CONTENTS
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2 Total Returns and Fund Investment Objectives
3 Letter to Shareholders
6 Investment Review: Turner Growth Equity Fund
8 Investment Review: Turner Midcap Growth Fund
10 Investment Review: Turner Small Cap Growth Fund
12 Investment Review: Turner Ultra Large Cap Growth Fund
14 Financial Statements
33 Report of Independent Auditors
TIP FUNDS
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The TIP Funds offer a series of 12 no-load mutual funds to individual and
institutional investors. The minimum initial investment in a TIP Fund for
regular accounts is $2,500 and $2,000 for individual retirement accounts. The
minimum amount for subsequent investments is $500.
Turner Investment Partners, Inc., based in Berwyn, Pennsylvania, serves as
the investment adviser to five of the TIP Funds. The firm, founded in 1990,
invests more than $2 billion in equity, fixed-income, and balanced portfolios on
behalf of individuals and institutions. Turner Investment Partners manages the
Turner Growth Equity Fund, the Turner Midcap Growth Fund, the Turner Small Cap
Growth Fund, the Turner Ultra Large Cap Growth Fund and the Turner Fixed Income
Fund. Separate investment firms manage the other seven mutual funds in the TIP
Funds family.
SHAREHOLDER SERVICES
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TIP Funds shareholders receive annual and semiannual reports and quarterly
account statements. Shareholders who have questions about their accounts may
call a toll-free telephone number, 1-800-224-6312. Or they may write to TIP
Funds, Box 419805, Kansas City, Missouri 64141.
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TOTAL RETURNS*
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Periods ended September 30, 1997
THREE FIVE
ONE YEARS YEARS SINCE
YEAR (ANNUALIZED) (ANNUALIZED) INCEPTION**
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Turner Growth
Equity Fund 32.61% 25.28% 19.29% 17.60%+
Turner Midcap
Growth Fund 43.77 -- -- 43.77++
Turner Small Cap
Growth Fund 16.64 39.74 -- 33.53+
Turner Ultra Large
Cap Growth Fund -- -- -- 22.80++
**Past performance cannot guarantee future results. The investment return and
principal value of an investment will fluctuate, so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
**The inception dates for each mutual fund are as follows: Turner Growth Equity
Fund, March 11, 1992; Turner Midcap Growth Fund, October 1, 1996; Turner Small
Cap Growth Fund, February 7, 1994; and Turner Ultra Large Cap Growth Fund,
February 1, 1997.
+Annualized
++Cumulative inception to date
FUND INVESTMENT OBJECTIVES
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THE TURNER GROWTH EQUITY FUND seeks capital appreciation. It invests
primarily in a diversified portfolio of common stocks that, in the Advisor's
opinion, have strong earnings growth potential. The Fund's economic-sector
weightings approximate the sector weightings of the Russell 1000 Growth Index.
THE TURNER MIDCAP GROWTH FUND seeks capital appreciation. It invests
primarily in a diversified portfolio of common stocks with market
capitalizations between $500 million and $6 billion at the time of purchase that
Turner believes offer strong earnings growth potential. The Fund's
economic-sector weightings approximate the sector weightings of the Russell
Midcap Growth Index.
THE TURNER SMALL CAP GROWTH FUND seeks capital appreciation. It invests
primarily in a diversified portfolio of common stocks with market
capitalizations not exceeding $1 billion that Turner believes offer strong
earnings growth potential. The Fund's economic-sector weightings approximate the
sector weightings of the Russell 2000 Growth Index.
THE TURNER ULTRA LARGE CAP GROWTH FUND seeks capital appreciation. It
invests primarily in a diversified portfolio of common stocks with market
capitalizations exceeding $10 billion at the time of purchase that Turner
believes offer strong earnings growth potential. The Fund's economic-sector
weightings approximate the sector weightings of the Russell Top 200 Growth
Index.
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TO OUR SHAREHOLDERS:
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A best-of-possible-worlds combination of sustained growth in corporate earnings,
generally declining interest rates, a smoothly humming economy, and subdued
inflation provided the backdrop for the continuing ascent of the stock market
during the 12-month period ended September 30. In this remarkable bull market,
where double-digit returns have become seemingly an annual routine, all
market-capitalization segments -- small, medium, and large -- flourished.
For our part, our mutual funds performed well on an ABSOLUTE basis (returns
versus historical norms). For the past 12 months, the Turner Growth Equity Fund
recorded a total return of 32.61%; the Turner Midcap Growth Fund, 43.77%; and
the Turner Small Cap Growth Fund, 16.64%. In its first eight months, our newest
fund, the Turner Ultra Large Cap Growth Fund, gained 22.80%. It's a reflection
of the extraordinary vitality of this bull market that our funds' gains during
this period -- even those of the Ultra Large Cap Fund, in existence for less
than a year -- exceeded the long-term compound annual averages for large- or
small-company stocks by a minimum of four percentage points, as measured by
Ibbotson Associates.
On a RELATIVE basis (returns versus an appropriate index), our performance
has been generally favorable. For the past 12 months, Growth Equity trailed the
Russell 1000 Growth Index by 3.7 percentage points; Midcap Growth outperformed
the Russell Midcap Growth Index by 14.1 percentage points; and Small Cap Growth
underperformed the Russell 2000 Growth Index by 6.7 percentage points. Since its
inception, Ultra Large Cap has outperformed the Russell Top 200 Growth Index by
2.7 percentage points and the S&P 500 Index by 0.8 percentage points.
WE RANK WELL VERSUS COMPETITORS
Another notable measure of performance is how well a mutual fund does
versus its peers. In this regard, we have cause for pride: our funds over their
entire histories have fared well compared to their peers in the industry.
According to data compiled by Lipper Analytical Services, our rankings in each
case are in the upper percentiles for the longest applicable time span. In
Lipper's Capital Appreciation Funds category, Growth Equity ranks 36th among 76
competing funds for the past five years, Midcap Growth ranks fifth of 247 for
the past nine months, Small Cap Growth ranks second of 259 for the past three
years, and Ultra Large Cap ranks 263rd of 878 for the past six months.
Details on the performance and investment strategies of each of our funds
begin on page 6.
As has been the case over the past two and a half years, the same select
niche did best: the biggest of the blue-chip stocks, the so-called "New Nifty
50" stocks such as General Electric, Microsoft, Gillette, and Coca-Cola, which
by the sheer size of their market capitalizations have exerted a
disproportionate influence on the S&P 500's outsized returns. The conventional
wisdom
3
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is that these larger, more liquid (that is, more easily tradable) stocks have
been popular because of investors' belief that they would hold up better than
smaller-cap shares if the bull market stumbles. In the capital markets, such a
belief tends to be self-reinforcing, and as a result small- and mid-cap stocks'
prices in aggregate advanced less spectacularly than those of large-cap stocks
over the past 12 months; the small-cap Russell 2000 Index gained 33.19%, 7.3
percentage points less than the large-cap S&P 500, while the Russell Midcap
Growth Index returned 29.65%, 10.8 percentage points less than the S&P 500.
Large-cap stocks' performance preeminence may be drawing to a close, however.
Since May 1997, for instance, the Russell 2000 Index has outperformed the S&P
500 by 14.0 percentage points, small stocks' best relative performance in years.
That's in sharp contrast to their relative performance in the 12-month period
ended last April, when the Russell 2000 lagged the S&P 500 by 25 percentage
points -- its worst showing in more than 20 years. With smaller and mid-sized
stocks starting to come to the fore and with broader market advances taking
place, we think perceptive stock selection may matter considerably more than it
has in recent years. We welcome the prospect, since picking individual
securities is at the heart of our growth-stock investment approach. Indeed,
since the founding of our firm in 1990, we have honed our ability to identify
for investment the type of companies that we prize: companies with rising
earnings estimates and positive earnings surprises.
WE CHERISH EARNINGS PROMISE
We prize such companies because our approach is predicated on this simple
tenet: earnings expectations largely drive stock prices, so stocks with the most
promising earnings prospects will tend to perform well over time. Early in the
decade we applied that approach to what was then our sole focus, large-cap
stocks, but in response to marketplace demand and our own evolution over the
years, we have become a growth-stock investment manager with services and
expertise that span the gamut of market capitalizations.
Happily, the rebound in small and mid-sized stocks has coincided with the
return to favor of our growth-stock investment approach, which produced
particularly strong returns for our mutual funds in the second half of the
fiscal year. In an industry in which eternity sometimes appears to extend no
further than two quarters, we stuck to our knitting and continued to seek out
companies that were the beneficiaries of favorable earnings expectations, even
though those companies elicited disappointing investor support until relatively
recently.
Early in 1997, for instance, we witnessed the dismaying spectacle of many
smaller growth companies suffering declines of 20% or more in their share prices
despite the strength -- and even the improvement -- of their earnings prospects.
We drew solace from the knowledge that the market would inevitably recognize the
merit of the superior earnings prospects of our holdings and reward them
accordingly. At the same time, we were steadfast in resisting the
4
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temptation to stray from our established approach and do something -- ANYTHING
- -- to reverse a temporary shortfall in our investment performance. To succumb to
that temptation would, in our view, not only be counter to the long-term
interests of the people who have entrusted money to us, it would represent a
self-inflicted wound to the central core that defines who we are as an
organization. Indeed, our approach is fundamental to us, to our identity and our
prospects for investment success over the long term. In short, we knew who we
are, and we remained true to ourselves. (To be sure, if you DON'T know who you
are, the capital markets are an expensive place to find out).
GROWTH INVESTING MAY TRIUMPH
Because we remained true to our approach, we think we are now primed to
capitalize on the change in market psychology. If past patterns are any
criterion, the pendulum may swing to the advantage of growth-stock investing for
at least the next two years, and we think our investments are positioned well to
reap the benefits.
One final point: we feel compelled to reiterate that the heady performance of
stocks in recent years has not been the norm; it has been far ABOVE the norm.
For one thing, there hasn't been a true bear market in large stocks in years:
the S&P 500 had gone 84 consecutive months -- seven full years -- without even a
10% correction, an unprecedented streak that ended only recently with the
massive sell-off in October. For another, equity valuations are generally lofty,
as are investor expectations for future returns. More than a few investors
believe the generally favorable market conditions that have existed in recent
years will continue to prevail -- an attitude known as "anchoring." But the
principle of regression to the mean suggests that the stock market's
extraordinary returns of recent years won't continue forever.
Even so, we think our growth style of investing can make money whether
broad or narrow segments of the market do in fact come under pressure in the
future. As we see it, investing in good companies with favorable earnings
outlooks has proved an effective strategy in the long run, no matter what the
market may do or which investing style may be in vogue at a given time. We
simply want to sound a cautionary note that after 15 years of stock-market
largesse, it may be judicious for investors to temper their expectations; coming
years may not be as beneficent as the recent past has been.
As always, we remain committed to our mission of delivering superior
investment returns and service to you, our shareholders. And as always, we
welcome your questions or comments.
/S/ SIGNATURE
Robert E. Turner
CHAIRMAN AND CHIEF INVESTMENT OFFICER
TURNER INVESTMENT PARTNERS, INC.
5
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INVESTMENT REVIEW
TURNER GROWTH EQUITY FUND
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Despite notable volatility, stocks in all capitalization segments generally
advanced at double-digit rates in the 12-month period ended September 30, 1997.
The Turner Growth Equity Fund profited from such a benign environment, with a
total return of 32.61% for the period. The fund's performance, however, fell
short of the Russell 1000 Growth Index by 3.7 percentage points and the S&P 500
Index by 7.8 points.
Growth Equity's shortfall was due primarily to the market's favoring of
multinational, mega-capitalization stocks at the expense of
lesser-capitalization issues. As is typically the case, more than 50% of our
holdings were in the stocks of mid-sized companies (companies with
capitalizations ranging from $1.2 billion to $8.4 billion). We owned many of the
larger stocks that largely dictate the performance of the Russell 1000 Growth
and S&P 500 indexes, but not in large enough proportions to outperform. In
short, a company's market capitalization -- rather than a company's growth
prospects -- proved a primary determinant of investment performance in this
fiscal year, a circumstance that didn't play fully to the strengths of our own
growth-investing approach.
The popularity of indexing (investing by weighting a portfolio to match a
broad index so as to replicate its performance) helped fuel the largest stocks'
rise. In our estimation, at least 15% of the S&P 500's 40.45% return over the
past 12 months is attributable to the impetus of indexing.
Recently, however, the market's leadership has conspicuously changed: in
the third quarter of 1997 small- and mid-capitalization stocks posted returns
that in aggregate beat those of large-cap stocks by seven percentage points or
more. Our own third-quarter performance reflected the change in market
leadership: Growth Equity rose 14.44% -- an advantage of 7.1 percentage points
over the S&P 500's results. That shift in leadership, in our judgment, should
continue to bode well for the performance of our holdings of
smaller-capitalization companies, which have earnings prospects generally
superior to those of their larger siblings. Our average investment has a
weighted market capitalization of $26.1 billion, versus $55.2 billion for the
Russell 1000 Growth Index.
We think select smaller-cap companies in the technology sector are
especially attractive in light of their anticipated earnings growth of more than
20% annually -- a growth rate that other sectors will find tough to match when
the economy slows. We also favor certain stocks in the health-care sector, which
stand to benefit from an increasingly aged population needing more medical
products and services, and the consumer-discretionary sector, which should be
enriched by a growing number of affluent households. Nearly half our holdings
are invested in the technology and health-care sectors, reflecting our policy of
matching our sector weightings to those of the Russell 1000 Growth Index.
Altogether, the growth prospects of our holdings are appealing: earnings
per share for the companies we own are expected to climb 27% in 1998, according
to analysts' consensus forecasts compiled by I/B/E/S Inc.
6
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PORTFOLIO MANAGER
ROBERT E. TURNER, founder and chairman of Turner Investment Partners, has
managed the Growth Equity Fund since its inception in 1992. A chartered
financial analyst, Bob previously was senior investment manager with Meridian
Investment Company. He earned bachelor's and MBA degrees at Bradley University
and has 16 years of investment experience.
COMPARISON OF CHANGE IN THE VALUE OF A
$100,000 INVESTMENT IN THE TURNER
GROWTH EQUITY FUND, VERSUS THE
S&P 500 INDEX AND THE RUSSELL
1000 GROWTH INDEX
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Annualized Annualized Annualized
One-Year Three-Year Five-Year Inception
Return Return Return to Date (1)
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32.61% 25.28% 19.29% 17.60%
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[LINE GRAPH OMITTED]
Turner Growth S&P 500 Russell 1000
Equity Fund Index Growth Index
3/31/92 100,000 100,000 100,000
9/30/92 100,550 105,110 103,260
9/30/93 127,340 118,710 109,430
9/30/94 123,520 123,090 115,830
9/30/95 149,000 159,650 153,120
9/30/96 183,140 192,090 185,880
9/30/97 242,862 269,760 253,357
These figures represent past performance. Past performance is no guarantee of
future results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than their original cost.
(1) The Turner Growth Equity Fund began operations on March 11, 1992.
7
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INVESTMENT REVIEW
TURNER MIDCAP GROWTH FUND
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In its first year, the Turner Midcap Growth Fund got a fast start out of the
gate: for the past 12 months ended September 30, 1997, the fund bounded to a
total return of 43.77%, a differential of 14.1 percentage points over the
Russell Midcap Growth Index's results. The fund's performance was such that it
even exceeded the 40.45% gain of the S&P 500 Index, the best-performing major
index over the past 12 months.
