SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant ss.240.14a-11(c) or ss.240.14a-12
Turner Funds
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the Appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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* Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_____________________________________________
2) Form, Schedule or Registration Statement No.: ______________________
3) Filing Party:_______________________________________________________
4) Date Filed: ________________________________________________________
TURNER FUNDS
TURNER HIGH YIELD FUND
Dear Shareholder:
A Special Meeting of Shareholders of the Turner High Yield Fund
(formerly, the Penn Capital Strategic High Yield Bond Fund) (the "Fund") of
Turner Funds (the "Trust") has been scheduled for July 31, 2002. If you are a
shareholder of record as of the close of business on June 17, 2002, you are
entitled to vote at the meeting and any adjournment of the meeting.
While you are, of course, welcome to join us at the meeting, most
shareholders cast their votes by filling out and signing the enclosed proxy
card. Whether or not you plan to attend the meeting, we need your vote. Please
mark, sign, and date the enclosed proxy card and return it promptly in the
enclosed postage-paid envelope so that the maximum number of shares may be
voted. You may also vote over the internet or by telephone by following the
enclosed instructions to utilize those methods of voting.
The attached proxy statement is designed to give you information
relating to the proposal on which you are asked to vote. The proposal described
in the proxy statement relates to approving the selection of Turner Investment
Partners, Inc. ("Turner") as investment adviser for the Fund and approval of an
investment advisory agreement between the Trust, on the Fund's behalf, and
Turner. We encourage you to support the Trustees' recommendation.
Your vote is important to us. Please do not hesitate to call
1-800-224-6312 if you have any questions about the proposal under consideration.
Thank you for taking the time to consider this important proposal and for your
investment in the Fund.
Sincerely,
/s/ Stephen J. Kneeley
Stephen J. Kneeley
President
Turner Funds
June 26, 2002
IMPORTANT NOTICE
We recommend that you read the entire proxy statement. For your
convenience, we have provided a brief overview of the proposals.
QUESTIONS AND ANSWERS
Q. WHY AM I RECEIVING THIS PROXY STATEMENT?
A. The Board of Trustees is seeking the approval of Turner Investment
Partners, Inc. ("Turner") as the new investment adviser for the Fund and the
approval of a new investment advisory agreement between the Trust, on the Fund's
behalf, and Turner.
Q. WHY AM I BEING ASKED TO VOTE ON THE APPROVAL OF TURNER AS INVESTMENT ADVISER
UNDER A NEW INVESTMENT ADVISORY AGREEMENT?
A. The Investment Company Act of
1940, as amended (the "1940 Act"), which regulates investment companies such as
the Fund, generally requires shareholder approval of new investment advisory
agreements. On April 30, 2002, the investment advisory agreement with the Fund's
former investment adviser expired. Under 1940 Act rules, the Board of Trustees
appointed Turner to serve as temporary adviser pursuant to an interim advisory
agreement. At the last regular meeting, the Board of Trustees unanimously agreed
to appoint Turner to serve as the Fund's adviser pursuant to a new advisory
agreement and to submit this appointment to shareholders for approval.
Q. HOW WILL THIS AFFECT MY ACCOUNT?
A. As the Fund's new investment adviser, Turner will manage the Fund's assets in
accordance with the Fund's investment objective and fundamental investment
policies, as disclosed in its prospectus as filed with the Securities and
Exchange Commission, and as amended from time to time. Turner will employ
different investment strategies in managing the Fund's assets than those used by
the Fund's former investment adviser. The terms of the proposed investment
advisory agreement with Turner are substantially similar to the terms of the
Fund's investment advisory agreement with its former investment adviser, except
for the dates of execution and name of the investment adviser.
Q. WILL MY VOTE MAKE A DIFFERENCE?
A. Yes. Your vote is needed to ensure that the proposal can be acted upon.
We encourage all shareholders to participate in the governance of their Fund.
Additionally, your immediate response on the enclosed proxy card will help save
the costs of any further solicitations.
Q. HOW DO THE TRUSTEES SUGGEST THAT I VOTE?
A. After careful consideration, the Trustees of your Fund, including the
independent Trustees who comprise a majority of the Fund's Board of Trustees,
unanimously recommend that you vote "FOR" the proposal.
Q. WHOM DO I CALL IF I HAVE QUESTIONS?
A. We will be happy to answer your questions about this proxy solicitation.
Please call us at 1-800-224-6312 between 8:30 a.m. and 8:00 p.m., Eastern Time,
Monday through Friday.
Q. HOW DO I VOTE?
A. You may use the enclosed postage-paid envelope to mail your proxy card.
You may also vote over the internet or by telephone. Please follow the
instructions on the enclosed proxy card to utilize these methods of voting.
TURNER FUNDS
TURNER HIGH YIELD FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JULY 31, 2002
Notice is hereby given that a Special Meeting of Shareholders (the "Meeting") of
the Turner High Yield Fund (formerly, the Penn Capital Strategic High Yield Bond
Fund) (the "Fund") of Turner Funds (the "Trust") will be held at the offices of
Turner Investments Partners, Inc. ("Turner") at 1235 Westlakes Drive, Suite 350,
Berwyn, Pennsylvania 19312 on Wednesday, July 31, 2002, at 2:00 p.m. Eastern
Time.
