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Trust:
TURNER FUNDS
Funds:
TURNER GROWTH EQUITY FUND
TURNER FIXED INCOME FUND
TURNER SMALL CAP FUND
Investment Adviser:
TURNER INVESTMENT PARTNERS, INC.
This Statement of Additional Information is not a prospectus and relates only to
the Turner Growth Equity Fund (the "Growth Equity Fund"), Turner Fixed Income
Fund (the "Fixed Income Fund") and Turner Small Cap Fund (the "Small Cap Fund")
(each a "Fund" and, together, the "Funds"). It is intended to provide
additional information regarding the activities and operations of the Turner
Funds (the "Trust") and the Funds and should be read in conjunction with the
Funds' Prospectus dated April 30, 1996. The Prospectus may be obtained without
charge by calling 1-800-224-6312.
TABLE OF CONTENTS
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THE TRUST............................................................ S-2
DESCRIPTION OF PERMITTED INVESTMENTS................................. S-2
INVESTMENT LIMITATIONS............................................... S-7
THE ADVISER.......................................................... S-9
THE ADMINISTRATOR.................................................... S-10
THE DISTRIBUTOR...................................................... S-11
TRUSTEES AND OFFICERS OF THE TRUST................................... S-11
COMPUTATION OF YIELD AND TOTAL RETURN................................ S-14
PURCHASE AND REDEMPTION OF SHARES.................................... S-15
DETERMINATION OF NET ASSET VALUE..................................... S-15
TAXES................................................................ S-15
PORTFOLIO TRANSACTIONS............................................... S-17
DESCRIPTION OF SHARES................................................ S-18
SHAREHOLDER LIABILITY................................................ S-18
LIMITATION OF TRUSTEES' LIABILITY.................................... S-19
5% SHAREHOLDERS...................................................... S-19
EXPERTS.............................................................. S-19
FINANCIAL INFORMATION................................................ S-19
APPENDIX............................................................. A-1
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April 30, 1996
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THE TRUST
This Statement of Additional Information relates only to the Turner Growth
Equity Fund (the "Growth Equity Fund"), Turner Fixed Income Fund (the "Fixed
Income Fund") and Turner Small Cap Fund (the "Small Cap Fund") (each a "Fund"
and, together, the "Funds"). Each Fund is a separate series of the Turner Funds
(the "Trust"), a diversified, open-end management investment company established
as a Massachusetts business trust under a Declaration of Trust dated January 26,
1996. The Declaration of Trust permits the Trust to offer separate series
("portfolios") of shares of beneficial interest ("shares"). Each portfolio is a
separate mutual fund, and each share of each portfolio represents an equal
proportionate interest in that portfolio. See "Description of Shares." No
investment in shares of a portfolio should be made without first reading that
portfolio's prospectus. Capitalized terms not defined herein are defined in the
Prospectus offering shares of the Funds.
DESCRIPTION OF PERMITTED INVESTMENTS
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time and at a specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume a position in a
futures contract at a specified exercise price during the term of the option. A
Fund may use futures contracts and related options for bona fide hedging
purposes, to offset changes in the value of securities held or expected to be
acquired or be disposed of, to minimize fluctuations in foreign currencies, or
to gain exposure to a particular market or instrument. A Fund will minimize the
risk that it will be unable to close out a futures contract by only entering
into futures contracts which are traded on national futures exchanges. In
addition, a Fund will only sell covered futures contracts and options on futures
contracts.
Stock and bond index futures are futures contracts for various stock and bond
indices that are traded on registered securities exchanges. Stock and bond index
futures contracts obligate the seller to deliver (and the purchaser to take) an
amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock or bond index at the close of the last trading day
of the contract and the price at which the agreement is made.
Stock and bond index futures contracts are bilateral agreements pursuant to
which two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock or bond index
value at the close of trading of the contract and the price at which the futures
contract is originally struck. No physical delivery of the stocks or bonds
comprising the Index is made; generally contracts are closed out prior to the
expiration date of the contracts.
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No price is paid upon entering into futures contracts. Instead, a Fund would be
required to deposit an amount of cash or U.S. Treasury securities known as
"initial margin." Subsequent payments, called "variation margin," to and from
the broker, would be made on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The margin is in the nature of
a performance bond or good-faith deposit on a futures contract.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures; (3) there may not be a liquid secondary market
for a futures contract or option; (4) trading restrictions or limitations may be
imposed by an exchange; and (5) government regulations may restrict trading in
futures contracts and futures options.
A Fund may enter into futures contracts and options on futures contracts traded
on an exchange regulated by the Commodities Futures Trading Commission ("CFTC"),
as long as, to the extent that such transactions are not for "bona fide hedging
purposes," the aggregate initial margin and premiums on such positions
(excluding the amount by which such options are in the money) do not exceed 5%
of a Fund's net assets. A Fund may buy and sell futures contracts and related
options to manage its exposure to changing interest rates and securities prices.
Some strategies reduce a Fund's exposure to price fluctuations, while others
tend to increase its market exposure. Futures and options on futures can be
volatile instruments and involve certain risks that could negatively impact a
Fund's return.
In order to avoid leveraging and related risks, when a Fund purchases futures
contracts, it will collateralize its position by depositing an amount of cash or
liquid, high grade debt securities, equal to the market value of the futures
positions held, less margin deposits, in a segregated account with its
custodian. Collateral equal to the current market value of the futures position
will be marked to market on a daily basis.
INVESTMENT COMPANY SHARES
Each Fund may invest in shares of other investment companies, to the extent
permitted by applicable law and subject to certain restrictions. These
investment companies typically incur fees that are separate from those fees
incurred directly by the Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees, in addition to paying Fund
expenses. Under applicable regulations, a Fund is prohibited from acquiring the
securities of another investment company if, as a result of such acquisition:
(1) the Fund owns more than 3% of the total voting stock of the
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other company; (2) securities issued by any one investment company represent
more than 5% of the Fund's total assets; or (3) securities (other than treasury
stock) issued by all investment companies represent more than 10% of the total
assets of the Fund. See also "Investment Limitations."
OPTIONS
A put option gives the purchaser of the option the right to sell, and the writer
of the option the obligation to buy, the underlying security at any time during
the option period. A call option gives the purchaser of the option the right to
buy, and the writer of the option the obligation to sell, the underlying
security at any time during the option period. The premium paid to the writer is
the consideration for undertaking the obligations under the option contract. The
initial purchase (sale) of an option contract is an "opening transaction." In
order to close out an option position, a Fund may enter into a "closing
transaction," which is simply the sale (purchase) of an option contract on the
same security with the same exercise price and expiration date as the option
contract originally opened. If a Fund is unable to effect a closing purchase
transaction with respect to an option it has written, it will not be able to
sell the underlying security until the option expires or the Fund delivers the
security upon exercise.
A Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to anticipate an increase in
the market value of securities that the Fund may seek to purchase in the future.
A Fund purchasing put and call options pays a premium therefor. If price
movements in the underlying securities are such that exercise of the options
would not be profitable for the Fund, loss of the premium paid may be offset by
an increase in the value of the Fund's securities or by a decrease in the cost
of acquisition of securities by the Fund.
A Fund may write covered call options as a means of increasing the yield on its
fund and as a means of providing limited protection against decreases in its
market value. When a fund sells an option, if the underlying securities do not
increase or decrease to a price level that would make the exercise of the option
profitable to the holder thereof, the option generally will expire without being
exercised and the Fund will realized as profit the premium received for such
option. When a call option written by a Fund is exercised, the Fund will be
required to sell the underlying securities to the option holder at the strike
price, and will not participate in any increase in the price of such securities
above the strike price. When a put option written by a Fund is exercised, the
Fund will be required to purchase the underlying securities at the strike price,
which may be in excess of the market value of such securities.
