- - -------------------------------------------------------------------------------
Keystone Institutional Trust
Keystone Institutional Small Capitalization Growth Fund
SCHEDULE OF INVESTMENTS -- December 31, 1996
Number Market
of Shares Value
- - --------------------------------------------------------------------------------
COMMON STOCKS (100.0%)
Automotive (3.0%)
Dura Automotive Systems, Inc. (a) 1,300 $28,762
Tower Automotive, Inc. (a) 1,500 46,594
- - -----------------------------------------------------------------------------
75,356
- - -----------------------------------------------------------------------------
Amusements (1.5%)
Studio Plus Hotels, Inc. (a) 2,400 38,100
- - -----------------------------------------------------------------------------
Building Materials (6.4%)
Champion Enterprises, Inc. (a) 1,600 31,200
Pulte Corp. 1,200 36,900
Toll Brothers Inc. 1,600 31,200
U.S. Home Corp. New (a) 1,000 26,000
Oakwood Homes Corp. 1,600 36,600
- - -----------------------------------------------------------------------------
161,900
- - -----------------------------------------------------------------------------
Business Services (14.5%)
Alternative Resource Corp. 2,800 48,125
Barret Business Services Inc. (a) 2,400 37,200
Equity Corporation International (a) 1,950 38,269
G&K Services, Class A 1,700 63,962
Norrell Corp. 600 16,350
Rental Services Corp. (a) 1,400 38,938
Thermo Cardiosystems, Inc. (a) 1,200 36,000
Newpark Resources, Inc. (a) 1,300 48,425
U.S. Filter Corp. (a) 1,250 39,687
- - -----------------------------------------------------------------------------
366,956
- - -----------------------------------------------------------------------------
Chemicals (0.9%)
OM Group, Inc. 840 22,680
- - -----------------------------------------------------------------------------
Consumer Goods (9.3%)
Blyth Industries, Inc. (a) 800 36,500
Action Performance Companies Inc. (a) 2,500 45,625
DeVry, Inc. Del (a) 2,000 47,000
Family Golf Centers Inc. (a) 800 24,200
Furniture Brands International Inc. 1,500 21,000
USA Detergents, Inc. (a) 1,500 61,687
- - -----------------------------------------------------------------------------
236,012
- - -----------------------------------------------------------------------------
Drugs (4.9%)
Amylin Pharmaceuticals, Inc. (a) 1,900 24,938
Gilead Sciences, Inc. (a) 1,000 24,937
Idexx Labs Inc. (a) 1,100 39,738
Magainin Pharmaceutical, Inc. (a) 2,200 20,900
Neurogen Corp. (a) 700 13,300
- - -----------------------------------------------------------------------------
123,813
- - -----------------------------------------------------------------------------
Electronics Products (5.3%)
Lattice Semicoductor Corp. (a) 600 27,525
Memtec Ltd 1,100 35,819
Microchip Technology, Inc. (a) 1,400 71,225
- - -----------------------------------------------------------------------------
134,569
- - -----------------------------------------------------------------------------
Page 4
<PAGE>
Foods (2.0%)
Hudson Foods Inc. 2,600 49,400
- - -----------------------------------------------------------------------------
Finance (9.0%)
BISYS Group, Inc. (a) 1,500 55,594
Investors Financial Services Corp. 2,400 66,300
First Alliance Co. (a) 1,400 41,825
TCF Financial Corp. 1,500 65,250
- - -----------------------------------------------------------------------------
228,969
- - -----------------------------------------------------------------------------
Health Care Service (2.6%)
Total Renal Care Holdings Inc. (a) 900 32,625
Pediatrix Medical Group (a) 900 33,188
- - -----------------------------------------------------------------------------
65,813
- - -----------------------------------------------------------------------------
Insurance (1.9%)
HCC Insurance Holdings, Inc. 2,050 49,200
- - -----------------------------------------------------------------------------
Oil Services (7.3%)
Falcon Drilling, Inc. (a) 2,500 98,125
Stone Energy Corp. (a) 600 17,925
Nuevo Energy Co. (a) 1,300 67,600
- - -----------------------------------------------------------------------------
183,650
- - -----------------------------------------------------------------------------
Restaurants (1.2%)
Applebees International Inc. 1,100 $30,112
- - -----------------------------------------------------------------------------
