Trust:
Turner Funds
P.O. Box 419805
Kansas City, MO 64141-6805
Investment Advisor:
Turner Investment Partners, Inc.
Distributor: ANNUAL
SEI Financial Services Company REPORT
SEPTEMBER 30, 1996
Administrator:
SEI Fund Resources
Legal Counsel:
Morgan, Lewis & Bockius LLP
Independent Public Accountants: [LOGO OMITTED]
Ernst & Young LLP
[LOGO OMITTED]
To open an account,
receive account information,
make inquiries or ==========================
request literature: TURNER GROWTH EQUITY FUND
==========================
TURNER SMALL CAP FUND
1-800-224-6312
This information must be preceded or accompanied
by a current prospectus for each Fund described.
TUR-F-021-01
<PAGE>
[LOGO OMITTED]
TURNER GROWTH EQUITY FUND
INVESTMENT ADVISOR'S REPORT TO SHAREHOLDERS
To Our Shareholders:
For the twelve month period ending September 30, 1996, the Turner Growth Equity
Fund posted a total return of 22.91% compared to 15.94% for the Lipper Capital
Appreciation Funds Index, 20.32% for the Standard and Poor's 500 Index and
21.40% for the Russell 1000 Growth Index. Major U.S. stock market indexes posted
their second consecutive year of strong gains as signs of continued low
inflation, a strong U.S. dollar, stable short-term interest rates and moderately
healthy corporate profits stimulated investor confidence. Since the Fund's
inception on March 11, 1992, the annualized total return for the Fund has been
14.54% versus 15.24% for the S&P 500 and 14.56% for the Russell 1000 Growth
Index.
A year ago, I informed you of our decision to implement some fine-tuning
adjustments to improve the implementation of our proven investment process.
These adjustments have firmly taken root and have borne fruit over the past
year. We firmly believe that our earnings- driven philosophy will continue to be
effective by enabling us to identify attractive investment opportunities and
deliver superior results over time. However, today's investment environment is
very dynamic as a result of rapid technological advancements and continually
improving information processing capabilities. While we are confident that our
philosophy and process are fundamentally sound, we are also committed to
continually assessing the environment and making those fine-tuning adjustments
which we believe necessary to maintain the effectiveness of our investment
strategy and its ability generate superior results in the future.
I again want to personally thank all our shareholders for your patience during a
challenging phase in the life of the Fund and am gratified that we were able to
reward your patience by outperforming the Russell 1000 Growth Index over this
past year. The current economic climate and stock market environment favors our
investment style and expertise, and the adjustments we implemented are working
very effectively. Although the current economic expansion is now in its sixth
year, we continue to uncover many exciting investment opportunities among
companies with impressive earnings dynamics at attractive valuations. As a
result, I am confident that we are on track to regain our ranking as a top
performer to the benefit of the assets you have entrusted to us.
Sincerely,
[SIGNATURE OMITTED]
Robert E. Turner
Chairman and Chief Investment Officer
<PAGE>
MANAGEMENT'S DISCUSSION OF PERFORMANCE
TURNER INVESTMENT PARTNERS
THE MARKET ENVIRONMENT
For the twelve month period ending September 30, 1996, the stock market provided
strong returns amid an environment characterized by volatility and mixed
economic signals. All of the major stock indexes grew at double digit rates with
the S&P 500 Index gaining 20.32%. Investor anxiety concerning the strength of
the economy was evident as larger cap, more defensive issues outdistanced small
cap stocks, reflected by comparing the 25.8% return of the Dow Jones Industrial
Average of the thirty largest industrial companies to the Russell 2000 Index of
smaller capitalization stocks at 13.13%.
The economic environment during the past year sent mixed signals, creating
uncertainty amid investors and volatility within the stock market. Robust
corporate profits and surprisingly strong employment growth during the early
part of this fiscal period turned investors more defensive as they feared that
an improving economy would lead the Federal Reserve to raise interest rates to
keep inflation under control. Larger cap, value-oriented stocks were favored as
investors bid up the price of stocks expected to benefit from improving economic
growth. Cyclicals like lodging, retail, airlines, chemicals and autos did well.
Interest rate sensitive stocks such as home building, savings & loans and
utilities lagged.
As this fiscal year progressed, investors apparently believed that the economy
was not on a sustained upswing and began to gravitate toward stocks of companies
that can deliver consistent and visible earnings in a slow-growth environment.
Moreover, a short-lived but long-anticipated correction removed some of the
speculative excess from the market, leaving stocks more fairly valued in
relation to projected earnings. Signs of continued low inflation, a strong U.S.
dollar, stable short-term interest rates and moderately healthy corporate
earnings cheered investors toward the end of the period. Technology stocks
staged a strong rebound as the autos and consumer discretionary sectors tailed
off amid signs of slower growth.
OUR INVESTMENT APPROACH
Turner Investment Partners' approach, as a growth-oriented investment manager is
to remain fully invested in the stock market at all times and own a broadly
diversified portfolio of approximately 100 holdings. We always maintain broad
industry sector weightings in line with the market, which frees the investment
team to focus its efforts on stock selection. Individual stocks are bought and
sold based upon three evaluation criteria: (1) a computer ranking in our
proprietary model that identifies stocks with superior earnings and reasonable
valuations; (2) fundamental analysis to evaluate a stock's projected earnings
per share relative to consensus expectations; and (3) technical analysis of the
stock's money flow, which is a measure of market support for a stock based on
price and volume trends. Stocks which are included in the Fund must meet all
three criteria. If any of these criteria are violated, the stock is promptly
sold.
<PAGE>
Our goal for the Fund is to consistently outperform the S&P 500 Index, leading
to superior returns over time. We met this goal during the most recent twelve
month period ended September 30, 1996. Since the inception of the Fund on March
11, 1992, we have produced an annualized total return of 14.54% which has
modestly underperformed the S&P 500 return of 15.24% for the same period.