A Fund may purchase and write options on an exchange or over-the-counter. Over-
the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
dealer. OTC
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options are available for a greater variety of securities and for a wider range
of expiration dates and exercise prices than are available for exchange-traded
options. Because OTC options are not traded on an exchange, pricing is done
normally by reference to information from a market maker. It is the position of
the SEC that OTC options are generally illiquid.
A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an equal amount of the
underlying foreign currency. With respect to put options on foreign currency
written by a Fund, the Fund will establish a segregated account with its
Custodian consisting of cash or liquid, high grade debt securities in an amount
equal to the amount the Fund would be required to pay upon exercise of the put.
A Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. A Fund may choose to
terminate an option position by entering into a closing transaction. The ability
of a Fund to enter into closing transactions depends upon the existence of a
liquid secondary market for such transactions.
All options written on indices must be covered. When a Fund writes an option on
an index, it will establish a segregated account containing cash or liquid, high
grade debt securities with its custodian in an amount at least equal to the
market value of the option and will maintain the account while the option is
open or will otherwise cover the transaction.
Risk Factors: Risks associated with options transactions include: (1) the
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success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while a Fund will receive a premium
when it writes covered call options, it may not participate fully in a rise in
the market value of the underlying security.
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REPURCHASE AGREEMENTS
Repurchase agreements are agreements by which a Fund obtains a security and
simultaneously commits to return the security to the seller (a member bank of
the Federal Reserve System or primary securities dealer as recognized by the
Federal Reserve Bank of New York) at an agreed upon price (including principal
and interest) on an agreed upon date within a number of days (usually not more
than seven) from the date of purchase. The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Adviser monitors
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the Trust's Custodian or its agent must take possession of the
underlying collateral. However, if the seller defaults, the Fund could realize
a loss on the sale of the underlying security to the extent that the proceeds of
sale, including accrued interest, are less than the resale price provided in the
agreement including interest. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, a Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest if the Fund is treated as an unsecured creditor and is required to
return the underlying security to the seller's estate.
U.S. GOVERNMENT SECURITIES
Each Fund may invest in securities issued or guaranteed by U.S. Government
agencies or instrumentalities such as the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"). Obligations of GNMA are
backed by the full faith and credit of the United States Government.
Obligations of FNMA and FHLMC are not backed by the full faith and credit of the
United States Government, but are considered to be of high quality since they
are considered to be instrumentalities of the United States. The market value
and interest yield of these securities can vary due to market interest rate
fluctuations and early prepayments of underlying mortgages. These securities
represent ownership in a pool of federally insured mortgage loans with a maximum
maturity of 30 years. However, due to scheduled and unscheduled principal
payments, GNMA certificates have a shorter average maturity and, therefore, less
principal volatility than a comparable 30-year bond. Since prepayment rates
vary widely, it is not possible to accurately predict the average maturity of a
particular GNMA pool. The scheduled monthly interest and
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principal payments relating to mortgages in the pool will be "passed through" to
investors. GNMA securities differ from conventional bonds in that principal is
paid back to the certificate holders over the life of the loan rather than at
maturity. As a result, there will be monthly scheduled payments of principal
and interest. In addition, there may be unscheduled principal payments
representing prepayments on the underlying mortgages. Although GNMA
certificates may offer yields higher than those available from other types of
U.S. Government securities, GNMA certificates may be less effective than other
types of securities as a means of "locking in" attractive long-term rates
because of the prepayment feature. For instance, when interest rates decline,
the value of a GNMA certificate likely will not rise as much as comparable debt
securities due to the prepayment feature. In addition, these prepayments can
cause the price of a GNMA certificate originally purchased at a premium to
decline in price to its par value, which may result in a loss.
Each Fund may invest in Separately Traded Interest and Principal Securities
("STRIPS"), which are component parts of U.S. Treasury Securities traded through
the Federal Book-Entry System. The Adviser will purchase only those STRIPS that
it determines are liquid or, if illiquid, do not violate the Fund's investment
policy concerning investments in illiquid securities. While there is no
limitation on the percentage of a Fund's assets that may be comprised of STRIPS,
the Adviser will monitor the level of such holdings to avoid the risk of
impairing shareholders' redemption rights.
INVESTMENT LIMITATIONS
FUNDAMENTAL POLICIES
The following investment limitations (and those set forth in the Prospectus) are
fundamental policies of each Fund which cannot be changed with respect to a Fund
without the consent of the holders of a majority of that Fund's outstanding
shares. The term "majority of the outstanding shares" means the vote of (i) 67%
or more of a Fund's shares present at a meeting, if more than 50% of the
outstanding shares of a Fund are present or represented by proxy, or (ii) more
than 50% of a Fund's outstanding shares, whichever is less.
No Fund may:
1. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate fund to purchase securities or require a
Fund to segregate assets are not considered to be borrowings. Asset
coverage of a least 300% is required for all borrowings, except where a
Fund has borrowed money for temporary purposes in amounts not exceeding 5%
of its total assets. A Fund will not purchase securities while its
borrowings exceed 5% of its total assets.
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2. Make loans if, as a result, more than 33 1/3% of its total assets would be
lent to other parties, except that each Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) lend its securities.
3. Purchase or sell real estate, physical commodities, or commodities
contracts, except that each Fund may purchase (i) marketable securities
issued by companies which own or invest in real estate (including real
estate investment trusts), commodities, or commodities contracts; and (ii)
commodities contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.
4. Issue senior securities (as defined in the Investment Company Act of 1940
(the "1940 Act")) except as permitted by rule, regulation or order of the
Securities and Exchange Commission (the "SEC").
5. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
6. Invest in interests in oil, gas, or other mineral exploration or
development programs and oil, gas or mineral leases.
The foregoing percentages (except with respect to the limitation on borrowing)
will apply at the time of the purchase of a security and shall not be considered
violated unless an excess or deficiency occurs immediately after or as a result
of a purchase of such security.
NON-FUNDAMENTAL POLICIES
The following investment limitations are non-fundamental policies of each Fund
and may be changed with respect to a Fund by the Board of Trustees.
No Fund may:
1. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by the Fund's fundamental limitation on borrowing.
2. Invest in companies for the purpose of exercising control.
3. Purchase securities on margin or effect short sales, except that each Fund
may (i) obtain short-term credits as necessary for the clearance of
security transactions; (ii) provide initial and variation margin payments
in connection with transactions involving futures contracts and options on
such contracts; and (iii) make short sales "against the box" or in
compliance with the SEC's
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position regarding the asset segregation requirements imposed by Section 18
of the 1940 Act.
4. Invest its assets in securities of any investment company, except (i) by
purchase in the open market involving only customary brokers' commissions;
(ii) in connection with mergers, acquisitions of assets, or consolidations;
or (iii) as otherwise permitted by the 1940 Act.
5. Purchase securities of any company which has (with predecessors) a record
of less than three years continuing operations if, as a result, more than
15% of the total assets (taken at fair market value) would be invested in
such securities.
6. Purchase or hold illiquid securities, i.e., securities that cannot be
disposed of for their approximate carrying value in seven days or less
(which term includes repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 15% of its net assets
would be invested in illiquid securities. Unregistered securities sold in
reliance on the exemption from registration in Section 4(2) of the 1933 Act
and securities exempt from registration on re-sale pursuant to Rule 144A of
the 1933 Act may be treated as liquid securities under procedures adopted
by the Board of Trustees. Each Fund will invest no more than 5% of its net
assets in short sales, unregistered securities, futures contracts, options
and investment company securities.
ADDITIONAL RESTRICTIONS
The following are non-fundamental investment limitations that are currently
required by one or more states in which the Trust sells shares of the Funds.
These limitations are in addition to, and in some cases more restrictive than,
the fundamental and non-fundamental investment limitations listed above. A
limitation may be changed or eliminated without shareholder approval if the
relevant state changes or eliminates its policy regarding such investment
restriction. As long as a Fund's shares are registered for sale in such states,
it may not:
1. Invest more than 5% of its net assets in warrants; provided that of this 5%
no more than 2% will be in warrants that are not listed on the New York
Stock Exchange or the American Stock Exchange.