Retail (3.8%)
Black Box Corp. (a) 600 24,525
Loehmanns Inc. New (a) 1,700 39,100
Mossimo Inc. (a) 300 3,713
Sports Authority Inc. (a) 1,300 28,275
- - -----------------------------------------------------------------------------
95,613
- - -----------------------------------------------------------------------------
Software Services (18.0%)
BDM International, Inc. (a) 1,000 53,875
Cognex Corp. (a) 2,100 38,718
Epic Design Technology, Inc. (a) 1,400 35,000
Geoworks, Inc. (a) 2,100 51,187
INSO Corp. (a) 900 35,438
National Instruments Corp. (a) 1,200 37,800
National Data Corp. 1,000 43,500
Natural Microsystems Corp. (a) 3,400 108,375
Project Software & Development Inc. (a) 1,200 50,325
- - -----------------------------------------------------------------------------
454,218
- - -----------------------------------------------------------------------------
Telecommunications (5.0%)
Aspect Telecommunications Corp. (a) 600 37,950
Heartland Wireless Communications, Inc. (a) 2,000 26,125
TSX Corp. (a) 1,400 12,250
Winstar Communications, Inc. (a) 2,400 50,550
- - -----------------------------------------------------------------------------
126,875
- - -----------------------------------------------------------------------------
Page 5
<PAGE>
Textiles (1.6%)
St. John Knits, Inc. 900 39,150
- - -------------------------------------------------------------------------------
Transportation (1.8%)
Railtex, Inc. (a) 1,900 47,263
- - -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost - $2,151,707) 2,529,649
- - -------------------------------------------------------------------------------
Maturity
Value
- - -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (0.6%)
Investments in repurchase agreements, in a joint trading
account, purchased 12/31/96, 6.716%, maturing 1/02/97(b) $15,006 15,000
- - -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost - $15,000) 15,000
- - -------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost - $2,166,707) 2,544,649
- - -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- NET (0.6%) (16,272)
- - -------------------------------------------------------------------------------
NET ASSETS (100%) $2,528,377
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
(a) Non-income-producing security.
(b) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at December 31, 1996.
See Notes to Financial Statements.
Page 6
<PAGE>
Keystone Institutional Trust
Keystone Institutional Small Capitalization Growth Fund
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period from December 28, 1995
Six Months Ended (Commencement of Operations)
December 31, 1996 to June 30, 1996
- - --------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Net asset value beginning of period $11.65 $10.00
- - --------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment loss (0.04) (0.03)
Net realized and unrealized gain 0.43 1.68
- - --------------------------------------------------------------------------------------------------------
Total from investment operations 0.39 1.65
- - --------------------------------------------------------------------------------------------------------
Less distributions from:
Net realized gain on investments (0.17) 0.00
- - --------------------------------------------------------------------------------------------------------
Net asset value end of period $11.87 $11.65
- - --------------------------------------------------------------------------------------------------------
Total return 3.38% 16.50%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.00%(b)(c) 1.00%(a)(b)
Net investment loss (0.62%)(c) (0.45%)(a)
Portfolio turnover rate 54% 57%
Average commission rate paid $0.0582 $0.0847
Net assets end of period (thousands) $2,528 $2,446
- - --------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized for the period from December 28, 1995 to June 30, 1996.
(b) Figures are net of expense reimbursement by Keystone in connection with
voluntary expense limitations. Before the expense reimbursement, the "Ratio
of expenses to average net assets" would have been 4.71 % for the
six-months ended December 31, 1996, and 2.81% for the period from December
28, 1995 (Commencement of Operations) to June 30, 1996.
(c) Annualized
See Notes to Financial Statements.