FACTORS RELATING TO FISCAL 1996 PERFORMANCE
Strong relative performance for the Fund during the second half of the year was
more than sufficient to overcome the lagging results produced earlier in the
year. During the first third of this year, investors turned more defensive and
favored value-oriented stocks, seeking to preserve stellar gains from 1995 by
moving into blue chip and defensive sectors. The market's advance was very
narrowly based with relatively few of the largest-cap issues responsible for a
disproportionately large share of the S&P 500 Index return: only twenty stocks
(e.g., GE, Merck, Philip Morris, Coca-Cola, and Exxon) contributed almost 30% of
the total return of the S&P. In this type of investment environment, a factor
which impeded the Fund's performance is our strategic, but selective commitment
to medium and smaller-capitalization companies which have been significant
contributors to our firm's long-term results. During the early part of the year,
however, performance was negatively impacted as defensively-oriented investors
generally favored large and more liquid stocks.
Fund performance improved substantially during the second half of the year. Our
experienced investment team was successful in identifying companies like
Safeway, HBO & Co., and Harley Davidson that reported favorable and often
exceptionally strong earnings growth. Additionally, investors in search of
companies with prospects for continued profit increases redirected their
attention away from large cap, blue chips to the broader mid and small cap
markets where our portfolio has a strategic commitment. As the year came to a
close, it was apparent that investor sentiment had shifted to companies that can
deliver superior earnings gains in the midst of an expected economic slowdown.
Moreover, the Federal Reserve's decision to leave interest rates unchanged eased
anxieties about rates for the remainder of calendar 1996. Stable growth and
interest sensitive sectors of the stock market began to respond favorably as
growth stocks across all capitalization categories outpaced cyclical stocks
during the second half of the year.
<PAGE>
IN SUMMARY
Although the economic slowdown that became apparent toward the end of the third
quarter of 1996 will dampen the strong pace of corporate profit growth
experienced during the past year, we believe that prospects for continued low
inflation, a strong U.S. dollar, stable short-term interest rates and moderately
healthy corporate earnings will be very favorable for the types of companies in
which the Fund is invested. These companies possess outstanding potential for
future earnings growth and price appreciation. With the Federal Reserve
committed to prolonging the current economic expansion, and inflation not a
problem, we expect that investors will continue to favor the type of growth
stocks in which we invest.
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT IN
THE GROWTH EQUITY FUND, VERSUS THE S&P 500 COMPOSITE
INDEX, AND THE RUSSELL 1000 GROWTH INDEX
[CHART INFO TO COME]
1 These figures represent past performance. Past performance is no guarantee of
future results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than their original cost.
2 Represents total return for the twelve month period
ended September 30, 1996.
3 The Turner Growth Equity Fund commenced operations
on March 11, 1992.
<PAGE>
[LOGO OMITTED}
TURNER SMALL CAP FUND
INVESTMENT ADVISOR'S REPORT TO SHAREHOLDERS
To Our Shareholders:
For the twelve month period ending September 30, 1996, the Turner Small Cap Fund
posted a return of 52.43%, compared to 15.83% for the Russell 2500 Index of
small-capitalization stocks. Major stock market indexes posted impressive gains
during the past year as stable interest rates, low inflation and strong
corporate profits provided a powerful catalyst for the market's advance. Since
the Fund's inception on February 7, 1994, the annualized total return for the
Fund has been 40.53% versus 14.59% for the Russell 2500.
Our sector-neutral approach, which ensures that the Fund weightings in each of
ten broad industry sectors are kept in line with the market, enabled us to
generate strong returns with less exposure to technology-related stocks than
many other small cap growth funds. Maintaining sector-neutrality was
particularly effective in a volatile period such as the fiscal period ended
September 30, 1996. Performance was fueled by the strong earnings growth
dynamics present in the companies in which we are invested. In the midst of the
anticipated economic slowdown and a strengthening dollar, investors often
embrace small growth companies that can dictate their own future by being able
to execute their niche strategies regardless of slowing economic conditions. We
continue to uncover many exciting investment opportunities among smaller
companies with specialized products and services, entrepreneurial and motivated
management, and focused business plans.
We appreciate your support and are very pleased that the Fund's results rewarded
you for the confidence you have placed in us. We look forward to the opportunity
to continue to serve you.
Sincerely,
[SIGNATURE OMITTED] [SIGNATURE OMITTED]
Robert E. Turner William H. Chenoweth
Chairman and Chief Investment Officer Senior Equity Portfolio Manager/Analyst
<PAGE>
MANAGEMENT'S DISCUSSION OF PERFORMANCE
TURNER INVESTMENT PARTNERS
THE MARKET ENVIRONMENT
For the twelve month period ending September 30, 1996, the stock market provided
strong returns amid an environment characterized by volatility and mixed
economic signals. All of the major stock indexes grew at double digit rates with
the S&P 500 Index gaining 20.34%. Investor anxiety concerning the strength of
the economy was evident as larger cap, more defensive issues outdistanced small
cap stocks, reflected by comparing the 25.75% return of the Dow Jones Industrial
Average of the thirty largest industrial companies to the Russell 2500 Index of
smaller capitalization stocks at 13.39%.
The economic environment during the past year sent mixed signals, creating
uncertainty amid investors and volatility within the stock market. Robust
corporate profits and surprisingly strong employment growth during the early
part of this fiscal period turned investors more defensive as they feared that
an improving economy would lead the Federal Reserve to raise interest rates to
keep inflation under control. Industry sectors that performed well among small
cap stocks included consumer discretionary stocks as retailers rebounded from a
two year slump and energy stocks, particularly those of exploration and drilling
companies. Sectors that registered disappointing results included utilities and
financial services, reacting adversely to upward pressure on interest rates.
Following a particularly severe correction among small cap stocks in the
June-July timeframe, small cap stocks rebounded sharply at fiscal year end.
Investors apparently believed that the economy was not on a sustained upswing
and began to gravitate toward stocks of companies that can deliver consistent
and visible earnings in a slow-growth environment, especially those of smaller
companies. Moreover, the short-lived but long-anticipated correction removed
some of the speculative excess from the market, leaving stocks more fairly
valued in relation to projected earnings. Signs of continued low inflation, a
strong U.S. dollar, stable short-term interest rates and moderately healthy
corporate earnings cheered investors toward the end of the period. Financial
services and technology sectors benefitted from stable interest rates and a
slow-growth economic scenario while health care stocks continued to lag.