At the Meeting, shareholders will be asked to consider and act on the following
proposal:
1. TO APPROVE TURNER AS THE FUND'S INVESTMENT ADVISER, AND TO APPROVE AN
INVESTMENT ADVISORY AGREEMENT BETWEEN THE TRUST, ON THE FUND'S BEHALF, AND
TURNER.
2. ANY OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING.
All shareholders are cordially invited to attend the Meeting. However, if you
are unable to attend the Meeting, please mark, sign and date the enclosed Proxy
Card and return it promptly in the enclosed, postage-paid envelope so that the
Meeting may be held and a maximum number of shares may be voted
Shareholders of record at the close of business on June 17, 2002 are entitled to
notice of and to vote at the Meeting or any adjournments of the Meeting.
BY ORDER OF THE BOARD OF TRUSTEES
/s/ John H. Graady
JOHN H. GRADY
SECRETARY
June 26, 2002
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG
WITH INSTRUCTIONS ON HOW TO VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU
PREFER TO VOTE BY ONE OF THOSE METHODS.
PROXY STATEMENT
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES
BY THE BOARD OF TRUSTEES OF TURNER FUNDS (THE "TRUST") FOR USE AT THE SPECIAL
MEETING OF SHAREHOLDERS TO BE HELD WEDNESDAY, JULY 31, 2002 AT 2:00 P.M. EASTERN
TIME AT THE OFFICES OF TURNER INVESTMENTS PARTNERS, INC. ("TURNER"), 1235
WESTLAKES DRIVE, SUITE 350, BERWYN, PENNSYLVANIA 19312, AND AT ANY ADJOURNED
SESSION THEREOF (THE SPECIAL MEETING AND ANY ADJOURNMENTS OF THE SPECIAL MEETING
ARE REFERRED TO IN THIS PROXY STATEMENT AS THE "MEETING").
Shareholders of the Turner High Yield Fund (formerly, the Penn Capital Strategic
High Yield Bond Fund) (the "Fund") of record at the close of business on June
17, 2002 ("Shareholders") are entitled to vote at the Meeting. As of June 17,
2002, the Fund had 2,390,680.3290 units of beneficial interest ("shares") issued
and outstanding.
Each share is entitled to one vote and each fractional share is entitled to a
proportionate fractional vote on each matter as to which such shares are to be
voted at the Meeting. Approval of the Proposal requires the affirmative vote of
a majority of the outstanding securities of the Fund entitled to vote as that
term is defined in the Investment Company Act of 1940, as amended (the "1940
Act").
In addition to the solicitation of proxies by mail, Trustees and officers of the
Trust and officers and employees of Turner may solicit proxies in person or by
telephone. Persons holding shares as nominees will, upon request, be reimbursed
for their reasonable expenses incurred in sending soliciting materials to their
principals. The Fund will bear the cost of the Meeting and proxy materials. The
proxy card and this proxy statement are being mailed to Shareholders on or about
June 26, 2002.
Shares represented by duly executed proxies will be voted in accordance with the
instructions given. Proxies may be revoked at any time before they are exercised
by a written revocation received by the President of the Trust at 1235 Westlakes
Drive, Suite 350, Berwyn, Pennsylvania 19312, by properly executing a
later-dated proxy, or by attending the Meeting and voting in person.
INTRODUCTION
Trust is organized as a Massachusetts business trust and is not required to hold
annual meetings of Shareholders. The Meeting is being called in order to permit
Shareholders to consider and vote on the proposal described below. Specifically,
Shareholders are being asked to approve Turner as the Fund's investment adviser,
and to approve an investment advisory agreement between the Trust, on the Fund's
behalf, and Turner.
PROPOSAL 1: APPROVAL OF TURNER AS THE FUND'S INVESTMENT ADVISER AND A NEW
INVESTMENT ADVISORY AGREEMENT FOR THE FUND
The Board of Trustees recommends that Shareholders approve Turner as the Fund's
new investment adviser, and approve the proposed investment advisory agreement
(the "New Advisory Agreement") between the Trust and Turner relating to the
Fund. A copy of the Investment Advisory Agreement is attached as Exhibit A to
this proxy statement. The description of the Investment Advisory Agreement in
this proxy statement is qualified in its entirety by reference to Exhibit A.
Turner currently serves as interim adviser to the Fund under 1940 Act rules.
Turner also currently serves as investment adviser to nineteen other funds in
the Trust pursuant to an investment advisory agreement dated April 28, 1996,
between the Trust, on those funds' behalf, and Turner.
TERMINATION OF THE INVESTMENT ADVISORY AGREEMENT WITH THE FORMER ADVISER. Penn
Capital Management Company, Inc. ("Penn Capital") served as the Fund's former
investment adviser pursuant to an investment advisory agreement dated August 14,
1997 (the "Previous Agreement"). The Fund's sole initial shareholder approved
the Previous Agreement at the Fund's inception for the purpose of complying with
applicable 1940 Act requirements. During the course of this year, the Board of
Trustees only approved a temporary extension of the term for the Previous
Agreement to April 30, 2002. During this temporary extension, the Board
considered a number of alternatives for the Fund, including reorganizing the
Fund into a new trust. Due to various factors, including lack of asset growth,
the Board determined not to renew the Previous Agreement when its term expired
on April 30, 2002.
