ANNUAL
REPORT
SEPTEMBER 30, 1998
[LOGO OMITTED]
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Turner Micro Cap Growth Fund
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Turner Short Duration
Government Funds - One Year Portfolio
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Turner Short Duration
Government Funds - Three Year Portfolio
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<PAGE>
[TRIANGLE DINGBAT OMITTED]CONTENTS
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2 Total Returns
2 Fund Investment Objectives
3 Letter to Shareholders
7 Investment Review: Turner Micro Cap Growth Fund
9 Investment Review: Turner Short Duration Government Funds--One Year
Portfolio
11 Investment Review: Turner Short Duration Government Funds--Three Year
Portfolio
13 Financial Statements
26 Report of Independent Auditors
27 Notice to Shareholders
TIP
INSTITUTIONAL FUNDS
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The TIP Institutional Funds offer a series of four no-load mutual funds to
institutional investors. The minimum initial investment in a TIP Institutional
Fund is $100,000. The minimum amount for subsequent investments
is $5,000.
Turner Investment Partners, Inc., based in Berwyn, Pennsylvania, serves as
the investment adviser to three of the TIP Institutional Funds. The firm,
founded in 1990, invests more than $2.6 billion in equity, fixed-income, and
balanced portfolios on behalf of individuals and institutions. Turner Investment
Partners manages the Turner Micro Cap Growth Fund, the Turner Short Duration
Funds - One Year Portfolio, and the Turner Short Duration Funds - Three Year
Portfolio. A separate investment firm manages the other mutual fund in the TIP
Institutional Funds family.
Turner Investment Partners, Inc. also manages the Turner Growth Equity
Fund, the Turner Midcap Growth Fund, the Turner Small Cap Growth Fund, TIP
Target Select Fund, and the Turner Ultra Large Cap Growth Fund mutual funds in
the TIP Funds family.
SHAREHOLDER SERVICES
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TIP Institutional 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, 1-888-847-7654. Or they may
write to TIP Institutional Funds, Box 419805, Kansas City, Missouri 64141.
<PAGE>
FUND INVESTMENT OBJECTIVES
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THE TURNER MICRO CAP GROWTH FUND seeks capital appreciation. It invests
primarily in a diversified portfolio of common stocks that, in Turner's opinion,
have strong earnings growth potential and market capitalizations not exceeding
$500 million at the time of purchase. The Fund's economic-sector weightings stay
within a range that's not more than 50% above or below the sector weightings of
the Russell 2000 Growth Index.
THE TURNER SHORT DURATION GOVERNMENT FUNDS - ONE YEAR PORTFOLIO seeks to
produce maximum total return consistent with preservation of capital and prudent
investment management. It invests primarily in high-grade securities issued or
guaranteed by the U.S. government or its agencies. The Fund seeks to limit
fluctuations in principal and reduce interest-rate risk by maintaining an
average effective duration no greater than that of a one-year Treasury bill.
THE TURNER SHORT DURATION GOVERNMENT FUNDS - THREE YEAR PORTFOLIO seeks to
produce maximum total return consistent with the preservation of capital and
prudent investment management. It invests primarily in high-grade securities
issued or guaranteed by the U.S. government or its agencies. The Fund seeks to
limit fluctuations in principal and reduce interest-rate risk by maintaining an
average effective duration no greater than that of a three-year Treasury note.
<TABLE>
<CAPTION>
TOTAL RETURNS* Periods ended September 30, 1998
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<S> <C> <C> <C> <C>
THREE SINCE
SEVEN ONE YEARS INCEPTION**
MONTHS YEAR (ANNUALIZED) (ANNUALIZED)
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TURNER MICRO CAP
GROWTH FUND (1.20)% -- -- (2.04)%
Russell 2000
Growth Index (23.75) -- -- (40.51)
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TURNER SHORT DURATION
GOVERNMENT FUNDS--
ONE YEAR PORTFOLIO 3.50 6.22% 6.48% 6.25
Merrill Lynch
Three-Month U.S.
Treasury Bill Index 3.21 5.36 5.41 5.34
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TURNER SHORT DURATION
GOVERNMENT FUNDS--
THREE YEAR PORTFOLIO 5.09 8.07 7.06 6.72
Lehman Brothers
1-3 Year U.S.
Government Bond Index 5.05 7.93 6.83 6.34
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<FN>
*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 Micro Cap
Growth Fund, March 1, 1998; Turner Short Duration Government Funds--One Year
Portfolio, March 1, 1994; and Turner Short Duration Government Funds--Three Year
Portfolio, March 1, 1994.
</FN>
</TABLE>
2
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TO OUR SHAREHOLDERS:
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For the seven-month period ended September 30, a host of negative news from
abroad about collapsing stock markets, a nuclear-armed Russia that's floundering
politically, and currency crises in Asia, Europe, and Latin America was bad for
small stocks but good for the bond market.
Small stocks, as represented by the Russell 2000 Index, underperformed any
other capitalization segment, losing 23.75%, one of its worst showings in modern
times. (The Russell 2000's average annual return over the past 10 years is
11.15%.) In contrast, investors flocked to the relative safety of bonds,
especially to credit-risk-free Treasuries. Consequently the Lehman Brothers 1-3
Year Government Bond Index rose 5.05%, a performance comparing favorably with
that of other seven-month stretches over the past 10 years.
ALL FUNDS OUTPERFORM
As for our own TIP Institutional Funds, the seven-month period was one of
strength in relative performance; all three of our funds outperformed their
indexes:
[Bullet] The Turner Micro Cap Growth Fund of the smallest capitalization
stocks, in its first seven months of operation, lost 1.20% to outperform the
Russell 2000 Growth Index by 22.55 percentage points. Although that kind of
relative performance certainly doesn't enhance your retirement nest egg or send
the children to college, we think the fund got off to a promising start and made
the best of an ugly market situation; although past performance is no guarantee
of future results, as the mutual-fund advertisements relentlessly remind us, we
think Micro Cap Growth's initial performance augurs well for the future, for
better returns in a market that, after a prolonged hiatus, may once again come
to favor small stocks.
[Bullet] The Turner Short Duration Government Funds - One Year Portfolio
continued to benefit from relatively high interest rates in short-term
maturities. Its seven-month return of 3.50% beat the Merrill Lynch Three-Month
U.S. Treasury Bill Index by 0.29 percentage points.
[Bullet] The Turner Short Duration Government Funds - Three Year Portfolio
capitalized on a significant drop in interest rates (the two-year Treasury yield
fell by 1.46 percentage points) to post a seven-month return of 5.09%,
outperforming the Lehman Brothers 1-3 Year U.S. Government Bond Index by 0.04
percentage points.
(Details on the performance and investment strategies of each of our funds
can be found in the Investment Review section beginning on page 7)
BIGGER HAS BEEN BETTER
In its first seven months, Micro Cap Growth unfortunately labored under a
notable disadvantage: a market environment in which bigger was considered
better, no matter what the fundamentals may indicate. In general, the larger the
capitalization segment, the better the result has been; large-cap stocks have
edged mid-cap stocks, which in turn have beaten small-cap stocks. As THE NEW
YORK TIMES noted, "Like pointer dogs fixed on their targets, investors just
can't seem to let go of the stocks of large, brand-name companies."
3
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That trend has been in place for four years. But no trend is forever, and
we think the time may be coming soon when the market will lavish above-average
returns on many smaller companies with above-average growth prospects over time,
as has been the case in the past.
Our investment disciplines reveal that the best growth prospects (and thus
the best potential returns) are to be found in small companies. In an inverse
correlation with recent performance, the smaller the market capitalization of
the companies, the better their growth prospects are. Granted, Wall Street
earnings estimates tend to be notoriously optimistic. But even if you make
allowances for a considerable margin of error (and a rash of downward
projections will certainly be forthcoming), the earnings numbers for smaller
stocks would still be solidly positive. Consequently, the superior earnings
power of the best smaller capitalization companies should translate into
superior returns for those companies going forward, in our view.
