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Advisors Inner Circle Fund – ‘N-30D’ for 9/30/96

As of:  Tuesday, 11/26/96   ·   For:  9/30/96   ·   Accession #:  935069-96-145   ·   File #:  811-06400

Previous ‘N-30D’:  ‘N-30D’ on 6/27/96 for 5/30/96   ·   Next:  ‘N-30D’ on 12/30/96 for 10/31/96   ·   Latest:  ‘N-30D’ on 2/28/03 for 12/31/02

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/26/96  Advisors Inner Circle Fund        N-30D       9/30/96    1:58K                                    Bowne - BGM/FA

Annual or Semi-Annual Report Mailed to Shareholders   —   Rule 30d-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Turner Funds Annual Report                            23    110K 


Document Table of Contents

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

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Filed on:11/26/96
11/1/969
10/31/961924F-2NT,  24F-2NT/A,  N-30D,  NSAR-B
For Period End:9/30/96123
4/30/962021NSAR-A
4/19/961922
12/5/959
10/31/95924F-2NT,  N-30D,  NSAR-B
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