2
APPOINTMENT OF TURNER AS INTERIM INVESTMENT ADVISER. At a special meeting of the
Board of Trustees held on April 30, 2002, the Trustees of the Trust, including
all of the Trustees who are not "interested persons" of the Trust as defined by
Section 2(a)(19) of the 1940 Act ("Independent Trustees"), appointed Turner to
serve as the Fund's interim investment adviser. In accordance with 1940 Act Rule
15a-4, Turner is serving as the Fund's interim investment adviser pursuant to an
Interim Advisory Agreement with a maximum term of 150 days.
SELECTION OF TURNER AS THE FUND'S NEW INVESTMENT ADVISER. At a meeting of the
Board of Trustees held on May 9, 2002, the Trustees of the Trust, including all
of the Independent Trustees, selected Turner as the Fund's new investment
adviser and approved the New Advisory Agreement, subject to shareholder
approval. In selecting Turner as the Fund's new investment adviser, the Board
placed particular emphasis on Turner's performance as investment adviser for
other funds of the Trust and its investment personnel with experience in the
high yield arena. The New Advisory Agreement and the Previous Advisory Agreement
are substantially the same, other than the name of the adviser and the dates of
execution and expiration.
TERMS OF THE NEW ADVISORY AGREEMENT.
COMPENSATION. Under the Previous Advisory Agreement, the Fund paid an annual
advisory fee of 0.55% of the Fund's average daily net assets. Under the New
Advisory Agreement, the Fund would pay the same advisory fees. However, under a
separate fee waiver agreement with the Fund, the Fund's former adviser had
contractually agreed to waive its advisory fees or reimburse Fund expenses to
keep the Fund's total operating expenses from exceeding 0.68% with respect to
Class I Shares through January 31, 2003.
If Shareholders approve Turner as the Fund's new investment adviser, Turner,
under a separate fee waiver agreement with the Fund, will contractually agree to
waive its advisory fees or reimburse Fund expenses to keep the Fund's total
operating expenses from exceeding 0.68% through January 31, 2003. Turner is not
required to extend the fee waiver and reimbursement arrangement with the Fund
after January 31, 2003.
For the fiscal year ended September 30, 2001, the Fund paid advisory fees of
$99,514, but the former adviser waived advisory fees and reimbursed Fund
expenses totaling $127,621. If the proposed advisory fee (and the related waiver
arrangements discussed above and service provider arrangements discussed below)
had been in place for the same period, the Fund would have paid the same amount
of advisory fees -- $99,514, but Turner would have waived fees or reimbursed
expenses of $88,753.
DUTIES UNDER THE NEW ADVISORY AGREEMENT. Under the New Advisory Agreement,
Turner will make the investment decisions for the assets of the Fund and
continuously review, supervise, and administer the Fund's investment program
with respect to these assets. Turner will discharge these responsibilities
subject to the supervision of the Trustees of the Trust and in a manner
consistent with the Fund's investment objective, policies and limitations. The
New Advisory Agreement provides that Turner will not be liable for any error of
judgment or mistake of law or for any loss arising out of any investment or for
any act or omission in carrying out its duties thereunder, except a loss
resulting from willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of reckless disregard by Turner of its
obligations or duties thereunder.
DURATION AND TERMINATION. Unless terminated earlier, the New Advisory Agreement
will continue in effect with respect to the Fund until two years from date of
execution, and thereafter, for periods of one year for so long as such
continuance is specifically approved with respect to the Fund at least annually:
(a) by the vote of a majority of those Trustees of the Trust who are not parties
to the Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval; and (b) by the
Trustees of the Trust or by vote of a majority of the Fund's outstanding voting
securities.
The New Advisory Agreement will terminate automatically in the event of its
assignment. The Trustees of the Trust or a vote of a majority of the Fund's
outstanding shares also may terminate the Agreement, with at least 30 days' (but
no more than 60 days') written notice to Turner. In addition, Turner may
terminate the Agreement with at least 90 days' written notice to the Trust.
2
DESCRIPTION OF THE INVESTMENT ADVISER. Turner is a professional investment
management firm founded in March 1990. Robert E. Turner is the Chairman and
controlling shareholder of Turner. As of March 31, 2002, Turner had
discretionary management authority with respect to approximately $9 billion of
assets. Turner has provided investment advisory services to investment companies
since 1992.
Paul Matlack, CFA, Senior Portfolio Manager at Turner, is expected to serve as
the lead manager for the committee managing the Fund's assets. Mr. Matlack
joined Turner in 2002. Previously, he was Vice President, Senior Portfolio
Manager, and co-head of the High Yield Group with Delaware Investment Advisors.
He has 17 years of investment experience.
Listed below are the names and principal occupations of each of the directors
and the principal executive officers of Turner. The principal business address
of each director and the principal executive officer, as it relates to their
duties at Turner, is 1235 Westlakes Drive, Suite 350, Berwyn, Pennsylvania
19312.
Name Title
---- -----
Robert E. Turner* Chairman, Chief Investment Officer -
Equities, and Co-Chief Executive Officer
Stephen J. Kneeley* President and Co-Chief Executive Officer
John H. Grady* Chief Operating Officer and General Counsel
Thomas R. Trala Chief Financial Officer, Treasurer
Mark D. Turner Vice Chairman, Senior Portfolio Manager
Roger Early Chief Investment Officer-- Fixed Income
* This person also is a Trustee or Trust officer.