OUR INVESTMENT APPROACH
The firm's approach as a growth-oriented investment manager is to remain fully
invested in the stock market at all times and own a broadly diversified
portfolio of approximately 130 holdings. We always maintain broad industry
sector weightings in line with the market, which frees the investment team to
focus its efforts on stock selection. Individual stocks are bought and sold
based upon three evaluation criteria: (1) a computer ranking in our proprietary
model that identifies stocks with superior earnings and reasonable valuations;
(2) fundamental analysis to evaluate a stock's projected earnings per share
relative to consensus expectations; and (3) technical analysis of the stock's
money flow, which is a measure of market support for a stock based on price and
volume trends. Stocks which are included in the Fund must meet all three
criteria. If any of these criteria are violated, the stock is promptly sold.
Our goal for the Fund is to consistently outperform the Russell 2500 Index,
leading to superior returns over time. We were pleased to achieve this goal for
the twelve month period ending September 30, 1996. Since the inception of the
Fund on February 7, 1994, the annualized total return for the Fund of 40.53%
exceeded the Russell 2500 return of 14.59% for the same period.
<PAGE>
FACTORS RELATING TO FISCAL 1996 PERFORMANCE
The Fund's strong performance throughout the year was achieved through the
consistent application of the firm's disciplined approach by our experienced
investment team. We utilize advanced technology, combined with effective team
working and streamlined decision making process, that enabled us to act quickly
on the information we receive from a variety of sources. Performance was fueled
by the strong earnings growth dynamics present in the companies in which we are
invested. For example, cumulative earnings are projected to increase 34.9% over
the next twelve months for the companies in the Fund compared to 19.9% for the
Russell 2500 and 13.4% for the S&P 500 (Source: Frank Russell Company).
Investments in a number of initial public offerings (IPO's) issued by companies
that deliver products or services to growing markets and possess strong earnings
dynamics also contributed to our outperformance of the Russell 2500 Index. In
addition, the prompt sale of holdings that violate our purchase criteria helped
us to avoid major disappointments.
IN SUMMARY
Although the economic slowdown that became apparent toward the end of the third
quarter of 1996 will dampen the strong pace of corporate profit growth
experienced during the past year, we believe that prospects for continued low
inflation, a strong U.S. dollar, stable short-term interest rates and moderately
healthy corporate earnings will be very favorable for small cap stocks,
particularly those of the types of companies in which the Fund is invested.
These companies possess outstanding potential for future earnings growth and
price appreciation. With the Federal Reserve committed to prolonging the current
economic expansion, and inflation not a problem, we expect that investors will
continue to favor the type of growth stocks in which we invest.
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT IN THE
SMALL CAP FUND, VERSUS THE RUSSELL 2500 INDEX
[CHART INFO TO COME]
1 These figures represent past performance. Past performance is no guarantee of
future results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than their original cost.
2 Represents total return for the twelve month period
ended September 30, 1996.
3 The Turner Small Cap Fund commenced operations on
February 7, 1994.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Turner Funds, Inc.
We have audited the accompanying statements of net assets of Turner Growth
Equity Fund and Turner Small Cap Fund as of September 30, 1996, and the related
statements of operations, changes in net assets and financial highlights for the
period then ended. 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
audit. The statements of changes in net assets for the period ended October 31,
1995, and the financial highlights for the periods ended October 31, 1992
through October 31, 1995 for Turner Growth Equity Fund and Turner Small Cap Fund
were audited by other auditors whose report dated December 5, 1995 expressed an
unqualified opinion on those statements and financial highlights.
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
September 30, 1996 by correspondence with the Custodian and brokers. 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 audit provides 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 Turner
Growth Equity Fund and Turner Small Cap Fund at September 30, 1996, the results
of their operations, the changes in their net assets, and the financial
highlights for the period then ended herein, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, PA
November 1, 1996
<PAGE>
STATEMENT OF NET ASSETS TURNER FUNDS
September 30, 1996
Market
Value
GROWTH EQUITY FUND Shares (000)
- -------------------------------------------------------------------------------
COMMON STOCKS (100.4%)
AGRICULTURE (1.3%)
Dole Food 29,980 $ 1,259
-------
AIRCRAFT (1.2%)
Boeing 12,310 1,163
-------
APPAREL/TEXTILES (1.4%)
Designer Holdings Limited* 30,000 784
Tommy Hilfiger* 8,790 521
-------
1,305
-------
AUTOMOTIVE (0.9%)
Harley-Davidson 21,100 907
-------
BANKS (0.7%)
NationsBank 7,800 678
-------
BEAUTY PRODUCTS (3.3%)
Alberto-Culver, Cl B 12,550 544
Colgate-Palmolive 11,050 960
Procter & Gamble 17,190 1,676
-------
3,180
-------
BROADCASTING, NEWSPAPERS &
ADVERTISING (0.8%)
Cox Communications* 42,350 778
-------
CHEMICALS (1.8%)
E.I. duPont de Nemours 10,740 948
Monsanto 20,520 749
------
1,697
------
COMMUNICATIONS EQUIPMENT (5.2%)
ADC Telecommunications* 11,420 731
Andrew* 15,645 780
Ascend Communications* 10,580 700
Cascade Communications* 16,024 1,306
Pairgain Technologies* 7,770 607
Picturetel* 12,930 456
Ultratech Stepper* 24,390 460
------
5,040
------
COMPUTERS & SERVICES (2.8%)
Compaq Computer* 12,300 789
HBO & Company 14,460 965
IBM 7,860 979
------
2,733
------
Market
Value
Shares (000)
- -------------------------------------------------------------------------------
DRUGS (9.5%)