EARNINGS ULTIMATELY DO MATTER
That view is predicated in part on this historical precedent: in periods
when analysts' earnings expectations turn more pessimistic, the companies with
the best earnings prospects tend to outperform. As earnings growth becomes
harder to sustain, investors prove willing to pay up for the predictable
earnings streams of high-quality growth companies. In the end, earnings and
quality will win out in our estimation. We think Micro Cap Growth's high-quality
holdings are precisely the kind that will do well in this environment.
What's more, small-cap stocks have done well in the past when their
valuations have hit historic lows, which is the case now in both absolute and
relative terms. For instance, the Russell 2000 stocks are now selling at a
price/earnings ratio of just 15.5, based on one-year forward earnings, versus an
average of 20.8 over the past five years -- a 25% discount. What's more, they
are selling at a 23% discount to the S&P 500 stocks, an unprecedented
phenomenon; traditionally, small-cap stocks have commanded a premium multiple in
light of the premium growth rates of their issuers.
Within the small-cap universe, micro-cap stocks seem especially well suited
to shine. As numerous research studies have documented, small-cap stocks have
outperformed their larger siblings by about two percentage points annually over
the long term. But the small stocks that have produced this performance
advantage historically are those in the ninth and tenth deciles of market
capitalization. By today's standards, stocks in the ninth and tenth deciles have
market capitalizations below $300 million. But that's far less than the typical
small-cap stock in the Russell 2000 Index, which has a weighted average market
capitalization of $620 million -- a figure inflated by 16 years of double-digit
gains. Today the typical small-cap stock isn't so small anymore. In essence, the
stocks that have generated the long-term outperformance known as the SMALL-CAP
effect are the stocks categorized today as MICRO-CAP stocks. As INVESTORS
BUSINESS DAILY observed recently, "As small-cap stocks get bigger and bigger,
the case for micro-cap stocks gets more and more compelling."
4
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BOND FUNDAMENTALS SOLID
Also compelling is the case for the short-duration fixed-income securities
that constitute the bulk of our One Year and Three Year Portfolios. Short-term
interest rates are currently relatively attractive. The yield curve is now
almost flat: the difference between one-year and 30-year yields at September 30
was just 0.58 percentage points -- the best reason we can think of for keeping
the maturity average of bond portfolios modest now, since extending to longer
maturities offers minuscule additional income and a lot more price risk.
What's more, the fundamentals underpinning the overall bond market remain
solid. Inflation -- Public Enemy #1 for fixed-income investors, because it
diminishes the value of bonds' fixed interest payments -- is low and appears
likely to stay that way, as economic growth slows. The Federal Reserve seems
unlikely to raise interest rates in the next few months. The federal budget
surplus is shrinking the supply of bonds. On the demand side, foreign investors
have stepped up their buying of U.S. bonds, thanks in part to the relatively
strong dollar, which increases the worth of their U.S. investments; indeed,
foreign investors have doubled their buying of Treasury securities in the past
three years. It's estimated that foreign investors now own about $1.5 trillion
of Treasuries, or about one-third of all those outstanding. Even though Treasury
yields have fallen substantially this year, they still look good to Japanese
investors, among others. Currently 10-year Treasuries yield 4.41%; Japanese
10-year bonds, a mere 0.91%. Finally, turmoil in the world's capital markets in
recent months has whetted the desire for safety, and U.S. bonds are considered
among the world's safest.
Since every silver lining has its cloud, we feel compelled to caution that
since interest rates are near historic lows, bond investors should temper their
expectations for future fixed-income returns. As of September 30 the benchmark
30-year Treasury yield stood at 4.97% -- the first time it had fallen below 5%
in its history. As a result bond returns going forward are starting from a
modest income base. In our judgment, bonds will be unlikely to continue
delivering the outsized capital gains of recent years. Long-term Treasuries, for
instance, have produced spectacular capital gains and total returns of nearly
20% over the past 12 months. At this juncture, what bonds -- and short-duration
bonds in particular -- can be reasonably expected to deliver are respectable
returns with very little risk and attractive real (inflation-adjusted) yields.
MAIN ROLE: RISK REDUCTION
As we see it, the main role of bonds is to reduce risk in a portfolio. The
first rule of investing is to preserve capital, and the beauty of short-duration
bonds is that they preserve capital better than any other asset class. With
interest rates falling recently, some investors are buying long-term bonds in
pursuit of yield and the prospect of additional fat gains. We think it's an
ill-advised move in the long run.
We think it's a mistake because long bonds don't provide rewards
commensurate with their risks, whereas short bonds provide a superior balance of
risk and reward. Typically return
5
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potential and yield rise along with maturity -- quickly at first, until the
three-year mark, then slowly. For instance, with the yield gap between one-year
and 30-year Treasury bonds now so small, an investor who puts $100,000 in bonds
would receive only about $580 more in interest payments annually from a 30-year
Treasury than from a one-year Treasury. Yet the 30-year Treasury bears as much
as 16 TIMES the risk of a loss than a one-year Treasury does if interest rates
rise. In other words, an investor today captures almost 90% of the yield premium
available in the bond market by choosing a one-year maturity, but gains little
added benefit in income -- and assumes a lot more price risk from changes in
interest rates -- from longer maturities.
Historically, the risk of severe price declines in short-duration
securities due to rate increases is almost nil. In rolling 12-month periods
since 1950, the performance of three-year Treasuries, for example, has been
smooth: positive returns more than 99% of the time and volatility a small
fraction of that of long bonds. Long bonds, in contrast, have lost money nearly
25% of the time and outperformed short bonds by a mere 0.2 percentage points on
an annualized basis over the entire time.
As we see it, from a risk/reward standpoint, short-duration maturities
stack up as the duration of choice for prudent fixed-income investors: they are
up to 16 times less risky than long durations are, yet deliver competitive
rewards over time. Such an agreeable tradeoff goes a long way toward explaining
why we have set our own fixed-income mutual funds at short-term average
maturities.
In closing, we thank you for keeping faith with us, and we thank our staff
members whose individual and collective efforts have contributed so much to our
strength and record of accomplishment. As always, we remain committed to our
mission of delivering superior investment returns and service to you. And as
always, we welcome your questions or comments.
/s/signature
Robert E. Turner
CHAIRMAN AND CHIEF INVESTMENT OFFICER
TURNER INVESTMENT PARTNERS, INC.
6
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INVESTMENT REVIEW
TURNER MICRO CAP GROWTH FUND
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In retrospect, the timing for starting the Turner Micro Cap Growth Fund could
have been better. Launched last March 1, Micro Cap Growth was barely a month old
when it encountered a brutal, once-in-a-generation rout that would take smaller
stocks, as represented by the Russell 2000 Growth Index, down about 30% over the
next five months. But the fund endured this adversity well and delivered a
modest loss of 1.20%, from its inception date through September 30 -- a return
that outperformed the Russell 2000 Growth Index by 22.55 percentage points.
In our estimation, Micro Cap Growth's admirable start affirms the merit of
our investment process, which involves a synthesis of quantitative, fundamental,
and technical analyses to identify candidates for investment with superior
earnings prospects, reasonable valuations, and favorable trading-volume and
price patterns. In short, our investment process emphasizes stock selection . .
. and the Micro Cap Growth's outperformance is a testament to excellent stock
selection: eight of the fund's 10 sector investments beat the corresponding
index sectors. Our best returns were in technology and consumer staples, two
sectors that suffered severe losses in the index. Our positions in financial
services and utilities underperformed.
Some of our more successful individual holdings included Molecular
Dynamics, a medical-equipment manufacturer that was acquired; Chico's, a
retailer of women's casual clothing; TSI International Software, which creates
specialized business software for SAP and others; and NVR, a home builder.
We think that after about four years of underperformance, the time for
smaller stocks in general and micro-cap stocks in particular may be near.