2. Invest in the securities of other investment companies except by purchase
in the open market where no commission or profit to a sponsor or dealer
results from the purchase other than the customary broker's commission, or
except when the purchase is part of a plan of merger, consolidation,
reorganization or acquisition.
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THE ADVISER
The Trust and Turner Investment Partners, Inc. (the "Adviser") have entered into
an advisory agreement (the "Advisory Agreement"). The Advisory Agreement
provides that the Adviser shall not be protected against any liability to the
Trust or its shareholders by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Adviser but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by any state in which the shares of the Fund are
registered, the Adviser will bear the amount of such excess. The Adviser will
not be required to bear expenses of any Fund to an extent which would result in
the Fund's inability to qualify as a regulated investment company under
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
The continuance of the Advisory Agreement as to any Fund after the first two
years must be specifically approved at least annually (i) by the vote of the
Trustees or by a vote of the shareholders of that Fund, and (ii) by the vote of
a majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the Trust or, with respect to any Fund,
by a majority of the outstanding shares of that Fund, on not less than 30 days'
nor more than 60 days' written notice to the Adviser, or by the Adviser on 90
days' written notice to the Trust.
THE ADMINISTRATOR
The Trust and SEI Financial Management Corporation (the "SFM" or
"Administrator") have entered into an administration agreement (the
"Administration Agreement"). The Administration Agreement provides that the
Administrator shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Trust in connection with the matters to which the
Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Administrator in
the performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. The Administration Agreement shall remain in effect for
a period of 3 years after the effective date of the agreement and shall continue
in effect for successive periods of 1 year unless terminated by either party on
not less than 90 days' prior written notice to the other party.
The Administrator, a wholly-owned subsidiary of SEI Corporation ("SEI"), was
organized as a Delaware corporation in 1969, and has its principal business
offices at
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680 East Swedesford Road, Wayne, Pennsylvania 19087-1658. Alfred P. West, Jr.,
Henry H. Greer and Carmen V. Romeo, constitute the Board of Directors of the
Administrator. Mr. West is the Chairman of the Board and Chief Executive
Officer of the Administrator and of SEI. Mr. Greer is the President and Chief
Operating Officer of the Administrator and of SEI. SEI and its subsidiaries are
leading providers of funds evaluation services, trust accounting systems, and
brokerage and information services to financial institutions, institutional
investors and money managers. The Administrator also serves as administrator to
the following other mutual funds: The Achievement Funds Trust, The Advisors'
Inner Circle Fund, The Arbor Fund, ARK Funds, Bishop Street Funds, Conestoga
Family of Funds, CoreFunds, Inc., CrestFunds, Inc.(C), CUFUND, FMB Funds, First
American Funds, Inc., First American Investment Funds, Inc., Insurance
Investment Products Trust, Inventor Funds, Inc., Marquis Funds(R), Monitor
Funds, Morgan Grenfell Investment Trust, The PBHG Funds, Inc., The Pillar Funds,
Rembrandt Funds(R), 1784 Funds, SEI Asset Allocation Trust, SEI Daily Income
Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI International
Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, Stepstone Funds, STI
Classic Funds and STI Classic Variable Trust.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, and the Trust are parties to a distribution agreement (the "Distribution
Agreement"). The Distributor receives no compensation for distribution of
shares of the Funds.
The Distribution Agreement shall remain in effect for a period of two years
after the effective date of the agreement and is renewable annually. The
Distribution Agreement may be terminated by the Distributor, by a majority vote
of the Trustees who are not interested persons and have no financial interest in
the Distribution Agreement or by a majority vote of the outstanding securities
of the Trust upon not more than 60 days' written notice by either party or upon
assignment by the Distributor.
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trustees and executive officers
of the Trust and their principal occupations for the last five years are set
forth below. Each may have held other positions with the named companies during
that period. The Trust pays the fees for unaffiliated Trustees.
The Trustees and Executive Officers of the Trusts, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with named companies during that
period. Unless otherwise noted, the business address of each Trustee and each
Executive Officer is SEI Financial Management Corporation, 680 East Swedesford
Road, Wayne,
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Pennsylvania 19087-1658. Certain officers of the Trust also serve as officers
of some or all of the following: The Achievement Funds Trust; The Advisors'
Inner Circle Fund; The Arbor Fund; ARK Funds; Bishop Street Funds; Conestoga
Family of Funds; CoreFunds, Inc.; CrestFunds, Inc.; CUFUND; First American
Funds, Inc.; First American Investment Funds, Inc.; FMB Funds, Inc.; Insurance
Investment Products Trust; Inventor Funds, Inc.; Marquis Funds(R); Monitor
Funds; Morgan Grenfell Investment Trust; The Pillar Funds; The PBHG Funds, Inc.;
Rembrandt Funds(R); SEI Asset Allocation Trust; SEI Daily Income Trust; SEI
Index Funds; SEI Institutional Managed Trust; SEI International Trust; SEI
Liquid Asset Trust; SEI Tax Exempt Trust; 1784 Funds; Stepstone Funds; STI
Classic Funds; and STI Classic Variable Trust, each of which is an open-end
management investment company managed by SEI Financial Management Corporation
and, except for Rembrandt Funds(R), distributed by SEI Financial Services
Company.
ROBERT E. TURNER - Trustee* - Date of Birth: 11/26/56. Chairman and Chief
Investment Officer of Turner Investment Partners, Inc. (the Adviser) since 1990.
JOAN LAMM-TENNANT, Ph.D. - Trustee - Date of Birth: 10/20/52. Professor of
Finance, Villanova University, since 1989. Director, Selective Insurance
(property and casualty insurance), since 1993. Director, Focus Trust Fund
(mutual fund), since 1995.
ALFRED C. SALVATO - Trustee - Date of Birth: 01/09/58. Treasurer, Thomas
Jefferson University Health Care Pension Fund, since 1995, and Assistant
Treasurer, 1988-1995.
MARK D. TURNER - Trustee* - Date of Birth: 12/12/57. President and Director of
Fixed Income Management of Turner Investment Partners, Inc. (the Adviser), since
1990.
JOHN T. WHOLIHAN - Trustee - Date of Birth: 12/12/37. Professor, Loyola
Marymount University, since 1984.
DAVID G. LEE - President, Chief Executive Officer - Date of Birth: 04/16/52.
Senior Vice President of SEI Financial Management Corporation and SEI Financial
Services Company, since 1993. Vice President of SEI Financial Management
Corporation and SEI Financial Services Corporation, 1991-1993. President, GW
Sierra Trust Funds prior to 1991.
STEPHEN J. KNEELEY - Vice President, Assistant Secretary - Date of Birth:
02/09/63. Chief Operating Officer of Turner Investment Partners, Inc., since
1990.
TODD B. CIPPERMAN - Vice President, Assistant Secretary - Date of Birth:
02/14/66. Attorney, SEI Corporation, since 1995. Associate, Dewey Ballantine
(law firm), 1994-1995. Associate Winston and Strawn (law firm), 1991-1994.
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JOSEPH M. LYDON - Vice President, Assistant Secretary - Date of Birth: 09/27/59.
Director of Business Administration of Fund Resources, SEI Corporation, since
1995. Vice President of Fund Group and Vice President of Dreman Value
Management (investment adviser) and President of Dreman Financial Services,
Inc., prior to 1995.
SANDRA K. ORLOW - Vice President, Assistant Secretary - Date of Birth: 10/18/53.
Vice President and Assistant Secretary of SEI Financial Management Corporation
and SEI Financial Services Company, since 1988.
KEVIN P. ROBBINS - Vice President, Assistant Secretary - Date of Birth:
04/15/61. Senior Vice President and General Counsel of SEI Corporation, the
Manager and Distributor since 1994. Vice President of SEI Corporation, 1992-
1994. Associate, Morgan, Lewis & Bockius (law firm) prior to 1992.
RICHARD J. SHOCH - Vice President, Assistant Secretary - Date of Birth:
10/28/66. Vice President, SEI Corporation, since 1995. Regulatory Manager, SEI
Corporation, 1991-1995. Student, Widener University School of Law, 1992-1995.
