RAINIER
INVESTMENT
MANAGEMENT
Mutual Funds Semi-Annual Report
unaudited
September 30, 1997
Small/Mid Cap Equity Portfolio
Core Equity Portfolio
Balanced Portfolio
Intermediate Fixed Income Portfolio
<PAGE>
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS ....................................................2
COMMENTS FROM
INVESTMENT ADVISOR ........................................................3
PORTFOLIO INVESTMENT RETURNS
Small/Mid Cap Equity Portfolio ....................................4
Core Equity Portfolio .............................................5
Balanced Portfolio ................................................6
Intermediate Fixed Income Portfolio ...............................7
SCHEDULES OF INVESTMENTS
Small/Mid Cap Equity Portfolio ....................................8
Core Equity Portfolio ............................................11
Balanced Portfolio ...............................................15
Intermediate Fixed Income Portfolio ..............................20
STATEMENTS OF
ASSETS AND LIABILITIES ...................................................22
STATEMENTS OF OPERATIONS .................................................23
STATEMENTS OF CHANGES
IN NET ASSETS ............................................................24
FINANCIAL HIGHLIGHTS .....................................................26
NOTES TO FINANCIAL STATEMENTS ............................................30
DIRECTORY OF FUNDS'
SERVICE PROCIVERS ........................................................32
INDEX DESCRIPTIONS .......................................................32
RAINIER INVESTMENT MANAGEMENT MUTUAL FUNDS
601 Union Street, Suite 2801
Seattle, Washington 98101
(800) 248-6314
This report and the financial statements contained herein are provided for the
general information of the shareholders of the Rainier Investment Management
Mutual Funds. This report is not authorized for distribution to prospective
investors in the Funds unless preceded or accompanied by an effective
prospectus. For more information on any Fund, including charges and expenses,
call (800) 248-6314 for a free prospectus. Read it carefully before you invest
or send money.
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholders,
As Chairman of the Rainier Investment Management No-Load Mutual Funds and a
fellow shareholder in the Funds, I'd like to express my appreciation for your
valued investment in one or more of the four Portfolios covered in this report.
If you are a new shareholder, welcome! This Semi-Annual Report contains
unaudited financial statements for the six months ending September 30, 1997. The
last audited Annual Report was produced as of March 31, 1997, our fiscal year
end.
In this Semi-Annual Report, you will find commentary describing the general
environment of the equity and fixed-income capital markets. Also, you will see
summaries for each of the four Portfolios, which provide performance information
for the last six months, followed by investment total returns. Finally, this
Semi-Annual Report contains financial statements detailing the expenses of the
Portfolio and the Portfolio holdings as of September 30, 1997.
Once again I am pleased to report to the shareholders that the Funds are
operating to our satisfaction. Asset growth has been steady and occasionally
robust. The back office is running smoothly. Portfolio returns have been very
strong in a bull market that through September 30 refused to retreat. We have
been blessed with several more favorable articles by the national financial
media. Money, Forbes, Los Angeles Times and Investor's Business Daily have
featured our solid returns, and disciplined investment strategy. We are pleased
that Jim Margard and the Small/Mid Cap Equity Portfolio finished second out of
100 stock funds in Barron's annual mutual fund manager rankings. Margard was the
only fund manager to have two funds ranked in the top ten out of 100 fund
managers ranked by Barron's.
As this bull market ages, the volatility of returns has accelerated. Our
strategies have been tested over a number of years in many different market
conditions. Our portfolio managers have extensive experience managing
institutional and mutual fund portfolios, and are composed even in the most
stressful of market environments. New shareholders should be aware that most of
the employees and all of the principals of Rainier Investment Management are
shareholders in the Funds. As fellow shareholders, we too experience directly
and personally the results of the Funds just as you do.
We are interested in your feedback. If you have encountered any problems or
have suggestions to improve our service, please call us. Thank you for your
investment in Rainier Investment Management Mutual Funds. We embrace and
appreciate the continued challenge and opportunity to meet your investment
needs.
Sincerely,
/s/ J. Glenn Haber
J. Glenn Haber
Chairman
Rainier Investment Management Mutual Funds
2
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COMMENTS FROM INVESTMENT ADVISOR
About the Advisor: The Investment Advisor to the Funds is Rainier
Investment Management, Inc.(R) (RIM) located in Seattle, Washington. RIM is one
of America's leading investment advisory firms, managing $4.2 billion of
discretionary assets for primarily institutional clients.
Equity Comments
Led by a powerful rally in secondary issues, U.S. stocks soared to record
highs between March and September. Investor sentiment continued to be fueled by
the bullish ingredients of low inflation, solid earnings growth, corporate
acquisitions and steady flows into equity mutual funds. The equity markets
experienced a major shift in leadership, with small- and mid-cap issues moving
to center stage. While the Standard & Poor's 500 Index surged an incredible 26%,
small-cap benchmarks rose even more. The meaningful exposure to small- and
mid-cap stocks was a key factor in the strong performance of our equity
portfolios in the first half of the fiscal year.
Despite an euphoric six months, at least a few clouds appeared on the
horizon. A number of large global companies cautioned analysts over the summer
that earnings expectations for the next several quarters were excessively high.
Turmoil in Southeast Asian financial markets spread, unnerving investors
world-wide and increasing uncertainty regarding the growth outlook for Asia and
the potential impact on multinational companies. The extended upward move in
equity prices has pushed many stocks--especially blue-chip favorites--to the
upper end of historical valuation ranges. As a result, richly valued shares may
be particularly vulnerable to negative developments.
We believe that recent volatility may be signaling a transition from a
period of above average returns to results that are closer to long-term
averages. This transition could produce a higher number of disappointments for
equity investors than they have been accustomed to in recent years. We therefore
anticipate that a heightened emphasis on risk control will be as important as
the achievement of absolute returns in 1998.
James R. Margard, CFA; David A. Veterane, CFA;
Peter M. Musser, CFA; Mark H. Dawson, CFA
Fixed Income Comments
The fixed-income markets bounced back from a March hike in the Federal
Funds rate to post respectable positive returns for the first six months of the
fiscal year ending September 30, 1997. The performance path was rocky and
volatile, however, as interest rates rose and then fell to the highest and
lowest levels of the calendar year. Overall yields fell one-half to
three-quarters percent, the greater returns within longer duration bonds.