Midcap Growth's gains accelerated as the fiscal year progressed, as mid-cap
companies' generally robust profit growth was rewarded increasingly by
investors. Indeed, if the current business expansion has been called the
Goldilocks economy -- not too strong or too weak, but just right -- mid-cap
companies might be similarly called Goldilocks companies at this juncture: they
offer a desirable combination of not too much share-price volatility, not too
much foreign-exchange exposure, and just-right growth prospects, i.e.,
double-digit earnings expectations. Indeed, we are especially interested in
investing in companies with capitalizations of about $1 billion that can
increase their valuations five- or tenfold. About 20% of our holdings have
market capitalizations below $1.2 billion, and our weighted average market
capitalization is $3.6 billion.
In the past 12 months, nine of our 10 sector investments outperformed the
Russell Midcap Growth Index's aggregate return. Especially successful were our
investments in the producer-durables, technology, utilities, and
autos/transportation sectors. Less successful was our position in
materials/processing, which failed to beat the index.
We think our holdings' fundamentals are attractive now; the companies we
own are projected to increase their earnings per share by 30% in 1998, versus
just a 24% growth projection for the Russell Midcap Growth Index. Nearly 50% of
our holdings have rising earnings estimates. The fund's average price/earnings
multiple based on 1998 earnings is 24, versus 21 for the index, a modest
premium, given our investments' growth prospects.
We now are invested in about 95 stocks, up slightly from before. In terms
of sector weightings, consumer-discretionary and technology amount to our two
biggest positions, representing about 46% of the fund's assets. Another 21% of
assets is invested in the financial-services and health-care sectors. All our
sector weightings mirror the Russell Midcap Growth sector weightings -- a
longstanding "sector-neutral" policy that in our estimation helps us to manage
risks posed by the economy; that policy rests on the premise that if one sector
of the economy should falter, the impact tends to be blunted by our
market-weighted investments in the other sectors.
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PORTFOLIO MANAGERS
CHRISTOPHER K. MCHUGH has co-managed the Turner Midcap Growth Fund since
its inception last year. Chris joined Turner Investment Partners when it was
founded in 1990 and previously held a position as performance specialist at
Provident Capital Management. He earned a bachelor's degree at the Philadelphia
College of Textiles and Science and an MBA degree at St. Joseph's University. He
has 11 years of investment experience and is a principal at Turner.
WILLIAM H. CHENOWETH has served as co-manager of the Turner Midcap Growth
Fund since its inception. Before joining Turner Investment Partners in 1993, he
was second vice president at Jefferson-Pilot Corporation. A chartered financial
analyst, Bill received bachelor's and MBA degrees from Emory University. He has
12 years of investment experience and is a principal at Turner.
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT
IN THE TURNER MIDCAP GROWTH FUND, VERSUS THE RUSSELL MIDCAP GROWTH INDEX
- -------------
Cumulative
Inception
to Date (1)
- -------------
43.77%
- -------------
[LINE GRAPH OMITTED]
Turner Midcap Growth Fund Russell Midcap Growth Index
10/31/96 100,000 100,000
9/30/97 142,485 131,177
These figures represent past performance. Past performance is no guarantee of
future results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than their original cost.
(1) The Turner Midcap Growth Fund began operations on October 1, 1996.
9
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INVESTMENT REVIEW
TURNER SMALL CAP GROWTH FUND
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The performance of the Turner Small Cap Growth Fund during the 12 months ended
September 30, 1997, was a marked study in contrasts. Small Cap Growth fell
19.53% in the first half of the fiscal year, then rebounded strongly in the
second half to finish with a soundly positive return of 16.64%. Even so, the
fund's results for the entire period trailed those of the Russell 2000 Growth
Index by 6.7 percentage points.
Small Cap Growth's performance was impaired primarily by the market's
aversion to growth stocks in the first half of the fiscal year. Value indexes
outperformed slumping growth indexes by 20 percentage points in the first half,
and in the process the price/earnings multiples of many of our holdings
contracted sharply. The growth companies that we held did exactly what we
expected them to do: generate superior earnings growth. As in the past, we
perceptively picked companies with strong earnings patterns, but unfortunately
it was one of those aberrant times in the market when our efforts were largely
for naught: our growth shares weren't spared from the general carnage wreaked on
the growth segment of the market.
The contraction in multiples was in fact part of a longer-term trend begun
in June 1996, when small-cap stocks' valuations had skyrocketed to historically
rich levels -- e. g., price/earnings ratios routinely were double the companies'
growth rates. By April 1997, however, those once-lofty valuations had dropped
with a vengeance, especially in relation to those of large-cap stocks. When
small stocks' relative valuations have been so compellingly low in the past,
their return potential has usually been compellingly high. And that again was
the case. In May alone the small-cap Russell 2000 Index soared 11%, its best
month in more than six years, and went on to return 33.14% for the final five
months of the fiscal year. As is typical in such a robust market, our own
holdings surged powerfully, up 43.68% in that five-month period.
We think the rally in smaller stocks -- particularly small GROWTH stocks --
is not over yet. For one thing, even with their recent appreciation, small
stocks' valuations are still below average relative to those of large stocks.
For another, year-over-year profit growth for large-cap companies began to
slacken in 1997's second quarter, due to an erosion of their international
earnings by the strong dollar. In contrast, small-cap companies, with modest or
nonexistent overseas businesses, have a relative immunity to the negative
foreign-exchange consequences of a strong dollar. Consequently, we think small
companies that can continue increasing earnings at rates of 20% or more will
likely be rewarded with higher multiples. Our holdings are trading at just 25
times their expected earnings growth rate of 34% next year, according to I/B/E/S
Inc. data. As such, they hold considerable potential for acquiring higher
multiples, in our opinion.
Our two largest sector weightings, approximating the 40% sector weightings
of the Russell 2000 Growth Index, are technology and consumer discretionary.
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PORTFOLIO MANAGER
WILLIAM H. CHENOWETH has managed the Turner Small Cap Growth Fund since its
inception in 1994. Before joining Turner Investment Partners in 1993, he was
second vice president at Jefferson-Pilot Corporation. A chartered financial
analyst, Bill received bachelor's and MBA degrees from Emory University. He has
12 years of investment experience and is a principal at Turner.
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT IN THE
TURNER SMALL CAP GROWTH FUND, VERSUS THE RUSSELL 2000
GROWTH INDEX AND THE RUSSELL 2500 INDEX
- ------------------------------------
Annualized Annualized
One-Year Three-Year Inception
Return Return to Date (1)
- ------------------------------------
16.64% 39.74% 33.53%
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[LINE GRAPH OMITTED]
Turner Small Cap Russell 2500 Russell 200
Growth Fund Index Growth Index
2/28/94 100,000 100,000 100,000
9/30/94 103,030 98,350 96,180
9/30/95 158,120 123,420 123,280
9/30/96 241,030 142,960 138,810
9/30/97 281,140 192,000 171,230
These figures represent past performance. Past performance is no guarantee of
future results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than their original cost.
(1) The Turner Small Cap Growth Fund began operations on February 7, 1994.
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INVESTMENT REVIEW
TURNER ULTRA LARGE CAP GROWTH FUND
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The largest of the large-cap stocks have been the market's darlings for most of
1997. In the eight-month period ended September 30, 1997 that the Turner Ultra
Large Cap Growth Fund has been in existence, shares of the corporate behemoths
constituting the Russell Top 200 Growth Index (which has a weighted average
market capitalization of $64.7 billion) climbed 20.12% in aggregate. Meanwhile,
the S&P 500 Index rose 22.02%. The Turner Ultra Large Cap Growth Fund did better
than either benchmark, gaining 22.80%.
Ultra Large Cap Growth opened inauspiciously in February 1997, a time when
large-cap stocks were reeling. Among other things, investors were jittery about
above-average equity valuations. Late in the month, Federal Reserve Chairman
Alan Greenspan contributed to the market's jitters with his much-chronicled
cautionary comments about the capital markets; among other things, he suggested
that the stock prices might be permeated by "excessive optimism." That
pronouncement, along with a subsequent quarter-point increase in short-term
rates by the Fed, helped send stocks tumbling; at one point in the first quarter
of 1997 the S&P 500 Index fell more than seven percentage points and the Russell
Top 200 Growth Index about five percentage points.
The decline was arrested, however, by a sustained sequence of good news:
S&P 500 companies reported aggregate first-quarter earnings increases of 14%,
interest rates fell across the board, inflation remained well below 3%, and
second-quarter earnings growth was expected to be favorable. As a result, share
prices of market leaders like Microsoft, which had fallen 10%, soared 30% from
the end of March to May. Later, when earnings began to show sporadic signs of
weakening, investors gravitated to small- and mid-cap stocks. But overall the
price trend in large-cap stocks was up strongly. The idea that price dips
provide buying opportunities proved deeply embedded in investors' psyches; every
time large stocks declined, a rebound ensued. Also, heavy mutual-fund inflows
and a continuing acquisition boom that reduced the supply of outstanding stock
bolstered share prices.
For the 12-month period, our best-performing investments were in the
technology, financial-services, and producer-durables sectors, all of which
outperformed the Russell Top 200 Growth Index. Our positions in
autos/transportation and utilities underperformed.
Despite worries about the waning market leadership of larger stocks, we
remain sanguine about the prospects for our own holdings. The companies in which
we are invested are expected to increase their earnings per share by 20.7% on
average next year, according to I/B/E/S Inc. consensus forecasts. That earnings
power is based on certain key strengths that should enable large companies to
continue prospering in markets around the world: vast economies of scale,
financial resources, and marketing expertise, plus an unrivaled ability to
create innovative, needed products and services. About 70% of the fund's assets
are invested in the technology, health-care, and consumer-staples sectors, in
line with the weightings of the Russell Top 200 Growth Index.
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PORTFOLIO MANAGER
JOHN F. HAMMERSCHMIDT has served as co-manager of the Turner Ultra Large
Cap Growth Fund since its inception in 1997. He joined Turner Investment
Partners in 1992. Previously John was vice president of government securities
trading with S. G. Warburg. He holds a bachelor's degree from Lehigh University
and an MBA degree from Duke University. He has 13 years of investment experience
and is a principal at Turner.
ROBERT E. TURNER, founder and chairman of Turner Investment Partners, has
co-managed Ultra Large Cap Growth since its inception. A chartered financial
analyst, Bob previously was senior investment manager with Meridian Investment
Company. He earned bachelor's and MBA degrees at Bradley University and has 16
years of investment experience.
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT IN THE
TURNER ULTRA LARGE CAP GROWTH FUND, VERSUS THE RUSSELL TOP 200 GROWTH INDEX
- -------------
Cumulative
Inception
to Date (1)
- -------------
22.80%
- -------------
[LINE GRAPH OMITTED]
Turner Ultra Large Cap Russell Top 200
Growth Fund Growth Index
1/31/97 100,000 100,000
9/30/97 123,415 120,130
These figures represent past performance. Past performance is no guarantee of
future results. The investment return and principal value of an investment will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than their original cost.
(1) The Turner Ultra Large Cap Growth Fund began operations on February 1, 1997.
13
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STATEMENT OF NET ASSETS TIP FUNDS
September 30, 1997
Market
Value
TURNER GROWTH EQUITY FUND Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (100.4%)
APPAREL/TEXTILES (0.6%)
Unifi 13,670 $ 560
--------
AUTOMOTIVE (0.5%)
Federal-Mogul 13,290 493
--------
BANKS (2.4%)
First Union 14,700 736
NationsBank 17,460 1,080
Washington Mutual 8,230 574
--------
2,390
--------
BEAUTY PRODUCTS (2.7%)
Colgate-Palmolive 15,330 1,068
Procter & Gamble 23,380 1,615
--------
2,683
--------
BROADCASTING, NEWSPAPERS, AND ADVERTISING (0.5%)
Clear Channel Communications* 7,170 465
--------
CHEMICALS (1.0%)
E.I. duPont de Nemours 15,540 957
--------
COMMUNICATIONS EQUIPMENT (2.5%)
Bay Networks* 26,260 1,014
Ciena* 15,100 748
Ultratech Stepper* 20,380 693
--------
2,455
--------
COMPUTERS AND SOFTWARE SERVICES (19.8%)
America Online* 12,370 933
Autodesk 16,690 757
Cadence Design Systems* 14,110 755
Cisco Systems* 19,450 1,421
Compaq Computer* 26,600 1,988
Compuware* 11,880 719
Hewlett-Packard 25,080 1,745
IBM 12,560 1,331
Jabil Circuit* 8,260 541
J.D. Edwards* 16,920 567
Microsoft* 20,450 2,706
Network Appliance* 12,010 652
Peoplesoft* 13,070 781
Sci Systems* 20,300 1,006
Storage Technology* 15,635 748
Market
Value
Shares (000)
- ------------------------------------------------------
Stratus Computer* 19,600 $ 948
Unisys* 34,490 528
Viasoft* 12,960 642
Wind River Systems* 12,140 501
Yahoo* 9,190 461
--------
19,730
--------
DRUGS (8.3%)
Bristol-Myers Squibb 23,990 1,985
Centocor* 10,830 515
Eli Lilly 17,400 2,096
Merck 21,230 2,122
Warner Lambert 11,230 1,515
--------
8,233
--------
ELECTRICAL SERVICES (0.1%)
AES* 1,280 56
--------
ENVIRONMENTAL SERVICES (2.0%)
Republic Industries* 25,140 828
USA Waste Services* 29,416 1,173
--------
2,001
--------
FINANCIAL SERVICES (2.1%)
Associates First Capital 16,420 1,022
Morgan Stanley, Dean Witter,
Discover 20,150 1,089
--------
2,111
--------
FOOD, BEVERAGE, AND TOBACCO (7.2%)
Archer-Daniels-Midland 51,940 1,243
Canandaigua Wine, Cl A* 11,120 524
Conagra 14,830 979
CPC International 9,590 888
Interstate Bakeries 10,970 752
Kellogg 29,150 1,228
Quaker Oats 21,000 1,058
Tyson Foods 21,990 515
--------
7,187
--------