TRUSTEES' CONSIDERATIONS IN APPOINTING TURNER AS THE FUND'S NEW ADVISER. At a
meeting held on May 9, 2002, the Board of Trustees reviewed Turner's
qualifications to serve as the Fund's investment adviser, placing particular
emphasis on its performance as investment adviser for other funds of the Trust
and its investment personnel with experience in the high yield arena. In
recommending that shareholders approve the New Advisory Agreement, the Trustees
carefully evaluated the experience of Turner's key personnel and the quality of
services Turner is expected to provide to the Fund, including, but not limited
to: (a) the nature and quality of the services expected to be rendered to the
Fund by Turner; (b) the level of the proposed advisory fees, including Turner's
voluntary waivers; (c) the Fund's investment objective and policies; (d) the
history, reputation, qualification and background of Turner, as well as the
qualifications of its personnel and its financial condition; (e) its overall
performance record; and (f) other factors deemed relevant. In this regard, the
Trustees noted the fact that Turner has been in operation since 1990 and has
extensive experience managing investment company assets.
The Trustees also considered that Penn Capital had agreed to assist Turner with
the transition of investment advisory services, in return for which Turner would
pay Penn Capital a fee, tied to the assets of the Fund for a five year period
beginning May 1, 2002. The fee payable will vary depending on the total assets
that remain in the Fund.
If Shareholders do not approve the selection of Turner as investment adviser and
the New Advisory Agreement, the Trustees will consider an alternate course of
action for the Fund, which may include termination of the Fund.
GENERAL DESCRIPTION OF THE FUND. The Fund seeks to generate high current income
and capital appreciation. It invests primarily (and, under normal conditions, at
least 80% of its total assets), in fixed income securities rated below
investment grade ("junk" bonds). The Fund may invest in preferred stocks,
convertible securities, zero coupon obligations, payment-in-kind bonds, and
variable rate securities.
TURNER'S APPROACH IN MANAGING THE FUND'S ASSETS. Turner will continue to manage
the Fund to achieve its investment objective, which is current yield and capital
appreciation (also known as "total return"), and will follow the Fund's
fundamental invstment policies. However, Turner intends to employ different
strategies than Penn Capital used in managing the Fund to achieve its investment
objective.
3
Turner intends to invest substantially all of the Fund's assets into a
diversified portfolio of approximately 70-85 bonds rated "B" or "BB" by Standard
and Poor's Corporation ("S&P), or "Ba" or "B" by Moody's Investors Services,
Inc. ("Moody's"). When Penn Capital managed the Fund, the Fund invested in a
diversified portfolio of approximately 115 bonds, including bonds rated "B",
"BB", "CCC" or lower by S&P, bonds in default, and unrated bonds. Turner does
not intend to invest more than 20% of the Fund's assets in bonds that are
unrated, rated "CCC" or lower, or in default. This strategy may cause the Fund
to earn less income, but also should result in the Fund owning fewer bonds in
default (which pay no income).
Bonds rated BB, Ba, B, CCC, CC and C by S&P or Moody's are generally considered
to have significant speculative characteristics regarding payment of principal
and interest. BB/Ba ratings indicate the least degree of speculation and C
indicates the highest. While these bonds may have certain quality and protective
characteristics, these may be outweighed by uncertainties as to payment of
principal and interest or exposure to adverse conditions.
Turner intends to select bonds that are part of an issuance of at least $300
million. In contrast, Penn Capital primarily selected bonds from issuances
smaller than $300 million. Turner intends to buy a minimum amount of $1 million
of bonds of a single issuer, while Penn Capital primarily bought bonds of single
issuers in smaller amounts.
Turner intends to invest no more than 2% of the Fund's assets in any single
issuer. The Fund will limit its investment in any one industry to the lesser of
10% of the Fund's assets or two times that industry's weighting in the Merrill
Lynch High Yield Index. Turner will continuously review the credit quality of
the bonds in the Fund's portfolio, and will sell a bond when the issuer is
downgraded, when the industry sector in which the bond belongs is downgraded as
a whole, or when the bond's price declines more than 15% as compared to its
industry sector.
RELATED MATTERS/NEW FEES.
Administrator. SEI Investments Mutual Funds Services ("SEI") currently serves as
the Fund's administrator. If Shareholders approve Turner as the Fund's new
investment adviser, Turner will become the Fund's new administrator, with SEI
serving as the Fund's sub-administrator. Under the administration agreement with
Turner, the Fund would pay Turner a higher administrative fee than it pays SEI
under the current administration agreement. Under the current administration
agreement, the Fund pays SEI a fee of 0.09% for assets in the Fund up to $250
million, 0.07% for the next $250 million, 0.06% for the next $250 million, 0.05%
for the next $1.25 billion, and 0.04% for assets over $2 billion. Under the
administration agreement with Turner, the Fund pays Turner a fee of 0.15% on
Trust assets up to $2 billion, and 0.12% thereafter. The tables below show the
current and new expense structure:
The following table sets forth information about the Fund's current and new
expense levels:
Current Fees New Fees
------------ --------
Investment Advisory Fees 0.55% 0.55%
Distribution Fees None None
Other Expenses 0.83%* 0.62%*
Total Fund Operating Expenses 1.38%** 1.17%***
Fee Waivers/Expense Reimbursements (0.70%) (0.49%)
Net Total Operating Expenses 0.68% 0.68%
* Other Expenses include administration fees.
** Penn Capital had contractually agreed to waive fees and reimburse Fund
expenses in order to keep the Fund's total operating expenses from
exceeding 0.68% through January 31, 2003.