American Home Products 26,200 $ 1,670
Amgen* 21,330 1,346
Biogen* 6,490 493
Eli Lilly 22,950 1,480
Genetics Institute* 7,650 532
Merck 23,800 1,675
Pfizer 15,000 1,187
Sigma Aldrich 12,270 699
-------
9,082
-------
ELECTRICAL SERVICES (0.8%)
AES 18,840 742
-------
ENVIRONMENTAL SERVICES (2.2%)
USA Waste Services* 23,430 738
WMX Technologies 41,900 1,377
-------
2,115
-------
FINANCIAL SERVICES (1.4%)
Associates First Capital 20,620 845
Household International 5,550 456
-------
1,301
-------
FOOD, BEVERAGE & TOBACCO (5.1%)
Campbell Soup 10,440 814
Coca-Cola 30,460 1,550
CPC International 12,910 967
Robert Mondavi* 21,840 715
Starbucks 26,290 867
-------
4,913
-------
GAS/NATURAL GAS (0.9%)
Williams 17,570 896
-------
HOTELS & LODGING (1.5%)
HFS* 11,600 776
Hilton Hotels 24,320 690
-------
1,466
-------
HOUSEHOLD PRODUCTS (2.7%)
Clorox 11,710 1,123
General Electric 16,130 1,468
-------
2,591
-------
<PAGE>
STATEMENT OF NET ASSETS TURNER FUNDS
September 30, 1996
Market
GROWTH EQUITY FUND Value
(Continued) Shares (000)
- -------------------------------------------------------------------------------
INSURANCE (3.5%)
American International Group 8,535 $ 860
Pacificare Health Systems, Cl B* 13,990 1,210
SunAmerica 19,820 684
Total Renal Care Holdings* 16,200 644
-------
3,398
-------
MACHINERY (1.7%)
Caterpillar 9,430 711
Minnesota Mining &
Manufacturing 13,120 917
-------
1,628
-------
MEDICAL PRODUCTS & SERVICES (5.5%)
Guidant 22,850 1,262
Health Management Associates,
Class A* 19,840 493
Healthsouth Rehabilitation* 33,140 1,272
Medtronic 10,710 687
Phycor* 22,750 866
Renal Treatment Centers* 20,570 684
-------
5,264
-------
MISCELLANEOUS BUSINESS SERVICES (13.0%)
Altera* 15,500 785
BMC Software* 12,750 1,014
Cisco Systems* 27,000 1,676
Computer Associates 13,650 816
CUC International* 19,000 758
Electronic Arts* 18,160 679
First Data 8,510 695
Fore Systems* 19,520 808
Microsoft 7,260 957
Oracle Systems 29,470 1,254
Parametric Technology* 16,120 796
Peoplesoft* 8,860 738
Sun Microsystems 14,340 891
Xylan 12,190 661
-------
12,528
-------
MISCELLANEOUS CONSUMER SERVICES (1.6%)
Accustaff 13,820 358
Service International 39,600 1,198
-------
1,556
-------
Market
Value
Shares (000
- -------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING (1.2%)
International Game Technology 21,200 $ 435
Rmi Titanium* 27,200 687
------
1,122
------
PAPER & PAPER PRODUCTS (0.8%)
Kimberly-Clark 8,670 764
------
PETROLEUM & FUEL PRODUCTS (1.7%)
Flores & Rucks* 11,900 460
Houston Exploration* 27,580 462
Louisiana Land & Exploration 13,480 709
------
1,631
------
PHOTOGRAPHIC EQUIPMENT &
SUPPLIES (0.7%)
Xerox 12,340 662
------
PRINTING & PUBLISHING (0.7%)
Gannett 9,470 666
------
PROFESSIONAL SERVICES (1.9%)
Gartner Group* 26,330 895
Paychex 16,500 957
------
1,852
------
RETAIL (8.3%)
American Stores 19,650 786
Borders Group 14,650 546
Boston Market* 27,000 952
Corporate Express* 10,990 427
McDonald's 19,800 938
PepsiCo 30,280 855
PetSmart* 28,120 728
Saks Holdings* 22,300 780
Staples 24,060 534
Walgreen 26,140 967
Williams Sonoma* 15,480 439
------
7,952
-------
RUBBER & PLASTIC (1.1%)
Nike, Cl B 9,000 1,093
------
<PAGE>
STATEMENT OF NET ASSETS TURNER FUNDS
September 30, 1996
Shares/Face Market
GROWTH EQUITY FUND Amount Value
(Concluded) (000) (000)
- -------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS (3.6%)
Intel 11,100 $1,059
Microchip Technology* 12,250 458
National Semiconductor* 24,170 486
Texas Instruments 14,350 791
Xilinx 18,060 614
------
3,408
------
STEEL & STEEL WORKS (0.8%)
Engelhard 32,900 757
------
TELEPHONES & TELECOMMUNICATION (4.9%)
Airtouch Communications 22,880 632
Cincinnati Bell 11,790 625
LCI International 25,570 805
Lucent Technologies 25,760 1,182
Teleport Communications Group* 27,350 646
WorldCom 37,650 805
------
4,695
------
WHOLESALE (5.9%)
Gillette 22,310 1,609
Johnson & Johnson 28,170 1,444
Philip Morris 13,360 1,199
Safeway 33,380 1,423
------
5,675
------
TOTAL COMMON STOCKS
(Cost $79,917) 96,497
------
REPURCHASE AGREEMENT (0.7%)
Lehman Brothers
5.33%, dated 09/30/96, matures
10/01/96, repurchase price
$694,523 (collateralized by
U.S. Treasury Note, par value
$716,859, 6.00%, matures 09/30/98:
market value $715,740) $694 694
------
TOTAL REPURCHASE AGREEMENT
(Cost $694) 694
------
Market
Value
(000)
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.1%)
(Cost $80,611) $97,191
-------
OTHER ASSETS AND LIABILITIES, NET (-1.1%) (1,027)
-------
NET ASSETS:
Portfolio Shares (unlimited authorization --
no par value) based on 5,646,884
outstanding shares of beneficial
interest 57,709
Accumulated net realized gain
on investments 21,875
Net unrealized appreciation
on investments 16,580
-------
TOTAL NET ASSETS (100.0%) $96,164
=======
Net Asset Value, Offering and Redemption
Price Per Share $ 17.03
=======
* NON-INCOME PRODUCING SECURITY
CL-CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
STATEMENT OF NET ASSETS TURNER FUNDS
September 30, 1996
Market
Value
SMALL CAP FUND Shares (000)
- -------------------------------------------------------------------------------
COMMON STOCKS (97.5%)
AIR TRANSPORTATION (0.6%)
Midwest Express* 14,602 $ 436
-------
APPAREL/TEXTILES (1.6%)
Nautica Enterprises* 19,186 619
Tommy Hilfiger* 7,835 464
-------
1,083
-------
BANKS (2.3%)
Astoria Financial* 18,270 530
Bank United Corporation, Cl A* 24,600 612
Washington Federal 16,980 401
-------
1,543
-------
BEAUTY PRODUCTS (0.9%)
Alberto-Culver, Cl B 14,375 624
-------
BROADCASTING, NEWSPAPERS &
ADVERTISING (1.8%)
International Family
Entertainment* 17,591 288
Snyder Communications* 22,410 431
Young Broadcasting, Cl A 14,900 492
-------
1,211
-------
CHEMICALS (1.2%)
GTS Duratek 14,300 235
International Specialty Products 24,745 247
W.H. Brady 12,300 309
-------
791
-------
COMMUNICATIONS EQUIPMENT (4.3%)
Omnipoint 16,503 481
Pairgain Technologies* 10,112 790
Picturetel* 13,554 478
Stanford Telecommunications 12,600 630
Ultratech Stepper* 28,769 543
-------
2,922
-------
COMPUTERS & SERVICES (2.4%)
HCIA 9,250 555
National Techteam 16,170 439
Verifone 13,542 606
-------
1,600
-------
Market
Value
Shares (000)
- -------------------------------------------------------------------------------
CONCRETE & MINERAL PRODUCTS (0.5%)
Ferro 11,800 $ 319
------
DRUGS (2.0%)