The economy continued to move along at close to a 4% annualized rate while
at the same time inflation was modest and subdued. Tighter labor markets, high
industrial output levels and strong consumer spending surprisingly did not
translate into big wage and price increases. Rising household debt levels and
the "wealth effect" from the growth of capital market assets did not deter the
market from assigning tight relative yield spreads between corporate bonds and
treasuries. Nor did the ratings agencies flinch, as upgrades outnumbered
downgrades during the period-the reason no doubt attributed to the benefits of
low interest rates in general.
The Federal Reserve has developed a "wait and see" attitude as to whether
rates will be raised again. Developing concerns in the Asian markets may defer
intervention into 1998, and the relatively flat shape of the yield curve implies
that inflation will likely remain benign. The Federal deficit reduction
translates into fewer new bonds at monthly auctions, and this reduces the supply
of high quality debt available at a time when credit worthiness becomes
increasingly important--a safe haven option. Going forward, while at near
cyclical lows, the fixed-income market will remain a viable portfolio asset.
Patricia L. Frost, CEO;
Michael E. Raney, CFA
3
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PORTFOLIO INVESTMENT RETURNS
Small/Mid Cap Equity Portfolio
Objective: The Small/Mid Cap Equity Portfolio seeks to provide investors
with maximum long-term capital appreciation. The Investment Advisor constructs a
diversified portfolio of small and medium capitalization common stocks.
Commentary: The Small/Mid Cap Equity Portfolio soared nearly 33% in the six
months ending September 30, 1997, nearly matching the sizzling small- and
mid-cap benchmarks. Secondary stocks, which have lagged blue-chips in recent
years, finally began to gain some ground in terms of relative performance.
Particularly strong returns were recorded in the financial, energy and
transportation sectors. Among the specific holdings that stood out were
Firstplus Financial, Dura Pharmaceuticals, TJX Companies, Ingersoll Rand,
Airborne Freight and Ensco International. In the Small/Mid Cap Portfolio we are
positioned with a moderately defensive stance as we head towards the end of the
year, emphasizing companies with competitive advantages within their respective
industries, low international exposure and solid balance sheets. Consistent with
our long-term strategies, we are careful to avoid large over- or underweightings
in a particular economic sector. Although secondary stocks have rallied sharply,
their relative performance has only recently improved. We think they have
further upside potential, and remain positive about the outlook for the
Portfolio.
COMPARISON OF CHANGE IN VALUE OF $10,000
Small/Mid Russell Russell Consumer
Cap Equity Midcap (TM) 2000(R) Price
Portfolio Index Index Index
05/10/94 $10,000 $10,000 $10,000 $10,000
03/31/95 11,938 11,261 11,495 10,272
03/31/96 16,520 15,190 14,539 10,563
03/31/97 18,197 16,185 14,611 10,855
09/30/97 25,142 20,822 19,507 10,936
TOTAL RETURNS for Periods Ending September 30, 1997
Inception
3 Months 1 Year 3 Years* to 9/30/97*
Small/Mid Cap Equity Portfolio 15.4% 41.1% 33.5% 31.2%
Russell Midcap(TM) Index 13.3 35.1 25.8 24.1
Russell 2000(R) Index 14.9 33.2 23.0 21.8
Consumer Price Index 0.6 2.2 2.6 2.7
*Annualized returns.
Inception date 5/10/94.
See page 32 for index descriptions. Total return assumes reinvestment of
dividends and distributions. Past performance is not predictive of future
results. Investment return will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
4
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Core Equity Portfolio
Objective: The Core Equity Portfolio seeks to maximize long-term capital
appreciation. The Fund invests primarily in a diversified portfolio of common
stocks of U.S. companies.
Commentary: Over the last six months the Core Equity Portfolio recorded
excellent performance results exceeding the return of the Standard & Poor's 500
Index by more than three percentage points. As we indicated in our last report,
we had been anticipating a period of improved relative performance for smaller
stocks, and had positioned the Core Portfolio accordingly. Our "growth at a
reasonable price" discipline led us to reduce many of the "mega-capitalization"
issues that reached our price targets, and to emphasize mid-cap stocks. Among
the mid-cap stocks that were particularly rewarding during this period were
Franklin Resources, Manor Care, Staples, Cadence Design and Noble Drilling.
Larger-cap shares contributing to outperformance included Household
International, Ford, IBM, General Electric and Bristol-Myers Squibb. As we
approach the end of the year our posture is moderately defensive, with
above-average exposure to energy and utilities, and below-average exposure to
technology and financials. However, we are still following our philosophy that
empasizes diversification in all sectors of the economy, and avoidance of large
over- or underweighting in any one sector.
COMPARISON OF CHANGE IN VALUE OF $10,000
Core Equity Standard & Poor's Consumer
Portfolio 500 Stock Index Price Index
05/10/94 $10,000 $10,000 $10,000
03/31/95 11,787 11,495 10,272
03/31/96 16,341 15,190 10,563
03/31/97 19,263 18,186 10,855
09/30/97 24,919 22,959 10,936
TOTAL RETURNS for Periods Ending September 30, 1997
Inception
3 Months 1 Year 3 Years* to 9/30/97*
Core Equity Portfolio 11.9% 42.2% 33.3% 30.9%
Standard & Poor's 500
Stock Index 7.5 40.4 29.9 27.8
Russell 1000(R) Index 8.7 39.3 29.4 27.4
Consumer Price Index 0.6 2.2 2.6 2.7
*Annualized returns.
Inception date 5/10/94.
See page 32 for index descriptions. Total return assumes reinvestment of
dividends and distributions. Past performance is not predictive of future
results. Investment return will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
5
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Portfolio Investment Returns, continued
Balanced Portfolio
Objective: The Balanced Portfolio seeks to provide investors with a balance
of long-term capital appreciation and current income. The Fund invests primarily
in a diversified portfolio of common stocks of U.S. companies, investment grade
intermediate-term debt securities and cash equivalent securities.
Commentary: The Balanced Portfolio rose more than 20% between March and
September, delivering "equity-like" returns while maintaining just 60-65% of its
assets in stocks. In addition to excellent returns from core positions in
large-cap issues such as IBM, General Electric and Marsh & McLennan, the
Balanced Portfolio also benefitted from the strong showing of mid-cap holdings
in Conseco, Arvin Industries and Southwest Airlines. While the equity component
of the Portfolio was the driving factor in recording outstanding six-month
results, the fixed-income portion of the Portfolio delivered solid returns as
well. Following a Federal Reserve rate hike in late March, interest rates rose,
but were nearly 3/4% lower by the end of September. The bond component is
invested in high-quality, intermediate term corporate and U.S. Government
issues. As of September 30, the asset mix of the Portfolio was 64% stocks, 33%
bonds and 3% cash. For investors who want to augment their exposure to the stock
market with the predictable income stream of bonds, the Balanced Portfolio
offers a potentially attractive investment.