Inevitably the market will recognize and reward the excellent growth prospects
of micro-cap companies, which are in the potent early stages of their growth
cycle, which are generating earnings growth through significant revenue growth
(not by the increasingly prevalent corporate ploys of cost-cutting and
accounting tricks), and which are selling at the lowest equity valuations in 20
years.
Our own holdings offer impressive earnings prospects and outstanding value:
the companies owned have a price/earnings multiple-to-growth-rate ratio of 0.58,
versus 1.60 for the large-cap S&P 500 stocks. About 60% of the fund's holdings
are invested in three growth-oriented sectors: technology, health care, and
consumer discretionary.
FUND PROFILE
SEPTEMBER 30, 1998
Fund net assets $2.8 million
Number of holdings 99
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SECTOR WEIGHTINGS
[BAR GRAPH OMITTED - PLOT POINTS AS FOLLOWS:]
21.9% Health care
19.8% Technology
18.4% Consumer discretionary
11.3% Financial Services
7.0% Producer durables
6.3% Materials/processing
4.9% Consumer staples
3.5% Auto/transportation
2.2% Utilities
2.0% Energy
2.7% Other
7
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[bullet] Weighted average market capitalization $230 million
[bullet] % of holdings with positive earnings surprises 56.3%
[bullet] % of holdings with negative earnings surprises 0%
[bullet] % in 10 largest holdings 17.7%
PORTFOLIO MANAGERS
FRANK L. SUSTERSIC has served as the lead product manager of the Micro Cap
Growth Fund since its inception in 1998. A Chartered Financial Analyst, Frank
joined Turner in 1994. Previously he was an investment officer and fund manager
with First Fidelity Bank Corporation. He holds a bachelor's degree from the
University of Pennsylvania and has eight years of investment experience.
WILLIAM C. MCVAIL serves as the co-manager of the Micro Cap Growth Fund.
Before joining Turner in 1998, Bill was a portfolio manager at PNC Equity
Advisors. A Chartered Financial Analyst, Bill received a bachelor's degree from
Vassar College and has more than 10 years of investment experience.
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
TURNER MICRO CAP GROWTH FUND, INSTITUTIONAL CLASS,
VERSUS THE RUSSELL 2000 GROWTH INDEX
Cumulative Inception
to Date (1)
-1.20%
[CHART OMITTED]
PLOT POINTS AS FOLLOWS
Turner Micro Cap Growth Fund Russell 2000 Growth Index
2/28/98 10,000 10,000
9/98 9,882 7,625
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 Micro Cap Growth Fund began operations on March 1, 1998.
8
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INVESTMENT REVIEW
TURNER SHORT DURATION GOVERNMENT FUNDS--ONE YEAR PORTFOLIO
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The Turner Short Duration Government Funds - One Year Portfolio continued to
build on its record of consistent outperformance in the latest seven-month
period ended September 30. The One Year Portfolio advanced 3.50%, versus 3.21%
for its benchmark, the Merrill Lynch Three-Month U.S. Treasury Bill Index.
It was a seven-month period in which the short and intermediate portions of
the yield curve flattened and thus made short rates more competitive, in which
wrenching global financial crises made the relative safety of U.S. bonds
appealing to investors, and in which the performance of credit-risk-free
Treasury securities was supreme. In short, it was a favorable time for
a short-duration fixed-income mutual fund oriented to government bonds such as
the One Year Portfolio.
The fund handily beat the return available in the money markets and did so
with relatively little volatility. As always, we sought to add extra return
through the selection of sectors and securities, not by making bold adjustments
to the fund's interest-rate exposure -- adjustments that our research and
experience have shown are typically counterproductive. Early in the period, our
holdings offering premium yields -- mortgage-backed and asset-backed securities
- -- did best. Later, our government holdings did best. Even so, our non-
government investments had such short maturities that the price damage to them
was minimal.
The swelling popularity of Treasuries reflected a sea change in investors'
tolerance for risk. Before, investors were hungry for yield and bid up the
prices of bonds with yield premiums in the belief that there was relatively
little risk in reaching for extra income. But after fears of a deepening global
recession mounted, investors thought that nothing less than the ultimate quality
of Treasuries would do and that all other kinds of bonds -- even those that were
the most highly rated -- were suddenly fraught with risk.
Our performance would have been better if we had maintained a longer, less
conservative average duration than about 0.3 years throughout the period. But we
chose that duration because we didn't want to unduly hurt the fund's performance
if rates rose. We still are of the view that the Federal Reserve is unlikely to
lower rates as aggressively as the market seems to anticipate, so we are keeping
the Fund's average duration neutral. We have increased our weighting in mortgage
and asset-backed securities because their unpopularity of late has boosted their
yields (and return potential) to more attractive levels.
Overall, we think our short-duration holdings and conservative investment
approach emphasizing preserving capital are well-suited for a bond market in
which yields are modest by historical standards and offer a heightened degree of
potential risk.
9
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FUND PROFILE
SEPTEMBER 30, 1998
Fund net assets $1.0 million
Number of holdings 22
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SECTOR WEIGHTINGS
[BAR GRAPH OMITTED - PLOT POINTS AS FOLLOWS:]
40.0% Mortgage-backed securities
34.3% Agency securities
23.7% Asset-backed securities
2.0% U.S. government securities
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[Bullet] Average effective duration 0.3 years
[Bullet] Average maturity 1.4 years
[Bullet] Average yield to maturity 5.30%
[Bullet] Average credit quality Agency
[Bullet] Convexity 0.0%
PORTFOLIO MANAGER
JAMES I. MIDANEK, fixed-income chief investment officer, has served as
manager of the Short Duration Funds - One Year Portfolio since inception. He
coordinates the work of Turner's fixed-income team, which is responsible for all
security selection, research, and trading for the portfolio. Jim joined Turner
in 1998, upon our acquisition of Solon Asset Management, which he co-founded and
served as fixed-income chief investment officer. Previously he was chief
investment officer, fixed income with Montgomery Asset Management. He holds a
bachelor's degree in accounting from Queens College and has 17 years of
investment experience.
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE TURNER SHORT
DURATION GOVERNMENT - ONE YEAR PORTFOLIO, INSTITUTIONAL CLASS, VERSUS THE
MERRILL LYNCH THREE-MONTH U.S. TREASURY BILL INDEX, AND THE LEHMAN 1-3 YEAR
GOVERNMENT BOND INDEX
Annualized
One-Year Three-Year Annualized Inception
Return Return to Date (1)
6.22% 6.48% 6.25%
[CHART OMITTED - PLOT POINTS TO FOLLOW]
TURNER SHORT DURATION LEHMAN 1-3 YEAR MERRILL LYNCH
GOVERNMENT ONE-YEAR GOVERNMENT BOND THREE-MONTH U.S. TREASURY
PORTFOLIO, INSTITUTIONAL INDEX BILL INDEX
3/1/94 10,000 10,000 10,000
9/30/94 10,231 10,049 10,235
9/30/95 10,935 10,871 10,837
9/30/96 11,704 11,488 11,431
9/30/97 12,428 12,279 12,047
9/03/98 13,201 13,253 12,693
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 Short Duration Government Funds--One Year Portfolio began
operations on March 1, 1994.
10
<PAGE>
INVESTMENT REVIEW
TURNER SHORT DURATION GOVERNMENT FUNDS--THREE YEAR PORTFOLIO
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Interest rates at one- to three-year maturities fell by 1.02 percentage points
or more and government securities outperformed in the seven-month period ended
September 30. Both of those key developments were a boon to the Turner Short
Duration Government Funds - Three Year Portfolio, which returned 5.09% and beat
the benchmark Lehman Brothers 1-3 Year U.S. Government Bond Index by 0.04
percentage points.
Since bond prices move in the opposite direction of interest rates, falling
rates boosted the prices of most of our investments during the period. And in
response to a spate of alarming financial news from abroad, investors flocked to
the relatively safety of government bonds -- a migration that benefited many of
our holdings in that sector (about 75% of our holdings are in government bonds).