Page 7
<PAGE>
Keystone Institutional Trust
Keystone Institutional Small Capitalization Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
<S> <C>
Assets (Note 1)
Investments at market value (identified cost - $2,166,707) $2,544,649
- - -------------------------------------------------------------------------------------------------------
Cash 966
Receivable for:
Investments sold 13,969
Expense Reimbursement Receivable 330
Interest and dividends 278
Deferred organization cost 15,828
- - -------------------------------------------------------------------------------------------------------
Total assets 2,576,020
- - -------------------------------------------------------------------------------------------------------
Liabilities (Note 4)
Payable for:
Accrued expenses 47,643
- - -------------------------------------------------------------------------------------------------------
Total liabilities 47,643
- - -------------------------------------------------------------------------------------------------------
Net assets $2,528,377
- - -------------------------------------------------------------------------------------------------------
Net assets represented by (Notes 1 and 2)
Paid-in capital $2,134,000
Undistributed net investment income 29,602
Accumulated net realized loss on investments (13,167)
Net unrealized appreciation on investments 377,942
- - -------------------------------------------------------------------------------------------------------
Total net assets applicable to outstanding shares of beneficial interest
at 12/31/96 ($11.87 a share on 212,943 shares outstanding) $2,528,377
- - -------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Page 8
<PAGE>
STATEMENT OF OPERATIONS
Six Months ended December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------
<S> <C> <C>
Investment income (Note 1)
Dividends $1,587
Interest 2,959
- - -------------------------------------------------------------------------------------
Total income 4,546
- - -------------------------------------------------------------------------------------
Expenses (Notes 4)
Management fee $9,479
Custodian fee 9,643
Registration fees 7,683
Audit fee 6,478
Transfer Agent fee 6,181
Reimburseable accounting expense 6,066
Legal fee 2,795
Printing expense 2,721
Miscellaneous expense 2,618
Organization expense 2,005
Reimbursement from Investment Adviser (43,805)
- - -------------------------------------------------------------------------------------
Total expenses 11,865
- - -------------------------------------------------------------------------------------
Net Investment loss (7,319)
- - -------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (Notes 1 and 3)
Realized gain on investments 29,845
- - -------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 61,650
- - -------------------------------------------------------------------------------------
Net gain on investments 91,495
- - -------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $84,176
- - -------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Page 9
<PAGE>
Keystone Institutional Trust
Keystone Institutional Small Capitalization Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from December 28, 1995
Six Months Ended (Commencement of Operations)
December 31, 1996 to June 30, 1996
- - ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Operations:
Net investment loss ($7,319) ($5,309)
Net realized gain on investments 29,845 34,918
Net change in unrealized appreciation 61,650 316,292
- - ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 84,176 345,901
- - ------------------------------------------------------------------------------------------------------------------------------------
Distribution to shareholders from:
Net realized gains on investments (35,700) 0
- - ------------------------------------------------------------------------------------------------------------------------------------
Capital share transactions: (Note 2)
Proceeds from shares sold 0 2,100,000
Reinvestment of capital gains 34,000 0
- - ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from capital stock activity 34,000 2,100,000
- - ------------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 82,476 2,445,901
- - ------------------------------------------------------------------------------------------------------------------------------------
Net assets:
Beginning of period 2,445,901 0
- - ------------------------------------------------------------------------------------------------------------------------------------
End of period (Including undistributed net investment income
December, 1996 - $29,602 and June, 1996 - $36,922) $2,528,377 $2,445,901
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Page 10
<PAGE>
Keystone Institutional Trust
Keystone Institutional Small Capitalization Growth Fund
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
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"). 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 Keystone, Inc. First Union Keystone, Inc. is a
wholly-owned subsidiary of First Union National Bank of North Carolina which in
turn is a wholly-owned subsidiary of First Union Corporation ("First Union").
The Fund is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as a diversified, open-end investment company. The Fund's
investment objective is long-term growth of capital.
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
Investments are usually valued at the closing sales price, or, in the absence of
sales and for over-the-counter securities, the mean of bid and asked quotations.