COMPARISON OF CHANGE IN VALUE OF $10,000
Standard &
Balanced Poor's 500 Balanced Consumer
Portfolio Stock Index Index Price Index
05/10/94 $10,000 $10,000 $10,000 $10,000
03/31/95 11,223 11,495 11,034 10,272
03/31/96 14,094 15,190 13,241 10,563
03/31/97 15,762 18,186 15,044 10,855
09/30/97 18,959 22,959 17,133 10,936
TOTAL RETURNS for Periods Ending September 30, 1997
Inception
3 Months 1 Year 3 Years* to 9/30/97*
Balanced Portfolio 8.4% 28.3% 22.5% 20.8%
Balanced Index (50/40/10) 5.0 23.3 18.4 17.2
Standard & Poor's 500
Stock Index 7.5 40.4 29.9 27.8
Lehman Brothers Government/
Corporate Intermediate Bond
Index 2.7 8.2 8.2 7.7
Consumer Price Index 0.6 2.2 2.6 2.7
*Annualized returns.
Inception date 5/10/94
See page 32 for index descriptions. Total return assumes reinvestment of
dividends and distributions. Past performance is not predictive of future
results. Investment return will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
6
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Intermediate Fixed Income Portfolio
Objective: The Intermediate Fixed Income Portfolio seeks to provide
investors with current income. The Fund invests primarily in a diversified
portfolio of investment grade, intermediate-term debt securities providing
current income. The Portfolio does not use risky derivative instruments.
Commentary: The six-month period ending September 30, 1997 was evidenced by
increasing interest rate volatility in the fixed-income markets. Yields rose and
then fell to both the highest and lowest levels of calendar year 1997. After a
hike of 1/4% in the Federal Funds rate in late March, longer intermediate bonds
breached 7%, only to fall nearly 1% by late July. Overall for the period
interest rates fell nearly 3/4%. Contributing factors to this performance were
strong indications that the overall economy has continued to expand at a
moderate pace with modest upward pressure on inflation. The Federal Reserve took
a "wait and see" attitude toward further rate changes and voted on September 30
to pass on intervention. Corporate spreads to treasury issues have remained
historically tight, although some concern regarding overseas markets has reduced
liquidity. A modest barbell weighting and avoidance of the extremely rich
current five- and ten-year maturities characterize the Portfolio's positioning.
We continue to emphasize high quality issuers and expect a fairly neutral
interest rate environment going forward.
COMPARISON OF CHANGE IN VALUE OF $10,000
Intermediate Lehman Consumer
Fixed Income Intermediate Price
Portfolio Bond Index Index
05/10/94 $10,000 $10,000 $10,000
03/31/95 10,492 10,607 10,272
03/31/96 11,421 11,622 10,563
03/31/97 11,803 12,180 10,855
09/30/97 12,424 12,878 10,936
TOTAL RETURNS for Periods Ending September 30, 1997
Inception
3 Months 1 Year 3 Years* to 9/30/97*
Intermediate Fixed Income
Portfolio 2.7% 6.8% 7.0% 6.6%
Lehman Brothers Government/
Corporate Intermediate
Bond Index 2.7 8.2 8.2 7.7
91-Day Treasury Bill Index 1.3 5.2 5.4 5.3
Consumer Price Index 0.6 2.2 2.6 2.7
*Annualized returns.
Inception date 5/10/94.
See page 32 for index descriptions. Total return assumes reinvestment of
dividends and distributions. Past performance is not predictive of future
results. Investment return will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
7
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SCHEDULES OF INVESTMENTS
Small/Mid Cap Equity Portfolio
September 30, 1997 (unaudited)
COMMON STOCKS
(99.00%) Shares Value
- -------------------------------------------------------------------------------
AUTOS AND TRANSPORTATION (3.21%)
Air Transportation (1.28%)
Airborne Freight Corp. 11,500 $ 696,469
Alaska Air Group Inc. 38,550 1,267,331
Offshore Logistics Inc. 46,550 837,900
Southwest Airlines Co. 29,275 934,970
------------
Total Air Transportation 3,736,670
------------
Auto Parts/Original Equipment (1.93%)
Arvin Industries Inc. 83,050 3,259,713
Mascotech Inc. 113,600 2,328,800
------------
Total Auto Parts/Original Equipment 5,588,513
------------
TOTAL AUTOS AND TRANSPORTATION 9,325,183
------------
CONSUMER DISCRETIONARY (10.88%)
Household Furnishings (0.87%)
Newell Co. 64,000 2,560,000
------------
Jewelry Watches and Gemstones (0.90%)
Tiffany & Co. 61,375 2,608,438
------------
Publishing/Newspapers (0.45%)
The New York Times Co. 24,750 1,299,375
------------
Retail (5.77%)
Costco Companies Inc. 48,700 1,832,338
General Nutrition Companies Inc. 107,750 3,138,219
Intimate Brands 105,350 2,455,972
Staples Inc. 97,150 2,683,769
The Men's Wearhouse Inc. 84,200 3,136,450
The TJX Companies Inc. 62,650 1,914,741
Zale Corp. 62,295 1,615,776
------------
Total Retail 16,777,265
------------
Services/Commercial (0.89%)
Cognizant Corp. 63,200 2,575,400
------------
Textile Apparel Manufacturer (1.31%)
Tommy Hilfiger Corp. 76,150 3,802,741
------------
Toys (0.69%)
Cannondale Corp. 89,475 2,013,187
------------
TOTAL CONSUMER DISCRETIONARY 31,636,406
------------
CONSUMER STAPLES (5.69%)
Drug and Grocery Store Chains (0.68%)
Great Atlantic & Pacific Tea Co. 36,800 1,506,500
Quality Food Centers Inc. 15,000 476,250
------------
Total Drug and Grocery Store Chains 1,982,750
------------
Foods (5.01%)
Dean Foods Co. 44,750 2,069,687
Dole Food Co. Inc. 66,250 2,993,672
Earthgrains Co. 22,000 946,000
Flowers Industries Inc. 111,150 2,264,681
McCormick and Co. Inc. 108,150 2,602,359
Sysco Corp. 49,950 1,845,028
The Quaker Oats Co. 36,906 1,859,140
------------
Total Foods 14,580,567
------------
TOTAL CONSUMER STAPLES 16,563,317
------------
FINANCIAL SERVICES (16.46%)
Banks/Outside New York City (3.64%)
Comerica Inc. 10,000 789,375
Crestar Financial Corp. 66,075 3,097,266
Magna Group Inc. 39,825 1,570,598
Prime Bancshares Inc. 16,300 309,700
South Trust Corp. 42,450 2,090,663
Union Planters Corp. 23,600 1,318,650
UnionBanCal Corp. 16,575 1,433,737
------------
Total Banks/Outside New York City 10,609,989
------------
Diversified Financial Services (0.51%)
Liberty Financial Co. Inc. 28,150 1,477,875
------------
Finance Companies (2.04%)
Firstplus Financial Group Inc. 73,087 4,102,008
Green Tree Financial Corp. 39,100 1,837,700
------------
Total Finance Companies 5,939,708
------------
See Accompanying Notes to Financial Statements.