Overall, we are pleased that the fund was able to outperform the Lehman 1-3 Year
index and do so with little volatility in a period in which volatility increased
sharply and non-Treasury securities -- even highly-rated corporate bonds -- hit
some rough patches, particularly in the third quarter of 1998.
Our average duration was generally kept slightly shorter than the Lehman
Brother's 1-3 Year Government Index's positioning of 1.7 years. That hurt our
performance slightly; we would have captured more price appreciation had our
duration been longer as rates fell. But we thought it was better to err on the
side of conservatism in setting the duration, since our analysis indicated that
our performance would be harmed more by rising rates than it would be helped by
falling rates. We continue to keep our duration conservative because we think
rates aren't likely to fall much lower from current levels. Indeed, the
benchmark 30-year Treasury yield at September 30 stood at 4.97%, an all-time
low.
During the period we had a smaller-than-usual position in mortgage-backed
securities because their spreads versus Treasuries had become uncommonly narrow.
But because mortgage spreads have widened over the past two months, we think the
return potential of mortgages has improved considerably and thus have increased
our weighting in them. To ensure that we are being compensated adequately for
assuming risks of all kinds, we continue to avoid securities yielding less than
the Fed Funds rate (the interest-rate charged by the Federal Reserve System to
banks needing overnight loans to meet reserve requirements). And we continue to
achieve our short-term maturity average in part by holding a combination of
longer-term and very short-term securities -- a combination that would enhance
the fund's performance if, for instance, the Fed Funds rate is reduced less than
the market now anticipates.
11
<PAGE>
FUND PROFILE
SEPTEMBER 30, 1998
Fund net assets $12.0 million
Number of holdings 32
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SECTOR WEIGHTINGS
[BAR GRAPH OMITTED - PLOT POINTS AS FOLLOWS:]
47.3% Mortgage-backed securities
27.7% U.S. government securities
18.2% Asset-backed securities
6.8% Agency securities
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COMPOSITE CHARACTERISTICS
[Bullet] Average effective duration 1.5 years
[Bullet] Average maturity 4.0 years
[Bullet] Average yield to maturity 5.01%
[Bullet] Average credit quality Government
PORTFOLIO MANAGER
JAMES I. MIDANEK, fixed-income chief investment officer, has served as
manager of the Short Duration Funds - Three Year Portfolio since inception. He
coordinates the work of Turner's fixed-income team, which is responsible for all
security selection, research, and trading for the portfolio. Jim joined Turner
in 1998, upon our acquisition of Solon Asset Management, which he co-founded and
served as fixed-income chief investment officer. Previously he was chief
investment officer, fixed income with Montgomery Asset Management. He holds a
bachelor's degree in accounting from Queens College and has 17 years of
investment experience.
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
TURNER SHORT DURATION GOVERNMENT - THREE YEAR PORTFOLIO, INSTITUTIONAL CLASS,
VERSUS THE LEHMAN 1-3 YEAR GOVERNMENT BOND INDEX
Annualized
One Year 3 Year Annualized Inception
Return Return to Date (1)
8.07% 7.06% 6.72%
[CHART OMITTED - PLOT POINTS TO FOLLOW]
TURNER SHORT DURATION LEHMAN
GOVERNMENT 3-YEAR PORTFOLIO, 1-3 YEAR
INSTITUTIONAL GOVERNMENT INDEX
3/1/94 10,000 10,000
9/30/94 10,089 10,049
9/30/95 10,976 10,871
9/30/96 11,637 11,488
9/30/97 12,463 12,279
9/30/98 13,469 13,253
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 Short Duration Government Funds--Three Year Portfolio began
operations on March 1, 1994.
12
<PAGE>
STATEMENT OF NET ASSETS TIP INSTITUTIONAL FUNDS
September 30, 1998
TURNER MICRO CAP Value
GROWTH FUND Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (96.7%)
BANKS (2.9%)
First Oak Brook 1,040 $ 20
Flagstar Bancorp 1,730 40
Flushing Financial 1,040 23
----
83
----
BUILDING AND CONSTRUCTION SUPPLIES (3.0%)
MDC Holdings 1,200 22
Meritage* 2,250 31
NVR* 980 32
----
85
----
COMMUNICATIONS EQUIPMENT (6.0%)
Alpine Group* 1,420 25
Concord Communications* 970 38
Harmon Industries 1,700 37
Medialink Worldwide* 1,080 18
Optek Technology* 1,800 32
RF Micro Devices* 1,100 20
----
170
----
COMPUTERS AND SERVICES (12.9%)
AVT* 850 19
Axent Technologies* 760 14
Brooktrout Technology* 1,740 24
Cybex Computer Products* 900 23
Inspire Insurance Solutions* 1,650 39
Leasing Solutions* 1,000 27
MAPICS* 1,260 28
Pinnacle Systems* 900 23
QuadraMed* 2,200 44
Segue Software* 2,400 40
Splash Technologies Holdings* 1,550 22
SPR* 1,125 26
SS&C Technologies* 1,400 17
Symix Systems* 1,050 19
----
365
----
Value
Shares (000)
- --------------------------------------------------------------------------------
DRUGS (8.5%)
Advanced Paradigm* 1,650 $ 50
Anika Therapeutics* 1,680 22
Coulter Pharmaceutical* 2,500 62
Kendle International* 1,850 61
Medco Research* 1,200 26
Natural Alternatives
International* 1,700 21
----
242
----
ENTERTAINMENT (1.0%)
Macrovision* 1,000 29
----
ENVIRONMENTAL SERVICES (2.7%)
Casella Waste Systems, Cl A* 800 27
Stericycle* 1,630 32
Waste Connections* 850 17
----
76
----
FINANCIAL SERVICES (5.8%)
Ace Cash Express* 1,870 22
American Capital Strategies 1,300 21
Financial Federal* 1,300 28
First Cash* 1,900 22
International Telecommunications
Data Systems* 1,260 36
Resource Asset Investment Trust 2,500 36
----
165
----
FOOD, BEVERAGE AND TOBACCO (3.1%)
Hansen Natural* 3,550 14
Horizon Organic Holding* 2,000 30
Worthington Foods 2,350 45
----
89
----
HOUSEHOLD FURNITURE AND FIXTURES (1.5%)
Pulaski Furniture 850 19
Stanley Furniture* 1,360 24
----
43
----
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STATEMENT OF NET ASSETS TIP INSTITUTIONAL FUNDS
September 30, 1998