CATHERINE L. STANTON - Vice President, Assistant Secretary - Date of Birth:
11/19/58. Vice President and Assistant Secretary of SEI Corporation, the
Manager and Distributor, since 1994. Associate, Morgan, Lewis & Bockius (law
firm), 1989-1994.
JEFFREY A. COHEN - Controller, Chief Accounting Officer - Date of Birth:
04/22/61. Director, Fund Resources, 1991 to present. Senior Accountant, Price
Waterhouse, 1988-1991.
JAMES W. JENNINGS - Secretary - Date of Birth: 1/15/37. Partner, Morgan, Lewis
& Bockius LLP (law firm), counsel to the Trust, the Adviser, the Manager and
Distributor.
JOHN H. GRADY, JR. - Assistant Secretary - Date of Birth: 06/01/61. 1800 M
Street, N.W., Washington, D.C. 20036, Partner, Morgan, Lewis & Bockius LLP,
Counsel to the Trust, Adviser, Manager and Distributor.
EDWARD B. BAER - Assistant Secretary - Date of Birth: 09/27/68. 1800 M Street,
N.W., Washington, D.C. 20036, Associate, Morgan, Lewis & Bockius LLP, Counsel to
the Trust, Adviser, Manager and Distributor, since 1995. Attorney, Aquila
Management Corporation, 1994. Rutgers University School of Law - Newark, 1991-
1994.
-----------------------------------
* Messrs. Turner and Turner are Trustees who may be deemed to be "interested
persons" of the Trust as the term is defined in the 1940 Act.
S-13
<PAGE>
The Trustees and Officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays fees to the Trustees who are not interested
persons of the Trust. Compensation of Officers and affiliated Trustees of the
Trust is paid by the adviser or the manager. It is estimated that each
unaffiliated Trustee will receive $6,000 per year as compensation for serving on
the Trust's Board.
COMPUTATION OF YIELD AND TOTAL RETURN
From time to time the Trust may advertise yield and total return of the Funds.
These figures will be based on historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future yields or returns. The yield of a Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The yield
is calculated by assuming that the income generated by the investment during
that 30-day period is generated in each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:
Yield = 2[((a-b)/cd + 1)/6/ - 1] where a = dividends and interest earned during
the period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.
The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment for designated time periods (including but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P (1 + T)/n/ = ERV, where P = a hypothetical initial payment
of $1,000; T = average annual total return; n = number of years; and ERV =
ending redeemable value, as of the end of the designated time period, of a
hypothetical $1,000 payment made at the beginning of the designated time period.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through the Transfer Agent on days when
the New York Stock Exchange is open for business. Shares of each Fund are
offered on a continuous basis.
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by a Fund in lieu
of cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions.
S-14
<PAGE>
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Trust also
reserves the right to suspend sales of shares of any Fund for any period during
which the New York Stock Exchange, the Adviser, the Administrator, the Transfer
Agent and/or the Custodian are not open for business.
DETERMINATION OF NET ASSET VALUE
The securities of each Fund are valued by the Administrator. The Administrator
will use an independent pricing service to obtain valuations of securities. The
pricing service relies primarily on prices of actual market transactions as well
as trade quotations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Trust under the general supervision of the
Trustees.
TAXES
The following is only a summary of certain tax considerations generally
affecting the Funds and their shareholders, and is not intended as a substitute
for careful tax planning. Shareholders are urged to consult their tax advisors
with specific reference to their own tax situations, including their state and
local tax liabilities.
FEDERAL INCOME TAX
The following discussion of federal income tax consequences is based on the Code
and the regulations issued thereunder as in effect on the date of this Statement
of Additional Information. New legislation, as well as administrative changes
or court decisions, may significantly change the conclusions expressed herein,
and may have a retroactive effect with respect to the transactions contemplated
herein.
Each Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By following such a policy, each Fund
expects to eliminate or reduce to a nominal amount the federal taxes to which it
may be subject.
In order to qualify for treatment as a RIC under the Code, each Fund must
distribute annually to its shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
the Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, or
S-15
<PAGE>
certain other income; (ii) the Fund must derive less than 30% of its gross
income each taxable year from the sale or other disposition of stocks or
securities held for less than three months; (iii) at the close of each quarter
of the Fund's taxable year, at least 50% of the value of its total assets must
be represented by cash and cash items, U.S. Government securities, securities of
other RICs and other securities, with such other securities limited, in respect
to any one issuer, to an amount that does not exceed 5% of the value of the
Fund's assets and that does not represent more than 10% of the outstanding
voting securities of such issuer; and (iv) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its assets may be
invested in securities (other than U.S. Government securities or the securities
of other RICs) of any one issuer or of two or more issuers which the Fund
controls or which are engaged in the same, similar or related trades or
business.
Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
each Fund will be subject to a nondeductible 4% federal excise tax to the extent
it fails to distribute by the end of any calendar year 98% of its ordinary
income for that year and 98% of its capital gain net income (the excess of
short- and long-term capital gains over short-and long-term capital losses) for
the one-year period ending on October 31 of that year, plus certain other
amounts.
In certain cases, a Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup withholding by the Internal Revenue Service, or (3) has not certified to
that Fund that such shareholder is not subject to backup withholding.
If any Fund fails to qualify as a RIC for any taxable year, it will be taxable
at regular corporate rates. In such an event, all distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of the Fund's current and accumulated earnings and profits, and such
distributions will generally be eligible for the corporate dividends-received
deduction.
STATE TAXES
No Fund is liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by any Fund
to shareholders and the ownership of shares may be subject to state and local
taxes.
PORTFOLIO TRANSACTIONS
The Adviser is authorized to select brokers and dealers to effect securities
transactions for the Funds. The Adviser will seek to obtain the most favorable
net
S-16
<PAGE>
results by taking into account various factors, including price, commission, if
any, size of the transactions and difficulty of executions, the firm's general
execution and operational facilities and the firm's risk in positioning the
securities involved. While the Adviser generally seeks reasonably competitive
spreads or commissions, a Fund will not necessarily be paying the lowest spread
or commission available. The Adviser seeks to select brokers or dealers that
offer a Fund best price and execution or other services which are of benefit to
the Fund.
The Adviser may, consistent with the interests of the Fund, select brokers on
the basis of the research services they provide to the Adviser. Such services
may include analyses of the business or prospects of a company, industry or
economic sector, or statistical and pricing services. Information so received
by the Adviser will be in addition to and not in lieu of the services required
to be performed by the Adviser under the Advisory Agreement. If, in the
judgment of the Adviser, a Fund or other accounts managed by the Adviser will be
benefitted by supplemental research services, the Adviser is authorized to pay
brokerage commissions to a broker furnishing such services which are in excess
of commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; and providing portfolio
performance evaluation and technical market analyses. The expenses of the
Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information, such services may not be used exclusively, or at all,
with respect to the Fund or account generating the brokerage, and there can be
no guarantee that the Adviser will find all of such services of value in
advising that Fund.
It is expected that the Funds may execute brokerage or other agency transactions
through the Distributor, which is a registered broker-dealer, for a commission
in conformity with the 1940 Act, the Securities Exchange Act of 1934 and rules
promulgated by the SEC. Under these provisions, the Distributor is permitted to
receive and retain compensation for effecting portfolio transactions for a Fund
on an exchange if a written contract is in effect between the Trust and the
Distributor expressly permitting the Distributor to receive and retain such
compensation. These rules further require that commissions paid to the
Distributor by a Fund for exchange transactions not exceed "usual and customary"
brokerage commissions. The rules define "usual and customary" commissions to
include amounts which are "reasonable and fair compared to the commission, fee
or other remuneration received or to be received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time." The
Trustees, including those who are not "interested persons" of
S-17
<PAGE>
the Trust, have adopted procedures for evaluating the reasonableness of
commissions paid to the Distributor and will review these procedures
periodically.
