In light of the unprecedented financial crisis of the last several weeks and the intensifying bear market, a few considered comments from us about the stock market and our portfolio-management methods and philosophy would seem to be in order.

To be sure, we feel no need to rehash all the gory details of the crisis -- all the news resulting from an excess of debt and a shortage of capital that have roiled the U.S. financial system. Tens of millions of words have already been written and spoken about all that. We can add little here. And there are a few brave souls who are eager to pontificate authoritatively on when this financial crisis will end. Here, too, we believe our own opinion would yield little of value, mainly because we think no one can possibly know exactly when and how this crisis will play out.

However, we do believe, above all, that this needs to be said: while the particular circumstances of financial crises and bear markets invariably differ, the outcomes tend to be fairly similar. That is, the stock market declines sharply, usually punctuated by what in investment-speak is called a "capitulation" -- a final-stage rash of selling. The federal government responds appropriately and aggressively to the crisis. Some vulnerable financial-services firms fail. And finally and blissfully, the healing process begins. Stocks eventually reverse course and economic statistics, which tend to lag real-world developments, eventually improve. We think this financial crisis is evolving in precisely that way.

So what do we as investment managers do?

We fret just like other people do, we have some restless nights, we analyze our stocks intensively, and most important, we stick to our investment disciplines. We believe the ability of any investment manager to outperform the market over time hinges on the consistent application of a proven investment process. At Turner, most of the assets we manage for clients involve our aggressive-growth-investment process, which has both proven itself over time and been applied consistently. Of course, the greatest challenge in sticking to our growth-investment process is to do so when it’s under the greatest assault, as is now the case.

But if it’s true that bear markets always present performance challenges to us, it’s also true that we aren’t about to change our growth-investment process as a result. We aren’t about to succumb to the temptation to adjust our process out of desperation to do something -- anything -- to "cure" a spell of negative results. We remain fundamental analysts who buy stocks of companies with favorable earnings prospects and who continue to believe strongly that what won’t work is when you start doing things not core to your disciplines or because they worked last week for somebody else.

As we’ve noted in the past, we believe the cure of fiddling with that process would be worse than the disease. It’s a sad irony of the investment-management business that the temptation to deviate from one’s investment process often tends to be the strongest at precisely the wrong time, just when that process is about to return to favor. Clients have told us one key reason why they have kept faith in us over the years is that they believe in what we are doing because we believe in what we are doing. We continue to have the courage of our convictions -- and no tolerance for "style drift."

In our judgment, buying stocks according to what our investment process indicates we should buy is more logical and reliable and potentially profitable than buying stocks based on what worked last week or what somebody else does. The stocks that we own, as always, have higher projected rates of earnings growth than those of the market (typically 30 to 50% higher), higher price/earnings ratios (typically 20 to 40% higher), but lower PEG (price/earnings to earnings growth) ratios (typically 0.7 to 1.0; for PEG ratios, the lower the number, the better, indicating earnings power can be bought more cheaply).

In a bear market, when price/earnings ratios shrink and earnings growth is questioned, our growth-stock holdings tend to perform poorly. Cases in point: Google and Apple. Both have been among the fastest earnings-growth companies over the last several quarters and years, delivering consistent upside to consensus earnings expectations. However, earnings strength hasn’t translated into gains in Google’s and Apple’s shares. Just the opposite: their shares have fallen nearly 50% year-to-date.

In contrast, the stocks of companies with more modest growth rates have performed much better. For instance, year-to-date Wal-Mart Stores has gained more than 20% and IBM has had only a slightly negative stock price. It’s times such as these -- when the stocks of slower-growing companies beat those of faster-growing peers, when even double-digit earnings growth is no deterrent to plummeting stock prices -- that truly test our resolve to adhere to our growth-investment discipline.

You may ask, "Shouldn’t Turner have seen this coming -- that the financial crisis would batter growth stocks hard in 2008?"

To that question, we can only respond with these points:

One, we didn’t foresee the carnage to growth stocks (or the carnage to the entire stock market, for that matter) that the financial crisis would inflict. Alas, in that, we have plenty of company, including the Federal Reserve, the Treasury Department, most of Wall Street, and the chief executives of the great majority of companies. Events unfolding today are truly unprecedented and have created scenarios few could have imagined.

Two, stocks weren’t overvalued or over-owned going into 2008; they were trading at a fairly reasonable price/earnings multiple of 15 times projected 2009 earnings. What’s more, investor sentiment was not wildly bullish. And to our delight, growth stocks had finally begun to outperform after seven years of underperformance. After such a long drought, we anticipated that more outperformance by growth lay ahead.

Three, our clients, knowing us primarily as an aggressive growth manager, expect us to be the manager in their lineup that captures extra return in a rising market. The problem, of course, is that no one ever quite knows when the market will go up (or down); there are often a lot of "head fakes" -- market counter-trends that prove temporary -- along the way. So as painful as this year has been for the performance of our growth portfolios, it would be even more painful if we failed to outperform when the market actually does begin rising again. So we must always be prepared for the upside scenario.