TURNER MICRO CAP Value
GROWTH FUND (continued) Shares (000)
- --------------------------------------------------------------------------------
INSURANCE (1.7%)
Farm Family Holdings* 970 $ 30
Penn Treaty American* 735 18
----
48
----
MEDICAL PRODUCTS AND SERVICES (9.0%)
Hanger Orthopedic Group* 1,700 32
Healthworld* 2,750 43
Hooper Holmes 1,000 20
Osteotech* 1,730 46
Resmed* 500 26
Sterigenics International* 2,030 44
Superior Consultants* 430 19
Xomed Surgical Products* 600 25
----
255
----
MISCELLANEOUS BUSINESS SERVICES (3.5%)
Meta Group* 450 15
NCO Group* 1,280 36
RCM Technologies* 1,330 20
TSI International Software Ltd* 840 29
----
100
----
MISCELLANEOUS MANUFACTURING (13.3%)
Aeroflex* 2,960 29
AFC Cable Systems* 750 18
Brass Eagle* 1,350 16
Cutter & Buck* 740 17
Dayton Superior* 950 17
Elcor 1,170 25
Engineered Support System 1,695 24
Genlyte Group* 860 18
LSI Industries 1,230 22
Monaco Coach* 940 24
National R.V. Holdings* 1,770 37
Quixote 2,900 36
Standard Motor Products 1,600 39
Tropical Sportswear* 1,800 33
Uniroyal Technology* 2,500 23
----
378
----
Value
Shares (000)
- --------------------------------------------------------------------------------
PETROLEUM AND FUEL PRODUCTS (2.0%)
Evergreen Resources* 1,900 $ 42
Kaneb Services* 2,930 15
------
57
------
REAL ESTATE (1.5%)
Bluegreen Corporation* 5,550 42
------
RETAIL (9.2%)
Catherine's Stores* 3,300 26
Chico's Fas* 3,430 55
Elder-Beerman Stores* 2,000 35
Garden Fresh Restaurant* 1,600 24
Genovese Drug Stores 1,500 29
Maxim Group* 1,900 36
Rush Enterprises* 3,800 39
Taco Cabana, Cl A* 3,000 18
------
262
------
SEMI-CONDUCTORS/INSTRUMENTS (1.2%)
Alpha Industries* 900 10
Transwitch* 1,650 25
------
35
------
TELEPHONES AND TELECOMMUNICATION (1.8%)
Com21* 1,100 20
Dycom Industries* 575 18
Hector Communication* 1,390 12
------
50
------
WATER UTILITIES (0.9%)
E'town 600 25
------
WHOLESALE (5.2%)
Advanced Marketing Systems 1,570 27
Craftmade International 1,370 21
D&K Healthcare Resources* 2,000 36
Miami Computer Supply* 1,900 30
U.S. Home and Garden* 7,500 35
------
149
------
TOTAL COMMON STOCKS
(Cost $2,805) 2,748
------
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STATEMENT OF NET ASSETS TIP INSTITUTIONAL FUNDS
September 30, 1998
TURNER MICRO CAP Face Amount Value
GROWTH FUND (continued) (000) (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (4.0%)
Morgan Stanley,
5.05%, dated 09/30/98, matures
10/01/98, repurchase price
$114,787, (collateralized
by U.S. Treasury Notes,
par value $108,749, 7.75%,
matures 02/15/01: market
value $117,611) $ 115 $ 115
------
TOTAL REPURCHASE AGREEMENT
(Cost $115) 115
------
TOTAL INVESTMENTS (100.7%)
(Cost $2,920) 2,863
------
OTHER ASSETS AND LIABILITIES, NET (-0.7%) (20)
------
NET ASSETS:
Portfolio Shares (unlimited
authorization--no par value)
based on 287,838 outstanding
shares of beneficial interest 2,947
Accumulated net realized loss
on investments (47)
Net unrealized depreciation
on investments (57)
------
TOTAL NET ASSETS (100.0%) $2,843
======
Net Asset Value, Offering and
Redemption Price Per Share $9.88
======
* NON-INCOME PRODUCING SECURITY
CL--CLASS
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STATEMENT OF NET ASSETS TIP INSTITUTIONAL FUNDS
September 30, 1998
TURNER SHORT DURATION Face
GOVERNMENT FUNDS-- Amount Value
ONE YEAR PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATION (2.0%)
U.S. Treasury Note
5.500%, 05/31/00 $ 20 $ 20
----
TOTAL U.S. TREASURY OBLIGATION
(Cost $20) 20
----
ASSET-BACKED SECURITIES (24.4%)
Chase Manhattan Auto Owner
Trust, Ser 1997-A, Cl A3
6.250%, 11/15/00 55 55
Contimortgage Home Equity Loan
Trust, Ser 1996-2, Cl A5
7.050%, 04/15/11 50 50
Fleet Credit Card Master
Trust, Ser 1993-4, Cl A (A)
5.813%, 12/31/00 31 31
NationsBank Credit Card Master
Trust, Ser 1996-1, Cl A (A)
5.650%, 02/15/06 55 55
Olympic Automobile Receivables
Trust, Ser 1996-A, Cl A5
6.000%, 02/15/02 50 51
----
TOTAL ASSET-BACKED SECURITIES
(Cost $241) 242
----
COLLATERALIZED MORTGAGE OBLIGATIONS (11.4%)
FHLMC CMO/REMIC,
Ser 1930, Cl VA
7.500%, 11/15/01 46 47
FHLMC CMO/REMIC,
Ser 1485, Cl E
6.000%, 12/15/04 7 7
FHLMC CMO/REMIC,
Ser 1572, Cl A
6.000%, 09/15/14 6 6
FHLMC CMO/REMIC,
Ser 1501, Cl F
6.100%, 11/15/16 19 19
FHLMC CMO/REMIC,
Ser 1205, Cl G
7.000%, 03/15/07 25 26
Face
Amount Value
(000) (000)
- --------------------------------------------------------------------------------
FNMA CMO/REMIC,
Ser 1993-167, Cl CA
5.500%, 04/25/14 $ 1 $ 1
FNMA CMO/REMIC ARM,
Ser 1991-124, Cl F (A)
6.190%, 02/25/21 7 7
-----
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $112) 113
-----
U.S. GOVERNMENT AGENCY
OBLIGATIONS (35.4%)
FFCB Discount Note
5.400%, 10/01/98 25 25
5.370%, 10/22/98 6 6
FHLMC Discount Note
5.410%, 10/07/98 200 200
5.410%, 10/14/98 70 70
TVA
6.000%, 10/08/99 50 50
-----
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(Cost $351) 351
-----
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (30.0%)
GNMA
7.000%, 03/20/16 83 85
7.000%, 12/20/17 84 86
GNMA ARM (A)
6.875%, 02/20/19 48 49
6.875%, 04/20/19 75 77
-----
TOTAL U.S. GOVERNMENT
MORTGAGE-BACKED BONDS
(Cost $297) 297
-----
TOTAL INVESTMENTS (103.2%)
(Cost $1,021) 1,023
-----
OTHER ASSETS AND LIABILITIES, NET (-3.2%) (32)
-----
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
STATEMENT OF NET ASSETS TIP INSTITUTIONAL FUNDS
September 30, 1998
TURNER SHORT DURATION
GOVERNMENT FUNDS-- Value
ONE YEAR PORTFOLIO (continued) (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited
authorization--no par value)
based on 98,164 outstanding
shares of beneficial interest $ 984
Undistributed net investment income 2
Accumulated net realized gain
on investments 3
Net unrealized appreciation
on investments 2
------
TOTAL NET ASSETS (100.0%) $ 991
======
Net Asset Value, Offering and
Redemption Price Per Share $10.09
======
(A) FLOATING RATE SECURITY--THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON SEPTEMBER 30, 1998.