8
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Financial/Miscellaneous (0.43%)
Sotheby's Holdings Inc. 61,800 $ 1,255,312
------------
Insurance/Life (1.75%)
AmerUs Life Holdings Inc. 46,450 1,524,140
Conseco Inc. 72,950 3,560,872
------------
Total Insurance/Life 5,085,012
------------
Insurance/Multi-Line (1.87%)
Hartford Financial Services Group 45,775 3,939,511
Hartford Life Inc. 39,100 1,502,906
------------
Total Insurance/Multi-Line 5,442,417
------------
Insurance/Property and Casualty (2.52%)
Everest Reinsurance Holdings 100,500 4,120,500
W.R. Berkley Corp. 74,213 3,195,776
------------
Total Insurance/Property and Casualty 7,316,276
------------
Investment Management Company (0.65%)
Donaldson, Lufkin & Jenrette Securities Corp. 26,275 1,880,305
------------
Savings and Loan (3.05%)
Bank United Corp. 80,500 3,562,125
Charter One Financial Inc. 43,900 2,595,588
Sovereign Bancorp. Inc. 154,500 2,703,750
------------
Total Savings and Loan 8,861,463
------------
TOTAL FINANCIAL SERVICES 47,868,357
------------
HEALTH CARE (12.61%)
Biotechnology Research and Production (0.90%)
Nabi 133,200 974,025
Nexstar Pharmaceuticals Inc. 91,875 1,630,781
------------
Total Biotechnology Research and Production 2,604,806
------------
Drugs and Pharmaceuticals (6.16%)
BioChem Pharma Inc. 70,750 2,228,625
Centocor Inc. 37,000 1,759,813
Forest Laboratories Inc. 73,025 3,076,178
Genzyme Corp. 125,500 3,733,625
PathoGenesis Corp. 113,250 4,020,375
R.P. Scherer Corp. 50,150 3,106,166
------------
Total Drugs and Pharmaceuticals 17,924,782
------------
Electronics/Medical Systems (0.41%)
DENTSPLY International Inc. 21,300 1,192,800
------------
Health Care Facilities (2.19%)
Manor Care Inc. 95,600 3,178,700
Sun Healthcare Group Inc. 155,750 3,202,609
------------
Total Health Care Facilities 6,381,309
------------
Health Care Management Services (0.36%)
Medpartners Inc. 49,075 1,052,045
------------
Health Care Services (0.44%)
Olsten Corp. 68,550 1,272,459
------------
Medical and Dental Instruments and Supplies (2.15%)
Dura Pharmaceuticals Inc. 58,550 2,554,244
Mentor Corp. 77,750 2,468,562
Respironics Inc. 20,000 550,000
Sola International Inc. 19,650 674,241
------------
Total Medical and Dental Instruments and Supplies 6,247,047
------------
TOTAL HEALTH CARE 36,675,248
------------
INTEGRATED OILS (3.84%)
Oil/Integrated Domestic (3.84%)
Amerada Hess Corp. 30,750 1,896,890
Coastal Corp. 53,725 3,290,656
Pennzoil Co. 17,250 1,374,609
USX-Marathon Group 123,650 4,598,234
------------
Total Oil/Integrated Domestic 11,160,389
------------
MATERIALS AND PROCESSING (9.94%)
Aluminum (0.99%)
Reynolds Metals Co. 40,600 2,874,987
------------
Building Materials (0.70%)
Armstrong World Industries Inc. 30,150 2,021,934
------------
Chemicals (1.63%)
Sigma-Aldrich Corp. 42,500 1,399,844
The B.F. Goodrich Co. 73,850 3,341,713
------------
Total Chemicals 4,741,557
------------
Fertilizers (0.42%)
Mississippi Chemical Corp. 62,550 1,219,725
------------
Metals and Minerals Miscellaneous (1.41%)
Titanium Metals Corp. 110,200 4,104,950
------------
Metal Fabricating (2.04%)
Precision Castparts Corp. 47,975 3,118,375
Wyman-Gordon Co. 107,100 2,811,375
------------
Total Metal Fabricating 5,929,750
------------
Paints and Coatings (1.10%)
H.B. Fuller Co. 45,275 2,453,339
RPM Inc. 36,600 750,300
------------
Total Paints and Coatings 3,203,639
------------
Paper (0.73%)
Fort James Corp. 46,350 2,123,409
------------
See Accompanying Notes to Financial Statements.