HOTELS AND LODGING (2.4%)
HFS* 17,570 1,308
Hilton Hotels 32,590 1,098
--------
2,406
--------
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STATEMENT OF NET ASSETS TIP FUNDS
September 30, 1997
Market
TURNER GROWTH EQUITY FUND Value
(Continued) Shares (000)
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (0.8%)
Clorox 11,060 $ 820
--------
INSURANCE (2.9%)
American International Group 9,600 991
Conseco 19,820 967
SunAmerica 22,995 901
--------
2,859
--------
MACHINERY (2.4%)
Applied Materials* 15,590 1,485
Tyco International Limited 10,500 862
--------
2,347
--------
MEASURING DEVICES (0.6%)
KLA Instruments* 9,240 624
--------
MEDICAL PRODUCTS AND SERVICES (7.3%)
Beverly Enterprises* 44,730 777
Depuy* 19,330 517
Health Management
Associates, Cl A* 16,100 509
Healthsouth Rehabilitation* 27,490 734
Medtronic 26,520 1,246
Phycor* 34,130 992
Renal Treatment Centers* 27,570 980
Tenet Healthcare* 27,800 810
Universal Health Services* 16,260 703
--------
7,268
--------
MISCELLANEOUS BUSINESS SERVICES (3.6%)
Electronics for Imaging* 14,260 727
Fiserv* 12,400 544
HBO 43,560 1,644
Teradyne* 12,250 659
--------
3,574
--------
MISCELLANEOUS CONSUMER SERVICES (0.5%)
Accustaff* 16,440 518
--------
MISCELLANEOUS MANUFACTURING (0.5%)
Blyth Industries* 19,020 533
--------
Market
Value
Shares (000)
- ------------------------------------------------------
PAPER AND PAPER PRODUCTS (1.3%)
Champion International 8,220 $ 501
Georgia-Pacific 7,730 807
--------
1,308
--------
PETROLEUM AND FUEL PRODUCTS (2.4%)
EVI* 8,190 524
Ocean Energy* 19,000 1,311
Santa Fe International* 13,070 608
--------
2,443
--------
PRINTING AND PUBLISHING (0.8%)
Time Warner 14,210 770
--------
PROFESSIONAL SERVICES (0.5%)
Corrections of America* 11,780 512
--------
RETAIL (10.4%)
Alberto Culver, Cl A 27,970 724
Borders Group* 17,190 473
Circuit City Stores 17,000 685
CKE Restaurants 24,380 1,024
CompUSA* 23,630 827
CVS 12,850 731
Dollar Tree Stores* 11,820 497
Gap 14,770 739
General Nutrition* 24,950 727
Home Depot 14,075 734
PepsiCo 41,170 1,670
Walgreen 38,240 980
Whole Foods Market* 13,480 521
--------
10,332
--------
SEMICONDUCTORS/INSTRUMENTS (7.7%)
Atmel* 33,930 1,236
Cypress Semiconductor* 41,190 638
Intel 22,840 2,108
Lam Research* 20,400 949
Maxim Integrated Products* 10,920 780
Rambus* 9,030 502
Texas Instruments 10,650 1,439
--------
7,652
--------
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STATEMENT OF NET ASSETS TIP FUNDS
September 30, 1997
Shares/Face Market
TURNER GROWTH EQUITY FUND Amount Value
(Concluded) (000) (000)
- -------------------------------------------------------
STEEL AND STEEL WORKS (0.9%)
Ispat International NV, Cl A,
ADR* 33,420 $ 957
--------
TELEPHONES AND TELECOMMUNICATION (2.4%)
Qwest Communications
International* 10,940 505
Teleport Communications
Group* 14,270 640
WorldCom* 36,150 1,279
--------
2,424
--------
TESTING LABORATORIES (0.9%)
Quintiles Transnational* 11,040 930
--------
WHOLESALE (2.4%)
Cardinal Health 11,110 789
Safeway* 29,340 1,595
--------
2,384
--------
TOTAL COMMON STOCKS
(Cost $80,328) 99,982
--------
REPURCHASE AGREEMENT (1.3%)
Lehman Brothers
6.05%, dated 09/30/97, matures
10/01/97, repurchase price
$1,264,860 (collateralized by
various GNMA obligations,
total par value $1,261,042,
7.50%, matures 09/15/27:
total market value $1,289,941) $1,265 1,265
--------
TOTAL REPURCHASE AGREEMENT
(Cost $1,265) 1,265
--------
TOTAL INVESTMENTS (101.7%)
(Cost $81,593) 101,247
--------
OTHER ASSETS AND LIABILITIES, NET (-1.7%) (1,657)
--------
Market
Value
(000)
- -------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 5,986,325 outstanding
shares of beneficial interest $58,320
Accumulated net realized gain
on investments 21,624
Net unrealized appreciation
of investments 19,646
-------
TOTAL NET ASSETS (100.0%) $99,590
=======
Net Asset Value, Offering and
Redemption Price Per Share $ 16.64
=======
* NON-INCOME PRODUCING SECURITY
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
GNMA--GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
SCHEDULE OF INVESTMENTS TIP FUNDS
September 30, 1997
Market
Value
TURNER MIDCAP GROWTH FUND Shares (000)
- -------------------------------------------------------
COMMON STOCKS (75.2%)
APPAREL/TEXTILES (2.3%)
Ralph Lauren* 1,520 $ 40
Tommy Hilfiger* 858 43
Unifi 800 33
--------
116
--------
AUTOMOTIVE (3.2%)
Avis Rent A Car* 4,060 97
Federal-Mogul 917 34
Lear* 720 35
--------
166
--------
BANKS (2.5%)
H.F. Ahmanson 470 27
Northern Trust 852 50
Washington Mutual 767 53
--------
130
--------
BROADCASTING, NEWSPAPERS, AND ADVERTISING (1.8%)
Clear Channel Communications* 630 41
Outdoor Systems* 1,889 50
--------
91
--------
CHEMICALS (1.0%)
Cytec Industries* 550 26
Solutia* 1,340 27
--------
53
--------
COMMUNICATIONS EQUIPMENT (1.7%)
Ciena* 860 43
Ultratech Stepper* 1,243 42
--------
85
--------
COMPUTERS AND SOFTWARE SERVICES (8.5%)
Bay Networks* 1,015 39
BEA Systems* 1,750 31
Compuware* 625 38
Jabil Circuit* 440 29
J.D. Edwards* 1,310 44
Peoplesoft* 598 36
Sci Systems* 920 46
Storage Technology* 660 32
Stratus Computer* 805 39
Market
Value
Shares (000)
- ------------------------------------------------------
Viasoft* 647 $ 32
Wind River Systems* 791 33
Yahoo* 750 38
--------
437
--------
DRUGS (0.6%)
Centocor* 655 31
--------
ELECTRICAL SERVICES (0.7%)
AES* 800 35
--------
ENVIRONMENTAL SERVICES (1.7%)
Allied Waste Industries* 2,570 49
USA Waste Services* 987 39
--------
88
--------
FINANCIAL SERVICES (1.0%)
Ocwen Financial* 1,185 50
--------
FOOD, BEVERAGE, AND TOBACCO (3.1%)
Canandaigua Wine, Cl A* 1,025 48
Interstate Bakeries 530 36
Quaker Oats 700 35
Tyson Foods 1,845 43
--------
162
--------
HOTELS AND LODGING (0.8%)
Signature Resorts* 900 43
--------
HOUSEHOLD PRODUCTS (0.6%)
Clorox 436 32
--------
INSURANCE (4.4%)
Ace Limited 430 40
Conseco 778 38
Frontier Insurance Group 1,035 39
Hartford Life, Cl A* 734 28
Oxford Health Plans* 400 30
SunAmerica 1,311 51
--------
226
--------
MEASURING DEVICES (1.1%)
KLA Instruments* 845 57
--------
MEDICAL PRODUCTS AND SERVICES (4.1%)
Beverly Enterprises* 2,880 50
Healthsouth Rehabilitation* 590 16
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
SCHEDULE OF INVESTMENTS TIP FUNDS
September 30, 1997
Market
TURNER MIDCAP GROWTH FUND Value
(Continued) Shares (000)
- ------------------------------------------------------
Phycor* 1,110 $ 32
Sofamor Danek Group* 730 42
Total Renal Care Holdings* 825 41
Universal Health Services* 661 29
--------
210
--------
MISCELLANEOUS BUSINESS SERVICES (3.5%)
Electronics for Imaging* 550 28
HBO 1,310 49
PRI Automation* 885 52
Teradyne* 935 50
--------
179
--------
MISCELLANEOUS CONSUMER SERVICES (0.7%)
Accustaff* 1,173 37
--------
PAPER AND PAPER PRODUCTS (2.7%)
Bemis 891 40
Bowater 960 49
Champion International 811 49
--------
138
--------
PETROLEUM AND FUEL PRODUCTS (4.3%)
BJ Services* 465 35
EVI* 630 40
Global Industries* 1,501 60
Ocean Energy* 758 52
Santa Fe International* 770 36
--------
223
--------
PETROLEUM REFINING (0.7%)
Tosco 1,033 36
--------
PRINTING AND PUBLISHING (1.3%)
CMP Media, Cl A* 1,200 30
Valassis Communications* 1,240 40
--------
70
--------
PROFESSIONAL SERVICES (2.4%)
Apollo Group, Cl A* 781 33
Corrections of America* 1,117 49
Sylvan Learning Systems* 880 39
--------
121
--------
Market
Value
Shares (000)
- ------------------------------------------------------
RETAIL (8.6%)
Bed Bath & Beyond* 1,160 $ 41
Borders Group* 1,275 35
Circuit City Stores 1,000 40
CKE Restaurants 1,015 43
CompUSA* 1,441 50
CVS 562 32
Dollar Tree Stores* 920 39
General Nutrition* 1,280 37
Papa John's International* 920 31
Rite Aid 795 44
Williams Sonoma* 1,132 48
--------
440
--------
SEMICONDUCTORS/INSTRUMENTS (4.9%)
Analog Devices* 972 33
Atmel* 815 30
Cypress Semiconductor* 2,049 32
Lam Research* 970 45
Microchip Technology* 830 37
Rambus* 660 37
VLSI Technology* 1,110 39
--------
253
--------
SPECIALTY MACHINERY (0.7%)
Cooper Cameron* 484 35
--------
STEEL AND STEEL WORKS (1.7%)
Ispat International NV,
Cl A, ADR* 1,425 41
Steel Dynamics* 2,079 49
--------
90
--------
TELEPHONES AND TELECOMMUNICATION (3.1%)
Nextlink Communications* 2,040 49
Premiere Technologies* 910 31
Qwest Communications
International* 850 39
Tel-Save Holdings* 1,720 41
--------
160
--------
WHOLESALE (1.5%)
Amerisource Health* 457 27
Cardinal Health 705 50
--------
77
--------
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
SCHEDULE OF INVESTMENTS/STATEMENT OF NET ASSETS TIP FUNDS
September 30, 1997
Face Market
TURNER MIDCAP GROWTH FUND Amount Value
(Concluded) (000) (000)
- ------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,537) $3,871
------
REPURCHASE AGREEMENT (11.8%)
Lehman Brothers
5.36%, dated 09/30/97, matures
10/01/97, repurchase price
$605,075 (collateralized by U.S.
Treasury Bond, par value
$493,249, 10.00%, matures
05/15/10: market value
$623,497) $605 605
------
TOTAL REPURCHASE AGREEMENT
(Cost $605) 605
------
TOTAL INVESTMENTS (87.0%)
(Cost $4,142) $4,476
======
* NON-INCOME PRODUCING SECURITY
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
Market
TURNER SMALL CAP Value
GROWTH FUND Shares (000)
- ------------------------------------------------------
COMMON STOCKS (98.3%)
AIR TRANSPORTATION (0.4%)
Mesaba Holdings* 32,430 $ 671
--------
APPAREL/TEXTILES (1.4%)
Interface 34,000 990
Tommy Hilfiger* 22,685 1,133
--------
2,123
--------
AUTOMOTIVE (0.6%)
Federal-Mogul 24,430 907
--------
BANKS (2.3%)
Astoria Financial 25,570 1,286
Golden State Bancorp* 44,100 1,317
Sovereign Bancorp 48,700 852
--------
3,455
--------
BEAUTY PRODUCTS (0.4%)
Alberto-Culver, Cl B 21,810 664
--------
BROADCASTING, NEWSPAPERS, AND ADVERTISING (1.7%)
Chancellor Media, Cl A* 31,900 1,679
Universal Outdoor Holdings* 25,520 957
--------
2,636
--------
CHEMICALS (0.9%)
H.B. Fuller 13,670 741
OM Group 14,090 563
--------
1,304
--------
COMMUNICATIONS EQUIPMENT (3.3%)
Inter-Tel 26,300 1,394
P-Com* 48,900 1,170
Powerwave Technologies* 20,140 780
Ultratech Stepper* 48,669 1,655
--------
4,999
--------
COMPUTERS AND SOFTWARE SERVICES (8.3%)
Aspect Development* 28,110 1,154
Aspen Technology* 22,742 799
Avid Technology* 34,700 1,128
Box Hill Systems* 41,300 723
Excite* 49,520 1,410
Jabil Circuit* 21,440 1,404
Network Appliance* 32,430 1,759
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
STATEMENT OF NET ASSETS TIP FUNDS
September 30, 1997
Market
TURNER SMALL CAP Value
GROWTH FUND (Continued) Shares (000)
- ------------------------------------------------------
Saville Systems Ireland, ADR* 14,950 $ 1,050
Security Dynamics Technology* 31,600 1,173
Viasoft* 20,910 1,035
Wind River Systems* 27,175 1,121
--------
12,756
--------
DRUGS (2.8%)
Dura Pharmaceuticals* 33,000 1,440
Medicis Pharmaceutical, Cl A* 29,520 1,354
Parexel International* 38,270 1,512
--------
4,306
--------
ENERGY AND POWER (0.4%)
Comfort Systems USA* 35,100 671
--------
ENTERTAINMENT (0.5%)
Bally Total Fitness* 45,950 793
--------
ENVIRONMENTAL SERVICES (1.0%)
Allied Waste Industries* 80,750 1,544
--------
FINANCIAL SERVICES (3.8%)
Amresco 48,600 1,804
Imperial Credit Industries* 48,824 1,294
Metris* 22,070 956
Ocwen Financial* 17,700 746
The Money Store 34,271 977
--------
5,777
--------
FOOD, BEVERAGE, AND TOBACCO (1.0%)
Morningstar Group* 14,260 613
Suiza Foods* 17,590 906
--------
1,519
--------
HOTELS AND LODGING (0.9%)
Signature Resorts* 30,470 1,447
--------
HOUSEHOLD FURNITURE AND FIXTURES (0.7%)
Ethan Allen Interiors 35,900 1,113
--------
INSURANCE (3.7%)
Coventry* 50,520 834
Executive Risk 20,120 1,376
Frontier Insurance Group 23,200 882
Mutual Risk Management 22,230 1,130
Protective Life 17,300 874
Vesta Insurance Group 10,160 579
--------
5,675
--------
Market
Value
Shares (000)
- ------------------------------------------------------
MACHINERY (4.9%)
Camco International 18,350 $ 1,280
Cooper* 40,300 1,481
DII Group* 31,210 1,023
Kuhlman 32,280 1,162
Magnetek* 58,840 1,316
SPX 21,420 1,256
--------
7,518
--------
MEDICAL PRODUCTS AND SERVICES (9.7%)
ATL Ultrasound* 26,630 1,245
Coast Dental Services* 23,720 706
Concentra Managed Care* 46,477 1,641
ESC Medical Systems* 37,800 1,422
Hanger Orthopedic Group* 47,020 702
Henry Schein* 30,600 1,094
National Surgery Centers* 52,797 1,148
Pediatrix Medical Group* 30,000 1,324
Renal Treatment Centers* 37,500 1,334
Sofamor Danek Group* 20,170 1,152
Total Renal Care Holdings* 27,087 1,354
Universal Health Services, Cl B* 39,780 1,720
--------
14,842
--------
METALS AND MINING (0.6%)
Titanium Metals* 23,600 879
--------
MISCELLANEOUS BUSINESS SERVICES (6.0%)
Arbor Software* 24,650 1,142
Cognex* 59,040 1,941
Concord EFS* 38,219 1,032
Maximus* 25,100 726
NCO Group* 22,310 825
PMT Services* 58,272 903
PRI Automation* 28,810 1,685
Vincam Group* 31,900 917
--------
9,171
--------
MISCELLANEOUS CONSUMER SERVICES (0.4%)
Sunrise Assisted Living* 16,800 607
--------
MISCELLANEOUS MANUFACTURING (2.4%)
Chicago Miniature Lamp* 36,820 1,224
Kaydon 13,210 793
Southdown 29,610 1,617
--------
3,634
--------
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
STATEMENT OF NET ASSETS TIP FUNDS
September 30, 1997
Market
TURNER SMALL CAP Value
GROWTH FUND (Continued) Shares (000)
- -------------------------------------------------------
PAPER AND PAPER PRODUCTS (1.5%)
Bowater 14,700 $ 750
Buckeye Cellulose* 21,342 860
Gaylord Container* 80,810 687
--------
2,297
--------
PETROLEUM AND FUEL PRODUCTS (5.7%)
Global Industries* 61,020 2,433
Hanover Compressor* 44,740 1,096
Ocean Energy* 39,370 2,716
Pride International* 55,350 1,882
UTI Energy* 16,000 661
--------
8,788
--------
PRINTING AND PUBLISHING (1.1%)
CMP Media, Cl A* 40,000 1,000
Valassis Communications* 22,270 710
--------
1,710
--------
PROFESSIONAL SERVICES (2.9%)
Caribiner International* 31,600 1,288
Corestaff* 34,400 1,114
Devry* 38,700 1,156
Hagler Bailly* 36,800 934
--------
4,492
--------
RAILROADS (1.0%)
Coach USA* 25,700 773
Wisconsin Central
Transportation* 23,850 759
--------
1,532
--------
REAL ESTATE (0.4%)
LaSalle Partners* 17,030 596
--------
RETAIL (8.4%)
Borders Group* 51,500 1,416
Children's Place Retail Stores* 47,700 692
CKE Restaurants 38,100 1,600
Cole National* 19,450 808
Compucom Systems* 79,890 739
Dollar Tree Stores* 28,230 1,187
Fine Host* 21,400 829
Goody's Family Clothing* 27,900 900
Linens N Things* 18,860 632
Papa John's International* 36,300 1,241
Market
Value
Shares (000)
- ------------------------------------------------------
Paul Harris Stores* 31,330 $ 865
Quality Food Centers* 10,551 432
Williams-Sonoma* 37,260 1,593
--------
12,934
--------
SEMICONDUCTORS/INSTRUMENTS (8.0%)
Computer Products* 57,200 1,702
Cypress Semiconductor* 54,500 845
Electroglas* 44,000 1,496
Photronics Labs* 20,330 1,231
PMC-Sierra* 45,200 1,153
Rambus* 14,380 800
Sanmina* 21,100 1,826
Unitrode* 12,850 952
Vitesse Semiconductor* 21,200 1,051
VLSI Technology* 36,350 1,261
--------
12,317
--------
SPECIALTY CONSTRUCTION (0.6%)
Iteq* 62,360 869
--------
STEEL AND STEEL WORKS (0.6%)
Steel Dynamics* 39,650 932
--------
TELEPHONES AND TELECOMMUNICATION (6.5%)
ACC* 20,245 666
Brooks Fiber Properties* 26,410 1,233
Intermedia Communications
of Florida* 33,763 1,585
Mastec* 19,600 857
McLeodUSA, Cl A* 25,650 1,012
Pacific Gateway Exchange* 11,650 456
Premiere Technologies* 39,200 1,338
Smartalk Teleservices* 35,800 886
Tekelec* 25,870 881
Tel-Save Holdings* 45,080 1,085
--------
9,999
--------
WHOLESALE (3.5%)