ARM--ADJUSTABLE RATE MORTGAGE
CL--CLASS
CMO--COLLATERALIZED MORTGAGE OBLIGATION
FFCB--FEDERAL FARM CREDIT BANK
FHLMC--FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA--FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA--GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
SER--SERIES
TVA--TENNESSEE VALLEY AUTHORITY
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
STATEMENT OF NET ASSETS TIP INSTITUTIONAL FUNDS
September 30, 1998
TURNER SHORT DURATION Face
GOVERNMENT FUNDS-- Amount Value
THREE YEAR PORTFOLIO (000) (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (28.0%)
U.S. Treasury Notes
5.500%, 05/31/00 $ 956 $ 972
6.250%, 06/30/02 2,247 2,389
-----
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $3,248) 3,361
-----
COLLATERALIZED MORTGAGE OBLIGATIONS (41.5%)
Citicorp Mortgage Securities,
Ser 1994-10, Cl A4
6.250%, 06/25/24 438 439
Commercial Mortgage Acceptance,
Ser 1998, Cl C1
6.230%, 12/15/07 421 432
Countrywide Funding,
Ser 1994-10, Cl A1
6.000%, 05/25/09 24 24
FHLMC CMO/REMIC,
Ser 1485, Cl E
6.000%, 12/15/04 216 216
FHLMC CMO/REMIC,
Ser 1501, Cl F
6.100%, 11/15/16 602 606
FHLMC CMO/REMIC,
Ser 1572, Cl A
6.000%, 09/15/14 33 33
FHLMC CMO/REMIC,
Ser 1614, Cl K
10.000%, 06/15/20 159 169
FHLMC CMO/REMIC,
Ser 1650, Cl D
5.400%, 04/15/24 49 49
FHLMC CMO/REMIC,
Ser 1930 Cl VA
7.500%, 11/15/01 842 865
FHLMC Discount Notes,
Pool #G10288
6.000%, 09/01/09 480 489
FHLMC, Pool #E00510
7.000%, 10/01/12 548 563
FNMA ARM (A), Pool #105435
7.535%, 12/01/17 6 6
FNMA CMO/REMIC
Ser 1993-185
6.500%, 09/25/22 570 598
Face
Amount Value
(000) (000)
- --------------------------------------------------------------------------------
FNMA CMO/REMIC,
Ser 1991-124F
6.190%, 02/25/21 $ 74 $ 74
FNMA CMO/REMIC,
Ser 1998-17, Cl B
9.400%, 10/25/17 2 2
FNMA, Pool #6222
9.000%, 04/01/16 366 400
GE Capital Mortgage Services,
Ser 1994-17, Cl A3
7.000%, 05/25/24 30 30
-----
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $4,898) 4,995
-----
ASSET-BACKED SECURITIES (18.3%)
AT&T Universal Card Master Trust,
Ser 1995-3, Cl A (A)
5.878%, 10/17/04 750 753
Chase Manhattan Auto Owner
Trust Ser 1997-A, Cl A3
6.250%, 11/15/00 300 302
Contimortgage Home Equity Loan
Trust, Ser 1996-2, Cl A5
7.050%, 04/15/11 600 604
Fleet Credit Card Master Trust,
Ser 1993-4, Cl A (A)
5.810%, 12/31/00 335 335
Olympic Automobile Receivables
Trust, Ser 1996-A, Cl A5
6.000%, 02/15/02 200 202
-----
TOTAL ASSET-BACKED SECURITIES
(Cost $2,192) 2,196
-----
U.S. GOVERNMENT AGENCY OBLIGATIONS (6.9%)
FHLB Discount Note
5.400%, 10/01/98 100 100
FNMA
5.650%, 02/12/01 175 175
FNMA Medium Term Notes
6.710%, 03/13/02 360 369
6.240%, 07/29/02 175 184
-----
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $812) 828
-----
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
STATEMENT OF NET ASSETS TIP INSTITUTIONAL FUNDS
September 30, 1998
TURNER SHORT DURATION Face
GOVERNMENT FUNDS-- Amount Value
THREE YEAR PORTFOLIO (continued) (000) (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (6.2%)
GNMA ARM (A), Pool #8108
7.000%, 03/20/16 $ 131 $ 134
GNMA ARM (A), Pool #8254
7.000%, 08/20/17 111 114
GNMA ARM (A), Pool #8426
6.875%, 11/20/18 235 240
GNMA TBA (B)
6.500%, 10/01/28 250 255
------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $737) 743
------
TOTAL INVESTMENTS (100.9%)
(Cost $11,887) 12,123
------
OTHER ASSETS AND LIABILITIES, NET (-0.9%) (108)
------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 1,171,801 outstanding
shares of beneficial interest $11,693
Undistributed net investment income 10
Accumulated net realized gain
on investments 76
Net unrealized appreciation
on investments 236
-------
TOTAL NET ASSETS (100.0%) $12,015
=======
Net Asset Value, Offering and
Redemption Price Per Share $10.25
=======
(A) FLOATING RATE SECURITY--THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON SEPTEMBER 30, 1998.
(B) WHEN ISSUED SECURITY
ARM--ADJUSTABLE RATE MORTGAGE
CL--CLASS
CMO--COLLATERALIZED MORTGAGE OBLIGATION
FHLB--FEDERAL HOME LOAN BANK
FHLMC--FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA--FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA--GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
REMIC--REAL ESTATE MORTGAGE INVESTMENT CONDUIT
SER--SERIES
TBA--TO BE ANNOUNCED
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (000) TIP INSTITUTIONAL FUNDS
TURNER TURNER SHORT DURATION
MICRO CAP GOVERNMENT FUNDS:
GROWTH ONE YEAR THREE YEAR
FUND(1) PORTFOLIO PORTFOLIO
----------- -------------------- --------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
PERIOD PERIOD YEAR PERIOD YEAR
3/1/98 THRU 3/1/98 THRU ENDED 3/1/98 THRU ENDED
9/30/98 9/30/98 2/28/98 9/30/98 2/28/98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividend....................................... $ 5 $ -- $ -- $ -- $ --
Interest ...................................... 5 37 66 488 1,007
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Income...................... 10 37 66 488 1,007
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ...................... 16 2 3 20 42
Investment Advisory Fee Waiver ................ (16) (2) (3) (20) (42)
Administrator Fees ............................ 43 10 25 20 25
Administrator Fees Waiver....................... -- (9) (24) (14) (13)
Custodian Fees ................................ 3 2 29 5 39
Transfer Agent Fees ........................... 12 22 8 25 8
Professional Fees ............................. 17 7 31 17 35
Trustee Fees .................................. 3 11 4 11 4
Registration Fees ............................. 29 20 14 29 18
Printing Fees ................................. 10 2 1 5 1
Shareholder Service Fees........................ -- -- 2 -- 35
Insurance and Other Fees........................ 1 2 4 2 5
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses .............................. 118 67 94 100 157
Less: Reimbursements from Advisor......... (97) (67) (94) (81) (117)
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Expenses............................ 21 -- -- 19 40
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ............ (11) 37 66 469 967
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) from Securities Sold (47) 1 1 74 54
Net Unrealized Appreciation (Depreciation)
of Investment Securities .................... (57) -- 1 119 98
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments ............................ (104) 1 2 193 152
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations ............................ $(115) $ 38 $ 68 $662 $1,119
===========================================================================================================================
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) Commenced operations on March 1, 1998.
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (000) TIP INSTITUTIONAL FUNDS
TURNER
MICRO CAP TURNER SHORT DURATION
GROWTH GOVERNMENT FUNDS:
FUND(1) ONE YEAR PORTFOLIO THREE YEAR PORTFOLIO
------------- -------------------------------- -------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
PERIOD PERIOD YEAR YEAR PERIOD YEAR YEAR
3/1/98 THRU 3/1/98 THRU ENDED ENDED 3/1/98 THRU ENDED ENDED
9/30/98 9/30/98 2/28/98 2/28/97 9/30/98 2/28/98 2/28/97
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) ....... $ (11) $ 37 $ 66 $ 39 $ 469 $ 967 $ 746
Net Realized Gain (Loss) from
Securities Sold ................... (47) 1 1 1 74 54 (37)
Net Unrealized Appreciation
(Depreciation) of Investments .... (57) -- 1 1 119 98 11
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Net Assets Resulting
from Operations ................ (115) 38 68 41 662 1,119 720
- -----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income .............. -- (35) (66) (39) (461) (966) (750)
Realized Capital Gains ............. -- (1) -- -- (10) -- (21)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions .............. -- (36) (66) (39) (471) (966) (771)
- -----------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ........ 3,087 5 827 462 666 3,854 7,303
Proceeds from Shares Issued in
Lieu of Cash Distributions........ -- 36 66 39 476 967 773
Cost of Shares Redeemed.............. (129) (247) (564) (37) (4,862) (7,239) (1,242)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
from Capital Share Transactions... 2,958 (206) 329 464 (3,720) (2,418) 6,834
- -----------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease)
in Net Assets .................. 2,843 (204) 331 466 (3,529) (2,265) 6,783
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Year................. -- 1,195 864 398 15,544 17,809 11,026
- -----------------------------------------------------------------------------------------------------------------------------
End of Year....................... $2,843 $ 991(3) $1,195 $ 864 $12,015(4) $15,544(2) $17,809
=============================================================================================================================
Shares Issued and Redeemed:
Issued ............................. 300 -- 82 46 66 383 730
Issued in Lieu of Cash Distributions -- 4 7 4 47 96 77
Redeemed............................. (12) (25) (56) (4) (481) (722) (124)
- -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Capital Shares.................... 288 (21) 33 46 (368) (243) 683
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) Commenced operations on March 1, 1998.