9
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Schedule of Investments--Small/Mid Cap Equity Portfolio, continued
Textile Products (0.92%)
Mohawk Industries Inc. 97,862 $ 2,678,972
------------
TOTAL MATERIALS AND PROCESSING 28,898,923
------------
OTHER (2.09%)
Multi-Sector Companies (2.09%)
Crane Co. 72,000 2,961,000
Lancaster Colony Corp. 58,950 3,131,719
------------
Total Multi-Sector Companies 6,092,719
------------
OTHER ENERGY (5.32%)
Energy/Miscellaneous (1.62%)
Swift Energy Co. 124,200 3,500,888
Valero Energy Corp. 36,750 1,205,859
------------
Total Energy/Miscellaneous 4,706,747
------------
Machinery/Oil Well Equipment and Services (0.88%)
Noble Drilling Corp. 79,200 2,554,200
------------
Offshore Drilling (0.47%)
Ensco International Inc. 34,650 1,366,509
------------
Oil/Crude Producers (2.35%)
Anadarko Petroleum Corp. 27,750 1,992,797
Burlington Resources Inc. 45,500 2,334,719
Comstock Resources Inc. 108,200 1,251,063
Nuevo Energy Co. 26,525 1,269,884
------------
Total Oil/Crude Producers 6,848,463
------------
TOTAL OTHER ENERGY 15,475,919
------------
PRODUCER DURABLES (9.40%)
Aerospace (0.23%)
Northrup Grumman Corp. 5,600 679,700
------------
Diversified Production (0.62%)
General Signal Corp. 42,000 1,816,500
------------
Identification Control and Filter Devices (4.45%)
American Power Conversion 107,650 3,027,656
Computer Products Inc. 76,450 2,274,388
Flowserve Corp. 64,100 1,914,988
Honeywell Inc. 57,900 3,890,156
Hubbell Inc. 39,350 1,819,938
------------
Total Identification Control and Filter Devices 12,927,126
------------
Machine Tools (1.01%)
Snap-on Inc. 63,525 2,926,120
------------
Machinery/Agricultural (0.58%)
AGCO Corp. 53,600 1,698,450
------------
Machinery/Industrial and Specialty (0.84%)
Ingersoll-Rand Co. 56,800 2,445,950
------------
Production Technology Equipment (0.84%)
Dynatech Corp. 59,575 2,446,298
------------
Telecommunications Equipment (0.83%)
General Cable Corp. 67,900 2,410,450
------------
TOTAL PRODUCER DURABLES 27,350,594
------------
TECHNOLOGY (12.22%)
Communications Technology (1.61%)
Premiere Technologies Inc. 58,450 1,994,606
Scientific-Atlanta Inc. 118,950 2,691,244
------------
Total Communications Technology 4,685,850
------------
Computer Services Software and Systems (7.14%)
Adobe Systems Inc. 84,650 4,264,244
Cadence Design Systems Inc. 126,650 6,775,775
Parametric Technology Corp. 59,950 2,645,294
Sabre Group Holdings Inc. 69,400 2,485,387
Symantec Corp. 102,600 2,334,150
Systems and Computer Technology 44,250 1,994,016
Wonderware Corp. 15,500 284,813
------------
Total Computer Services Software and Systems 20,783,679
------------
Computer Technology (1.97%)
Cabletron Systems Inc. 87,100 2,787,200
Computer Sciences Corp. 27,250 1,927,938
Tandy Corp. 30,600 1,028,925
------------
Total Computer Technology 5,744,063
------------
Electronics/Technology (1.50%)
Symbol Technologies Inc. 99,075 4,353,108
------------
TOTAL TECHNOLOGY 35,566,700
------------
UTILITIES AND REITs (7.34%)
Real Estate Investment Trusts (1.98%)
American Health Properties Inc. 26,950 660,275
Innkeepers USA Trust 60,650 1,042,422
LTC Properties Inc. 45,000 855,000
Nationwide Health Properties Inc. 79,000 1,900,937
Omega Healthcare Investors Inc. 35,950 1,294,200
------------
Total Real Estate Investment Trusts 5,752,834
------------
Utilities/Electrical (2.50%)
FPL Group Inc. 32,025 1,641,281
New York State Electric & Gas 46,875 1,259,766
Pinnacle West Capital Corp. 130,225 4,378,816
------------
Total Utilities/Electrical 7,279,863
------------
See Accompanying Notes to Financial Statements.
10
<PAGE>
Utilities/Gas Distributors (2.02%)
Columbia Gas System Inc. 46,250 $ 3,237,500
Consolidated Natural Gas Co. 45,200 2,630,075
------------
Total Utilities/Gas Distributors 5,867,575
------------
Utilities/Miscellaneous (0.38%)
Citizens Utilities Co. 119,737 1,107,567
------------
Utilities/Telecommunications (0.46%)
Century Telephone Enterprises Inc. 30,725 1,351,900
------------
TOTAL UTILITIES AND REITs 21,359,739
------------
TOTAL COMMON STOCKS (cost $244,140,369) $287,973,494
------------
SHORT-TERM INVESTMENTS
(3.03%) Par Value Value
- -------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (3.03%)
American Family
5.1553% 12-31-2031 $1,306,042 $1,306,042
General Mills Inc.
5.1350% 12-31-2031 1,211,367 1,211,367
Johnson Controls Inc.
5.1650% 12-31-2031 4,033,447 4,033,447
Pitney Bowes
5.1441% 12-31-2031 1,618,881 1,618,881
Wisconsin Electric
5.1852% 12-31-2031 647,825 647,825
TOTAL VARIABLE RATE DEMAND NOTES (cost $8,817,562) 8,817,562
------------
TOTAL SHORT-TERM INVESTMENTS (cost $8,817,562) $8,817,562
------------
TOTAL INVESTMENTS IN SECURITIES (102.03%)(cost $252,957,931) $296,791,056
------------
LIABILITIES IN EXCESS OF OTHER ASSETS (-2.03%) ($5,914,607)
------------
NET ASSETS (100.00%) $290,876,449
============
Core Equity Portfolio
September 30, 1997 (unaudited)
COMMON STOCKS
(99.43%) Shares Value
- -------------------------------------------------------------------------------
BASIC INDUSTRY (5.81%)
Chemical/Fertilizer (0.26%)
Mississippi Chemical Corp. 54,250 $ 1,057,875
------------
Chemical/Major (0.38%)
E.I. duPont de Nemours and Co. 25,600 1,576,000
------------
Chemical/Specialty (1.74%)
H.B. Fuller Co. 47,425 1,486,092
RPM Inc. 22,050 452,025
Sigma-Aldrich Corp. 42,000 1,383,375
The B.F. Goodrich Co. 85,900 3,886,975
------------
Total Chemical/Specialty 7,208,467
------------
Metals (2.50%)
Aluminum Co. of America 90,050 7,384,100
Titanium Metals Corp. 79,850 2,974,413
------------
Total Metals 10,358,513
------------
Paper and Forest Products (0.93%)
Fort James Corp. 84,025 3,849,395
------------
TOTAL BASIC INDUSTRY 24,050,250
------------
CAPITAL GOODS (5.62%)
Aerospace/Industrial (2.08%)
Crane Co. 54,050 2,222,806
Ingersoll-Rand Co. 629,990 2,712,894
Precision Castparts Corp. 26,475 1,720,875
Wyman-Gordon Co. 76,800 2,016,000
------------
Total Aerospace/Industrial 8,672,575
------------
See Accompanying Notes to Financial Statements.
