Cardiothoracic Systems, Inc..... 61,250
16,100 * Chattem, Inc.................... 293,825
12,200 * Cytyc Corp...................... 243,238
6,200 * Heartport, Inc.................. 110,631
700 * Neurogen Corp................... 13,869
7,600 * Pediatrix Medical Group, Inc.... 316,350
12,000 * Perclose, Inc................... 285,750
1,500 * Spine-Tech, Inc................. 71,063
8,900 * Thermo Cardiosystems, Inc....... 223,056
1,999,941
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES-- 3.8%
13,900 Memtec Ltd...................... 274,525
10,800 Roper Industries, Inc........... 305,100
9,500 Trimas Corp..................... 271,937
851,562
INFORMATION SERVICES & TECHNOLOGY-- 16.6%
7,800 * Avid Technology, Inc............ 256,913
10,300 * BDM International, Inc.......... 261,362
25,000 * Clarify, Inc.................... 389,844
21,000 * Dataworks Corp.................. 349,125
5,700 * Discreet Logic, Inc............. 132,525
20,100 * Geoworks........................ 184,669
5,500 * International Telecomm Systems,
Inc........................... 129,250
9,400 * Natural Microsystems Corp....... 345,450
17,400 * Project Software & Development,
Inc........................... 369,750
800 * Qad, Inc........................ 17,300
19,500 * Rational Software Corp.......... 320,531
10,446 * Synopsys, Inc................... 361,693
16,700 * System Software Associates,
Inc........................... 253,109
10,100 * Vantive Corp.................... 310,259
3,681,780
MACHINERY-- DIVERSIFIED-- 1.2%
10,900 * Rental Service Corp............. 257,513
METAL PRODUCTS & SERVICES-- 1.9%
7,200 * JLK Direct Distribution, Inc.... 173,700
11,400 * Oregon Metallurgical Corp....... 252,225
425,925
</TABLE>
<PAGE>
PAGE 4 62452C
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
SCHEDULE OF INVESTMENTS-- AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS-- CONTINUED
<S> <C> <C> <C>
LEISURE & TOURISM-- 2.6%
2,700 * Anchor Gaming................... $ 215,325
26,600 * Sodak Gaming, Inc............... 364,088
579,413
OFFICE EQUIPMENT & SUPPLIES-- 3.7%
11,500 * Cognex Corp..................... 439,156
9,100 * National Instruments Corp....... 371,394
810,550
OIL-- 4.8%
9,500 * Basin Exploration, Inc.......... 98,563
7,700 * Nuevo Energy Co................. 391,256
5,700 * Ocean Energy, Inc............... 366,581
4,000 * Seacor Smit, Inc................ 216,500
1,072,900
PUBLISHING, BROADCASTING &
ENTERTAINMENT-- 2.0%
9,900 * Jacor Communications, Inc....... 434,981
TELECOMMUNICATION SERVICES &
EQUIPMENT-- 8.7%
13,800 * Applied Voice Technology,
Inc........................... 332,925
14,800 * Aspect Telecommunications
Corp.......................... 325,137
15,000 * Centigram Communications Corp... 216,563
15,700 * Ortel Corp...................... 372,875
15,200 * Smartalk Teleservices, Inc...... 348,650
14,700 * Westell Technologies............ 329,831
1,925,981
TEXTILE & APPAREL-- 1.8%
10,800 * Gadzooks, Inc................... 203,850
5,000 * Pacific Sunwear of California... 191,719
395,569
<CAPTION>
SHARES VALUE
COMMON STOCKS-- CONTINUED
<S> <C> <C> <C>
TRANSPORTATION-- 0.6%
4,700 * Coach USA, Inc.................. $ 121,906
UTILITIES-- TELEPHONE-- 2.7%
11,200 * McLeadUSA, Inc. Cl. A........... 378,700
12,400 * Telephone Save Holdings, Inc.... 220,100
598,800
TOTAL COMMON STOCKS
(COST $16,980,913)............ 20,280,558
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT-- 7.4%
<S> <C> <C> <C>
$1,640,000 Keystone Joint Repurchase
Agreement, Investments in
repurchase agreements, in a
joint trading account
purchased 8/27/97, 5.5847%,
maturing 9/2/97, maturing
value $1,641,018 (a)
(cost $1,640,000)............. 1,640,000
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--
(COST $18,620,913) 99.0 % 21,920,558
OTHER ASSETS AND
LIABILITIES-- NET 1.0 230,457
NET ASSETS 100.0 % $22,151,015
</TABLE>
* Non-income producing securities.