(2) Includes undistributed net investment income of $2.
(3) Includes undistributed net investment income of $2.
(4) Includes undistributed net investment income of $10.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
</FN>
</TABLE>
FINANCIAL HIGHLIGHTS TIP INSTITUTIONAL FUNDS
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Asset Unrealized Distributions Distributions Net Asset Net Assets
Value, Net Gains from Net from Value End
Beginning Investment (Losses) on Investment Capital End Total of
of Period Income(Loss) Investments Income Income Gains of Period Return Period(000)
------------------------------ -----------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TURNER MICRO CAP GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998(1) $10.00 (0.04) (0.08) -- -- $ 9.88 (1.20)%+ $ 2,843
- ------------------------------------------------------------------------------------------------------------------------------------
TURNER SHORT DURATION GOVERNMENT FUNDS--ONE YEAR PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
For the seven month period ended September 30:
1998(2) $10.08 0.35 -- (0.33) (0.01) $ 10.09 3.50%+ $ 991
For the years ended February 28:
1998(3) $10.06 0.60 0.02 (0.60) -- $ 10.08 6.34% $ 1,195
1997 $10.03 0.60 0.03 (0.60) -- $ 10.06 6.32% $ 864
1996 $ 9.99 0.64 0.05 (0.65) -- $ 10.03 7.09% $ 398
1995(4) $10.00 0.53 (0.02) (0.52) -- $ 9.99 5.21% $ 145
- ------------------------------------------------------------------------------------------------------------------------------------
TURNER SHORT DURATION GOVERNMENT FUNDS--THREE YEAR PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
For the seven month period ended September 30:
1998(2) $10.10 0.35 0.15 (0.34) (0.01) $ 10.25 5.09%+ $12,015
For the years ended February 28:
1998(3) $10.00 0.59 0.10 (0.59) -- $ 10.10 7.07% $15,544
1997 $10.04 0.58 (0.01) (0.59) (0.02) $ 10.00 5.45% $17,809
1996 $ 9.80 0.60 0.23 (0.59) -- $ 10.04 8.73% $11,027
1995(4) $10.00 0.61 (0.22) (0.59) -- $ 9.80 4.08% $ 7,065
Ratio of Ratio of Net
Expenses Investment(Loss)
to Average Average Average
Ratio of Ratio of Net Net Assets Net Assets Debt Debt
Net Expenses Investment (Excluding (Excluding Per Share Outstanding
to Average Income (Loss) Waivers and Waivers and Interest During the During the
Net Assets to Average Net Assets Reimbursements) Reimbursements) Expense Period(5) Period (5)(6)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TURNER MICRO CAP GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998(1) 1.25%* (0.64)%* 8.18%* (7.57)%* -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TURNER SHORT DURATION GOVERNMENT FUNDS--ONE YEAR PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
For the seven month period ended September 30:
1998(2) 0.00%* 5.88%* 10.83%* (4.95)%* -- -- --
For the years ended February 28:
1998(3) 0.00% 5.97% 8.83% (2.86)% -- -- --
1997 0.00% 5.91% 10.25% (4.34)% -- -- --
1996 0.00% 6.46% 16.47% (10.01)% -- -- --
1995(4) 0.00% 5.74% 27.89% (22.15)% -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TURNER SHORT DURATION GOVERNMENT FUNDS--THREE YEAR PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
For the seven month period ended September 30:
1998(2) 0.24%* 5.84%* 1.49%* 4.59%* -- -- --
For the years ended February 28:
1998(3) 0.24% 5.85% 1.21% 4.88% -- -- --
1997 0.24% 5.80% 1.21% 4.83% 0.02% $0.04 $ 56,238
1996 0.24% 6.18% 1.45% 4.97% 0.12% $0.28 $256,115
1995(4) 0.15% 6.21% 1.18% 5.18% 0.04% $0.08 $ 75,604
Average
Shares
Outstanding Portfolio
During the Turnover
Period Rate
- --------------------------------------------------------------
- --------------------------------------------------------------
TURNER MICRO CAP GROWTH FUND
- --------------------------------------------------------------
<S> <C> <C>
1998(1) -- 128.53%
- --------------------------------------------------------------
TURNER SHORT DURATION GOVERNMENT FUNDS--ONE YEAR PORTFOLIO
- --------------------------------------------------------------
For the seven month period ended September 30:
1998(2) -- 96.56%
For the years ended February 28:
1998(3) -- 68.80%
1997 -- 81.82%
1996 -- --
1995(4) -- --
- --------------------------------------------------------------
TURNER SHORT DURATION GOVERNMENT FUNDS--THREE YEAR PORTFOLIO
- --------------------------------------------------------------
For the seven month period ended September 30:
1998(2) -- 121.63%
For the years ended February 28:
1998(3) -- 197.03%
1997 1,320,830 279.00%
1996 901,238 251.00%
1995(4) 895,472 405.00%
<FN>
* Annualized
+ Returns are for the period indicated and have not been annualized.
(1) Commenced operations on March 1, 1998.
(2) On November 10, 1997 the Board of Trustees of TIP Funds approved a change in
the Turner Short Duration Government Funds One Year and Three Year
Portfolios' year end from February 28 to September30, effective March 1,
1998.
(3) On January 22, 1998, shareholders of each Fund approved a change in the
advisor from Solon Asset Management, L.P. to Turner Investment Partners, Inc.
(4) Commenced operations on March 1, 1994.
(5) Average based upon amounts outstanding at each month end.
(6) There was no debt outstanding at the end of any period presented.
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.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS TIP INSTITUTIONAL FUNDS
September 30, 1998
1. ORGANIZATION:
The TIP Institutional Funds (the "Trust") a Delaware Business Trust, registered
under the Investment Company Act of 1940, as amended, is a diversified, open-end
management investment company with four funds. The financial statements included
herein are those of the Turner Micro Cap Growth Fund, Turner Short Duration
Government Funds--One Year Portfolio (the "One Year Portfolio") and Turner Short
Duration Government Funds--Three Year Portfolio (the "Three Year Portfolio")
(each a "Fund" and collectively the "Funds"). As of September 30, 1998, the One
Year Portfolio and the Three Year Portfolio had advisory shares that had not
commenced operations. Micro Cap Growth Fund commenced operations March 1, 1998.
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 November 10, 1997 the Board of Trustees of TIP Funds approved a change in the
Turner Short Duration Government Funds One Year and Three Year Portfolios' year
end from February 28 to September 30, effective March 1, 1998.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies followed by
the Funds.
SECURITY VALUATION -- It is the policy of the Funds to value portfolio
securities at market value. Market value is determined on the basis of last
reported sales price, or if no sales are reported, as is the case with most
securities traded over the counter, the mean between representative bid and
asked quotations. Short-term securities with maturities of 60 days or less
may be carried at amortized cost, which approximates market value.Fixed
income securities for which market quotations are not readily available may
be valued, pursuant to guidelines established by the Board of Trustees,
with reference to fixed income securities whose prices are more readily
obtainable and whose durations are comparable to the securities being
valued. Subject to the foregoing, other securities for which market
quotations are not readily available are valued at fair value as determined
in good faith by the Board of Trustees.
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 as of trade date. Realized gains and losses are determined
on the specific identified cost basis. Interest income includes
amortization of discounts and premiums. Securities purchased on a when-
issued or delayed delivery basis may be settled a month or more after the
trade date. Such securities are included in the portfolio and are subject
to market fluctuations during this period. On the date of the commitment to
purchase or sell, the Funds designate specific assets with a current value
at least equal to the amount of the commitment to be used for settling the
commitment.