Medicis Pharmaceutical, Cl A* 14,350 692
Parexel International 10,165 640
------
1,332
------
ENERGY & POWER (0.7%)
Calenergy* 15,586 497
------
ENTERTAINMENT (0.7%)
Regal Cinemas* 20,325 508
------
FINANCIAL SERVICES (6.8%)
Aames Financial 14,050 708
Amresco 27,150 621
ContiFinancial* 15,167 432
Equitable of Iowa 3,690 153
First USA Paymentech* 16,900 687
Hambrecht and Quist* 14,595 283
Imperial Credit Industries* 18,962 694
National Surgery Centers 16,728 468
The Money Store 20,671 548
------
4,594
------
FOOD, BEVERAGE & TOBACCO (1.5%)
Einstein / Noah Bagel* 13,900 427
Robert Mondavi* 16,966 556
------
983
------
INSURANCE (5.8%)
American Travelers 2,500 83
CMAC Investment 10,458 664
Compdent* 11,499 434
Executive Risk 13,920 536
Hcc Insurance Holdings 20,370 588
Protective Life 14,100 532
Total Renal Care Holdings* 14,957 595
United Dental Care* 13,135 475
------
3,907
------
LUMBER & WOOD PRODUCTS (0.8%)
Champion Enterprises 24,500 554
------
MACHINERY (0.5%)
Wyman-Gordan* 14,940 342
------
<PAGE>
STATEMENT OF NET ASSETS TURNER FUNDS
September 30, 1996
Market
SMALL CAP FUND Value
(Continued) Shares (000)
- -------------------------------------------------------------------------------
MANUFACTURING (0.7%)
West Marine* 14,200 $ 469
-------
MEASURING DEVICES (2.0%)
Uniphase 15,600 659
Waters 21,603 708
-------
1,367
-------
MEDICAL PRODUCTS & SERVICES (0.9%)
Orthodontic Centers of America* 29,842 608
-------
METALS & MINING (0.9%)
Titanium Metals 20,800 603
-------
MISCELLANEOUS BUSINESS SERVICES (17.4%)
Apac Teleservices 11,022 565
Aspen Technology 8,496 576
Concord EFS* 24,469 630
Data Processing Resources 13,219 291
Forte Software 9,850 387
HNC Software 13,526 541
Lanvision Systems 17,250 216
Medic Computer Systems 13,940 507
National Data 12,944 565
National Processing* 29,980 585
Nova 18,830 621
PMT Services 32,172 651
Rational Software 20,500 700
Sapient 11,400 507
Security Dynamics Technology 8,913 640
Sitel 14,562 648
Sykes Enterprises 6,925 334
Transaction Systems Architects* 10,600 448
Transition Systems* 22,400 470
Vincam Group* 14,400 551
Wind River Systems* 15,430 683
Xylan 12,000 651
--------
11,767
--------
MISCELLANEOUS CONSUMER SERVICES (3.3%)
Accustaff 26,200 678
Career Horizons* 13,900 540
Romac International* 19,050 581
Sunrise Assisted Living* 15,100 423
-------
2,222
Market
Value
Shares (000)
- -------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING (1.9%)
Buckeye Cellulose 21,942 $ 570
Rmi Titanium* 27,600 697
-------
1,267
-------
PAPER & PAPER PRODUCTS (1.6%)
Fort Howard 23,703 578
NUCO2* 24,404 506
-------
1,084
-------
PETROLEUM & FUEL PRODUCTS (5.0%)
Falcon Drilling* 19,619 510
Flores & Rucks* 16,100 622
Global Industries 24,700 392
Houston Exploration* 36,820 617
Nabors Industries* 25,139 343
Oceaneering International* 24,840 422
Pride Petroleum Service* 32,250 456
-------
3,362
-------
PETROLEUM REFINING (0.7%)
Polymer Group* 32,340 453
-------
PROFESSIONAL SERVICES (3.4%)
ABR Information Services* 8,568 617
Apollo Group, Cl A* 14,723 394
Equity International* 13,850 440
International Network Services* 10,570 381
RTW* 17,117 494
-------
2,326
-------
RAILROADS (2.1%)
Coach USA* 17,600 471
Genessee and Wyoming* 16,850 459
Wisconsin Central Transportation* 13,161 472
-------
1,402
-------
RETAIL (4.8%)
Abercrombie & Fitch, Cl A* 18,450 424
Borders Group 16,950 631
Gargoyles* 15,000 308
Hot Topic* 11,500 272
Just for Feet* 11,475 575
Vons* 12,850 551
Zale* 20,400 446
-------
3,207
-------
<PAGE>
STATEMENT OF NET ASSETS TURNER FUNDS
September 30, 1996
Market
SMALL CAP FUND Shares Value
(Concluded) (000) (000)
- -------------------------------------------------------------------------------
RUBBER & PLASTIC (0.8%)
Sealed Air* 14,593 $ 544
-------
SEMI-CONDUCTORS/INSTRUMENTS (3.6%)
BMC Industries* 20,130 576
Computer Products* 26,090 571
Microchip Technology* 14,700 549
Sanmina* 12,700 511
Trident International* 13,500 228
-------
2,435
-------
SPECIALTY MACHINERY (1.1%)
U.S. Filter* 21,365 729
-------
TECHNOLOGY, GENERAL (0.9%)
Tel-Save Holdings* 20,500 589
-------
TELEPHONES & TELECOMMUNICATION (6.3%)
ACC Corporation 10,645 503
Boston Communications Group* 22,200 361
Brooks Fiber Properties* 16,950 487
Icg Communications* 28,450 597
Intermedia Communications
of Florida* 21,063 616
IXC Communications* 19,500 400
Lcc International* 16,000 298
Mcleod* 16,950 559
Telco Communications Group* 21,900 405
-------
4,226
-------
TESTING LABORATORIES (0.9%)
Quintiles Transnational 8,658 634
-------
WHOLESALE (4.8%)
Applied Analytical Industries* 13,850 334
Citrix Systems* 14,116 704
Hughes Supply 17,010 629
North Face* 16,000 452
Physician Sales & Services 22,808 536
US Office Products 15,426 553
-------
3,208
-------
TOTAL COMMON STOCKS
(Cost $57,085) 65,748
-------
Face Market
Amount Value
(000) (000)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (6.4%)
Lehman Brothers
5.33%, dated 09/30/96, matures
10/01/96, repurchase price
$4,279,988 (collateralized by
U.S. Treasury Note, par value
$4,419,201, 6.00%,
matures 09/30/98: market
value $4,412,274) $4,279 $ 4,279
-------
TOTAL REPURCHASE AGREEMENT
(Cost $4,279) 4,279
-------
TOTAL INVESTMENTS (103.9%)
(Cost $61,364) 70,027
-------
OTHER ASSETS AND LIABILITIES, NET (-3.9%) (2,602)
-------
NET ASSETS:
Portfolio Shares (unlimited authorization
-- no par value) based on 2,914,724
outstanding shares of beneficial
interest 57,074
Accumulated net realized gain
on investments 1,688
Net unrealized appreciation
on investments 8,663
-------
TOTAL NET ASSETS (100.0%) $67,425
=======
Net Asset Value, Offering and Redemption
Price Per Share $23.13
=======
* NON-INCOME PRODUCING SECURITY
CL-CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
STATEMENT OF OPERATIONS TURNER FUNDS
<TABLE>
<CAPTION>
<S> <C> <C>
GROWTH EQUITY SMALL CAP
FUND FUND
-------------- ---------------
FOR THE ELEVEN FOR THE ELEVEN
MONTH PERIOD MONTH PERIOD
ENDED 9/30/96 ENDED 9/30/96
(000) (000)
- --------------------------------------------------------------------------------------------------------------------
Investment Income:
Dividends ................................................................... $ 924 $ 21
Interest .................................................................... 41 84