(a) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at August 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 5 62452D
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 28,
SIX MONTHS 1995
ENDED EIGHT MONTHS (COMMENCEMENT OF
AUGUST 31, 1997 ENDED OPERATIONS)
(UNAUDITED) FEBRUARY 28, 1997(C) TO JUNE 30, 1996
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.28 $11.65 $10.00
OPERATIONS
Net investment loss (0.03)(b) (0.04)(b) (0.03)
Net realized and unrealized gain (loss) on investments 1.75 (0.16) 1.68
Total from investment operations 1.72 (0.20) 1.65
LESS DISTRIBUTIONS FROM:
Net realized gain on investments 0 (0.17) 0
NET ASSET VALUE, END OF PERIOD $13.00 $11.28 $11.65
TOTAL RETURN 15.25% (1.75%) 16.50%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses 0.99%(a) 1.00%(a) 1.00%(a)
Total expenses, excluding expense reimbursements N/A 2.53%(a) 2.81%(a)
Net investment loss (0.64%)(a) (0.57%)(a) (0.45%)(a)
PORTFOLIO TURNOVER RATE 50% 123% 57%
AVERAGE COMMISSION RATE PAID $0.0461 $ 0.0509 $ 0.0847
NET ASSETS, END OF PERIOD (THOUSANDS) $22,151 $ 2,888 $ 2,446
</TABLE>
(a) Annualized.
(b) Computed using average shares outstanding throughout the period.
(c) The Fund changed its fiscal year end from June 30 to the last day of
February effective, February 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 6 62452D
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (identified cost,
$18,620,913) $21,920,558
Cash 502
Receivable for Fund shares sold 286,482
Interest and dividends receivable 3,081
Deferred organization expenses 13,196
Prepaid expenses and other assets 5,317
Total assets 22,229,136
LIABILITIES
Payable for Investments purchased 36,805
Payable for Fund shares repurchased 10,714
Management fee payable 26,498
Due to affiliates 1,246
Accrued expenses and other liabilities 2,858
Total liabilities 78,121
NET ASSETS $22,151,015
NET ASSETS REPRESENTED BY
Paid-in capital $18,169,257
Accumulated net investment loss (34,925)
Accumulated net realized gain on investments 717,038
Net unrealized appreciation on investments 3,299,645
Total net assets 22,151,015
NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST OUTSTANDING
Net assets of $22,151,01541,704,270 shares
outstanding $ 13.00
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 13,678
Interest 23,360
Total income 37,038
EXPENSES
Management fee $58,223
Accounting expenses 916
Professional fees 8,166
Custodian fee 3,808
Miscellaneous expenses 850
Total expenses 71,963
Net investment loss (34,925)
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized gain on investments 333,889
Net change in unrealized appreciation
on investments 3,446,016
Net realized and unrealized gain on
investments 3,779,905
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,744,980
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 7 62452D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS DECEMBER 28, 1995
ENDED EIGHT MONTHS (COMMENCEMENT OF
AUGUST 31, 1997 ENDED OPERATIONS)
(UNAUDITED) FEBRUARY 28, 1997* TO JUNE 30, 1996
<S> <C> <C> <C>
OPERATIONS
Net investment loss $ (34,925) $ (9,482) $ (5,309)
Net realized gain on investments 333,889 398,376 34,918
Net change in unrealized appreciation
(depreciation) on investments 3,446,016 (462,663) 316,292
Net increase (decrease) in net assets resulting from
operations 3,744,980 (73,769) 345,901
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net realized gains on investments 0 (35,700) 0
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 15,918,115 517,700 2,100,000
Payment for shares redeemed (400,212) 0 0
Net asset value of shares issued in reinvestment of
distributions 0 34,000 0
Net increase in net assets from capital share
transactions 15,517,903 551,700 2,100,000
Total increase in net assets 19,262,883 442,231 2,445,901
NET ASSETS
Beginning of period 2,888,132 2,445,901 0
End of period (including net investment income (loss) of
($34,925), $0 and $36,922, respectively) $22,151,015 $2,888,132 $ 2,445,901
</TABLE>
*The Fund changed its fiscal year end from June 30 to the last day of February
effective February 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 8 62452E
KEYSTONE INSTITUTIONAL TRUST
KEYSTONE INSTITUTIONAL SMALL CAPITALIZATION GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Keystone Institutional Trust (the "Trust") is a Massachusetts business trust
that is authorized to issue more than one series of shares. At this time, the
Trust issues one series of shares called Keystone Institutional Small
Capitalization Growth Fund (the "Fund"). The Fund is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, open-end
investment company. The Fund's investment objective is long-term growth of
capital.