NET ASSET VALUE PER SHARE -- The net asset value per share of each Fund is
calculated on each business day, by dividing the total value of the Fund's
assets, less liabilities, by the number of shares outstanding.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repur-
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued) TIP INSTITUTIONAL FUNDS
September 30, 1998
chase 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 allocated
between the Funds based on average net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily and paid monthly to Shareholders for the One Year and
Three Year Portfolios. Substantially all of the net investment income for
the Micro Cap Growth Fund is distributed in the form of dividends at least
annually. 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 principles. These bookax differences are either
temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to paid-in-capital or accumulated
net realized gain, as appropriate, in the period that the differences
arise.
Accordingly, the Micro Cap Growth Fund reclassified ($11,000) from
undistributed net investment income to paid in capital relating to current
year net operating loss.
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 period. Actual results could differ from those
estimates.
RECLASSIFICATIONS-- Certain prior year amounts have been reclassified to
conform with the current year presentation.
3. TRANSACTIONS WITH AFFILIATES:
Certain officers of the Trust are also officers
of SEI Investments Mutual Funds Services (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 Institutional Funds and SEI Investments Mutual Funds Services (the
"Administrator") are parties to an agreement under which the Administrator
provides management and administrative services for an annual fee which is
calculated daily and paid monthly. For the One Year and Three Year
portfolios the fee for the initial year is 0.08% of the average daily net
assets of the Funds, plus an additional $15,000. Thereafter, for the One
Year and Three Year Portfolios, and from inception for the Micro Cap Growth
Fund, the annual fee will be: 0.10% of the average daily net assets of the
Funds up to $250 million, 0.08% on the next $250 million, and 0.07% of such
assets in excess of $500 million. There is a minimum annual fee of $75,000,
for the first class of shares and $15,000 for each additional class of
shares, per fund payable to the Administrator for services rendered to the
Funds under the Administration Agreement. A portion of the annual minimum
fee may be waived by the Administrator.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Concluded)
TIP INSTITUTIONAL FUNDS September 30, 1998
Prior to January 1, 1998, administrative services were provided to the
Trust by Solon Asset Management, L.P. for an annual fee of .07% of the average
daily net assets of the Funds.
On January 1, 1998 DST Systems, Inc. (the "Transfer Agent") became the transfer
agent and dividend disbursing agent for the Funds under a transfer agency
agreement with the Trust.
Prior to January 1, 1998, Solon Asset Management, L.P. was the transfer agent
and dividend disbursing agent for the Funds.
The Trust and SEI Investments Distribution Co. (the "Distributor") are parties
to a Distribution Agreement dated January 1, 1998. The Distributor receives no
fees for its distribution services under this agreement.
5. INVESTMENT ADVISORY AGREEMENTS:
The Trust and Turner Investment Partners, Inc. (the "Advisor") are parties to an
Investment Advisory Agreement dated January 1, 1998, under which the Advisor
receives an annual fee equal to 0.25% of the average daily net assets of the One
Year and Three Year Portfolios, and 1.00% of the average daily net assets of the
Micro Cap Fund, respectively. The Advisor has voluntarily agreed to waive all or
a portion of its fees and if necessary, to reimburse expenses of the Funds in
order to limit total operating expenses to not more than 0.36% of the average
daily net assets of the One Year and Three Year Portfolios, and 1.25% of the
average daily net assets of the Micro Cap Fund, on an annualized basis. Fee
waivers and expense reimbursements are voluntary and may be terminated at any
time.
On January 1, 1998 Turner Investment Partners, Inc. acquired substantially all
of the assets and liabilities of Solon Asset Management L.P. (the Trust's prior
investment advisor).
On January 22, 1998 shareholders of each Fund approved a change in the advisor
from Solon Asset Management, L.P. to Turner Investment Partners, Inc.
6. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales including
government securities, other than short-term investments, for the period ended
September 30, 1998, are as follows (000):
TURNER TURNER
TURNER SHORT DURATIONSHORT DURATION
MICRO CAP GOVERNMENT GOVERNMENT
GROWTH PORTFOLIO PORTFOLIO
FUND ONE YEAR THREE YEAR
- --------------------------------------------------------------------------------
Purchases
Government $ -- $ 96 $10,360
Other 6,461 211 1,152
Sales
Government $ -- $ 486 $13,754
Other 3,608 58 929
At September 30, 1998, 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, 1998, are as follows (000):
TURNER TURNER
TURNER SHORT DURATION SHORT DURATION
MICRO CAP OVERNMENT GOVERNMENT
GROWTH PORTFOLIO PORTFOLIO
FUND ONE YEAR THREE YEAR
- --------------------------------------------------------------------------------
Aggregate gross
unrealized
appreciation $ 215 $ 3 $ 237
Aggregate gross
unrealized
depreciation (272) (1) (1)
------ ----- -----
Net unrealized
appreciation/
(depreciation) $ (57) $ 2 $ 236
======= ===== =====
25
<PAGE>
INDEPENDENT AUDITORS TIP INSTITUTIONAL FUNDS
September 30, 1998
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
TIP INSTITUTIONAL FUNDS
We have audited the accompanying statements of net assets of the Turner
Short Duration Government Funds -- One Year Portfolio, the Turner Short Duration
Government Funds -- Three Year Portfolio, and the Turner Micro Cap Growth Fund
(three of the funds constituting the TIP Institutional Funds) as of September
30, 1998, and the related statements of operations, the statements of changes in
net assets, and the financial highlights for each of the periods presented
therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1998, 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 Short Duration Government Funds -- One Year Portfolio, the Turner Short
Duration Government Funds -- Three Year Portfolio, and the Turner Micro Cap
Growth Fund of the TIP Institutional Funds at September 30, 1998, the results of
their operations, the changes in their net assets, and financial highlights for
each of the periods presented therein, in conformity with generally accepted
accounting principles.
/s/signature omitted Ernst & Young LLP
Philadelphia, Pennsylvania
November 2, 1998
26
<PAGE>
NOTICE TO SHAREHOLDERS
OF
TIP INSTITUTIONAL FUNDS
(UNAUDITED)
For the shareholders that do not have a September 30, 1998 taxable year end,
this notice is for informational purposes only. For shareholders with a
September 30, 1998 taxable year end, please consult your tax advisor as to the
pertinence of this notice. For the fiscal year ended September 30, 1998, each
portfolio is designating the following items with regard to distributions paid
during the year.
<TABLE>
LONG TERM MID TERM
(20% RATE) (28% RATE) ORDINARY
CAPITAL GAIN CAPITAL GAIN INCOME
PORTFOLIO DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
---------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Turner Short Duration Government Funds
One Year Portfolio 3.30% 0.00% 96.70%
Turner Short Duration Government Funds
Three Year Portfolio 2.41% 0.00% 97.59%
Turner Micro Cap
Growth Fund 0.00% 0.00% 0.00%
TAX EXEMPT TOTAL QUALIFYING
PORTFOLIO INTEREST DISTRIBUTIONS DIVIDENDS (1)
---------- ---------------- ---------------- ----------------
Turner Short Duration Government Funds
One Year Portfolio 0.00% 100.00% 0.00%
Turner Short Duration Government Funds
Three Year Portfolio 0.00% 100.00% 0.00%
Turner Micro Cap
Growth Fund 0.00% 0.00% 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
</FN>
</TABLE>
27
<PAGE>
TIP INSTITUTIONAL FUNDS
P.O. Box 419805
Kansas City, MO 64141-6805
INVESTMENT ADVISER
Turner Investment Partners, Inc.
DISTRIBUTOR
SEI Investments Distribution Co.
ADMINISTRATOR
SEI Investments Mutual Funds Services
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
INDEPENDENT AUDITORS
Ernst & Young LLP
[LOGO OMITTED]
TURNER
INVESTMENT PARTNERS,
INC.
To open an account, receive account information, make inquiries, or request
literature:1-888-TIP-7654
THIS REPORT WAS PREPARED FOR SHAREHOLDERS IN THE
TIP INSTITUTIONAL FUNDS. IT MAY BE DISTRIBUTED
TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A
TIP INSTITUTIONAL FUNDS PROSPECTUS, WHICH
CONTAINS DETAILED INFORMATION.
TPI-F-005-02