- ---------------------------------------------------------------------------------------------------------------------
Total Investment Income.................................................... 965 105
- ---------------------------------------------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees .................................................... 667 280
Investment Advisory Fee Waiver .............................................. -- (83)
Administrator Fees .......................................................... 137 69
Custodian Fees .............................................................. 10 21
Transfer Agent Fees ......................................................... 12 12
Professional Fees ........................................................... 22 16
Trustee Fees ................................................................ 6 5
Registration Fees ........................................................... 38 17
Pricing Fees ................................................................ 2 --
Printing Expense ............................................................ 18 8
Amortization of Deferred Organizational Costs ............................... 3 3
Insurance and Other Fees .................................................... 27 2
- ---------------------------------------------------------------------------------------------------------------------
Total Expenses ............................................................ 942 350
Directed Brokerage ........................................................ (106) --
- ---------------------------------------------------------------------------------------------------------------------
Net Expenses ............................................................ 836 350
- ---------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) .......................................... 129 (245)
- ---------------------------------------------------------------------------------------------------------------------
Net Realized Gain From Securities Sold ...................................... 21,978 1,936
Excess of Market Value Over Book Value of Securities Distributed Upon
Redemption of Shares ....................................................... -- 1,924
- ---------------------------------------------------------------------------------------------------------------------
Net Realized Gain on Investments ............................................. 21,978 3,860
Net Unrealized Appreciation (Depreciation) of Investment Securities ......... (3,868) 5,659
- ---------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments ............................. 18,110 9,519
- ---------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations ........................ $18,239 $9,274
=====================================================================================================================
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS TURNER FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
GROWTH EQUITY SMALL CAP
FUND FUND
------------------------ ------------------------
FOR THE FOR THE FOR THE FOR THE
ELEVEN MONTH TWELVE MONTH ELEVEN MONTH TWELVE MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
9/30/96 10/31/95 9/30/96 10/31/95
(000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net Investment Income (Loss) ....................... $ 129 $ 935 $ (245) $ (56)
Net Realized Gain on Securities Sold ............... 21,978 11,270 1,936 1,005
Excess Market Value Over Book Value of Securities
Distributed Upon Redemption of Shares ............. -- -- 1,924 --
Net Unrealized Appreciation (Depreciation) of
Investment Securities ............................ (3,868) 11,773 5,659 2,573
- ---------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations ................................ 18,239 23,978 9,274 3,522
- ---------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income .............................. (132) (1,022) -- --
Realized Capital Gain .............................. (5,807) -- (925) --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions .............................. (5,939) (1,022) (925) --
- ---------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ........................ 14,623 33,135 66,572 5,250
Proceeds from Shares Issued in Lieu of
Cash Distributions ............................... 5,650 909 904 --
Cost of Shares Redeemed ............................ (52,228) (54,140) (21,472) (506)
- ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Capital Share Transactions ..................... (31,955) (20,096) 46,004 4,744
- ---------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets......... (19,655) 2,860 54,353 8,266
- ---------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period .............................. 115,819 112,959 13,072 4,806
- ---------------------------------------------------------------------------------------------------------------------
End of Period .................................... $ 96,164 $115,819 $67,425 $13,072
=====================================================================================================================
Shares Issued and Redeemed:
Issued ............................................. 946 2,600 3,120 407
Issued in Lieu of Cash Distributions ............... 394 70 55 --
Redeemed ........................................... (3,428) (3,998) (1,073) (35)
- ---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Share Transactions ....... (2,088) (1,328) 2,102 372
- ---------------------------------------------------------------------------------------------------------------------
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS TURNER FUNDS
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Realized and Net Net
Asset Net Unrealized Distributions Distributions Asset Assets
Value Investment Gains or from Net from Value End
Beginning Income (Losses) on Investment Capital End of Period
of Period (Loss) Investments Income Gains of Period Total Return(3) (000)
---------- -------- -------------- ---------- ---------- ---------- ---------------- ----------
- -------------------
GROWTH EQUITY FUND
- -------------------
1996 $14.97 0.02 2.91 (0.02) (0.85) $17.03 20.61% $ 96,164