Because no Fund markets its shares through intermediary brokers or dealers, it
is not the Funds' practice to allocate brokerage or principal business on the
basis of sales of its shares which may be made through such firms. However, the
Adviser may place portfolio orders with qualified broker-dealers who recommend a
Fund's shares to clients, and may, when a number of brokers and dealers can
provide best net results on a particular transaction, consider such
recommendations by a broker or dealer in selecting among broker-dealers.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
portfolios and shares of each portfolio. Each share of a portfolio represents
an equal proportionate interest in that portfolio with each other share. Shares
are entitled upon liquidation to a pro rata share in the net assets of the
portfolio. Shareholders have no preemptive rights. All consideration received
by the Trust for shares of any portfolio and all assets in which such
consideration is invested would belong to that portfolio and would be subject to
the liabilities related thereto. Share certificates representing shares will
not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for obligations of the Trust, and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any shareholder held personally liable for the
obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisers, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the
S-18
<PAGE>
Declaration of Trust that they have not acted in good faith in the reasonable
belief that their actions were in the best interests of the Trust. However,
nothing in the Declaration of Trust shall protect or indemnify a Trustee against
any liability for his willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties.
5% SHAREHOLDERS
As of the date of this Statement of Additional Information, SEI Financial
Management Corporation controls all of the outstanding shares of the Funds.
EXPERTS
The financial statements in this Statement of Additional Information for the
fiscal year ended October 31, 1995, of the Turner Growth Equity and Turner Small
Cap Portfolios of The Advisors' Inner Circle Fund (the "AIC Fund") have been
audited by Arthur Andersen LLP, independent public accountants to the AIC Fund
since its inception, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said report. On April 30, 1996, all of the outstanding assets and liabilities
of the AIC Fund were acquired by the Trust. Ernst & Young LLP has been selected
to serve as the Trust's independent public accountants for the fiscal year
ending September 30, 1996.
FINANCIAL INFORMATION
S-19
<PAGE>
To the Shareholders and Trustees of Turner Growth Equity Fund and Turner Small
Cap Fund of The Advisors' Inner Circle Fund:
We have audited the accompanying statements of net assets of Turner Growth
Equity Fund and Turner Small Cap Fund (two of the funds constituting The
Advisors' Inner Circle Fund) as of October 31, 1995, and the related statements
of operations, changes in net assets and financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, 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 and overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Turner
Growth Equity Fund and Turner Small Cap Fund of The Advisors' Inner Circle Fund
as of October 31, 1995, the result of their operations, changes in their net
assets, and financial highlights for the periods presented, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, PA
December 5, 1995
S-20
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 1995
<TABLE>
<CAPTION>
Market
Value
TURNER GROWTH EQUITY FUND Shares (000)
- ----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 98.7%
AIR TRANSPORTATION -- 0.9%
Delta Air Lines 15,300 $ 1,004
--------
AIRCRAFT -- 1.2%
Boeing 22,080 1,449
--------
APPAREL/TEXTILES --1.1%
Tommy Hilfiger* 35,000 1,334
--------
AUTO & TRUCK RELATED -- 1.7%
Chrysler 18,400 950
General Motors 24,200 1,059
--------
2,009
--------
BANKS -- 4.1%
Ahmanson H F 27,988 700
Chemical Bank 25,210 1,434
First Bank System 21,500 1,070
Nationsbank 24,220 1,592
--------
4,796
--------
BASIC CHEMICALS -- 1.7%
Morton International 36,820 1,123
Sigma Aldrich 18,070 858
--------
1,981
--------
COMMUNICATIONS -- 9.8%
Airtouch Communications* 43,570 1,242
Ascend Communications* 37,440 2,434
Cascade Communications* 18,260 1,301
Glenayre Technologies* 8,980 577
Tele-Communications, Cl A* 85,380 1,451
Ultratech Stepper* 31,010 1,240
Bellsouth 8,870 679
Comcast Special, Cl A 73,545 1,315
HBO 15,920 1,126
--------
11,365
--------
COMPUTERS & SERVICES -- 16.4%
America Online* 15,000 1,200
Bay Networks* 37,500 2,485
Cirrus Logic* 18,750 790
Cisco Systems* 20,000 1,550
Compaq Computer* 28,850 1,608
Informix* 30,270 $ 882
Intuit* 13,840 996
Medic Computer Systems* 13,080 697
Microsoft* 16,220 1,622
Netscape Communications* 14,870 1,309
Oracle* 36,800 1,605
UUNET Technologies* 14,940 908
First Data 20,900 1,382
Hewlett Packard 13,870 1,285
National Data 25,400 673
--------
18,992
--------
CONCRETE & MINERAL PRODUCTS -- 1.0%
Owens Corning Fiberglass* 27,620 1,170
--------
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT --
8.9%
3COM* 18,490 869
Applied Materials* 43,640 2,188
Atmel* 18,880 590
Komag* 16,700 952
LSI Logic* 25,000 1,178
Silicon Valley Group* 26,140 846
Worldcom* 39,460 1,287
Intel 23,000 1,607
Micron Technology 10,390 734
--------
10,251
--------
ENERGY & POWER -- 0.9%
California Energy* 54,570 989
--------
FINANCIAL SERVICES -- 3.5%
Donaldson, Lufkin, & Jenrette* 28,500 848
Block H & R 29,440 1,215
First USA 19,370 891
Household International 19,510 1,097
--------
4,051
--------
FOOD, BEVERAGE & TOBACCO -- 8.8%
Chiquita Brands International 56,390 916
Coca Cola 17,230 1,238
Dole Food 40,000 1,505
Pepsico 35,120 1,853
Philip Morris 23,680 2,001
Sara Lee 50,000 1,469
Seagram 32,720 1,178
--------
10,160
--------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 1995
<TABLE>
<CAPTION>
Market
TURNER GROWTH EQUITY Value
FUND (Continued) Shares (000)
- ----------------------------------------------------------------------------
<S> <C> <C>
FOOTWEAR -- 1.3%
Just For Feet* 27,050 $ 639
Nine West Group* 20,000 890
--------
1,529
--------
GRAIN MILL PRODUCTS -- 1.0%
Ralston Purina 19,460 1,155
--------
HEALTHCARE -- 6.3%
Amgen* 18,130 870
Boston Scientific* 22,290 939
Columbia HCA Healthcare 28,340 1,392
Johnson & Johnson 14,020 1,143
Medtronic 30,000 1,732
Merck 21,300 1,225
--------
7,301
--------
INSURANCE -- 4.1%
Phycor* 16,665 612
Aetna Life & Casualty 20,450 1,439
The PMI Group 17,120 822
United Healthcare 36,200 1,923
--------
4,796
--------
LUMBER & WOOD PRODUCTS -- 1.0%
Georgia-Pacific 13,410 1,106
--------
MACHINERY -- 0.6%
Smith International* 40,000 640
--------
METAL & METAL INDUSTRIES -- 3.4%
Engelhard 68,680 1,709
Phelps Dodge 18,090 1,146
Reynolds Metals 20,480 1,032
--------
3,887
--------
OIL & GAS -- 7.9%
Apache 65,510 1,671
Exxon 19,570 1,495
Helmerich & Payne 25,000 647
Mobil 20,000 2,015
Texaco 30,000 2,043
USX-Marathon Group 73,430 1,303
--------
9,174
--------
PAPER & PAPER PRODUCTS -- 1.1%
Kimberly Clark 17,446 $ 1,267
--------
RAILROADS -- 1.8%
CSX 14,470 1,211
Union Pacific 14,020 917
--------
2,128
--------
RECREATIONAL PRODUCTS & SERVICES -- 2.2%
Mirage Resorts* 34,420 1,127
Walt Disney 24,950 1,438
--------
2,565
--------
RETAIL -- 5.5%
Corporate Express* 48,935 1,278
Micro Warehouse* 24,440 1,088
Officemax* 50,000 1,238
Petsmart* 30,000 1,005
Sunglass Hut International* 40,600 1,106
Zale* 40,530 598
--------