11
<PAGE>
Schedule of Investments--Core Equity Portfolio, continued
Agriculture/Construction Equipment (0.35%)
AGCO Corp. 44,550 $ 1,411,678
Deere & Co. 400 21,500
------------
Total Agriculture/Construction Equipment 1,433,178
------------
Electric Equipment (2.36%)
General Electric Co. 103,700 7,058,081
General Signal Corp. 62,400 2,698,800
------------
Total Electric Equipment 9,756,881
------------
Miscellaneous Capital Goods (0.83%)
Flowserve Corp. 56,150 1,677,481
Hubbell Inc. 37,600 1,739,000
------------
Total Miscellaneous Capital Goods 3,416,481
------------
TOTAL CAPITAL GOODS 23,279,115
------------
CONSUMER CYCLICAL (9.87%)
Automotive and Related (0.78%)
Snap-on Inc. 70,475 3,246,255
------------
Autos and Auto Parts (0.82%)
Arvin Industries Inc. 19,900 781,075
Ford Motor Co. 48,100 2,176,525
Mascotech Inc. 20,400 418,200
------------
Total Autos and Auto Parts 3,375,800
------------
Building Materials (0.68%)
Armstrong World Industries Inc. 41,812 2,804,017
------------
Miscellaneous Consumer Cyclical (2.16%)
Cannondale Corp. 11,000 247,500
Mohawk Industries 96,250 2,634,844
Sotheby's Holdings Inc. 67,000 1,360,937
Tommy Hilfiger Corp. 94,375 4,712,852
------------
Total Miscellaneous Consumer Cyclical 8,956,133
------------
Retail (5.43%)
Costco Companies Inc. 49,100 1,847,388
Federated Department Stores Inc. 16,650 718,031
General Nutrition Companies Inc. 90,450 2,634,356
Intimate Brands 129,525 3,019,552
Staples Inc. 126,300 3,489,038
Tandy Corp. 36,250 1,218,906
Toys "R" Us Inc. 118,925 4,221,838
The Men's Wearhouse Inc. 40,950 1,525,388
The TJX Companies Inc. 48,050 1,468,528
Tiffany & Co. 54,750 2,326,875
------------
Total Retail 22,469,900
------------
TOTAL CONSUMER CYCLICAL 40,852,105
------------
CONSUMER SERVICES (2.68%)
Entertainment (0.38%)
The Walt Disney Co. 19,500 1,572,188
------------
Healthcare Management (0.57%)
Manor Care Inc. 36,800 1,223,600
Olsten Corp. 61,275 1,137,417
------------
Total Healthcare Management 2,361,017
------------
Healthcare Services (0.71%)
Medpartners Inc. 61,525 1,318,942
Sun Healthcare Group Inc. 78,450 1,613,128
------------
Total Healthcare Services 2,932,070
------------
Miscellaneous Consumer Services (0.62%)
Cognizant Corp. 63,450 2,585,588
------------
Publishing/Newspaper (0.40%)
The New York Times Co. 31,300 1,643,250
------------
TOTAL CONSUMER SERVICES 11,094,113
------------
CONSUMER STAPLES (22.07%)
Biotechnology (2.07%)
BioChem Pharma Inc. 2,950 92,925
Centocor Inc. 42,800 2,035,675
Genzyme Corp. 109,675 3,262,831
Nabi 114,925 840,389
Nexstar Pharmaceuticals Inc. 45,000 798,750
PathoGenesis Corp. 43,500 1,544,250
------------
Total Biotechnology 8,574,820
------------
Drugs (8.27%)
American Home Products Corp. 88,075 6,429,475
Bristol-Myers Squibb Co. 120,400 9,963,100
Dura Pharmaceuticals Inc. 15,250 665,281
Forest Laboratories Inc. 72,750 3,073,019
Johnson & Johnson 50,125 2,888,453
R.P. Scherer Corp. 47,200 2,923,450
SmithKline Beecham PLC 169,950 8,306,306
------------
Total Drugs 34,249,084
------------
Food Merchandising (0.48%)
Great Atlantic & Pacific Tea Co. 38,100 1,209,675
Quality Food Centers Inc. 18,600 761,438
------------
Total Food Merchandising 1,971,113
------------
Foods (7.43%)
ConAgra Inc. 18,775 1,239,150
Dean Foods Co. 36,125 1,670,781
Dole Food Co. Inc. 83,325 3,765,248
Flowers Industries Inc. 111,900 2,279,963
See Accompanying Notes to Financial Statements.