*** Turner has contractually agreed to waive fees and reimburse Fund expenses
to keep the Fund's total operating expenses from exceeding 0.68% through
January 31, 2003. Turner may discontinue this arrangement at any time
after January 31, 2003.
4
The following example is intended to help you compare the cost of investing in
the Fund under the current and new fee structure. Although your actual costs and
returns might be different, your approximate costs of investing $10,000 in the
Fund would be:*
Current Fees New Fees
------------ --------
One Year $69 $95
Three Years $368 $348
Five Years $688 $622
Ten Years $1,597 $1,402
* The example above assumes that you invest $10,000 in the Fund for the time
periods indicated and that you sell your shares at the end of the period. The
example also assumes that each year your investment has a 5% return, and you
reinvest all dividends and distributions. The example numbers under Current
Fees are based on Net Total Operating Expenses of 0.68% for the first year,
and on Total Fund Operating Expenses of 1.38% for the remaining periods. The
example numbers under New Fees are based on Net Total Operating Expenses of
0.68% for the first six months and on Total Fund Operating Expenses of 1.17%
for the remaining periods. The example does not reflect any redemption fees
(described below) under New Fees. If redemption fees were included, your costs
under New Fees would be higher.
REDEMPTION FEE. If Shareholders approve Turner as the Fund's new investment
adviser, the Fund may begin to charge a redemption fee, payable at a rate of 2%
as a percentage of amount redeemed, on redemptions made within 90 days of
purchase. The redemption fee is designed to deter market timing and similar
activities of short-term investors that may be detrimental to the Fund and its
shareholders. The fee will not be assessed against persons who hold their shares
through a single qualified retirement plan or other omnibus account arrangement
where the purchase and sale orders of a number of persons are aggregated before
being communicated to the Fund. The Fund reserves the right nonetheless to
impose the fee on these accounts when a pattern of trading in an account emerges
that is harmful to the Fund. The redemption fee will be imposed only if the
Board approves it. Currently, the Fund does not impose redemption fees.
The following table sets forth information about the differences in shareholder
fees:
Current Fees New Fees
------------ --------
Redemption Fee None 2.00%*
*Applies to redemptions made within 90 days of purchase.
DISTRIBUTOR. SEI Investments Distribution Co. ("SIDCO") currently serves as the
Fund's distributor. If Shareholders approve Turner as the Fund's new investment
adviser, Turner Investment Distributors, Inc. ("TID"), an affiliate of Turner,
will serve as the Fund's distributor under TID's existing distribution agreement
with the Trust.
THE TRUSTEES RECOMMEND THAT SHAREHOLDERS VOTE "FOR" PROPOSAL I.
GENERAL INFORMATION ABOUT THE TRUST AND OTHER MATTERS
TRUSTEES AND OFFICERS. Information about the Trust's current Trustees and
principal executive officers, including their names, positions with the Trust,
and association with the Trust is set forth below:
Name Position with the Trust
---- -----------------------
Robert E. Turner* Trustee, Chairman of the Board
Janet F. Sansone Trustee, Audit Committee Member
Dr. John T. Wholihan Trustee, Audit Committee Member
Alfred C. Salvato Trustee, Audit Committee Member,
Fair Value Pricing Committee Member
Stephen J. Kneeley* President and Chief Executive Officer
Peter Golden Controller and Chief Accounting Officer
John H. Grady* Executive Vice President and Secretary
* Mr. Turner, in his role as a Trustee, is an "interested person" (as that term
is defined in the 1940 Act) of the Trust due to his association with Turner.
Messrs. Kneeley and Grady are "affiliated persons" (as that term is defined in
the 1940 Act) of the Trust and Turner.
5
ADMINISTRATOR. SEI, One Freedom Valley Drive, Oaks, Pennsylvania 19456,
currently serves as the Fund's administrator pursuant to an administrative
agreement between the Trust, on the Fund's behalf, and SEI as mentioned above.
If Shareholders approve Turner as the Fund's new adviser, Turner will become the
Fund's new administrator, with SEI expected to serve as sub-administrator.
DISTRIBUTOR. SIDCO, One Freedom Valley Drive, Oaks, Pennsylvania 19456, an
affiliate of SEI, serves as the distributor of the Fund's shares pursuant to a
distribution agreement between the Trust, on the Fund's behalf, and SIDCO. SIDCO
receives no compensation for distributing Fund shares. If Shareholders approve
Turner as the Fund's new adviser, TID will become the Fund's new distributor.
TID is a wholly owned subsidiary of Turner and would receive no compensation
under the distribution agreement.
5% SHAREHOLDERS. As of June 17, 2002, the following persons were the only
persons who were record owners or, to the knowledge of the Trust, were
beneficial owners of 5% or more of the shares of the Fund. The Trust believes
that most of the shares referred to below were held by the following persons in
accounts for their fiduciary, agency, or custodial customers.
Name and Address of Shareholder Number of Shares Percent of Fund
------------------------------- ---------------- ---------------
First Union National Bank 1,076,480.1360 45.03%
Cash/Reinvest
A/C 9888888863
CMG-2-1151
1525 W WT Harris Blvd NC1151
Charlotte, NC 28262-8522
Independence Trust Company 266,838.9200 11.16%
Attn: Operations
P.O. Box 682188
Franklin TN 37068-2188
Virtua Memorial Hospital 239,320.1530 10.01%
Burlington County Inc.