6,313
--------
UTILITIES, ELECTRIC, & GAS -- 2.5%
AES* 46,950 927
Southern 56,070 1,339
Ultramar 26,640 649
--------
2,915
--------
TOTAL COMMON STOCK
(Cost $93,879,341) 114,327
--------
REPURCHASE AGREEMENTS -- 0.1%
Lehman Brothers 5.560%, dated 10/31/95, matures 11/01/95,
repurchase price $152,982 (collateralized by U.S. Treasury
Note, par value $151,419, 7.500%, matures 01/31/97: market
value $157,618) 153
--------
TOTAL REPURCHASE AGREEMENTS (Cost $152,982) 153
--------
TOTAL INVESTMENTS -- 98.8%
(Cost $94,032,323) 114,480
--------
OTHER ASSETS AND LIABILITIES -- 1.2%
Other Assets and Liabilities, Net 1,339
--------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 1995
<TABLE>
<CAPTION>
TURNER GROWTH EQUITY FUND (Concluded)
- ------------------------------------------------------------------------------
<S> <C>
NET ASSETS:
Portfolio shares (unlimited authorization-- no par value)
based on 7,735,310 outstanding shares of beneficial interest $ 89,664
Net investment loss (40)
Accumulated net realized gain on investments 5,747
Net unrealized appreciation on investments 20,448
--------
TOTAL NET ASSETS: -- 100.0% $115,819
========
Net Asset Value, Offering Price and Redemption Price Per Share $14.97
========
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
Market
Value
TURNER SMALL CAP FUND Shares (000)
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 97.7%
AIR TRANSPORTATION -- 2.0%
American West Airlines* 6,000 $ 82
Midwest Express Holdings* 7,034 176
-------
258
-------
APPAREL/TEXTILES -- 1.4%
Tommy Hilfiger* 3,210 122
Westpoint Stevens* 2,630 56
-------
178
-------
BANKS -- 1.2%
TCF Financial 2,700 159
-------
BASIC CHEMICALS -- 2.6%
Applied Extrusion Technologies* 9,600 148
NL Industries* 6,490 84
International Specialty Products 12,790 110
-------
342
-------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 0.6%
Clear Channel Communications* 920 75
-------
COMMUNICATIONS -- 9.1%
Apac Teleservices* 3,450 $ 87
Ascend Communications* 2,680 174
Brightpoint* 3,950 75
Cascade Communications* 1,880 134
Coherent Communications Systems* 6,100 125
Picturetel* 2,300 152
Premisys Communications* 2,000 179
Transaction Network Services* 4,000 92
U.S. Order* 3,240 49
Ultratech Stepper* 3,050 122
-------
1,189
-------
COMPUTERS & SERVICES -- 23.4%
America Online* 1,770 142
Arcsys* 2,320 97
Aspen Technology* 4,390 121
Avid Technology* 4,300 188
Checkfree* 10,700 226
Computervision* 2,600 31
Dendrite International* 7,700 134
Discreet Logic* 2,490 142
HNC Software* 3,800 97
Macro Media* 4,340 161
Maxis* 1,600 71
Medic Computer Sytems* 2,160 115
Netcom On Line Communication Services* 2,200 128
Netscape Communications* 2,120 187
Pure Software* 4,850 178
Shiva* 1,950 117
Spyglass* 2,300 114
Tivoli Systems* 3,550 114
Transaction Systems Architects* 3,105 81
UUNET Technologies* 3,957 242
Verity* 2,970 109
Fair Isaac 3,560 96
National Data 6,127 162
-------
3,053
-------
CONCRETE & MINERAL PRODUCTS -- 1.0%
USG* 4,400 128
-------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 1995
<TABLE>
<CAPTION>
Market
TURNER SMALL CAP FUND Value
(Continued) Shares (000)
- ----------------------------------------------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS -- 2.2%
Department 56* 1,380 $ 63
Guest Supply* 4,200 79
Oakley* 4,190 144
-------
286
-------
ELECTRONIC AND OTHER ELECTRICAL
EQUIPMENT -- 5.8%
Burr-Brown* 3,510 114
Komag* 1,390 79
Oak Technology* 2,750 151
Ontrak Systems* 2,870 56
Sierra Semiconductor* 4,690 84
Silicon Valley Group* 4,770 155
Belden 4,910 118
-------
757
-------
FINANCIAL SERVICES -- 6.2%
Credit Acceptance* 3,420 80
Imperial Credit Industries* 5,400 78
Jayhawk Acceptance* 12,050 144
Litchfield Financial* 3,450 52
Markel* 920 69
Stormedia* 2,050 94
WFS Financial* 5,950 99
Mutual Risk Management 2,600 96
The Money Store 2,463 99
-------
811
-------
FOOD, BEVERAGE & TOBACCO -- 2.5%
Redhook Ale Brewery* 3,315 98
Robert Mondavi* 5,880 166
Interstate Bakeries 3,110 66
-------
330
-------
FOOTWEAR -- 1.4%
Just For Feet* 3,345 79
Nine West Group* 2,490 111
-------
190
-------
HEALTHCARE -- 3.0%
Amerisource Health* 2,550 69
Idexx Laboratories* 2,700 110
Ornda Health* 5,400 95
Physician Sales & Services* 7,675 125
-------
399
-------
HOUSEHOLD PRODUCTS -- 0.5%
RPM 3,520 $ 68
-------
INSURANCE -- 6.8%
Compdent* 5,550 173
Phycor* 3,600 132
Total Renal Care Holdings* 4,634 94
United Dental Care* 4,100 125
CMAC Investment 2,710 129
The PMI Group 2,600 125
Vesta Insurance Group 2,675 108
-------
886
-------
MACHINERY -- 2.7%
C.P. Clare* 4,650 120
Plasma & Materials Technologies* 5,700 66
PRI Automation* 2,280 84
Smith International* 5,100 82
-------
352
-------
MEASURING DEVICES -- 2.2%
Cognex* 1,050 63
Fore Systems* 2,300 122
Veeco Instruments* 4,260 102
-------
287
-------
MEDICAL PRODUCTS & SERVICES -- 2.7%
Medisense* 4,250 91
Medpartners* 2,000 56
Nellcor* 1,740 100
Orthodontic Centers of America* 3,250 104
-------
351
-------
OIL & GAS -- 4.1%
BJ Services* 3,850 90
Citation* 9,040 169
Energy Ventures* 6,000 114
Falcon Drilling* 9,600 100
Nabors Industries* 7,720 67
-------
540
-------
PACKAGING -- 1.0%
Sealed Air* 5,020 132
-------
PAPER & PAPER PRODUCTS -- 0.4%
Boise Cascade 1,640 59
-------
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 1995
<TABLE>
<CAPTION>
Market
Value
TURNER SMALL CAP FUND (Concluded) Shares (000)
- ---------------------------------------------------------------------------
<S> <C> <C>
PROFESSIONAL SERVICES -- 5.6%
ABR Information Services* 4,500 $ 133
Concord EFS* 3,165 109
PMT Services* 4,240 114
Quintiles Transnational* 2,500 161
RTW* 4,740 115
Loewen Group 2,430 97
-------
729
-------
RAILROADS -- 1.5%
Wisconsin Central* 2,040 123
Illinois Central 1,990 76
-------
199
-------
RECREATIONAL PRODUCTS & SERVICES -- 0.5%
Station Casinos* 4,700 61
-------
RETAIL -- 7.3%
Baby Superstore* 1,320 62
Corporate Express* 5,120 134
Eastbay* 5,450 116
Kenneth Cole Production* 1,510 62
Officemax* 5,385 133
Petsmart* 5,065 169
Sunglass Hut International* 4,400 120
U.S. Office Products* 5,410 93
Zale* 4,400 65
-------
954
-------
TOTAL COMMON STOCK
(Cost $9,769,556) 12,773
-------
REPURCHASE AGREEMENTS -- 6.9%
Lehman Brothers 5.560%, dated 10/31/95, matures 11/01/95,
repurchase price $894,718 (collateralized by U.S. Treasury
Note, par value $885,575, 7.500%, matures 01/31/97: market
value $921,828) 895
-------
TOTAL REPURCHASE AGREEMENTS (Cost $894,718) 895
-------
</TABLE>
<TABLE>
<CAPTION>
Market
Value
(000)
- ---------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS -- 104.6%
(Cost $10,664,274 $13,668
-------
OTHER ASSETS AND LIABILITIES -- (4.6%)
Payable for Securities Purchased (688)
Other Assets and Liabilities, Net 92
-------
TOTAL OTHER ASSETS AND LIABILITIES (596)
=======
NET ASSETS:
Portfolio shares (unlimited authorization--no par value) based on
812,803 outstanding shares of beneficial interest 9,154
Net investment loss (8)
Accumulated net realized gain on investments 922
Net unrealized appreciation on investments 3,004
-------
TOTAL NET ASSETS: -- 100.0% $13,072
=======
Net Asset Value, Offering Price and Redemption Price Per Share $ 16.08
=======
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS THE ADVISORS' INNER CIRCLE FUND
For the year ended October 31, 1995
<TABLE>
<CAPTION>
TURNER TURNER
GROWTH EQUITY SMALL CAP
FUND FUND
------------- -----------
11/01/94 11/01/94
TO 10/31/95 TO 10/31/95
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Dividend Income..................................... $ 1,905 $ 30