That means we must continue to own the "growthiest" stocks and strictly follow our growth-investment process. The average PEG ratio of our growth portfolios is a compelling 0.7. And we are comfortable with our holdings, especially early-cycle stocks such as home-building, retailing, select banking, and semiconductor shares, which have been good relative performers in the past two months. In short, we own stocks that our growth-investment process has identified as having superior return potential -- the stocks of companies that, in our estimation, will meet or exceed investors’ earnings expectations over time.

Although we aren’t in the business of being investment prognosticators, our analysis suggests that the stock market is at or close to a bottom. In our judgment, the market’s risk/reward profile is highly favorable. Valuations are uncommonly low (the equity-risk premium is now more than 5%), based on the scenario that the economy and earnings recover at some point next year. Investor sentiment, as measured by technical indicators such as put/call ratios, short interest, and volatility indexes, is as bearish as it’s ever been. Finally, market returns for the past 10 years have been horrible (see display). The performance of growth stocks has been even worse. For instance, the Russell 1000 Growth Index has produced an annualized total return of a mere 0.59% for the 10-year period ended September 30, 2008.

This 10-year period has been dominated by two ferocious bear markets: the bear market of 2000-2002, the worst in modern times, and the current bear market. Unless a near-miracle occurs over the next 15 months, this decade will go down in the books as the second-worst for stock investing in history, trailing only the Great Depression decade of the 1930s. Some market pundits have taken to calling the 2000s the Lost Decade for stocks.

The Lost Decade is the product of this investing phenomenon: what goes up excessively must inevitably go down. The glorious, once-in-a-lifetime bull market of the 1980s and 1990s -- which produced an annualized total return of 16.4%, a premium of six percentage points over the long-term average, according to Ibbotson Associates -- has led to the paltry returns of this decade. As the display indicates, stock-market returns tend to come in waves, with 10 years of above-average stock-market returns typically followed by 10 years of below-average returns. And just as our growth portfolios, despite our best efforts, tend to underperform in down markets, they tend to outperform in up markets. For instance, after the bear market early in the decade, our growth portfolios generated a meaningful margin of outperformance in 2003 versus their respective benchmarks (Core Growth 5.29%, Midcap Growth 6.93%, and Concentrated Growth 29.91%, net of fees). And when growth investing finally came back in favor, such as in 2007, performance was generally even better (Core Growth 10.96%, Midcap Growth 13.48%, Concentrated Growth 20.07%, net of fees). Of course, past performance is no guarantee of future results.

Admittedly, the performance patterns of our growth portfolios are hard to keep in mind when we are bombarded by continual bad news on the airwaves, when the cable channels proclaim "News Alert!" about events that arguably aren’t news at all, and when even the Web sites of respected newspapers compete with bloggers to see who can capture the world’s increasingly short attention span for the next three minutes.

But it’s important to remember that we’ve been here before and that things will get better. It’s important to remember that the U.S. economy, in our view, remains the biggest, the most resilient, and the most adaptable in the world. It’s important to remember that the federal government is striving to tighten the nuts and bolts of the financial system that require adjustment. It’s important to remember that American companies generally have never been better managed or had stronger balance sheets (with the notable exception of some financial companies). It’s important to remember that the global economy is producing new business success stories and raising the world’s standard of living day by day. And it’s important to remember that earnings go up and drive stock prices in the long run. Better days and better markets lie ahead. And when that happens, our growth portfolios will be seeking to capture the upside.

And finally, it’s important for us to remember that we are here to serve you. In that spirit, we thank you for your continuing confidence and support. You can be assured that we will continue to apply our growth-investment process consistently to achieve performance that’s as good as we can possibly make it.

Sincerely,

Bob Turner

Chairman and Chief Investment Officer

Turner Investment Partners

Period Ending August 31, 2008 Composite (Inception Date)	YTD	1 Year	3 Years	5 Years	Since Inception
Core Growth Equity (April 1990) - Net	-20.2%	-10.4%	4.6%	8.2%	10.8%
Russell 1000 Growth Index	-9.8%	-6.8%	4.4%	6.1%	8.7%
Concentrated Growth Equity (Jan. 1998) – Net	-26.8%	-17.7%	3.5%	4.7%	11.6%
Russell 1000 Growth Index	-9.8%	-6.8%	4.4%	6.1%	2.6%
Midcap Growth Equity (Aug 1996) - Net	-15.1%	-8.0%	6.4%	9.2%	13.3%
Russell Midcap Growth Index	-9.5%	-7.6%	5.3%	9.7%	8.4%

Turner Investment Partners, Inc. claims compliance with the Global Investment Performance Standards (GIPS®).

To receive a complete list and description of Turner's composites and/or presentations that adhere to the GIPS® standards, contact Debi Rossi at drossi@turnerinvestments.com or write Ms. Rossi at Turner Investment Partners, Inc., 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312.