Applied Analytical Industries* 23,850 483
Inacom* 18,040 671
Industrial Distribution Group* 36,580 768
JLK Direct Distribution, Cl A* 25,720 770
Kent Electronics* 38,100 1,505
North Face* 45,170 1,214
--------
5,411
--------
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS TIP FUNDS
September 30, 1997
Face Market
TURNER SMALL CAP Amount Value
GROWTH FUND (Concluded) (000) (000)
- ------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $123,827) $150,888
--------
REPURCHASE AGREEMENT (2.7%)
Lehman Brothers
6.05%, dated 09/30/97,
matures 10/01/97, repurchase
price $4,159,876 (collateralized
by various GNMA obligations,
total par value $4,151,205,
7.50% - 9.00%, maturing
05/15/27 - 06/15/27: total
market value $4,242,359) $4,160 4,160
--------
TOTAL REPURCHASE AGREEMENT
(Cost $4,160) 4,160
--------
TOTAL INVESTMENTS (101.0%)
(Cost $127,987) 155,048
--------
OTHER ASSETS AND LIABILITIES, NET (-1.0%) (1,586)
--------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 5,822,967 outstanding
shares of beneficial interest 125,653
Accumulated net realized gain
on investments 748
Net unrealized appreciation
of investments 27,061
--------
TOTAL NET ASSETS (100.0%) $153,462
========
Net Asset Value, Offering and
Redemption Price Per Share $ 26.35
========
* NON-INCOME PRODUCING SECURITY
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
GNMA--GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
SCHEDULE OF INVESTMENTS TIP FUNDS
September 30, 1997
Market
TURNER ULTRA LARGE CAP Value
GROWTH FUND Shares (000)
- -------------------------------------------------------
COMMON STOCKS (95.9%)
BANKS (3.3%)
Citicorp 67 $ 9
NationsBank 222 14
-----
23
-----
BEAUTY PRODUCTS (4.6%)
Colgate-Palmolive 175 12
Gillette 77 7
Procter & Gamble 192 13
-----
32
-----
COMPUTERS AND SOFTWARE SERVICES (18.1%)
Cisco Systems* 270 20
Compaq Computer* 332 25
Computer Associates 190 14
Hewlett-Packard 310 22
Microsoft* 255 34
Sun Microsystems* 265 12
-----
127
-----
DRUGS (17.0%)
Bristol-Myers Squibb 272 22
Eli Lilly 171 21
Merck 302 30
Pfizer 338 20
Schering-Plough 270 14
Warner-Lambert 90 12
-----
119
-----
ENTERTAINMENT (2.4%)
Walt Disney 217 17
-----
ENVIRONMENTAL SERVICES (1.7%)
Republic Industries* 360 12
-----
FINANCIAL SERVICES (1.3%)
American Express 105 9
-----
FOOD, BEVERAGE, AND TOBACCO (7.2%)
Archer Daniels Midland 442 11
CPC International 135 12
Philip Morris 649 27
-----
50
-----
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
SCHEDULE OF INVESTMENTS TIP FUNDS
September 30, 1997
Market
TURNER ULTRA LARGE CAP Value
GROWTH FUND (Concluded) Shares (000)
- -------------------------------------------------------
INSURANCE (1.7%)
American International Group 115 $ 12
-----
MACHINERY (6.1%)
Applied Materials* 81 8
General Electric 270 18
Tyco International Limited 210 17
-----
43
-----
MEDICAL PRODUCTS AND SERVICES (4.0%)
Johnson & Johnson 280 16
Tenet Healthcare* 410 12
-----
28
-----
MISCELLANEOUS BUSINESS SERVICES (2.1%)
CUC International* 490 15
-----
PAPER AND PAPER PRODUCTS (1.0%)
International Paper 120 7
-----
PHOTOGRAPHIC EQUIPMENT AND SUPPLIES (2.4%)
Xerox 200 17
-----
RETAIL (10.0%)
Gap 275 14
Home Depot 49 2
PepsiCo 538 22
Safeway* 264 14
Wal-Mart Stores 222 8
Walgreen 378 10
-----
70
-----
SEMICONDUCTORS/INSTRUMENTS (8.4%)
Intel 478 44
Texas Instruments 114 15
-----
59
-----
TELEPHONES AND TELECOMMUNICATION (4.6%)
Lucent Technologies 242 20
WorldCom* 330 12
-----
32
-----
TOTAL COMMON STOCKS
(Cost $658) 672
-----
Face Market
Amount Value
(000) (000)
- ------------------------------------------------------
REPURCHASE AGREEMENT (3.1%)
Lehman Brothers
5.38%, dated 09/30/97, matures
10/01/97, repurchase price
$22,144 (collateralized by
U.S. Treasury Bond, par
value $17,781, 8.75%, matures
08/15/20: market
value $22,794) $22 $ 22
----
TOTAL REPURCHASE AGREEMENT
(Cost $22) 22
----
TOTAL INVESTMENTS (99.0%)
(Cost $680) $694
====
*NON-INCOME PRODUCING SECURITY
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (000) TIP FUNDS
September 30, 1997
<TABLE>
<CAPTION>
TURNER ULTRA
TURNER MIDCAP LARGE CAP
GROWTH GROWTH
FUND FUND
- ------------------------------------------------------------------------------------------------------------------
Assets:
<S> <C> <C>
Investment Securities at Value (Cost $4,142 and $680 respectively).......... $4,476 $ 694
Capital Shares Sold Receivable.............................................. 1,131 --
Receivable for Investment Securities Sold .................................. 40 34
Income Receivable .......................................................... 1 1
Other Assets ............................................................... 21 24
- ------------------------------------------------------------------------------------------------------------------
Total Assets ............................................................ 5,669 753
- ------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for Investment Securities Purchased ............................... (521) (45)
Accrued Expenses ........................................................... (3) --
Capital Shares Redeemed Payable ........................................... -- (5)
Other Liabilities........................................................... -- (2)
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities ....................................................... (524) (52)
- ------------------------------------------------------------------------------------------------------------------
Net Assets:
Portfolio shares (unlimited authorization--no par value) based on
361,886 and 57,088 respectively outstanding shares of beneficial interest 4,453 612
Undistributed Net Investment Income......................................... -- 1
Accumulated Net Realized Gain on Investments .............................. 358 74
Net Unrealized Appreciation of Investments ................................ 334 14
- ------------------------------------------------------------------------------------------------------------------
Total Net Assets ........................................................ $5,145 $ 701
==================================================================================================================
Net Asset Value, Offering Price, and Redemption Price Per Share .............. $14.22 $12.28
==================================================================================================================
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS (000) TIP FUNDS
TURNER GROWTH TURNER MIDCAP TURNER SMALL TURNER ULTRA
EQUITY GROWTH CAP LARGE CAP
FUND FUND GROWTH FUND GROWTH FUND
------------- ------------- ------------ ------------
FOR THE FOR THE FOR THE FOR THE EIGHT
YEAR ENDED YEAR ENDED YEAR ENDED MONTH PERIOD
9/30/97 9/30/97(1) 9/30/97 ENDED 9/30/97(2)
- ------------------------------------------------------------------------------------------------------------------
Investment Income:
<S> <C> <C> <C> <C>
Dividends ....................................... $ 658 $ 6 $ 172 $ 3
Interest ........................................ 78 5 161 1
- ------------------------------------------------------------------------------------------------------------------
Total Investment Income........................ 736 11 333 4
- ------------------------------------------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ........................ 718 13 836 2
Investment Advisory Fee Waiver .................. (24) (13) (74) (2)
Reimbursements by Advisor........................ -- (40) -- (28)
Administrator Fees .............................. 111 75 98 50
Administrator Fee Waiver.......................... -- (66) -- (47)
Custodian Fees .................................. 11 8 15 4
Transfer Agent Fees ............................. 49 11 57 9
Professional Fees ............................... 36 2 23 --
Trustee Fees .................................... 11 -- 7 --
Registration Fees ............................... 39 20 48 14
Pricing Fees .................................... 2 1 2 --
Printing Fees ................................... 14 1 15 --
Amortization of Deferred Organizational Costs ... 8 8 8 1
Insurance and Other Fees ........................ 5 2 5 --
- ------------------------------------------------------------------------------------------------------------------
Total Expenses ................................ 980 22 1,040 3
Directed Brokerage ............................ (57) -- -- --
- ------------------------------------------------------------------------------------------------------------------
Net Expenses ................................ 923 22 1,040 3
- ------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) .............. (187) (11) (707) 1
- ------------------------------------------------------------------------------------------------------------------
Net Realized Gain From Securities Sold .......... 23,807 387 754 74
Net Unrealized Appreciation
of Investment Securities ...................... 3,066 284 18,398 14
- ------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain
on Investments .............................. 26,873 671 19,152 88
- ------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
From Operations .............................. $26,686 $660 $18,445 $ 89
==================================================================================================================
<FN>
(1) The Turner Midcap Growth Fund began operations on October 1, 1996.
(2) The Turner Ultra Large Cap Growth Fund began operations on February 1, 1997.
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) TIP FUNDS
<TABLE>
<CAPTION>
TURNER GROWTH TURNER MIDCAP
EQUITY FUND GROWTH FUND
-------------------------- --------------
FOR THE TWELVE-
10/1/96 10/1/95 MONTH PERIOD
TO TO ENDED
9/30/97 9/30/96 9/30/97(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
<S> <C> <C> <C>
Net Investment Income (Loss) ......................................... $ (187) $ 129 $ (11)
Net Realized Gain on Securities Sold ................................. 23,807 21,978 387
Excess of Market Value Over Book Value of Securities
Distributed Upon Redemption of Shares ............................... -- -- --
Net Unrealized Appreciation (Depreciation) of
Investment Securities .............................................. 3,066 (3,868) 284
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations .................................................. 26,686 18,239 660
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ................................................ -- (132) --
Realized Capital Gain ................................................ (23,871) (5,807) (18)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions ................................................ (23,871) (5,939) (18)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued .......................................... 32,378 14,623 6,106
Proceeds from Shares Issued in Lieu of
Cash Distributions ................................................. 23,565 5,650 17
Cost of Shares Redeemed .............................................. (55,332) (52,228) (1,670)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Capital Share Transactions ....................................... 611 (31,955) 4,453
- ------------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets ............................ 3,426 (19,655) 5,095
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ................................................ 96,164 115,819 --
Excess of Market Value Over Book Value of Securities
Received in In-Kind Subscriptions ................................. -- -- 50(3)
- ------------------------------------------------------------------------------------------------------------------------------------
End of Period ...................................................... $99,590 $ 96,164 $5,145(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Issued and Redeemed:
Issued ............................................................... 2,198 946 518
Issued in Lieu of Cash Distributions ................................. 1,832 394 2
Redeemed ............................................................. (3,691) (3,428) (158)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Share Transactions ....................... 339 (2,088) 362
- ------------------------------------------------------------------------------------------------------------------------------------
TURNER SMALL CAP TURNER ULTRA LARGE
GROWTH FUND CAP GROWTH FUND
--------------------------------------------------------
FOR THE FOR THE EIGHT-
TWELVE-MONTH ELEVEN-MONTH MONTH PERIOD
PERIOD ENDED PERIOD ENDED ENDED
9/30/97 9/30/96 9/30/97(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
<S> <C> <C> <C>
Net Investment Income (Loss) ......................................... $ (707) $ (245) $ 1
Net Realized Gain on Securities Sold ................................. 754 1,936 74
Excess of Market Value Over Book Value of Securities
Distributed Upon Redemption of Shares ............................... -- 1,924 --
Net Unrealized Appreciation (Depreciation) of
Investment Securities .............................................. 18,398 5,659 14
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations .................................................. 18,445 9,274 89
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ................................................ -- -- --
Realized Capital Gain ................................................ (1,689) (925) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions ................................................ (1,689) (925) --
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued .......................................... 134,196 66,572 766
Proceeds from Shares Issued in Lieu of
Cash Distributions ................................................. 1,340 904 --
Cost of Shares Redeemed .............................................. (66,255) (21,472) (154)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Capital Share Transactions ....................................... 69,281 46,004 612
- ------------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets ............................ 86,037 54,353 701
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ................................................ 67,425 13,072 --
Excess of Market Value Over Book Value of Securities
Received in In-Kind Subscriptions ................................. -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
End of Period ...................................................... $153,462 $67,425 $701
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Issued and Redeemed:
Issued ............................................................... 5,861 3,120 72
Issued in Lieu of Cash Distributions ................................. 62 55 --
Redeemed ............................................................. (3,015) (1,073) (15)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Share Transactions ....................... 2,908 2,102 57
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The Turner Midcap Growth Fund began operations on October 1, 1996.
(2) The Turner Ultra Large Cap Growth Fund began operations on February 1, 1997.
(3) During 1997, the Fund received securities in-kind with unrealized
appreciation approximating $50.
(4) Includes undistributed net investment income of $1.