1000 Atlantic Ave
Camden, NJ 08104-1595
Saxon & Co TTEE 189,956.5960 7.95%
FBO 20101021040948
P.O. Box 7780-1888
Philadelphia, PA 19182-0001
The Horace Bushnell Memorial Hall Corp 157,536.9920 6.59%
166 Capitol Ave
Hartford, CT 06106-1662
SEI Trust Company Cust 125,738.7460 5.26%
IRA A/C Frank J. DiPrima
5840 Bent Pine Dr
Vero Beach, FL 32967-7589
As of June 17, 2002, the Turner Trust's Trustees and officers did not own any
Fund shares.
ADJOURNMENT. In the event that sufficient votes in favor of the proposal set
forth in the Notice of the Special Meeting are not received by the time
scheduled for the Meeting, the persons named as proxies may propose one or more
adjournments of the Meeting. Turner will bear the costs of any adjourned
sessions. The persons named as proxies will vote for an adjournment any proxies
that they are entitled to vote in favor of the proposal.
6
VOTING DETAILS. Each whole share held entitles the Shareholder to one vote for
each dollar (carried forward to two decimal places) of net asset value of such
share as of the close of business on June 17, 2002, and each fractional share is
entitled to a proportionate fractional vote. A majority in interest of the
Fund's shares entitled to vote on the proposal constitutes a quorum. Any
Shareholder who submits a proxy may revoke it at any time before it is exercised
by submitting to the Trust a specific written notice of revocation. Abstentions
and "broker non-votes" will not be counted for or against the proposal, but will
be counted for purposes of determining whether a quorum is present. Abstentions
will be counted as votes present for purposes of determining a "majority of the
outstanding voting securities" present at the Meeting and will therefore have
the effect of counting against the proposal.
SHAREHOLDER PROPOSALS. The Trust is not required to hold annual shareholder
meetings. Shareholders wishing to submit proposals for inclusion or presentation
in a proxy statement for a subsequent meeting should send their written
proposals to the Secretary of the Trust c/o Turner Investment Partners, Inc.,
1235 Westlakes Drive, Suite 350, Berwyn, Pennsylvania 19312.
OTHER MATTERS. The Trustees know of no other business to be brought before the
Meeting. However, if any other matters properly come before the Meeting, it is
their intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed proxy.
SHAREHOLDER REPORTS. THE FUND'S LAST AUDITED FINANCIAL STATEMENTS AND ANNUAL
REPORT, FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001, AND THE SEMI-ANNUAL REPORT
DATED MARCH 31, 2002, ARE AVAILABLE FREE OF CHARGE. TO OBTAIN A COPY, PLEASE
CALL THE FUND TOLL FREE AT 1-800-224-6312, OR SEND A WRITTEN REQUEST TO THE
TURNER HIGH YIELD FUND C/O TURNER INVESTMENT DISTRIBUTORS, INC., 1235 WESTLAKES
DRIVE, SUITE 350, BERWYN, PENNSYLVANIA 19312.
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SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. YOU
MAY ALSO VOTE OVER THE INTERNET OR BY TELEPHONE. PLEASE FOLLOW THE ENCLOSED
INSTRUCTIONS TO UTILIZE THESE METHODS OF VOTING.
7
EXHIBIT A
FORM OF
INVESTMENT ADVISORY AGREEMENT
TURNER FUNDS
AGREEMENT made this _____ day of _____, 2002, by and between Turner
Funds, a Massachusetts business trust (the "Trust"), and Turner Investment
Partners, Inc. (the "Adviser" or the "Administrator").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended; and
WHEREAS, the Trust has retained the Administrator to provide
administration of the Trust's operations, subject to the control of the Board of
Trustees;
WHEREAS, the Trust desires to retain the Adviser to render investment
management services with respect to the Turner High Yield Fund, formerly the
Penn Capital Strategic High Yield Bond Fund (the "Fund"), and such other
portfolios as the Trust and the Adviser may agree upon (each a "Fund") and as
are set forth in the attached schedule, and the Adviser is willing to render
such services:
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF ADVISER. The Trust employs the Adviser to manage the
investment and reinvestment of the assets of the Fund, and to
continuously review, supervise and (where appropriate) administer the
investment program of the Fund, to determine in its discretion (where
appropriate) the securities to be purchased or sold, to provide the
Trust with records concerning the Adviser's activities which the Trust
is required to maintain, and to render regular reports to the
Administrator and to the Trust's officers and Trustees concerning the
Adviser's discharge of the foregoing responsibilities. The retention of
a sub-adviser by the Adviser shall not relieve the Adviser of its
responsibilities under this Agreement.
The Adviser shall discharge the foregoing responsibilities subject
to the control of the Board of Trustees of the Trust and in compliance
with such policies as the Trustees may from time to time establish, and
in compliance with the objectives, policies, and limitations for the
Fund set forth in the Fund's prospectus and statement of additional
information as amended from time to time, and applicable laws and
regulations.
The Adviser accepts such employment and agrees, at its own
expense, to render the services and to provide the office space,
furnishings and equipment and the personnel (including any
sub-advisers) required by it to perform the services on the terms and
for the compensation provided herein. The Adviser will not, however,
pay for the cost of securities, commodities, and other investments
(including brokerage commissions and other transaction charges, if any)
purchased or sold for the Trust.