1995 $12.46 0.10 2.52 (0.11) -- $14.97 21.15% $115,819
1994 $13.12 0.10 (0.66) (0.10) -- $12.46 (4.28)% $112,959
1993 $10.40 0.09 2.72 (0.09) -- $13.12 27.08% $ 53,327
1992(1) $10.00 0.03 0.40 (0.03) -- $10.40 6.95% $ 7,781
- -------------------------------------------------------------------------------------------------------------------
SMALL CAP FUND
- -------------------------------------------------------------------------------------------------------------------
1996 $16.08 (0.08) 8.17 -- (1.04) $23.13 52.90% $ 67,425
1995 $10.90 (0.06) 5.24 -- -- $16.08 47.52% $ 13,072
1994(2) $10.00 (0.02) 0.92 -- -- $10.90 12.35% $ 4,806
Ratio of
Ratio of Net Ratio of Investment
Investment Expenses Income(Loss) to
Ratio Income to Average Average
of Expenses (Loss) Net Assets Net Assets Portfolio Average
to Average to Average (Excluding (Excluding Turnover Commission
Net Assets Net Assets Waivers) Waivers) Rate Rate (4)
------------ ------------ -------------- ---------- ------------ ------------
- -------------------
GROWTH EQUITY FUND
- -------------------
1996 1.06%+* 0.03%+* 1.06%+* 0.03%+* 147.79% $0.0600
1995 1.03%+ 0.69%+ 1.03%+ 0.69%+ 177.86% --
1994 0.95% 0.86% 1.08% 0.73% 164.81% --
1993 1.00% 0.80% 1.52% 0.28% 88.35% --
1992(1) 1.44%* 0.73%* 2.55%* (0.38)%* 205.00% --
- ---------------------------------------------------------------------------------------------
SMALL CAP FUND
- ---------------------------------------------------------------------------------------------
1996 1.25%* (0.88)%* 1.54%* (1.17)%* 149.00% $0.0600
1995 1.25% (0.68)% 2.39% (1.82)% 183.49% --
1994(2) 1.09%* (0.27)%* 4.32%* (3.50)%* 173.92% --
<FN>
* Annualized
(1)The Turner Growth Equity Fund commenced operations on March 11, 1992.
(2)The Turner Small Cap Fund commenced operations on February 7, 1994.
(3)Returns are for the period indicated and have not been annualized.
(4)Average commission rate paid per share for the security purchases and sales
made during the period.
+ The Ratios of Expenses to Average Net Assets and Net Investment Income to
Average Net Assets do not reflect the Advisor's use of arrangements whereby
certain broker-dealers have agreed to pay certain expenses of the Turner
Growth Equity Fund in return for the direction of a percentage of the Fund's
brokerage transactions. As a result of these arrangements, the Ratio of
Expenses to Average Net Assets was 0.94% for both the year ended 10/31/95
and the eleven month period ended 9/30/96, and the Ratios of Net Investment
Income to Average Net Assets were 0.78% and 0.15% for the same periods
described.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS TURNER FUNDS
September 30, 1996
1. ORGANIZATION:
THE TURNER FUNDS, INC. (the "Trust") a Massachusetts' business trust, is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company with four funds: the Turner
Small Cap Fund ( the "Small Cap Fund"), the Turner Growth Equity Fund (the
"Growth Equity Fund"), the Turner Mid Cap Fund, and the Turner Fixed Income
Fund. These statements relate only to the Small Cap Fund and Growth Equity Fund
(the "Funds"). As of September 30, 1996, the Turner Mid Cap and Turner Fixed
Income Funds had not commenced operations. The assets of each fund are
segregated, and a shareholder's interest is limited to the fund in which shares
are held. The Funds' prospectus provides a description of each Fund's investment
objectives, policies and strategies.
On April 19, 1996, the shareholders of the Advisors' Inner Circle Turner Small
Cap Fund and the Advisors' Inner Circle Growth Equity Fund (the Advisors' Inner
Circle Trust) and together "the Turner Funds" voted to approve a tax-free
reorganization of the Turner Funds through a transfer of all the assets and
liabilities of the Turner Funds to the Turner Small Cap and Turner Growth Equity
Funds portfolios. In connection with the reorganization, the Funds have changed
their fiscal year end from October 31, 1996 to September 30, 1996.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies followed by
the Funds.
SECURITY VALUATION -- Investments in equity securities which are traded on
a national exchange (or reported on the NASDAQ national market system) are
stated at the last quoted sales price if readily available for such equity
securities on each business day; other equity securities traded in the
over-the-counter market and listed equity securities for which no sale was
reported on that date are stated at the last quoted bid price. Debt
obligations exceeding sixty days to maturity for which market quotations
are readily available are valued at the most recently quoted bid price.
Debt obligations with sixty days or less remaining until maturity may be
valued at their amortized cost, which approximates market value.
FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a
regulated investment company by complying with the appropriate provisions
of the Internal Revenue Code of 1986, as amended. Accordingly, no
provision for Federal income taxes is required.
SECURITY TRANSACTIONS AND RELATED INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Dividend income is recognized on the ex-dividend date, and interest income
is recognized on the accrual basis. Costs used in determining realized
gains and losses on the sales of investment securities are those of the
specific securities sold during the respective holding period.
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated on each business day, by dividing the total value of the Fund's
assets, less liabilities, by the number of shares outstanding.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in the event of default of the counter-
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) TURNER FUNDS
September 30, 1996
party. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding,
realization of the collateral by the Funds may be delayed or limited.
OTHER -- Expenses that are directly related to one of the Funds are
charged to that Fund. Other operating expenses of
the Trust are
prorated to the Funds on the basis of relative daily net assets.
Distributions from net investment income are declared and paid to
Shareholders on a quarterly basis. Any net realized capital gains on sales
of securities are distributed to Shareholders at least annually.