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 & 27
<PAGE>
FINANCIAL HIGHLIGHTS TIP FUNDS
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Net Realized and Net Net
Asset Net Unrealized Distributions Distributions Asset Assets Ratio
Value Investment Gains or from Net from Value End of Expenses
Beginning Income (Losses) on Investment Capital End of Period to Average
of Period (Loss) Investments Income Gains of Period Total Return(5) (000) Net Assets
---------- ---------- ------------ ------------- ------------- --------- --------------- --------- -----------
- -------------------
GROWTH EQUITY FUND
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $17.03 (0.03) 4.23 -- (4.59) $16.64 32.61% $ 99,590 1.02%+
1996 $14.97 0.02 2.91 (0.02) (0.85) $17.03 20.61% $ 96,164 1.06%+*
1995 $12.46 0.10 2.52 (0.11) -- $14.97 21.15% $115,819 1.03%+
1994 $13.12 0.10 (0.66) (0.10) -- $12.46 (4.28)% $112,959 0.95%
1993 $10.40 0.09 2.72 (0.09) -- $13.12 27.08% $ 53,327 1.00%
1992(1) $10.00 0.03 0.40 (0.03) -- $10.40 6.95% $ 7,781 1.44%*
- -------------------
MIDCAP GROWTH FUND
- -------------------
1997 (2) $10.00 (0.03) 4.36 -- (0.11) $14.22 43.77% $ 5,145 1.25%
- ----------------------
SMALL CAP GROWTH FUND
- ----------------------
1997 $23.13 (0.07) 3.80 -- (0.51) $26.35 16.64% $153,462 1.24%
1996 $16.08 (0.08) 8.17 -- (1.04) $23.13 52.90% $ 67,425 1.25%*
1995 $10.90 (0.06) 5.24 -- -- $16.08 47.52% $ 13,072 1.25%
1994(3) $10.00 (0.02) 0.92 -- -- $10.90 12.35% $ 4,806 1.09%*
- ----------------------------
ULTRA LARGE CAP GROWTH FUND
- ----------------------------
1997 (4) $10.00 0.01 2.27 -- -- $12.28 22.80% $ 701 1.00%*
Ratio of Net
Ratio of Net Ratio of Investment
Investment Expenses Income (Loss) to
Income to Average Average
(Loss) Net Assets Net Assets Portfolio Average
to Average (Excluding (Excluding Turnover Commission
Net Assets Waivers) Waivers) Rate Rate(6)
------------ ---------- ----------------- --------- ----------
- ------------------
GROWTH EQUITY FUND
- ------------------
<S> <C> <C> <C> <C> <C>
1997 (0.25)%+ 1.05%+ (0.28)%+ 178.21% $0.0600
1996 0.03%+* 1.06%+* 0.03%+* 147.79% $0.0600
1995 0.69%+ 1.03%+ 0.69%+ 177.86% n/a
1994 0.86% 1.08% 0.73% 164.81% n/a
1993 0.80% 1.52% 0.28% 88.35% n/a
1992(1) 0.73%* 2.55%* (0.38)%* 205.00% n/a
- ------------------
MIDCAP GROWTH FUND
- ------------------
1997 (2) (0.62)% 7.96% (7.33)% 348.29% $0.0600
- ---------------------
SMALL CAP GROWTH FUND
- ---------------------
1997 (0.84)% 1.33% (0.93)% 130.68% $0.0600
1996 (0.88)%* 1.54%* (1.17)%* 149.00% $0.0600
1995 (0.68)% 2.39% (1.82)% 183.49% n/a
1994(3) (0.27)%* 4.32%* (3.50)%* 173.92% n/a
- ---------------------------
ULTRA LARGE CAP GROWTH FUND
- ---------------------------
1997 (4) 0.20%* 26.45%* (25.25)%* 346.47% $0.0600
<FN>
* Annualized
(1) The Turner Growth Equity Fund began operations on March 11, 1992.
(2) The Turner Midcap Growth Fund began operations on October 1, 1996.
(3) The Turner Small Cap Growth Fund began operations on February 7, 1994.
(4) The Turner Ultra Large Cap Growth Fund began operations on February 1, 1997.
(5) Returns are for the period indicated and have not been annualized.
(6) Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal years
beginning after September 1, 1995.
+ The Ratios of Expenses to Average Net Assets and Net Investment Income to
Average Net Assets do not reflect the Advisor's use of arrangements whereby
certain broker-dealers have agreed to pay certain expenses of the Turner
Growth Equity Fund in return for the direction of a percentage of the Fund's
brokerage transactions. These arrangements reduced the Ratio of Expenses to
Average Net Assets to 0.96% (0.99% excluding waivers) for the year ended
9/30/97, 0.94% for the eleven month period ended 9/30/96 and 0.94% for the
year ended 10/31/95 and the Ratios of Net Investment Income (Loss) to Average
Net Assets to (0.19%) ( (0.22%) excluding waivers) and 0.15% and 0.78% for
the same periods described.
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS TIP FUNDS
September 30, 1997
1. ORGANIZATION:
TIP FUNDS (the "Trust") a Massachusetts' business trust, is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company with 12 funds. The financial statements included herein are
those of the Turner Growth Equity Fund (the "Growth Equity Fund"), the Turner
Midcap Growth Fund (the "Midcap Growth Fund"), the Turner Small Cap Growth Fund
( the "Small Cap Growth Fund"), and the Turner Ultra Large Cap Growth Fund (the
"Ultra Large Cap Growth Fund") (the "Funds"). As of September 30, 1997 the
Turner Fixed Income Fund had not commenced operations. Additionally, the Turner
Small Cap Growth Fund was closed to new investors as of August 30, 1997. The
assets of each fund are segregated, and a shareholder's interest is limited to
the fund in which shares are held. The Funds' prospectus provides a description
of each Fund's investment objectives, policies, and strategies.
On April 19, 1996, the shareholders of the Advisors' Inner Circle Turner Growth
Equity Fund (the Advisors' Inner Circle Trust) and the Advisors' Inner Circle
Turner Small Cap Growth Fund, together "the Turner Funds" voted to approve a
tax-free reorganization of the Turner Funds through a transfer of all the assets
and liabilities of the Turner Funds to the Turner Growth Equity and Turner Small
Cap Growth Funds' portfolios. In connection with the reorganization, the Funds
changed their fiscal year end from October 31 to September 30.
On February 21, 1997 the Board of Trustees of Turner Funds voted to change the
name of the Trust to TIP Funds.
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 60 days to maturity for which market quotations are readily available
are valued at the most recently quoted bid price. Debt obligations with 60 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.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) TIP FUNDS
September 30, 1997
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.
EXPENSES -- 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 TO SHAREHOLDERS -- Distributions from net investment income
are declared and paid to Shareholders on a quarterly basis. Any net
realized capital gains on sales of securities are distributed to
Shareholders at least annually.
Dividends from net investment income and distributions from net realized
capital gains are determined in accordance with U.S. Federal income tax
regulations, which may differ from those amounts determined under generally
accepted accounting principals. These book/tax differences are either
temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to paid-in-capital or accumulated
net realized gain, as appropriate, in the period that the differences
arise.
Accordingly, for the Turner Small Cap Growth Fund, $(702) was reclassified
from undistributed net investment income (loss) to paid-in-capital. In
addition, the following amounts were reclassified from undistributed net
investment income (loss) to accumulated net realized gain (loss):
Turner Growth Equity Fund $(187)
Turner Midcap Growth Fund (11)
Turner Small Cap Growth Fund (5)
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of income and
expenses during the reported period. Actual results could differ from those
estimates.
3. TRANSACTIONS WITH AFFILIATES:
Certain officers of the Trust are also officers of SEI Fund Resources (the
"Administrator") and/or SEI Investments Distribution Co. (the "Distributor").
Such officers are paid no fees by the Trust for serving as officers and trustees
of the Trust.
4. ADMINISTRATION, SHAREHOLDER SERVICING, AND DISTRIBUTION AGREEMENTS:
The TIP Trust and the Administrator are parties to an agreement under which the
Administrator provides management and administrative services for an annual fee
of 0.12% of the average daily net assets of each of the Funds up to $75 million,
0.10% on the next $75 million, 0.09% on the next $150 million, 0.08% on the next
$300 million, and 0.075% of such assets in excess on $600 million. There is a
minimum annual fee of $75,000 per Fund payable to the Administrator for services
rendered to the Funds under the Administration
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) TIP FUNDS
September 30, 1997
Agreement. During fiscal 1997, the Administrator has voluntarily waived a
portion of its fee.
The Growth Equity Fund had directed certain portfolio trades to brokers who paid
a portion of its expenses. For the year ended September 30, 1997, the Growth
Equity Fund's expenses were reduced by $56,912 under this arrangement.
DST Systems, Inc., (the "Transfer Agent") serves as the transfer agent and
dividend disbursing agent for the Funds under a transfer agency agreement with
the Trust.
The Trust and the Distributor are parties to a Distribution Agreement dated
April 30, 1996. The Distributor receives no fees for its distribution services
under this agreement.
5. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS:
The Trust and Turner Investment Partners, Inc. (the "Adviser") are parties to an
Investment Advisory Agreement dated April 30, 1996, under which the Adviser
receives an annual fee equal to .75% of the average daily net assets of the
Growth Equity, Midcap, and Ultra Large Cap Funds , and 1.00% of those of the
Small Cap Fund. The Adviser has voluntarily agreed to waive all or a portion of
its fees and to reimburse expenses of the Growth Equity, Midcap, Small Cap, and
Ultra Large Cap Funds in order to limit their total operating expenses (as a
percentage of average daily net assets on an annualized basis) to not more than
1.00%, 1.25%, 1.25%, and 1.00%, respectively. Fee waivers and expense
reimbursements are voluntary and may be terminated at any time.
CoreStates Bank, N.A. acts as custodian (the "Custodian") for the Funds. Fees of
the Custodian are being paid on the basis of the net assets of the Funds. The
Custodian plays no role in determining the investment policies of the Funds or
which securities are to be purchased or sold in the Funds.
6. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the year ended September 30, 1997 are as follows
(000):
ULTRA
SMALL LARGE
GROWTH MIDCAP CAP CAP
EQUITY GROWTH GROWTH GROWTH
FUND FUND FUND FUND
- -------------------------------------------------------
Purchases
Government $ -- $ -- $ -- $ --
Other 168,670 8,834 174,531 1,960
Sales
Government $ -- $ -- $ -- $ --
Other 192,638 6,124 108,684 1,385
At September 30, 1997, the total cost of securities and the net realized gains
or losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Funds
at September 30, 1997, are as follows (000):
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTCLUDED) TIP FUNDS
September 30, 1997
ULTRA
SMALL LARGE
GROWTH MIDCAP CAP CAP
EQUITY GROWTH GROWTH GROWTH
FUND FUND FUND FUND
- ------------------------------------------------------
Aggregate gross
unrealized
appreciation $20,631 $376 $28,895 $ 26
Aggregate gross
unrealized
depreciation (985) (42) (1,834) (12)
------- ---- ------- ----
Net unrealized
appreciation $19,646 $334 $27,061 $ 14
======= ==== ======= ====
7. IN-KIND TRANSFER OF SECURITIES:
During the year ended September 30, 1997, the Turner Midcap Growth Fund issued
shares of beneficial interest in exchange for portfolio securities at their
current value from certain accounts managed by Turner Investment Partners, Inc.:
VALUE OF
SHARES SECURITIES UNREALIZED
ISSUED RECEIVED APPRECIATION
-------- ---------- ------------
Midcap Fund 48,958 $489,579 $49,743
The historical tax basis of the securities exchanged for shares of beneficial
interest of the portfolio was recorded in the books of the Midcap Growth Fund
and included the unrealized appreciation shown above.
32
<PAGE>
REPORT OF INDEPENDENT AUDITORS TIP FUNDS
September 30, 1997
BOARD OF DIRECTORS AND SHAREHOLDERS:
TIP FUNDS
We have audited the accompanying statements of net assets of the Turner
Growth Equity Fund and the Turner Small Cap Growth Fund, the statements of
assets and liabilities, including the schedules of portfolio investments, of the
Turner Ultra Large Cap Growth Fund and the Turner Midcap Growth Fund as of
September 30, 1997, and the related statements of operations for the period then
ended, and the statements of changes in net assets for the periods presented
herein. We have also audited the financial highlights for the periods ended
September 30, 1996 and September 30, 1997 presented herein for the Turner Growth
Equity Fund and the Turner Small Cap Growth Fund, and for the period ended
September 30, 1997 presented herein for the Turner Ultra Large Cap Growth Fund
and the Turner MidCap Growth Fund. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for the periods ended October 31,
1992 through October 31, 1995 for the Turner Growth Equity Fund and the Turner
Small Cap Growth Fund were audited by other auditors whose report dated December
5, 1995 expressed an unqualified opinion on the financial statements and
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 the
Turner Growth Equity Fund, the Turner Small Cap Growth Fund, the Turner Ultra
Large Cap Growth Fund, and the Turner Midcap Growth Fund at September 30, 1997,
the results of their operations, the changes in their net assets, and the
financial highlights for the periods ended September 30, 1996 and September 30,
1997 presented herein for the Turner Growth Equity Fund and the Turner Small Cap
Growth Fund, and for the period ended September 30, 1997 presented herein for
the Turner Ultra Large Cap Growth Fund and the Turner Midcap Growth Fund, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
October 31, 1997
33
<PAGE>
NOTICE TO SHAREHOLDERS
OF
TIP FUNDS
(UNAUDITED)
SHAREHOLDER'S VOTING RESULTS
There was a special meeting of shareholders on August 21, 1997 to elect the
Board of Trustees. The results were as follows:
Election of Trustees:
<TABLE>
<CAPTION>
SHARES VOTED % OF % OF SHARES WITHHELD % TOTAL % OF
FOR VOTED TOTAL AUTHORITY WITHHELD TOTAL
------------ -------- -------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Turner 6,763,147.00 99.52% 64.51% 32,732 0.48% 0.31%
John T. Wholihan 6,760,183.00 99.47% 64.48% 35,696 0.53% 0.34%
Alfred C. Salvato 6,758,991.00 99.46% 64.47% 36,888 0.54% 0.35%
Richard A. Hocker 6,760,684.00 99.48% 64.48% 35,195 0.52% 0.34%
Michael E. Jones 6,760,771.00 99.48% 64.48% 35,108 0.52% 0.33%
Janet F. Sansone 6,761,664.00 99.50% 64.49% 34,216 0.50% 0.33%
</TABLE>
34
<PAGE>
NOTICE TO SHAREHOLDERS
OF
TURNER FUNDS
(UNAUDITED)
For the shareholders that do not have a September 30, 1997 taxable year end,
this notice is for informational purposes only. For shareholders with a
September 30, 1997 taxable year end, please consult your tax adviser as to the
pertinence of this notice.
For the fiscal year ended September 30, 1997, the portfolio is designating long
term capital gains, qualifying dividends, and exempt interest income with regard
to distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY (C)
CAPITAL GAIN INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS)
--------- ------------- ------------- -------------
<S> <C> <C> <C>
Growth Equity Fund 41% 59% 100%
Midcap Growth Fund 0% 100% 100%
Small Cap Growth Fund 52% 48% 100%
Ultra Large Cap Growth Fund 0% 0% 0%
(D) (E) (F)
QUALIFYING TAX EXEMPT FOREIGN
PORTFOLIO DIVIDENDS (1) INTEREST TAX CREDIT
--------- ------------- ---------- ----------
Growth Equity Fund 4% 0% 0%
Midcap Growth Fund 1% 0% 0%
Small Cap Growth Fund 0% 0% 0%
Ultra Large Cap Growth Fund 2% 0% 0%
- --------
<FN>
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of the portfolio's total
distributions.