12
<PAGE>
General Mills Inc. 66,725 $4,599,855
H.J. Heinz Co. 67,100 3,099,181
McCormick and Co. Inc. 111,400 2,680,563
Pepsico Inc. 142,950 5,798,409
Sara Lee Corp. 17,800 916,700
Sysco Corp. 55,550 2,051,878
The Quaker Oats Co. 53,200 2,679,950
------------
Total Foods 30,781,678
------------
Hospital Supplies (0.52%)
DENTSPLY International Inc. 38,200 2,139,200
------------
Household Products (0.81%)
Newell Co. 83,525 3,341,000
------------
Medical Devices (0.44%)
Mentor Corp. 57,600 1,828,000
------------
Miscellaneous Consumer Staples (0.53%)
Lancaster Colony Corp. 41,475 2,203,359
------------
Tobacco (1.52%)
Philip Morris Co. Inc. 151,450 6,294,641
------------
TOTAL CONSUMER STAPLES 91,383,695
------------
ENERGY (11.24%)
Miscellaneous Energy (0.06%)
Offshore Logistics Inc. 13,950 251,100
------------
Natural Gas Diversified (1.15%)
Coastal Corp. 77,450 4,743,812
------------
Oil/Gas Production (2.09%)
Anadarko Petroleum Corp. 28,950 2,078,972
Burlington Resources Inc. 71,750 3,681,672
Comstock Resources Inc. 74,800 864,875
Nuevo Energy Co. 10,000 478,750
Swift Energy Co. 55,250 1,557,359
------------
Total Oil/Gas Production 8,661,628
------------
Oil/Integrated Domestic (4.46%)
Amerada Hess Corp. 56,450 3,482,259
Pennzoil Co. 30,000 2,390,625
Phillips Petroleum Co. 75,150 3,879,619
Valero Energy Corp. 51,600 1,693,125
USX-Marathon Group 188,400 7,006,125
------------
Total Oil/Integrated Domestic 18,451,753
------------
Oil/Integrated International (2.98%)
British Petroleum Co. PLC 36,400 3,305,575
Mobil Corp. 122,100 9,035,400
------------
Total Oil/Integrated International 12,340,975
------------
Oil Services (0.50%)
Noble Drilling Corp. 64,750 2,088,188
------------
TOTAL ENERGY 46,537,456
------------
FINANCIAL (15.14%)
Banks (5.83%)
Comerica Inc. 2,950 232,866
Crestar Financial Corp. 66,035 3,095,391
Fleet Financial Group 77,050 5,051,591
Magna Group Inc. 1,675 66,058
PNC Bank Corp. 161,600 7,888,100
Sovereign Bancorp Inc. 130,550 2,284,625
The Chase Manhattan Corp. 42,125 4,970,750
Union Planters Corp. 10,000 558,750
------------
Total Banks 24,148,131
------------
Finance Companies (3.20%)
Firstplus Financial Group Inc. 70,213 3,940,705
Green Tree Financial Corp. 76,800 3,609,600
Household International Inc. 50,400 5,704,650
------------
Total Finance Companies 13,254,955
------------
Financial Services (1.33%)
Marsh & McLennan Co. Inc. 71,650 5,490,181
------------
Insurance (3.53%)
AmerUs Life Holdings Inc. 10,000 328,125
Conseco Inc. 67,500 3,294,844
Everest Reinsurance Holdings 72,050 2,954,050
Hartford Financial Services Group 67,875 5,841,492
W.R. Berkley Corp. 50,662 2,181,654
------------
Total Insurance 14,600,165
------------
Miscellaneous Financial (0.46%)
Liberty Financial Co. Inc. 36,350 1,908,375
------------
Savings and Loan (0.79%)
Bank United Corp. 44,250 1,958,063
Charter One Financial Inc. 22,400 1,324,400
------------
Total Savings and Loan 3,282,463
------------
TOTAL FINANCIAL 62,684,270
------------
See Accompanying Notes to Financial Statements.
13
<PAGE>
Schedule of Investments--Core Equity Portfolio, continued
TECHNOLOGY (17.82%)
Aerospace (1.09%)
The Boeing Co. 76,500 $ 4,164,469
Northrup Grumman Corp. 2,600 315,575
------------
Total Aerospace 4,480,044
------------
Communications Peripherals (0.12%)
Computer Products Inc. 17,200 511,700
------------
Computer Peripherals (0.48%)
American Power Conversion Corp. 70,000 1,968,750
------------
Computer Software (5.84%)
Adobe Systems Inc. 89,400 4,503,525
Cadence Design Systems Inc. 144,475 7,729,411
Microsoft Corp. 60,070 7,948,012
Parametric Technology Co. 49,500 2,184,188
Symantec Corp. 80,150 1,823,413
------------
Total Computer Software 24,188,549
------------
Computer Services (1.45%)
Computer Sciences Corp. 38,900 2,752,175
Sabre Group Holdings Inc. 81,075 2,903,498
Systems and Computer Technology 8,150 367,259
------------
Total Computer Services 6,022,932
------------
Computer Systems (2.47%)
International Business Machines 96,725 10,246,805
------------
Electronic Systems (2.07%)
Honeywell Inc. 79,250 5,324,609
Symbol Technologies Inc. 74,200 3,260,163
------------
Total Electronic Systems 8,584,772
------------
Miscellaneous Technology (0.43%)
Dynatech Corp. 21,400 878,738
General Cable Corp. 25,500 905,250
------------
Total Miscellaneous Technology 1,783,988
------------
Networking Equipment (1.00%)
Cabletron Systems Inc. 42,350 1,355,200
Cisco Systems Inc. 38,200 2,790,987
------------
Total Networking Equipment 4,146,187
------------
Semi-Conductors and Related (0.83%)
Intel Corp. 37,150 3,429,409
------------
Telecommunications Equipment (2.04%)
Motorola Inc. 71,000 5,103,125
Scientific-Atlanta Inc. 147,250 3,331,531
------------
Total Telecommunications Equipment 8,434,656
------------
TOTAL TECHNOLOGY 73,797,792
------------
TRANSPORTATION (0.57%)
Airlines (0.57%)
Alaska Air Group Inc. 12,575 413,403
Southwest Airlines Co. 61,225 1,955,373
------------
Total Airlines 2,368,776
------------
UTILITIES AND REITs (8.60%)
Communications (4.90%)
Ameritech Corp. 108,650 7,225,225
Bell Atlantic Corp. 72,310 5,816,436
Citizens Utilities Co. 6,400 59,200
SBC Communications Inc. 116,950 7,177,806
------------
Total Communications 20,278,667
------------
Electric (1.65%)
Duke Power Co. 29,700 1,468,294
FPL Group Inc. 24,325 1,246,656
New York State Electric & Gas 57,475 1,544,641
Pacific Gas & Electric Co. 277 6,423
Pinnacle West Capital Corp. 77,575 2,608,459
------------
Total Electric 6,874,473
------------
Natural Gas (1.25%)
Columbia Gas Systems Inc. 61,225 4,285,750
Consolidated Natural Gas Co. 15,000 872,812
------------
Total Natural Gas 5,158,562
------------
Real Estate Investment Trusts (0.80%)
American Health Properties Inc. 12,925 316,663
Innkeepers USA Trust 63,900 1,098,281
LTC Properties Inc. 42,700 811,300
Nationwide Health Properties Inc. 31,500 757,968
Omega Health Investors Inc. 8,700 313,200
------------
Total Real Estate Investment Trusts 3,297,412
------------
TOTAL UTILITIES AND REITs 35,609,114
------------
TOTAL COMMON STOCKS (cost $358,499,477) $411,656,686
------------
See Accompanying Notes to Financial Statements.
14
<PAGE>
SHORT TERM INVESTMENTS
(1.09%) Par Value Value
- -------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (1.09%)
American Family
5.1553% 12-31-2031 $360,430 $360,430
General Mills Inc.
5.1350% 12-31-2031 560,000 560,000
Johnson Controls Inc.