Interest Income..................................... 155 17
- --------------------------------------------------------------------------------
Total Investment Income............................ 2,060 47
- --------------------------------------------------------------------------------
Expenses:
Administrator Fees.................................. 215 75
Investment Advisory Fees............................ 897 82
Investment Advisory Fee Waiver...................... -- (82)
Contributions by Adviser............................ -- (12)
Custodian Fees...................................... 14 6
Transfer Agent Fees................................. 24 12
Professional Fees................................... 49 15
Trustee Fees........................................ 6 2
Registration Fees................................... (5) 1
Pricing Fees........................................ 5 --
Printing Expense.................................... 16 1
Amortization of Deferred Organizational Costs....... 3 2
Insurance and Other Fees............................ 10 1
Directed Brokerage.................................. (109) --
- --------------------------------------------------------------------------------
Total Expenses..................................... 1,125 103
- --------------------------------------------------------------------------------
Net Investment Income (Loss)...................... 935 (56)
- --------------------------------------------------------------------------------
Net Realized Gain from Securities Sold.............. 11,270 1,005
Net Unrealized Appreciation of Investment
Securities......................................... 11,773 2,573
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments.... 23,043 3,578
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations......................................... $23,978 $3,522
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS THE ADVISORS' INNER CIRCLE FUND
For the period ended October 31, 1995
<TABLE>
<CAPTION>
TURNER TURNER
GROWTH EQUITY SMALL CAP
FUND FUND
----------------------- -----------------------
11/01/94 11/01/93 11/01/94 02/07/94(2)
TO 10/31/95 TO 10/31/94 TO 10/31/95 TO 10/31/94
(000) (000) (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss). $ 935 $ 743 $ (56) $ (8)
Net Realized Gain (Loss) on
Securities Sold............. 11,270 (5,082) 1,005 (27)
Net Unrealized Appreciation
of Investment Securities.... 11,773 2,203 2,573 431
- --------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting from
Operations................. 23,978 (2,136) 3,522 396
- --------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income........ (1,022) (704) -- --
- --------------------------------------------------------------------------------
Total Distributions......... (1,022) (704) -- --
- --------------------------------------------------------------------------------
Capital Share Transactions:
Shares Issued................ 33,135 68,222 5,250 4,410
Shares Issued in Lieu of Cash
Distributions............... 909 625 -- --
Shares Redeemed.............. (54,140) (6,375) (506) --
- --------------------------------------------------------------------------------
Increase (Decrease) in Net
Assets Derived from Capital
Share Transactions.......... (20,096) 62,472 4,744 4,410
- --------------------------------------------------------------------------------
Total Increase in Net
Assets..................... 2,860 59,632 8,266 4,806
- --------------------------------------------------------------------------------
Net Assets:
Beginning of Period.......... 112,959 53,327 4,806 --
- --------------------------------------------------------------------------------
End of Period................ $115,819 $112,959 $13,072 $4,806
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Issued and Redeemed:
Shares Issued................ 2,600 5,465 407 441
Issued in Lieu of Cash
Distributions............... 70 51 -- --
Redeemed..................... (3,998) (517) (35) --
- --------------------------------------------------------------------------------
Net Increase (Decrease) in
Share Transactions.......... (1,328) 4,999 372 441
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(2) The Turner Small Cap Fund commenced operations on February 7, 1994.
The accompanying notes are an integral part of the financial statements.
<PAGE>
For the period ended October 31, 1995.
FINANCIAL HIGHLIGHTS THE ADVISORS' INNER CIRCLE FUND
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Net Realized and Net Ratio
Asset Unrealized Distributions Assets Ratio of Net
Value Net Gains or from Net Distributions Net Asset End of Expenses Income
Beginning Investment Losses on Investment from Capital Value End Total of Period to Average to Average
of Period Income Securities Income Gains of Period Return (000) Net Assets Net Assets
--------- ---------- ------------ ------------- ------------- --------- ------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------
TURNER GROWTH EQUITY FUND
- -------------------------
1995 $12.46 0.10 2.52 (0.11) -- $14.97 21.15% 115,819 0.94%+ 0.78%+
1994 $13.12 0.10 (0.66) (0.10) -- $12.46 (4.28%) 112,959 0.95% 0.86%
1993 $10.40 0.09 2.72 (0.09) -- $13.12 27.08% 53,327 1.00% 0.80%
1992(1) $10.00 0.03 0.40 (0.03) -- $10.40 6.95%* 7,781 1.44%* 0.73%*
- ---------------------
TURNER SMALL CAP FUND
- ---------------------
1995 $10.90 (0.06) 5.24 -- -- $16.08 47.52% 13,072 1.25% (0.68%)
1994(2) $10.00 (0.02) 0.92 -- -- $10.90 12.35%* 4,806 1.09%* (0.27%)*
<CAPTION>
Ratio
of Net
Ratio of Income
Expenses (Loss) to
to Average Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
---------- ---------- ---------
<S> <C> <C> <C>
- -------------------------
TURNER GROWTH EQUITY FUND
- -------------------------
1995 0.94%+ 0.78%+ 177.86%
1994 1.08% 0.73% 164.81%
1993 1.52% 0.28% 88.35%
1992(1) 2.55%* (0.38%)* 205.00%
- ---------------------
TURNER SMALL CAP FUND
- ---------------------
1995 2.39% (1.82%) 183.49%
1994(2) 4.32%* (3.50%)* 173.92%
</TABLE>
* 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.
+ Absent Turner Growth Equity Fund participation in a Directed Brokerage
program, the Ratios of Expenses to Average Net Assets (with and without
waivers) and Expenses to Net Income (with and without waivers) were 1.03%
and .69%, respectively.
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS THE ADVISORS' INNER CIRCLE FUND
October 31, 1995
1. Organization:
THE ADVISORS' INNER CIRCLE FUND (the "'Trust") is organized as a Massachusetts
business trust under a Declaration of Trust dated July 18, 1991. The Trust is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company with eleven portfolios. The
financial statements included herein present those of the Turner Growth Equity
Fund and the Turner Small Cap Fund (the "Funds"). The financial statements of
the remaining portfolios are presented separately. The assets of each portfolio
are segregated, and a Shareholder's interest is limited to the portfolio in
which shares are held.
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 counterparty. 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.
Distributions from net investment income and net realized capital gains are
determined in accordance with the 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 in the period that the
differences arise. Accordingly, the following permanent difference,
primarily attributable to certain net operating losses which, for tax
purposes, are not available to offset future income, has been reclassified
to paid-in-capital.