** Items (D), (E) and (F) are based on a percentage of ordinary income
distributions of the portfolio.
</FN>
</TABLE>
35
<PAGE>
TRUST
TIP Funds
P.O. Box 419805
Kansas City, MO 64141-6805
INVESTMENT ADVISOR
Turner Investment Partners, Inc.
DISTRIBUTOR
SEI Distribution Company
ADMINISTRATOR
SEI Fund Resources
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
INDEPENDENT AUDITORS
Ernst & Young LLP
[TURNER INVESTMENT PARTNERS LOGO OMITTED]
To open an account, receive account
information, make inquiries, or request literature:
1-800-224-6312
THIS REPORT WAS PREPARED FOR SHAREHOLDERS IN THE TIP FUNDS. IT MAY BE
DISTRIBUTED TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A TIP FUNDS PROSPECTUS,
WHICH CONTAINS DETAILED INFORMATION.
TUR-F-026-01
ANNUAL
REPORT
SEPTEMBER 30, 1997
[TIP FUNDS LOGO OMITTED]
==============================================
Turner Growth Equity Fund
==============================================
Turner Midcap Growth Fund
==============================================
Turner Small Cap Growth Fund
==============================================
Turner Ultra Large Cap
Growth Fund
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
CLOVER CAPITAL MANAGEMENT, INC.
CLOVER EQUITY VALUE FUND
The Clover Equity Value Fund utilizes a research driven, value oriented
approach to equity investing. The Fund invests in equity and convertible
securities which possess favorable valuation attributes relative to the stock
market averages or the valuation characteristics of the company's stock in past
years. Valuations are measured by a stock's price relative to the company's per
share cash flows, revenues, book value, earnings and its liquidation value on
the private market. Earnings and cash flow are normalized in the case of
companies where profit margins are temporarily depressed and improvements
are anticipated.
For the eleven months ended September 30, 1997 the Equity Value Fund posted
a total return of 23.86% versus a total return of 36.68% for the S&P 500
Composite Index. Again in 1997 an inflation scare, this one in early spring,
gave way to euphoric investment markets in the face of benign employment and
wage data. Investors perceive that low inflation and growth will co-exist and an
elongated business cycle is indeed possible. In this environment, many cyclical
sectors which had been previously lagging the market moved to the top of the
performance charts. The energy service, home building, trucking, financial and
brokerage sectors led market performance in 1997. Inflation defensive sectors
and sectors exhibiting poor pricing power lagged the overall market. Examples
would be gold, metals, hospital management and photography/imaging.
The Fund's performance lagged the large capitalization led market rise.
However, late in the year the multi-year bull market began to broaden out with
awakening investor appetite for small and mid-cap capitalization companies. The
Fund has participated in this improving breadth and is well positioned to
continue to further capitalize on this trend. For the year, the Fund's
underperformance is attributed to several large holdings which while
contributing simply did not keep up with the markets relentless drive upward.
These holdings remain in place and expected turnarounds are developing as
benchmarked as should be a source of future returns. Notable performance by our
holdings in cable, computer services and electronic distribution accounted for
much of the Fund's 1997 gains.
Most common stocks continue to trade at record levels for valuation. The
Fund will continue to patiently search for value in out-of-favor sectors. The
Advisor believes that equity investing may become more challenging in the
future. The Fund's investment philosophy and research based selectivity will
become increasingly valuable in a slower growth environment.
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT
IN THE CLOVER EQUITY VALUE FUND, VERSUS THE
S&P 500 COMPOSITE INDEX
- ---------------------------------------------
Annualized Annualized Annualized
One Year 3 Year 5 Year Inception
Return+ Return Return to Date (1)
- ---------------------------------------------
26.43% 20.75% 18.82% 17.17%
- ---------------------------------------------
Clover Equity S&P 500
Value Fund Composite Index
12/31/91 10,000 10,000
10/31/92 9,938 10,281
10/31/93 11,511 11,811
10/31/94 13,560 12,267
10/31/95 16,442 15,506
10/31/96 19,150 19,240
9/30/97 23,719 26,296
These figures represent past performance. Past performance is no guarantee of
future results.
The investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their original
cost.
(1) The Clover Equity Value Fund commenced operations on December 6, 1991.
+ Return is for the twelve month period ended September 30, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
CLOVER CAPITAL MANAGEMENT, INC.
CLOVER SMALL CAP VALUE FUND
The Clover Small Cap Value Fund seeks attractive returns through investment
in a diversified portfolio of stocks. The Fund's focus is on relatively unknown
companies whose market capitalizations fall in the small and micro-cap
categories. Within this sector the Advisor isolates and invests in companies
that trade at attractive values relative to a firm's book value, cashflow, debt
commitment, peers, and company specific historical valuation. It is the
Advisor's belief that within this sector of small, inexpensive and relatively
obscure stocks that rewarding investment gains can be realized.
For the eleven months ended September 30, 1997 the Small Cap Value Fund
posted a total return of 48.23%, exceeding the benchmark Frank Russell 2000
Index return of 35.27%. Fund performance was aided by the appreciation of stocks
from a broad variety of sectors. Investment efforts were focused on small,
undervalued and relatively obscure companies with reasonable prospects for share
price appreciation. Although no industry sectors were specifically targeted for
investment, depressed valuations in several sectors led to emphasis in those
areas. Sectors which made significant contributions to Fund performance included
the computer hardware/software, financial and trucking sectors.
Looking ahead, the Fund will continue to consistently apply its core
investment methodology. This involves isolation of individual companies with
inexpensive share prices relative to their fundamental statistics and future
operating potential. The Advisor believes that there is no value gained by
attempting to forecast broad market movements, interest rates or macroeconomic
changes, and therefore intends to keep levels of cash reasonably low at all
times. Despite vigorous returns in the equity markets in the past year, the
Advisor was able to opportunistically purchase the shares of undervalued
companies, and anticipates additional opportunities in the months ahead.
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT
IN THE CLOVER SMALL CAP VALUE FUND, VERSUS THE
FRANK RUSSELL 2000 INDEX
--------------------------
Annualized
One Year Inception
Return+ to Date (1)
- --------------------------
49.19% 35.23%
- --------------------------
Clover Small Cap Frank Russell
Value Fund 2000 Index
2/28/96 10,000 10,000
10/31/96 10,908 10,586
9/30/97 16,169 14,320
These figures represent past performance. Past performance is no guarantee of
future results.
The investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their original
cost.
(1) The Clover SmallCap Value Fund commenced operations on February 28, 1996.
+ Return is for the twelve month period ended September 30, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
CLOVER CAPITAL MANAGEMENT, INC.
CLOVER FIXED INCOME FUND
The Clover Fixed Income Fund produced a total rate of return for the eleven
months ended September 30, 1997 of 7.43%, outperforming the 7.41% total rate of
return recorded by the Merrill Lynch Corporate-Government-Mortgage Bond Index.
For the period, Treasury interest rates were nearly unchanged for short
term bonds, declined by nearly 10 basis points for 5 year Notes (1 basis point =
1/100 of 1%) and were nearly 25 basis points lower for longer maturity bonds.
Below is a table that profiles the change in interest rates of various U.S.
Treasury debt issues over this period.
U.S. Treasury Yield Curve
10/31/96 9/30/97 10/31/96 10/31/96
-------- -------- -------- --------
6 month Bills 5.26% 5.27% 5 year Notes 6.07% 5.99%
1 year Bills 5.40% 5.44% 10 year Notes 6.34% 6.10%
3 year Notes 5.86% 5.85% 30 year Bonds 6.64% 6.40%
Interest rates moved sharply higher from the end of October 1996 through
early April 1997 on concerns that the U.S. economy was growing too fast at a
time when both industrial capacity and labor markets were in tight supply. The
markets concern was confirmed by the Federal Reserve when it acted to increase
the overnite bank lending rates (Fed Fund Rate) by 1/4 percentage point on March
25th. Since then, reports showing the economy slowing to a more moderate growth
rate, excellent reports on inflation at both the consumer and wholesale levels
and the Asian currency crisis have worked to alleviate investors concerns. As a
result, interest rates declined throughout the summer months, finishing the end
of September at levels near those recorded on October 31, 1996.
The Fund's outperformance of the Merrill Lynch
Corporate-Government-Mortgage Bond Index during the period was primarily the
result of strong relative performance ofour holdings in special situation bonds,
such as convertible debentures, and holdings in companies that are experiencing
improvement in credit quality strength. (Improvements in credit quality usually
result in investors' willingness to purchase a corporate issuers' debt at yield
spreads that are narrower to U.S. Treasury bonds of the same maturity, than
spreads required to the credit quality improvement).
COMPARISON OF CHANGE IN THE VALUE OF A $100,000 INVESTMENT
IN THE CLOVER FIXED INCOME FUND, VERSUS THE
MERRILL LYNCH CORPORATE/GOVERNMENT MORTGAGE BOND INDEX
-----------------------------------------------
Annualized Annualized Annualized
One Year 3 Year 5 Year Inception
Return+ Return Return to Date (1)
- ------------------------------------------------
9.63% 9.49% 7.24% 7.91%
- ------------------------------------------------
Clover Fixed Merrill Lynch Corporate/
Income Fund Government Mortgage Bond Index
12/31/91 10,000 10,000
10/31/92 10,582 10,596
10/31/93 12,002 11,869
10/31/94 11,582 11,440
10/31/95 13,350 13,247
10/31/96 14,186 14,006
9/30/97 15,240 15,043
These figures represent past performance. Past performance is no guarantee of
future results.
The investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their original
cost.
(1) The Clover Fixed Income Fund commenced operations on December 6, 1991.
+ Return is for the twelve month period ended September 30, 1997.
<PAGE>
STATEMENT OF NET ASSETS CLOVER FUNDS
September 30, 1997
Market
CLOVER EQUITY Value
VALUE FUND Shares (000)
- --------------------------------------------------------
COMMON STOCK 95.9%
AUTOMOTIVE 1.5%
Chrysler 47,000 $ 1,730
--------
BROADCASTING, NEWSPAPERS & ADVERTISING 8.8%
Comcast UK Cable Partners
Limited* 385,000 3,946
Comcast, Special, Cl A 250,000 6,437
--------
10,383
--------
COMMUNICATIONS EQUIPMENT 4.3%
Harman International 70,000 3,504
Harris 34,000 1,556
--------
5,060
--------
COMPUTERS & SERVICES 10.9%
MAPICS* 342,400 4,451
Marcam Solutions* 171,200 1,626
Policy Management Systems* 50,500 3,140
SunGard Data Systems* 150,000 3,638
--------
12,855
--------
ENTERTAINMENT 5.6%
Genting Berhad, ADR 450,000 1,400
King World Productions* 120,000 5,190
--------
6,590
--------
FOOD, BEVERAGE & TOBACCO 3.2%
RJR Nabisco 60,000 2,063
United Biscuits Holdings, ADR 500,000 1,635
--------
3,698
--------
INSURANCE 2.4%
Cincinnati Financial 35,000 2,870
--------
MACHINERY 3.0%
Pall 165,000 3,558
--------
MEASURING DEVICES 1.4%
Wheelabrator Technologies 100,000 1,600
--------
Market
Value
Shares (000)
- --------------------------------------------------------
MEDICAL PRODUCTS & SERVICES 9.8%
Mallinckrodt 40,000 $ 1,440
Medpartners* 414,850 8,893
Oncor* 238,000 1,190
--------
11,523
--------
MISCELLANEOUS BUSINESS SERVICES 2.3%
Advo* 150,000 2,738
--------
PAPER & PAPER PRODUCTS 1.3%
Willamette Industries 40,000 1,530
--------
PETROLEUM & FUEL PRODUCTS 5.5%
Phillips Petroleum 35,000 1,807
Union Texas Petroleum 120,000 2,820
USX-Marathon Group 50,000 1,859
--------
6,486
--------
PRINTING & PUBLISHING 1.3%
American Greetings, Cl A 40,000 1,475
--------
REAL ESTATE INVESTMENT TRUSTS 4.0%
Chateau Communities 50,000 1,475
Manufactured Home
Communities 75,000 1,950
Storage Trust Realty 50,000 1,306
--------
4,731
--------
RETAIL 5.3%
Cash America International 150,000 1,688
Department 56* 80,000 2,315
Kroger* 75,000 2,264
--------
6,267
--------
RUBBER & PLASTIC 4.7%
Hanna 140,000 3,719
Myers Industries 113,400 1,871
--------
5,590
--------
STEEL & STEEL WORKS 1.2%
Alcan Aluminum 42,000 1,460
--------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS CLOVER FUNDS
September 30, 1997
CLOVER EQUITY Shares/ Market
VALUE FUND Face Amount Value
(Concluded) (000) (000)
- --------------------------------------------------------
TELEPHONES & TELECOMMUNICATION 12.2%
COMSAT 70,000 $ 1,667
Frontier 415,000 9,545
MIDCOM Communications* 230,000 1,581
Sprint 31,000 1,550
--------
14,343
--------
TRANSPORTATION SERVICES 1.4%
CSX 29,000 1,697
--------
WHOLESALE 5.8%
Avnet 80,000 5,085
Supervalu 45,000 1,766
--------
6,851
--------
TOTAL COMMON STOCK
(Cost $95,637) 113,035
--------
CORPORATE OBLIGATIONS 3.3%
Canandaigua Wine
8.750%, 12/15/03 $1,500 1,534
Tenet Healthcare
8.000%, 01/15/05 2,300 2,386
--------
TOTAL CORPORATE OBLIGATIONS
(Cost $3,752) 3,920
--------
CONVERTIBLE BONDS 0.6%
Meditrust, Convertible to
27.6396 Shares
7.500%, 03/01/01 600 696
--------
TOTAL CONVERTIBLE BONDS
(Cost $592) 696
--------
Market
Face Amount Value
(000) (000)
- --------------------------------------------------------
REPURCHASE AGREEMENT 1.8%
Lehman Brothers,
5.32%, dated 09/30/97, matures
10/01/97, repurchase price
$2,081,684 (collateralized by
U.S. Treasury Bond, par value
$1,696,139, 10.00%, matures
05/15/10: market value
$2,144,026) $2,081 $ 2,081
--------
TOTAL REPURCHASE AGREEMENT
(Cost $2,081) 2,081
--------
TOTAL INVESTMENTS 101.6%
(Cost $102,062) 119,732
--------
OTHER ASSETS AND LIABILITIES, NET (1.6%) (1,873)
--------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 6,206,748 outstanding
shares of beneficial interest 87,501
Undistributed net investment income 38
Accumulated net realized gain
on investments 12,650
Net unrealized appreciation
of investments 17,670
--------
TOTAL NET ASSETS (100.0%) $117,859
========
Net Asset Value, Offering and Redemption
Price Per Share $18.99
========
* NON-INCOME PRODUCING SECURITY
ADR--AMERICAN DEPOSITORY RECEIPT
CL--CLASS
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS CLOVER FUNDS
September 30, 1997
Market
CLOVER SMALL CAP Value
VALUE FUND Shares (000)
- --------------------------------------------------------
COMMON STOCK 98.9%
AGRICULTURE 0.2%
Cagle's, Cl A 1,600 $ 24
--------
AIR TRANSPORTATION 1.5%
Mesa Air Group* 30,000 193
Tower Air 10,000 41
--------
234
--------
APPAREL/TEXTILES 2.5%
Crown Crafts 8,000 116
Designer Holdings Limited* 27,000 263
--------
379
--------
AUTOMOTIVE 5.5%