Keystone Investment Management Company ("Keystone") is the Investment Adviser
and Manager. Keystone was formerly a wholly-owned subsidiary of Keystone
Investments, Inc. ("KII") and is currently a subsidiary of First Union
Corporation ("First Union").
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect amounts
reported herein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Fund.
A. VALUATION OF SECURITIES
The Fund values securities traded on a national securities exchange or included
on the NASDAQ National Market System ("NMS") at the last reported sales price on
the exchange where primarily traded. The Fund values securities traded on an
exchange or NMS for which there has been no sale and other securities traded in
the over-the-counter market at the mean between the last reported bid and asked
price. Securities for which market quotations are not available, including
restricted securities, are valued at fair value as determined in good faith
according to procedures approved by the Board of Trustees. Short-term
investments with remaining maturities of 60 days or less are carried at
amortized cost, which approximates market value.
B. REPURCHASE AGREEMENTS
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.
Securities pledged as collateral for repurchase agreements are held by the
custodian on the Fund's behalf. The Fund monitors the adequacy of the collateral
daily and will require the seller to provide additional collateral in the event
the market value of the securities pledged falls below the carrying value of the
repurchase agreement.
C. SECURITIES 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. Dividend income is recorded on the
ex-dividend date.
D. FEDERAL INCOME TAXES
The Fund has qualified and intends to qualify in the future as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Fund is relieved of any federal income tax liability by
distributing all of its net taxable investment income and net taxable capital
gains, if any, to its shareholders. The Fund also intends to avoid excise tax
liability by making the required distributions under the Code. Accordingly, no
provision for federal income taxes is required.
<PAGE>
PAGE 9 62452E
E. DISTRIBUTIONS
The Fund intends to distribute net investment income and net capital gains, if
any, at least annually. Distributions to shareholders are recorded at the close
of business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. These differences are primarily due to net operating
losses generated by the Fund. In January 1998, we will send you complete
information on the distributions paid during calendar year 1997 to help you in
completing your federal tax return.
3. CAPITAL SHARE TRANSACTIONS
The Trust's Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest with no par value. Transactions in shares of
the Fund were as follows:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 28,
1995
SIX MONTHS (COMMENCEMENT
ENDED EIGHT MONTHS OF
AUGUST 31, ENDED OPERATIONS)
1997 FEBRUARY 28, TO JUNE 30,
(UNAUDITED) 1997* 1996
<S> <C> <C> <C>
Shares sold 1,483,700 43,108 210,000
Shares redeemed.... (35,482) 0 0
Shares issued in
reinvestment of
dividends and
distributions 0 2,944 0
Net increase 1,448,218 46,052 210,000
</TABLE>
* The Fund changed fiscal year end from June 30 to the last day in February,
effective February 28, 1997.
4. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities and U.S. government securities) for the six months ended
August 31, 1997 were $20,397,822 and $6,695,952, respectively.
5. INVESTMENT MANAGEMENT AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
Under the terms of the investment advisory and management agreement dated
December 11, 1996, Keystone serves as the investment adviser and manager to the
Fund. In return for its services, Keystone is paid a management fee, computed
daily and paid monthly, which is determined by applying percentage rates
starting at 0.80% and declining as net assets increase to 0.65% per annum, to
the average daily net asset value of the Fund. Keystone has voluntarily agreed
to limit the expenses of the Fund to 1.00% annually of average daily net assets.
No expense reimbursements were made during the six months ended August 31, 1997.
During the six months ended August 31, 1997, the Fund paid or accrued $916 to
Keystone for certain accounting services. Additionally, Evergreen Keystone
Services Company ("EKSC") (formerly Keystone Investor Resource Center, Inc.), a
wholly-owned subsidiary of Keystone, serves as the Fund's transfer and dividend
disbursing agent.
BISYS Fund Services, Inc. ("BISYS"), an affiliate of EKD, serves as the Fund's
sub-administrator. As sub-administrator, BISYS provides the officers of the
Fund. For this service, BISYS is paid a fee by Keystone, which is not a Fund
expense.
Officers of the Fund and affiliated Trustees receive no compensation directly
from 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.