2. PORTFOLIO TRANSACTIONS. The Adviser is authorized to select the
brokers or dealers that will execute the purchases and sales of
portfolio securities for the Fund and is directed to use its best
efforts to obtain the best net results as described from time to time
in the Fund's Prospectus and Statement of Additional Information. The
Adviser will promptly communicate to the officers and the Trustees of
the Trust such information relating to portfolio transactions as they
may reasonably request.
It is understood that the Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or be in
breach of any obligation owing to the Trust under this Agreement, or
otherwise, by reason of its having directed a securities transaction on
the Trust's behalf to a broker-dealer in compliance with the provisions
of Section 28(e) of the Securities Exchange Act of 1934 or as described
from time to time by the Fund's' Prospectus and Statement of Additional
Information.
3. COMPENSATION OF THE ADVISER. For the services to be rendered by the
Adviser as provided in Sections 1 and 2 of this Agreement, the Trust
shall pay to the Adviser compensation at the rate specified in the
Schedule(s) which are attached hereto and made a part of this
Agreement. Such compensation shall be paid to the Adviser
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at the end of each month, and calculated by applying a daily rate,
based on the annual percentage rates as specified in the attached
Schedule(s), to the assets. The fee shall be based on the average daily
net assets for the month involved. The Adviser may, in its discretion
and from time to time, waive a portion of its fee. All rights of
compensation under this Agreement for services performed as of the
termination date shall survive the termination of this Agreement.
4. OTHER EXPENSES. The Adviser shall pay all expenses of printing and
mailing reports, prospectuses, statements of additional information,
and sales literature relating to the solicitation of prospective
clients. The Trust shall pay all expenses relating to mailing to
existing shareholders prospectuses, statements of additional
information, proxy solicitation material and shareholder reports.
5. EXCESS EXPENSES. If the expenses for the Fund for any fiscal year
(including fees and other amounts payable to the Adviser, but excluding
interest, taxes, brokerage costs, litigation, and other extraordinary
costs) as calculated every business day would exceed the expense
limitations imposed on investment companies by any applicable statute
or regulatory authority of any jurisdiction in which shares of the Fund
are qualified for offer and sale, the Adviser shall bear such excess
cost.
However, the Adviser will not bear expenses of the Fund that would
result in the Portfolio's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code.
Payment of expenses by the Adviser pursuant to this Section 5 shall be
settled on a monthly basis (subject to fiscal year end reconciliation)
by a reduction in the fee payable to the Adviser for such month
pursuant to Section 3(a) or 3(b) and, if such reduction shall be
insufficient to offset such expenses, by reimbursing the Trust.
6. REPORTS. The Trust and the Adviser agree to furnish to each other,
if applicable, current prospectuses, proxy statements, reports to
shareholders, certified copies of their financial statements, and such
other information with regard to their affairs as each may reasonably
request.
7. STATUS OF ADVISER. The services of the Adviser to the Trust are not
to be deemed exclusive, and the Adviser shall be free to render similar
services to others so long as its services to the Trust are not
impaired thereby. The Adviser shall be deemed to be an independent
contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any
way or otherwise be deemed an agent of the Trust.
8. CERTAIN RECORDS. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated
under the Investment Company Act of 1940 which are prepared or
maintained by the Adviser on behalf of the Trust are the property of
the Trust and will be surrendered promptly to the Trust on request.
9. LIMITATION OF LIABILITY OF ADVISER. The duties of the Adviser shall
be confined to those expressly set forth herein, and no implied duties
are assumed by or may be asserted against the Adviser hereunder. The
Adviser shall not be liable for any error of judgment or mistake of law
or for any loss arising out of any investment or for any act or
omission in carrying out its duties hereunder, except a loss resulting
from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its
obligations and duties hereunder, except as may otherwise be provided
under provisions of applicable state law or Federal securities law
which cannot be waived or modified hereby. (As used in this Paragraph
9, the term "Adviser" shall include directors, officers, employees and
other corporate agents of the Adviser as well as that corporation
itself).
10. PERMISSIBLE INTERESTS. Trustees, agents, and shareholders of the
Trust are or may be interested in the Adviser (or any successor
thereof) as directors, partners, officers, or shareholders, or
otherwise; directors, partners, officers, agents, and shareholders of
the Adviser are or may be interested in the Trust as Trustees,
shareholders or otherwise; and the Adviser (or any successor) is or may
be interested in the Trust as a shareholder or otherwise. In addition,
brokerage transactions for the Trust may be effected through affiliates
of the Adviser if approved by the Board of Trustees, subject to the
rules and regulations of the Securities and Exchange Commission.
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11. LICENSE OF ADVISER'S NAME. The Adviser hereby agrees to grant a
license to the Trust for use of its name in the Fund's name for the
term of this Agreement and such license shall terminate upon
termination of this Agreement.
12. DURATION AND TERMINATION. This Agreement, unless sooner terminated
as provided herein, shall remain in effect until two years from date of
execution, and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a)
by the vote of a majority of those Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such
approval, and (b) by the Trustees of the Trust or by vote of a majority
of the Fund's outstanding voting securities; provided, however, that if
the Fund's shareholders fail to approve the Agreement as provided
herein, the Adviser may continue to serve hereunder in the manner and
to the extent permitted by the Investment Company Act of 1940 and rules
and regulations thereunder. The foregoing requirement that continuance
of this Agreement be "specifically approved at least annually" shall be
construed in a manner consistent with the Investment Company Act of
1940 and the rules and regulations thereunder.