APS Holding, Cl A* 12,500 110
Arvin Industries 3,300 130
Exide 6,600 150
Hi-Lo Automotive* 26,000 91
Jason* 14,000 115
R & B* 6,400 57
Republic Automotive Parts* 9,400 160
Rush Enterprises* 2,000 19
--------
832
--------
BEAUTY PRODUCTS 1.9%
Allou Health & Beauty, Cl A* 12,000 88
Jean Philippe Fragrances* 19,500 151
Parlux Fragrances* 15,000 31
Stephan 1,500 21
--------
291
--------
BROADCASTING, NEWSPAPERS & ADVERTISING 8.8%
Comcast UK Cable Partners
Limited* 69,200 709
Comcast, Special, Cl A 8,300 214
Four Media* 15,500 124
Jones Intercable, Cl A* 12,300 155
Snyder Communications* 5,016 138
--------
1,340
--------
CHEMICALS 0.4%
Triple S Plastics* 7,500 56
--------
Market
Value
Shares (000)
- --------------------------------------------------------
COMMUNICATIONS EQUIPMENT 5.1%
Aseco* 9,400 $ 161
California Microwave* 5,500 110
Performance Technologies* 17,000 329
TII Industries* 21,500 173
--------
773
--------
COMPUTERS & SERVICES 8.6%
Bell & Howell* 5,000 162
Innovex 4,500 145
MAPICS* 22,000 286
Marcam Solutions* 11,000 104
Metatec, Cl A* 25,300 133
Santa Cruz Operation* 11,000 61
StorMedia, Cl A* 29,500 171
Trident Microsystems* 14,000 247
--------
1,309
--------
CONSUMER PRODUCTS 0.8%
Oil Dri of America 7,700 130
--------
ENTERTAINMENT 1.6%
Aztar* 20,000 147
Harvey's Casinos Resorts 5,400 95
--------
242
--------
ENVIRONMENTAL SERVICES 0.5%
OHM* 9,900 74
--------
FINANCE 2.5%
Cash America International 25,500 287
Ezcorp* 9,000 93
--------
380
--------
FOOD, BEVERAGE & TOBACCO 2.1%
Canandaigua Wine, Cl A* 3,100 146
Chock Full O'Nuts* 13,100 103
Imperial Holly 5,000 70
--------
319
--------
INSURANCE 2.7%
Acceptance Insurance* 9,000 236
LaSalle Re Holdings 4,000 141
Rightchoice Managed Care* 3,400 35
--------
412
--------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS CLOVER FUNDS
September 30, 1997
CLOVER SMALL CAP Market
VALUE FUND Value
(Continued) Shares (000)
- -------------------------------------------------------
LEASING & RENTING 0.9%
Cruise America* $17,000 $ 136
--------
LEISURE PRODUCTS 3.8%
GT Bicycles* 57,100 468
Riddell Sports* 21,500 113
--------
581
--------
LUMBER & WOOD PRODUCTS 1.0%
Belmont Homes* 20,000 161
--------
MACHINERY 2.6%
Daw Technologies* 35,000 81
Hardinge 3,000 103
NACCO Industries, Cl A 800 94
Tecumseh Products, Cl A 2,100 117
--------
395
--------
MARINE TRANSPORTATION 0.5%
Maritrans 8,300 80
--------
MEASURING DEVICES 0.5%
Instron 3,700 70
--------
MEDICAL PRODUCTS & SERVICES 5.1%
Mariner Health Group* 10,200 161
Medpartners* 4,200 90
Oncor* 45,000 225
Physicians Resource Group* 23,000 260
Staff Builders* 20,000 49
--------
785
--------
METALS & MINING 0.4%
Southern Peru Copper 3,800 69
--------
MISCELLANEOUS BUSINESS SERVICES 3.1%
Advo* 14,700 268
Franklin Electric Publishing* 15,200 205
--------
473
--------
PAPER & PAPER PRODUCTS 2.1%
Continental Can* 4,700 125
Paragon Trade Brands* 6,600 123
Tranzonic 2,700 79
--------
327
--------
Market
Value
Shares (000)
- -------------------------------------------------------
PETROLEUM & FUEL PRODUCTS 2.1%
Bellwether Exploration* 8,900 $ 125
HS Resources* 7,500 129
Tesoro Petroleum* 3,300 60
--------
314
--------
PRECIOUS METALS 2.1%
Campbell Resources* 200,000 138
Golden Star Resources* 29,000 187
--------
325
--------
PRINTING & PUBLISHING 2.6%
Cadmus Communications 7,900 162
Norwood Promotional Products* 14,700 232
--------
394
--------
PROFESSIONAL SERVICES 4.0%
Baker (Michael)* 13,800 147
Children's Discovery Centers* 27,400 212
Failure Group* 13,700 103
Moneygram Payment Systems* 8,500 152
--------
614
--------
REAL ESTATE INVESTMENT TRUSTS 2.1%
Home Properties of New York 8,600 224
Storage Trust Realty 3,800 99
--------
323
--------
RETAIL 10.9%
BT Office Products International* 15,000 173
Building Materials Holding* 6,500 85
Buttrey Food & Drug Stores* 12,700 148
Cache* 46,000 155
Department 56* 5,400 156
Designs* 15,300 73
Jacobson Stores 20,100 231
Michael Anthony Jewelers* 12,700 41
Movie Gallery* 7,500 30
Multiple Zones* 28,500 175
Perfumania* 23,000 86
Roadhouse Grill* 29,000 109
Service Merchandise* 15,000 62
Tandycrafts* 32,200 143
--------
1,667
--------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS CLOVER FUNDS
September 30, 1997
CLOVER SMALL CAP Shares/ Market
VALUE FUND Face Amount Value
(Concluded) (000) (000)
- ------------------------------------------------------
RUBBER & PLASTIC 2.2%
Myers Industries 20,000 $ 330
--------
SEMI-CONDUCTORS/INSTRUMENTS 3.0%
Exar* 6,000 159
IEC Electronics* 10,200 200
Tegal* 12,700 105
--------
464
--------
STEEL & STEEL WORKS 0.3%
Roanoke Electric Steel 2,000 45
--------
TELEPHONES & TELECOMMUNICATION 1.8%
CoreComm* 6,000 99
MIDCOM Communications* 26,500 182
--------
281
--------
TRUCKING 1.1%
Celadon Group* 9,400 136
Johnstown America Industries* 3,500 30
--------
166
--------
WHOLESALE 2.0%
Moore Medical* 5,000 51
Nash Finch 7,000 166
Patrick Industries 6,000 92
--------
309
--------
TOTAL COMMON STOCK
(Cost $12,138) 15,104
--------
REPURCHASE AGREEMENT 3.3%
Lehman Brothers,
5.32%, dated 09/30/97, matures
10/01/97, repurchase price
$508,237 (collateralized by
U.S. Treasury Bond, par value
$414,106, 10.00%, matures
05/15/10: market value
$523,458) $508 508
--------
Market
Value
(000)
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $508) $ 508
-------
TOTAL INVESTMENTS 102.2%
(Cost $12,646) 15,612
-------
OTHER ASSETS AND LIABILITIES, NET (2.2%) (333)
-------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 958,307 outstanding
shares of beneficial interest 11,346
Accumulated net realized gain
of investments 967
Net unrealized appreciation
of investments 2,966
-------
TOTAL NET ASSETS 100.0% $15,279
=======
Net Asset Value, Offering and Redemption
Price Per Share $15.94
=======
* NON-INCOME PRODUCING SECURITY
CL--CLASS
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS CLOVER FUNDS
September 30, 1997
Market
CLOVER FIXED Face Amount Value
INCOME FUND (000) (000)
- ------------------------------------------------------
CORPORATE OBLIGATIONS 55.8%
BEVERAGES 9.5%
Anheuser Busch
6.750%, 08/01/03 $ 750 $ 763
Bass America
6.750%, 08/01/99 450 455
Canandaigua Wine
8.750%, 12/15/03 1,000 1,023
--------
2,241
--------
ENTERTAINMENT 4.7%
Mattel
6.750%, 05/15/00 350 355
Walt Disney
6.375%, 03/30/01 750 753
--------
1,108
--------
FINANCE 3.9%
General Motors Acceptance
7.750%, 01/15/99 400 408
Texaco Capital MTN
7.342%, 07/15/02 500 524
--------
932
--------
FOOD/MISCELLANEOUS 1.1%
Grand Metropolitan Investment
6.500%, 09/15/99 250 252
--------
INDUSTRIAL 0.8%
Masco
6.125%, 09/15/03 200 195
--------
MEDICAL PRODUCTS & SERVICES 15.0%
Abbott Laboratories
5.600%, 10/01/03 700 674
Eli Lilly
6.250%, 03/15/03 750 746
Meditrust
7.000%, 08/15/07 500 498
Tenet Healthcare
8.000%, 01/15/05 1,100 1,141
Zeneca Wilmington
6.300%, 06/15/03 500 495
--------
3,554
--------
Market
Face Amount Value
(000) (000)
- --------------------------------------------------------
PRINTING & PUBLISHING 6.0%
Knight-Ridder
8.500%, 09/01/01 $ 750 $ 781
McGraw-Hill
9.430%, 09/01/00 600 650
--------
1,431
--------
RETAIL 2.1%
Dayton Hudson
7.500%, 03/01/99 500 509
--------
UTILITIES 12.7%
Detroit Edison
6.560%, 05/01/01 500 503
Florida Power & Light
5.500%, 07/01/99 800 793
Northern Illinois Gas
6.750%, 06/01/02 1,000 1,015
Northern States Power
7.875%, 10/01/01 650 686
--------
2,997
--------
TOTAL CORPORATE OBLIGATIONS
(Cost $13,069) 13,219
--------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS 16.4%
FHLMC, Pool # 252641
8.000%, 07/01/07 51 53
FHLMC, Pool # 277449
8.500%, 09/01/09 32 32
FHLMC, REMIC,
Series 1546, Cl H
7.000%, 12/15/22 390 385
FNMA, Pool # 369214
5.000%, 04/01/09 368 344
FNMA, REMIC,
Series 1993-118 G
6.500%, 11/25/06 1,000 1,007
FNMA, REMIC,
Series 1993-95, Cl PE
6.500%, 10/25/07 750 754
FNMA, REMIC,
Series G93-21, Cl VE
6.600%, 11/25/07 184 179
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS CLOVER FUNDS
September 30, 1997
CLOVER FIXED Market
INCOME FUND Face Amount Value
(Concluded) (000) (000)
- ------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (CONTINUED)
GNMA, Pool # 13125
8.000%, 10/15/06 $ 34 $ 36
GNMA, Pool # 187899
8.000%, 05/15/17 245 253
GNMA, Pool # 196477
10.000%, 04/15/10 92 99
GNMA, Pool # 202886
8.000%, 03/15/17 226 234
GNMA, Pool # 221235
8.500%, 07/15/17 93 97
GNMA, Pool # 331786
8.000%, 08/15/22 389 402
--------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED
BONDS (Cost $3,843) 3,875
--------
U.S. TREASURY OBLIGATIONS 22.5%
U.S. Treasury Bonds
7.500%, 11/15/16 1,250 1,389
8.000%, 11/15/21 750 886
7.250%, 08/15/22 1,000 1,092
U.S. Treasury Notes
7.250%, 05/15/04 150 159
7.500%, 02/15/05 300 324
6.500%, 05/15/05 950 970
6.500%, 08/15/05 500 510
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $5,100) 5,330
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS 2.1%
FNMA, MTN
6.250%, 01/14/04 250 244
Private Export Funding
6.620%, 10/01/05 250 252
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $480) 496
--------
CONVERTIBLE BOND 2.8%
Meditrust, Convertible
to 27.6396 Shares
7.500%, 03/01/01 570 661
--------
TOTAL CONVERTIBLE BOND
(Cost $574) 661
--------
Market
Face Amount Value
(000) (000)
- ------------------------------------------------------
REPURCHASE AGREEMENT 0.9%
Lehman Brothers,
5.32%, dated 09/30/97, matures
10/01/97, repurchase price
$209,785 (collateralized by
U.S. Treasury Bond, par value
$170,929, 10.00%, matures
05/15/10: market value
$216,067) $210 $ 210
--------
TOTAL REPURCHASE AGREEMENT
(Cost $210) 210
--------
TOTAL INVESTMENTS 100.5%
(Cost $23,276) 23,791
--------
OTHER ASSETS AND LIABILITIES, NET (0.5%) (114)
--------
NET ASSETS:
Portfolio Shares of (unlimited
authorization -- no par value)
based on 2,386,625 outstanding
shares of beneficial interest 23,102
Undistributed net investment income 18
Accumulated net realized gain
on investments 42
Net unrealized appreciation
of investments 515
--------
TOTAL NET ASSETS 100.0% $23,677
========
Net Asset Value, Offering and Redemption
Price Per Share $9.92
========
CL--CLASS
FHLMC--FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA--FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA--GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
MTN--MEDIUM TERM NOTE
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS (000) CLOVER FUNDS
For the eleven month period ended 9/30/97
<TABLE>
<CAPTION>
CLOVER EQUITY CLOVER SMALL CAP CLOVER FIXED
VALUE FUND VALUE FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------
Investment Income:
<S> <C> <C> <C>
Dividends ....................................... $ 1,437 $ 38 $ --
Interest ........................................ 688 22 1,367
- ---------------------------------------------------------------------------------------------------------------
Total Investment Income........................ 2,125 60 1,367
- ---------------------------------------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ........................ 689 67 91
Investment Advisory Fee Waiver .................. (47) (67) (55)
Reimbursements by Advisor........................ -- (13) --
Administrator Fees .............................. 160 52 52
Custodian Fees .................................. 8 4 6
Transfer Agent Fees ............................. 98 13 20
Professional Fees ............................... 40 8 9
Trustee Fees .................................... 19 2 5
Registration Fees ............................... 27 22 15
Pricing Fees .................................... 2 -- 2
Printing Expense ................................ 24 4 4
Amortization of Deferred Organizational Costs ... 1 18 1
Insurance and Other Fees ........................ 4 -- 1
- ---------------------------------------------------------------------------------------------------------------
Total Expenses ................................ 1,025 110 151
- ---------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) .............. 1,100 (50) 1,216
- ---------------------------------------------------------------------------------------------------------------
Net Realized Gain From Securities Sold .......... 12,612 1,014 50
Net Unrealized Appreciation
of Investment Securities ...................... 8,409 2,889 349
- ---------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain
on Investments ................................ 21,021 3,903 399
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
From Operations ................................ $22,121 $3,853 $1,615
- ---------------------------------------------------------------------------------------------------------------
</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>
STATEMENT OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
CLOVER EQUITY
VALUE FUND
------------------------
FOR THE
ELEVEN MONTH TWELVE MONTH
PERIOD ENDED PERIOD ENDED
9/30/97 10/31/96
- ---------------------------------------------------------------------------------------------------------------
Investment Activities:
<S> <C> <C>
Net Investment Income (Loss) ......................................... $ 1,100 $ 911
Net Realized Gain on Securities Sold ................................. 12,612 3,967
Net Unrealized Appreciation (Depreciation) of
Investment Securities .............................................. 8,409 5,039
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations .................................................. 22,121 9,917
- ---------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ................................................ (1,119) (992)
Realized Capital Gain ................................................ (3,929) (4,207)
- ---------------------------------------------------------------------------------------------------------------
Total Distributions ................................................ (5,048) (5,199)
- ---------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued .......................................... 28,919 35,078
Proceeds from Shares Issued in Lieu of
Cash Distributions ................................................. 4,923 5,130
Cost of Shares Redeemed .............................................. (18,106) (11,523)
- ---------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Capital Share Transactions ....................................... 15,736 28,685
- ---------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets........................................ 32,809 33,403
- ---------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ................................................ 85,050 51,647
End of Period ...................................................... $117,859(1) $85,050(1)
===============================================================================================================
Shares Issued and Redeemed:
Issued ............................................................... 1,714 2,281
Issued in Lieu of Cash Distributions ................................. 297 349
Redeemed ............................................................. (1,054) (758)
- ---------------------------------------------------------------------------------------------------------------
Net Increase in Share Transactions .................................. 957 1,872
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes undistributed net investment income of $38 and $57 as of 9/30/97
and 10/31/96, respectively.