Management values the following securities at prices it deems in good faith to
be fair under the direction of the Fund's Board of Trustees: (1) securities
(including restricted securities) for which complete quotations are not readily
available and (2) listed securities if, in the opinion of management, the last
sales price does not reflect a current value or if no sale occurred.
B. Repurchase Agreements
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 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. Futures Contracts
In order to gain exposure to, or protect against, changes in security values,
the Fund may buy and sell futures contracts.
The initial margin deposited with a broker when entering into a futures
transaction is subsequently adjusted by daily payments or receipts as the value
of the contract changes. Such changes are recorded as unrealized gains or
losses. Realized gains or losses are recognized on closing the contract.
Page 11
<PAGE>
Risks of entering into futures contracts include (i) the possibility of an
illiquid market for the contract, (ii) the possibility that a change in the
value of the contract may not correlate with changes in the value of the
underlying instrument or index, and (iii) the credit risk that the other party
will not fulfill its obligations under the contract. Futures contracts also
involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
D. 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
amortization of discounts and premiums.
E. 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.
F. 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.
2. 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:
Period from December 28,1995
Six Months Ended (Commencement of Operations) to
December 31, 1996 June 30, 1996
----------------- -------------------------------
Sales 2,944 210,000
----- -------
Net Increase 2,944 210,000
===== =======
3. 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
December 31, 1996 were $1,267,609 and $1,224,297, respectively.
Page 12
<PAGE>
4. Investment Management Agreement and Other Affiliated Transactions
Under the terms of the Investment Advisory and Management Agreement between
Keystone and the Fund, Keystone provides investment management and
administrative services to the Fund. In return Keystone is paid a management fee
that is computed and paid daily. The management fee is calculated by applying
percentage rates to the aggregate net asset value of the Fund's shares as
follows: 0.80% of the first $100,000,000, plus 0.75% of the next $150,000,000,
plus 0.65% of amounts over $250,000,000.
During the six months ended December 31, 1996, the Fund paid or accrued to
Keystone investment management and administrative service fees of $9,479, which
represent 0.80% of the Fund's average daily net asset value during the period.
During the six months ended December 31, 1996, the Fund paid or accrued $6,181
to Evergreen Keystone Service Company for transfer agent fees.
Keystone has voluntarily agreed to limit the expenses of the Fund to 1.0%
annually of average net assets through December 31, 1996. In connection with the
voluntary expense limitation Keystone reimbursed the Fund $43,805. Keystone does
not intend to seek repayment of this amount.
Officers of the Fund and affiliated Trustees receive no compensation directly
from the Fund.
Page 13
<PAGE>
PROXY RIDER FOR KEYSTONE INSTITUTIONAL TRUST
Shareholders of the Fund considered and acted upon the proposals listed below at
a special meeting of shareholders held Monday, December 9, 1996. Below are the
results of that vote:
1. To elect the following Trustees:
Affirmative Withhold
----------- --------
Frederick Amling 210,000 -0-
Laurence B. Ashkin 210,000 -0-
Charles A. Austin III 210,000 -0-
Foster Bam 210,000 -0-
George S. Bissell 210,000 -0-
Edwin D. Campbell 210,000 -0-
Charles F. Chapin 210,000 -0-
K. Dun Gifford 210,000 -0-
James S. Howell 210,000 -0-
Leroy Keith, Jr. 210,000 -0-
F. Ray Keyser, Jr. 210,000 -0-
Gerald M. McDonell 210,000 -0-
Thomas L. McVerry 210,000 -0-
William Walt Pettit 210,000 -0-
David M. Richardson 210,000 -0-
Russell A. Salton, III MD 210,000 -0-
Michael S Scofield 210,000 -0-
Richard J. Shima 210,000 -0-
Andrew J. Simons 210,000 -0-
2. To approve an Investment Advisory and Management Agreement between the
Fund and Keystone Investment Management Company.
Affirmative 210,000
Against -0-
Abstain -0-
Page 14