This Agreement may be terminated with respect to the Fund at any
time, without the payment of any penalty by vote of a majority of the
Trustees of the Trust or by vote of a majority of the Fund's
outstanding voting securities on not less than 30 days nor more than 60
days' written notice to the Adviser, or by the Adviser at any time
without the payment of any penalty, on 90 days' written notice to the
Trust. This Agreement will automatically and immediately terminate in
the event of its assignment. Any notice under this Agreement shall be
given in writing, addressed and delivered, or mailed postpaid, to the
other party at any office of such party.
As used in this Section 12, the terms "assignment", "interested
persons", and a "vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in the
Investment Company Act of 1940 and the rules and regulations
thereunder; subject to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
13. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice
to the other party at the last address furnished by the other party to
the party giving notice: if to the Trust at 1235 Westlakes Drive, Suite
350, Berwyn, Pennsylvania 19312, and if to the Adviser at 1235
Westlakes Drive, Suite 350, Berwyn, Pennsylvania 19312.
14. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
15. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Massachusetts and the applicable
provisions of the 1940 Act. To the extent that the applicable laws of
the Commonwealth of Massachusetts, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter
shall control.
16. PRIVACY AND CONFIDENTIALITY. Notwithstanding any provision herein
to the contrary, each party agrees not to use or disclose nonpublic
personal information of customers and consumers of the Fund for any
purpose other than performance of its responsibilities and duties under
this Agreement or as required or permitted by applicable law,
including, without limitation, Regulation S-P of the SEC.
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A copy of the Declaration of Trust of the Trust is on file with the Secretary of
the Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees, and
are not binding upon any of the Trustees, officers, or shareholders of the Trust
individually but binding only upon the assets and property of the Trust.
Further, the obligations of the Trust with respect to any one Fund will not be
binding on any other Fund.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.
TURNER FUNDS, ON BEHALF OF THE TURNER HIGH YIELD FUND
(FORMERLY, PENN CAPITAL STRATEGIC HIGH YIELD BOND FUND)
By:
------------------------------------
Attest:
-------------------------------
TURNER INVESTMENT PARTNERS, INC.
By:
------------------------------------
Attest:
--------------------------------
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SCHEDULE A DATED , 2002
TO THE
INVESTMENT ADVISORY AGREEMENT
DATED , 2002
BETWEEN
TURNER FUNDS
AND
TURNER INVESTMENT PARTNERS, INC.
Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:
Fund Fee (in basis points)
- ---- ---------------------
Turner High Yield Fund (formerly, Penn Capital 0.55% of the average daily net assets
Strategic High Yield Bond Fund)
A-5
THE TURNER FUNDS
Special Meeting of the Shareholders of the
Turner High Yield Fund
PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR
THE SPECIAL MEETING OF SHAREHOLDERS,
TO BE HELD ON July 31, 2002
The undersigned, hereby appoints John H. Grady and Brian M. Ferko as proxies and
each of them, each with full power of substitution, to vote at the Special
Meeting of Shareholders of the Turner High Yield Fund, formerly the Penn Capital
Strategic High Yield Bond Fund (the "Fund"), a series of the Turner Funds (the
"Trust"), to be held at the offices of Turner Investments Partners, Inc., 1235
Westlakes Drive, Suite 350, Berwyn, Pennsylvania 19312 on July 31, 2002, at 2:00
p.m. Eastern Time, and any adjournments or postponements of the Special Meeting
(the "Meeting") all shares of beneficial interest of the Fund that the
undersigned would be entitled to vote if personally present at the Meeting
("Shares") on the proposals set forth below, and in accordance with their own
discretion, any other matters properly brought before the Meeting.
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS A VOTE "FOR" THE FOLLOWING
PROPOSAL:
PROPOSAL. Approval of Turner Investment Partners, Inc.
("Turner") as the Fund's investment adviser and an
Investment Advisory Agreement between the Trust, on
the Fund's behalf, and Turner.
____For ____Against ____Abstain
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED HEREIN BY THE
SIGNING SHAREHOLDER. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, THIS PROXY WILL BE VOTED FOR THE FOREGOING PROPOSALS AND WILL BE VOTED
IN THE APPOINTED PROXIES' DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
The undersigned acknowledges receipt with this proxy of a copy of the Notice of
Special Meeting and the proxy statement. Your signature(s) on this proxy should
be exactly as your name(s) appear on this proxy. If the shares are held jointly,
each holder must sign this proxy. Attorneys-in-fact, executors, administrators,
trustees or guardians must indicate the full title and capacity in which they
are signing.
Dated: , 2002
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--------------------------------
Signature of Shareholder
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Signature (Joint owners)
PLEASE DATE, SIGN AND RETURN PROMPTLY USING THE ENCLOSED, POSTAGE-PAID ENVELOPE
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. YOU MAY VOTE IN PERSON IF YOU
ATTEND THE MEETING.
Telephone and Internet Voting Instructions:
To vote by Telephone:
1) Read the proxy statement and have this proxy card at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set forth below and follow the simple
instructions.
To vote by Internet:
1) Read the proxy statement and have this proxy card at hand.
2) Go to Website www.proxyvote.com
3) Enter the 12-digit control number set forth below and follow the simple
instructions.
Control Number: xxxxxxxxxxxx