<TABLE>
<CAPTION>
(000)
-----
<S> <C>
Turner Small Cap Fund.................................................. $56
</TABLE>
This reclassification has no effect on net assets or net asset value per
share.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) THE ADVISORS' INNER CIRCLE FUND
October 31, 1995
3. Organization Costs and Transactions with Affiliates:
The Turner Growth Equity Fund and Turner Small Cap Fund incurred organization
costs of approximately $17,000 and $19,000 respectively. These costs have been
capitalized by the funds and are being amortized over sixty months commencing
with operations. In the event of the initial shares of the fund redeemed by any
holder thereof during the period that the fund is amortizing its organizational
costs the redemption proceeds payable to the holder thereof by the fund will be
reduced by the unamortized organizational costs in the same ratio as the number
of initial shares being redeemed bears to the number of initial shares
outstanding at the time of redemption. These costs include legal fees of
approximately $7,000 and $1,000, respectively, for organizational work
performed by a law firm of which an officer of the fund is a partner.
Certain officers and trustees of the Trust are also officers of SEI Financial
Management Company (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:
The Trust and the Administrator are parties to an Administration Agreement
dated November 14, 1991, under which the Administrator provides management and
administrative services for an annual rate of that Portfolio's proportionate
share of .20% of the aggregate average daily net assets of the Portfolios up to
$75 million and .15% of such assets in excess of $75 million. There is a
minimum annual fee of $75,000 per Fund.
DST Systems, Inc., (the "Transfer Agent") serves as the transfer agent and
dividend distributing agent for the Funds under a transfer agency agreement
with the Trust.
The Trust and the Distributor are parties to a Distribution Agreement dated
November 14, 1991. The Distributor receives no fees for its distribution
services under this agreement. However the Distribution Agreement between the
Distributor and the Trust provides that the Distributor may receive
compensation on portfolio transactions effected for the Trust in accordance
with the rules of the Securities and Exchange Commission ("SEC"). Accordingly,
it is expected that portfolio transactions may result in brokerage commissions
being paid to the Distributor. The SEC rules require that such commissions not
exceed usual and customary brokerage commissions. The Distributor returned a
portion of these commissions to the Fund in order to reduce the expenses of the
Growth Equity Fund.
5. Investment Advisory and Custodian Agreements:
The Trust and Turner Investment Partners, Inc. (the "Adviser") are parties to
an Investment Advisory Agreement dated February 21, 1992 under which the
Adviser receives an annual fee equal to .75% of the average daily net assets of
the Growth Portfolio and 1.00% of the average daily net assets of the Small Cap
Fund. The Adviser has voluntarily agreed for an indefinite period of time, 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 Fund. Fees of
the Custodian are being paid on the basis of the net assets of the Fund. The
Custodian plays no role in determining the investment policies of the Trust or
which securities are to be purchased or sold in the Fund.
6. Investment Transactions:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the year ended October 31, 1995, are as follows:
<TABLE>
<CAPTION>
TURNER TURNER
GROWTH EQUITY SMALL CAP
FUND FUND
(000) (000)
------------- ---------
<S> <C> <C>
Purchases
Government............................................. $ 0 $ 0
Other.................................................. 208,628 19,308
Sales
Government............................................. $ 0 $ 0
Other.................................................. 230,975 14,885
</TABLE>
At October 31, 1995, 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
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) THE ADVISORS' INNER CIRCLE FUND
October 31, 1995
securities held by the Fund at October 31, 1995, is as follows:
<TABLE>
<CAPTION>
TURNER TURNER
GROWTH EQUITY SMALL CAP
FUND FUND
(000) (000)
------------- ---------
<S> <C> <C>
Aggregate gross unrealized appreciation................. $22,022 $3,254
Aggregate gross unrealized depreciation................. (1,574) (250)
------- ------
Net unrealized appreciation............................. $20,448 $3,004
======= ======
</TABLE>
7. Capital Loss Carryforward
The Turner Growth Equity and Turner Small Cap Funds utilized their entire
capital loss carryforward balances $5,523,115 and $26,470, respectively, to
reduce realized gains incurred which otherwise would have been distributed.
<PAGE>
APPENDIX
The following descriptions are summaries of published ratings.
DESCRIPTION OF CORPORATE BOND RATINGS
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such
a rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA by S&P also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and differs from AAA issues only
in small degree. Debt rated A by S&P has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories.
Bonds rated BBB by S&P are considered as medium-grade obligations (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds rated Aaa by Moody's are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged". Interest payments are protected by a large, or an exceptionally stable,
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Bonds rated Aa by Moody's are
judged by Moody's to be of high quality by all standards. Together with bonds
rated Aaa, they comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risk appear somewhat larger than in Aaa securities.
Bonds rated A by Moody's possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future. Debt rated
Baa by Moody's is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
A-1
<PAGE>
Fitch uses plus and minus signs with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the AAA category. Bonds rated AAA by Fitch are considered to be
investment grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events. Bonds rated AA by
Fitch are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+. Bonds
rated A by Fitch are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Bonds
rated BBB by Fitch are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
Bonds rated AAA by Duff are judged by Duff to be of the highest credit quality,
with negligible risk factors being only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA by Duff are judged by Duff to be of high credit
quality with strong protection factors and risk that is modest but that may vary
slightly from time to time because of economic conditions. Bonds rated A by
Duff are judged by Duff to have average but adequate protection factors.
However, risk factors are more variable and greater in periods of economic
stress. Bonds rated BBB by Duff are judged by Duff as having below average
protection factors but still considered sufficient for prudent investment, with
considerable variability in risk during economic cycles.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a
very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly. Obligations for which there is a low expectation on
investment risk are rated A by IBCA. Capacity for timely repayment of principal
and interest is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk. Obligations for
which there is currently a low expectation of investment risk are rated BBB by
IBCA. Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or
A-2
<PAGE>
financial conditions are more likely to lead to increased investment risk than
for obligations in higher categories.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by Standard & Poor's Corporation ("S&P") is regarded by
S&P as having the greatest capacity for timely payment. Issues rated A are
further refined by use of the numbers 1, 1 +, and 2 to indicate the relative
degree of safety. Issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1, the highest rating category, reflect a
"very strong" degree of safety regarding timely payment. Those rated A-2, the
second highest rating category, reflect a satisfactory degree of safety
regarding timely payment but not as high as A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") are judged by Moody's to be of "superior" quality and "strong"
quality respectively on the basis of relative repayment capacity.
F-1+ (Exceptionally Strong) is the highest commercial paper rating Fitch
assigns; paper rated F-1+ is regarded as having the strongest degree of
assurance for timely payment. Paper rated F-1 (Very Strong) reflects an
assurance of timely payment only slightly less in degree than paper rated F-1+.
The rating F-2 (Good) reflects a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues rated F-1+ or
F-1.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by good fundamental
protection factors. Risk factors are minor. Duff has incorporated gradations
of 1+ and 1- to assist investors in recognizing quality differences within this
highest tier. Paper rated Duff-1+ has the highest certainty of timely payment,
with outstanding short-term liquidity and safety just below risk-free U.S.
Treasury short-term obligations. Paper rated Duff-1- has high certainty of
timely payment with strong liquidity factors which are supported by good
fundamental protection factors. Risk factors are very small. Paper rated Duff-
2 is regarded as having good certainty of timely payment, good access to capital
markets (although ongoing funding may enlarge total financing requirements) and
sound liquidity factors and company fundamentals. Risk factors are small.
The designation A1, the highest rating by IBCA, indicates that the obligation is
supported by a strong capacity for timely repayment. Those obligations rated
A1+ are supported by the highest capacity for timely repayment. Obligations
rated A2, the second highest rating, are supported by a satisfactory capacity
for timely repayment, although such capacity may be susceptible to adverse
changes in business, economic or financial conditions.
A-3