(2) Includes undistributed net investment income of $18 and $11 as of 9/30/97
and 10/31/96, respectively.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<PAGE>
CLOVER FUNDS
CLOVER SMALL CAP CLOVER FIXED
VALUE FUND INCOME FUND
------------------------ ------------------------
FOR THE FOR THE
ELEVEN MONTH TWELVE MONTH ELEVEN MONTH TWELVE MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
9/30/97 10/31/96 9/30/97 10/31/96
- --------------------------------------------------------------------------------
$ (50) $-- $ 1,216 $ 1,029
1,014 67 50 208
2,889 77 349 (166)
- --------------------------------------------------------------------------------
3,853 144 1,615 1,071
- --------------------------------------------------------------------------------
-- (4) (1,209) (1,030)
(60) -- (204) (76)
- --------------------------------------------------------------------------------
(60) (4) (1,413) (1,106)
- --------------------------------------------------------------------------------
7,760 4,664 7,459 8,594
59 3 1,346 1,094
(828) (312) (5,061) (4,607)
- --------------------------------------------------------------------------------
6,991 4,355 3,744 5,081
- --------------------------------------------------------------------------------
10,784 4,495 3,946 5,046
- --------------------------------------------------------------------------------
4,495 -- 19,731 14,685
$15,279 $4,495 $23,677(2) $19,731(2)
================================================================================
================================================================================
604 442 765 877
5 1 138 112
(65) (29) (519) (471)
- --------------------------------------------------------------------------------
544 414 384 518
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS CLOVER FUNDS
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Net Realized and Net Net
Asset Net Unrealized Distributions Distributions Asset Assets Ratio
Value Investment Gains or from Net from Value End of Expenses
Beginning Income (Losses)on Investment Capital End of Period to Average
of Period (Loss) Investments Income Gains of Period Total Return (000) Net Assets
---------- ---------- -------------- ------------- ------------- --------- ------------ --------- ------------
- ------------------------
CLOVER EQUITY VALUE FUND
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(1) $16.20 0.18 3.54 (0.18) (0.75) $18.99 23.86%+ $117,859 1.10%*
1996 $15.29 0.19 2.15 (0.22) (1.21) $16.20 16.47% $ 85,050 1.10%
1995 $13.74 0.24 2.46 (0.22) (0.93) $15.29 21.25% $ 51,647 1.10%
1994 $11.94 0.08 2.01 (0.08) (0.21) $13.74 17.80% $ 25,249 1.14%
1993 $10.45 0.10 1.54 (0.10) (0.05) $11.94 15.83% $ 15,070 1.18%
1992(2) $10.00 0.10 0.44 (0.09) -- $10.45 5.94%* $ 9,005 1.20%*
- ---------------------------
CLOVER SMALL CAP VALUE FUND
- ---------------------------
1997(1) $10.87 (0.04) 5.24 -- (0.13) $15.94 48.23%+ $ 15,279 1.40%*
1996(3) $10.00 0.02 0.88 (0.03) -- $10.87 8.97%+ $ 4,495 1.40%*
- ------------------------
CLOVER FIXED INCOME FUND
- ------------------------
1997(1) $ 9.85 0.54 0.16 (0.54) (0.09) $ 9.92 7.43%+ $ 23,677 0.75%*
1996 $ 9.89 0.59 0.01 (0.59) (0.05) $ 9.85 6.26% $ 19,731 0.80%
1995 $ 9.14 0.58 0.77 (0.58) (0.02) $ 9.89 15.27% $ 14,685 0.80%
1994 $10.85 0.57 (0.92) (0.57) (0.79) $ 9.14 (3.54)% $ 9,762 0.80%
1993 $10.23 0.61 0.72 (0.61) (0.10) $10.85 13.40% $ 7,966 0.78%
1992(2) $10.00 0.56 0.23 (0.56) -- $10.23 9.05%* $ 8,982 0.80%*
</TABLE>
Ratio of Net
Ratio of Investment
Ratio of Net Expenses Income (Loss)
Investment to Average to Average
Income Net Assets Net Assets
or (Loss) (Excluding (Excluding Portfolio Average
to Average Waivers and Waivers and Turnover Commission
Net Assets Contributions) Contributions) Rate Rate(4)
------------ -------------- -------------- --------- ---------
1.18%* 1.15%* 1.13%* 51.64% $0.0551
1.32% 1.21% 1.21% 51.36% $0.0577
1.82% 1.20% 1.72% 84.76% n/a
0.71% 1.30% 0.55% 58.44% n/a
0.89% 1.51% 0.56% 82.51% n/a
1.15%* 2.09%* 0.26%* 31.00% n/a
(0.64)%* 2.43%* (1.67)%* 59.03% $0.0461
(0.03)%* 5.29%* (3.92)%* 14.17% $0.0470
6.03%* 1.02%* 5.76%* 11.83% n/a
6.00% 1.11% 5.69% 24.52% n/a
6.13% 1.40% 5.53% 35.84% n/a
5.88% 1.46% 5.22% 11.11% n/a
5.62% 1.29% 5.11% 68.61% n/a
6.28%* 1.76%* 5.32%* 113.00% n/a
* Annualized
+ Returns are for the period indicated and have not been annualized.
(1)On June 25, 1997 the Board of Trustees of TIP Funds approved a change in the
Clover Funds' fiscal year end from October 31 to September 30, effective
September 30, 1997.
(2)The Clover Fixed Income Fund and the Clover Equity Value Fund commenced
operations on December 6, 1991.
(3)The Clover Small Cap Value Fund commenced operations on February 28, 1996.
(4)Average commission rate paid per share for the security purchases and sales
made during the period. Presentation of the rate is only required for fiscal
years beginning after September 1, 1995.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS CLOVER FUNDS
September 30, 1997
1. ORGANIZATION:
TIP FUNDS (the "Trust") is organized as a Massachusetts business trust. The
Trust is registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company with twelve portfolios. The
financial statements included herein are those of the Clover Equity Value Fund,
the Clover Fixed Income Fund, and the Clover Small Cap Value Fund (the "Funds").
The Clover Max Cap Value Fund was not in operation as of September 30, 1997. 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. The Funds' prospectus provides a
description of each Fund's investment objectives, policies and strategies.
On March 17, 1997 the Board of Trustees of the Advisors' Inner Circle Fund
approved a tax-free reorganization for the Funds under which all of the assets
and liabilities of the Funds were transferred to the TIP Funds, a Massachusetts'
business trust. A shareholder meeting was held on June 17, 1997 at which time
this reorganization was approved by the Funds' shareholders. In conjunction with
the reorganization, the Funds have changed their fiscal year end from October
31, 1997 to September 30, 1997.
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
provisions for Federal income taxes are 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 adjusted for the accretion and amortization of
purchase discounts and premiums during the respective holding period.
Purchase discounts and premiums on securities held by the Funds are
accreted and amortized to maturity using the scientific interest method,
which approximates the effective interest method.
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 the 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.
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 each Fund's
assets, less liabilities, by the number of shares outstanding.
EXPENSES -- 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 TO SHAREHOLDERS -- Distributions from net investment income
are declared and paid quarterly to Shareholders for the Equity Value Fund
and the Small Cap Value Fund and declared
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) CLOVER FUNDS
September 30, 1997
daily and paid monthly for the Fixed Income Fund. 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 principles. 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. These classifications have no effect on net assets or
net asset value.
Accordingly, the following amounts were reclassified from undistributed net
investment income (loss) to accumulated net realized gain (loss):
Clover Small Cap Value Fund $(50)
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
3. ORGANIZATION COSTS AND TRANSACTIONS WITH
AFFILIATES:
Organization costs have been capitalized by the Funds and are being amortized
over sixty months commencing with the reorganziation. In the event any of the
initial shares of a Fund are redeemed by any holder thereof during the period
that such 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.
Certain officers of the Trust are also officers of SEI Fund
Resources (the "Administrator") and/or SEI Investments Distribution Co. (the
"Distributor"). Such officers are paid no fees by the Trust for serving as
officers of the Trust.
4. ADMINISTRATION, SHAREHOLDER SERVICING AND
DISTRIBUTION AGREEMENTS:
Prior to June 25, 1997, the Advisors' Inner Circle Trust and the Administrator
were parties to an Administration Agreement, under which the Administrator
provided management and administrative services for an annual fee of .20% of the
average daily net assets of each of the Funds. There was a minimum annual fee of
$50,000 per Fund payable to the Administrator for services rendered to the Funds
under the Administration Agreement.
As of June 25, 1997 the TIP Trust and the Administrator entered into an
agreement under which the Administrator provides management and administrative
services for an annual fee of .12% of the average daily net assets of each of
the Funds up to $75 million, .10% on the next $75 million, .09% on the next $150
million, .08% on the next $300 million and .075% of such assets in excess of
$600 million. There is a minimum annual fee of $75,000 per Fund payable to the
Administrator for services rendered to the Funds under The Administration
Agreement.
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 (CCM Securities, Inc.) are parties
to a Distribution Agreement. The Distributor receives no fees for its
distribution services under this agreement.
5. INVESTMENT ADVISORY AND CUSTODIAN
AGREEMENTS:
The Trust and Clover Capital Management, Inc. (the "Adviser") are parties to an
Investment Advisory Agreement under which the Adviser receives an annual fee
equal to .74% of the average daily net assets of the Equity Value Fund, .45% of
the average daily net assets of the Fixed Income Fund and .85% of the average
daily net assets of the
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) CLOVER FUNDS
September 30, 1997
Small Cap Value Fund. The Adviser has voluntarily agreed to waive all or a
portion of its fees (and to reimburse the expenses of the Funds) in order to
limit operating expenses to not more than 1.20% of the average daily net assets
for net assets below $20 million and to not more than 1.10% for net assets of
$20 million or more for the Equity Value Fund. Operating expenses for the Fixed
Income Fund are limited to not more than .80% of the average daily net assets
for net assets below $20 million and to not more than .75% for net assets of
$20 million or more. Operating expenses for the Small Cap Value Fund are
limited to 1.40% of the Portfolio's average daily net assets. Fee waivers and
expense reimbursements are voluntarily andmay be terminated at any time.
CoreStates Bank, N.A. acts as custodian (the "Custodian") for the Funds. Fees of
the Custodian are being paid in part on the basis of the net assets of the Funds
and the cost of transactions. The Custodian plays no role in determining the
investment policies of the Trust or which securities are to be purchased or sold
by the Funds.
6. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the period ended September 30, 1997, are as follows
(000):
CLOVER CLOVER CLOVER
EQUITY SMALL CAP FIXED
VALUE FUND VALUE FUND INCOME FUND
---------- ---------- -----------
Purchases
Government $ -- $ -- $2,343
Other 70,539 11,811 5,454
Sales
Government $ 997 $ -- $ 874
Other 47,289 4,876 1,618
At September 30, 1997, the total cost of securities and the net realized gains
or losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Funds
at September 30, 1997 is as follows (000):
CLOVER CLOVER CLOVER
EQUITY SMALL CAP FIXED
VALUE FUND VALUE FUND INCOME FUND
---------- ---------- -----------
Aggregate
gross
unrealized
appreciation $19,819 $3,194 $568
Aggregate
gross
unrealized
depreciation (2,149) (228) (53)
------- ------ ----
Net unrealized
appreciation $17,670 $2,966 $515
======= ====== ====
7. CONCENTRATION OF CREDIT RISK:
The Fixed Income Fund invests primarily in fixed income securities which are
rated in the top four rating categories by either Moody's Investors Services,
Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P"), or if not rated,
determined by the Adviser to be of comparable quality. The ability of the
issuers of the securities held by the Fund to meet their obligations may be
affected by economic developments in a specific industry, state or region.
The summary of credit quality rating for securities held by the Fund at
September 30, 1997 is as follows:
S&P MOODY'S
---------------- ----------------
Bonds: AAA 44.5% Aaa 43.8%
AA 16.8% Aa 16.4%
A 18.0% A 23.7%
BBB 7.8% Baa 7.0%
BB 4.8% Ba 4.8%
B 4.3% B 4.3%
NR 3.8% NR --
------ ------
100.0% 100.0%
<PAGE>
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDERS
TIP FUNDS
We have audited the accompanying statements of net assets of the Clover
Equity Value Fund, the Clover Small Cap Value Fund, and the Clover Fixed Income
Fund as of September 30, 1997, and the related statements of operations, changes
in net assets and financial highlights for the eleven-month period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The statement
of changes in net assets for the period ended October 31,1996, and the financial
highlights for the periods ended October 31, 1992 through October 31, 1996 for
the Clover Equity Value Fund, the Clover Small Cap Value Fund, and the Clover
Fixed Income Fund were audited by other auditors whose report dated December 6,
1996 expressed an unqualified opinion on those statements and financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 the
Clover Equity Value Fund, the Clover Small Cap Value Fund, and the Clover Fixed
Income Fund at September 30, 1997, the results of their operations, the changes
in their net assets, and the financial highlights for the eleven-month period
then ended, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
October 31, 1997
<PAGE>
NOTICE TO SHAREHOLDERS
OF
THE CLOVER FUNDS
(UNAUDITED)
For the shareholders that do not have a September 30, 1997 taxable year end,
this notice is for informational purposes only. For shareholders with a
September 30, 1997 taxable year end, please consult your tax adviser as to the
pertinence of this notice.
For the fiscal year ended September 30, 1997, the portfolio is designating long
term capital gains, qualifying dividends and exempt interest income with regard
to distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG TERM ORDINARY (C)
CAPITAL GAIN INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS)
--------- ------------- ------------- -------------
<S> <C> <C> <C>
Clover Equity Value Fund ............. 73% 27% 100%
Clover Small Cap Value Fund .......... 0% 100% 100%
Clover Fixed Income Fund ............. 14% 86% 100%
(D) (E) (F)
QUALIFYING TAX EXEMPT FOREIGN
PORTFOLIO DIVIDENDS (1) INTEREST TAX CREDIT
--------- ------------- ------------- -------------
Clover Equity Value Fund ............. 100% 0% 0%
Clover Small Cap Value Fund .......... 0% 0% 0%
Clover Fixed Income Fund ............. 0% 0% 0%
</TABLE>
- -------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of the portfolio's total
distributions.
** Items (D), (E) and (F) are based on a percentage of ordinary income
distributions of the portfolio.
<PAGE>
Trust:
TIP Funds
P.O. Box 419805
Kansas City, MO 64141-6805
Investment Advisor:
Clover Capital Management, Inc.
Distributor:
CCM Securities, Inc.
Administrator:
SEI Fund Resources
Legal Counsel:
Morgan, Lewis & Bockius LLP
Independent Auditors:
Ernst & Young LLP
To open an account,
receive account information,
make inquiries or
request
literature:
1-800-224-6312
ANNUAL
REPORT
SEPTEMBER 30, 1997
(LOGO)
[GRAPHIC OMITTED]
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CLOVER EQUITY VALUE FUND
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CLOVER SMALL CAP VALUE FUND
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CLOVER FIXED INCOME FUND
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This information must be preceded or accompanied by
a current prospectus for each Fund described.