Dividends from net investment income and distributions from net realized
capital gains are determined in accordance with U.S. federal income tax
regulations, which may differ from those amounts determined under generally
accepted accounting principals. These book/tax differences are either
temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to paid-in-capital or accumulated
net realized gain, as appropriate, in the period that the differences
arise. Accordingly, the Turner Small Cap Fund's $245,351 net operating loss
has been reclassified to offset short-term capital gains.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
3. TRANSACTIONS WITH AFFILIATES:
Certain officers and trustees of the Trust are also officers of SEI Fund
Resources (the "Administrator") and/or SEI Financial Services Company (the
"Distributor"). Such officers and trustees are paid no fees by the Trust for
serving as officers and trustees of the Trust.
4. ADMINISTRATION, SHAREHOLDER SERVICING AND DISTRIBUTION AGREEMENTS:
Prior to April 30, 1996, the Advisors' Inner Circle Trust and the Administrator
were parties to an Administration Agreement dated November 14, 1991, as amended
and restated on May 17, 1994, under which the Administrator provided management,
and administrative services for an annual fee subject to certain minimums, of
.20% of the average daily net assets of each of the Funds up to $75 million and
.15% of such assets in excess of $75 million.
As of April 30, 1996, the Turner Trust and the Administrator entered into an
agreement under which the Administrator provides management and administrative
services for an annual fee of .12% of the average daily net assets of each of
the Funds up to $75 million, .10% on the next $75 million, .09% on the next $150
million, .08% on the next $300 million and .075% of such assets in excess on
$600 million.
The Trust had directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the eleven month period ended September 30, 1996,
the Growth Equity Fund's expenses were reduced by $105,611 under this
arrangement.
DST Systems, Inc., (the "Transfer Agent") serves as the transfer agent and
dividend disbursing agent for the Funds under a transfer agency agreement with
the Trust.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) TURNER FUNDS
September 30, 1996
The Trust and the Distributor are parties to a Distribution Agreement dated
April 30, 1996. The Distributor receives no fees for its distribution services
under this agreement.
5. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS:
The Trust and Turner Investment Partners, Inc. (the "Adviser") are parties to an
Investment Advisory Agreement dated April 30, 1996, under which the Adviser
receives an annual fee equal to .75% of the average daily net assets of the
Growth Equity Fund and 1.00% of the average daily net assets of the Small Cap
Fund. The Adviser has voluntarily agreed to waive all or a portion of its fees
(and to reimburse the Fund's expenses) in order to limit operating expenses to
not more than 1.25% of the average daily net assets of the Small Cap Portfolio.
Fee waivers and expense reimbursements are voluntary and may be terminated at
any time.
CoreStates Bank, N.A. acts as custodian (the "Custodian") for the Funds. Fees of
the Custodian are being paid on the basis of the net assets of the Funds. The
Custodian plays no role in determining the investment policies of the Funds or
which securities are to be purchased or sold in the Funds.
6. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the eleven month period ended September 30, 1996 are
as follows:
GROWTH EQUITY SMALL CAP
FUND FUND
(000) (000)
----------------- --------------
Purchases
Government $ 0 $ 0
Other 144,150 89,232
Sales
Government $ 0 $ 0
Other 178,968 45,663
At September 30, 1996, the total cost of securities and the net realized gains
or losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Funds
at September 30, 1996, are as follows:
GROWTH EQUITY SMALL CAP
FUND FUND
(000) (000)
---------------- --------------
Aggregate gross unrealized
appreciation $18,009 $10,093
Aggregate gross unrealized
depreciation (1,429) (1,430)
------- -------
Net unrealized appreciation $16,580 $ 8,663
======= =======
During the eleven month period ended September 30, 1996, the Turner Small Cap
Portfolio transferred securities with a market value of $5,857,000 (cost basis
$3,933,000) to shareholders in order to meet Fund share redemptions. This
security transfer resulted in a non-taxable realized gain to the portfolio of
$1,924,000 which is included in paid in capital, a component of equity.
<PAGE>
NOTICE TO SHAREHOLDERS
OF
TURNER FUNDS
(UNAUDITED)
Shareholder's Voting Results
- ----------------------------
There was a special meeting of shareholders on April 19, 1996 for the
shareholders of the Turner Growth Equity Fund and the Turner Small Cap Fund to
approve an Agreement and Plan of Reorganization and Liquidation between The
Advisor's Inner Circle Fund, on behalf of Turner Growth Equity Portfolio and
Turner Small Cap Portfolio, and the Turner Funds, on behalf of the Growth
Equity Fund and the Small Cap Fund.
Growth Equity Fund
Proposal Shares Voted % Voted % of Total
-------- ------------ ------- ----------
For 3,617,282 97.66% 52.60%
Against 0 0.00% 0.00%
Abstain 86,565 2.34% 1.26%
Small Cap Fund
Proposal Shares Voted % Voted % of Total
-------- ------------ ------- ----------
For 439,305 99.96% 56.47%
Against 0 0.00% 0.00%
Abstain 171 0.04% 0.02%
<PAGE>
NOTICE TO SHAREHOLDERS
OF
TURNER FUNDS
(UNAUDITED)
For the shareholders that do not have a September 30, 1996 taxable year end,
this notice is for informational purposes only. For shareholders with a
September 30, 1996 taxable year end, please consult your tax adviser as to the
pertinence of this notice.
For the fiscal year ended September 30, 1996, the portfolio is designating long
term capital gains, qualifying dividends and exempt interest income with regard
to distributions paid during the year as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(A) (B)
LONG TERM ORDINARY (C)
CAPITAL GAIN INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS)
---------- ---------------- ---------------- ----------------
Growth Equity Fund .............. 64% 36% 100%
Small Capitalization Fund ....... 18% 82% 100%
(D) (E) (F)
QUALIFYING TAX EXEMPT FOREIGN
PORTFOLIO DIVIDENDS (1) INTEREST TAX CREDIT
---------- ---------------- ---------------- ----------------
Growth Equity Fund .............. 5% 0% 0%
Small Capitalization Fund ....... 1% 0% 0%
</TABLE>
- --------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of the portfolio's distributions.
** Items (D),(E) and (F) are based on a percentage of ordinary income
distributions of the portfolio.