5.1650% 12-31-2031 1,421,054 1,421,054
Pitney Bowes
5.1441% 12-31-2031 240,000 240,000
Sara Lee
5.1240% 12-31-2031 250,000 250,000
Warner-Lambert
5.1150% 12-31-2031 736,134 736,134
Wisconsin Electric
5.1852% 12-31-2031 $955,548 $955,548
------------
TOTAL VARIABLE RATE DEMAND NOTES (cost $4,523,166) 4,523,166
------------
TOTAL SHORT-TERM INVESTMENTS (cost $4,523,166) $4,523,166
------------
TOTAL INVESTMENTS IN SECURITIES (100.52%) (cost $363,022,643) $416,179,852
------------
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.52%) ($2,161,069)
------------
NET ASSETS (100.00%) $414,018,783
============
Balanced Portfolio
September 30, 1997 (unaudited)
LONG-TERM DEBT SECURITIES
(31.60%) Par Value Value
- -------------------------------------------------------------------------------
CORPORATE BONDS (16.90%)
FINANCE (16.36%)
Automobile (1.52%)
Ford Motor Credit Co.
6.3750% 04-15-2000 $190,000 $190,785
Ford Motor Credit Medium Term Note
5.9000% 06-09-1998 75,000 75,096
GMAC Medium Term Notes
5.5000% 12-15-2001 500,000 480,981
7.5000% 11-04-1997 50,000 50,084
------------
Total Automobile 796,946
------------
Consumers (3.10%)
American General Finance
6.8750% 01-15-2000 50,000 50,772
Beneficial Corp. Medium Term Note
8.0500% 04-02-1999 200,000 205,806
6.3500% 12-03-2001 700,000 698,359
Sears Roebuck Acceptance Corp.
Medium Term Note
7.1100% 06-19-2001 $650,000 $665,842
------------
Total Consumers 1,620,779
------------
Diversified (3.72%)
Associates Corp. of North America
6.0000% 06-15-2000 25,000 24,884
7.5000% 04-15-2002 100,000 104,490
Associates Corp. of North America
Medium Term Notes
8.0000% 10-27-1999 50,000 51,777
6.3750% 06-01-2000 75,000 75,308
6.8400% 07-03-2001 700,000 710,627
Commercial Credit TRV
6.8750% 05-01-2002 200,000 203,389
6.5000% 06-01-2005 500,000 493,993
General Electric Capital
6.6600% 05-01-2018/00 75,000 75,876
Household Finance Co. Medium Term Note
7.0000% 05-15-2000 200,000 203,751
------------
Total Diversified 1,944,095
------------
See Accompanying Notes to Financial Statements.
15
<PAGE>
Schedule of Investments--Balanced Portfolio, continued
Insurance (1.54%)
Allstate Corp.
5.8750% 06-15-1998 $150,000 $150,092
Travelers PPTY
6.7500% 04-15-2001 500,000 505,970
USLIFE Corp.
6.7500% 01-15-1998 150,000 150,438
------------
Total Insurance 806,500
------------
Leasing Companies (1.82%)
International Lease Finance
6.2500% 10-15-2000 500,000 500,564
International Lease Finance
Medium Term Note
6.3400% 02-01-2002 450,000 448,559
------------
Total Leasing Companies 949,123
------------
Other (4.66%)
Dean Witter Discovry and Co.
6.2500% 03-15-2000 30,000 30,124
6.7500% 08-15-2000 200,000 203,334
Merrill Lynch
6.3750% 03-30-1999 50,000 50,222
7.3750% 08-17-2002 30,000 31,206
7.0500% 04-15-2003 55,000 55,511
Merrill Lynch Medium Term Note
7.0500% 06-04-2001 350,000 357,994
Morgan Stanley Group
6.1250% 10-01-2003 215,000 210,506
Morgan Stanley Group
Medium Term Note
5.7500% 02-15-2001 500,000 492,518
Smith Barney Shearson
6.6250% 07-01-2002 1,000,000 1,006,417
------------
Total Other 2,437,832
------------
TOTAL FINANCE 8,555,275
------------
INDUSTRIAL (0.54%)
Automotive (0.05%)
Ford Motor Co.
7.5000% 11-15-1999 25,000 25,667
------------
Energy and Related Goods and Services (0.30%)
Texaco Capital
Medium Term Note
7.2500% 08-01-2002 150,000 154,865
------------
Medical and Related Goods and Services (0.19%)
McKesson Corp.
8.6250% 02-01-1998 50,000 50,477
SmithKline Beecham PLC Corp.
Medium Term Note
6.6250% 10-01-2005 50,000 50,148
------------
Total Medical and Related Goods and Services 100,625
------------
TOTAL INDUSTRIAL 281,157
------------
TOTAL CORPORATE BONDS 8,836,432
------------
U.S. GOVERNMENT SECURITIES (14.30%)
U.S. TREASURY NOTES
7.1250% 02-29-2000 400,000 411,250
6.7500% 04-30-2000 1,000,000 1,020,938
5.7500% 10-31-2000 700,000 696,938
7.7500% 02-15-2001 970,000 1,023,654
7.5000% 11-15-2001 400,000 421,875
6.3750% 08-15-2002 475,000 482,422
6.2500% 02-15-2003 425,000 429,250
5.7500% 08-15-2003 700,000 689,501
7.2500% 08-15-2004 1,200,000 1,276,875
6.5000% 05-15-2005 1,000,000 1,021,876
------------
TOTAL U.S. TREASURY NOTES 7,474,579
------------
FOREIGN BONDS
(U.S. DOLLAR DENOMINATED) (0.40%)
Hydro Quebec
7.3750% 02-01-2003 50,000 51,914
Ontario Global Bond
7.3750% 01-27-2003 150,000 156,511
------------
TOTAL FOREIGN BONDS 208,425
------------
TOTAL LONG-TERM DEBT SECURITIES (cost $16,326,649) $16,519,436
COMMON STOCKS
(63.94%) Shares Value
- -------------------------------------------------------------------------------
BASIC INDUSTRY (4.12%)
Chemical/Major (0.42%)
E.I. duPont de Nemours and Co. 3,600 $ 221,625
------------
Chemical/Specialty (1.26%)
H.B. Fuller Co. 3,000 162,563
RPM Inc. 5,550 113,775
Sigma-Aldrich Corp. 3,050 100,459
The B.F. Goodrich Co. 6,250 282,813
------------
Total Chemical/Specialty 659,610
------------
See Accompanying Notes to Financial Statements.
16
<PAGE>
Metals (1.81%)
Aluminum Co. of America 7,250 $ 594,500
Reynolds Metals Co. 1,750 123,922
Titanium Metals Corp. 6,100 227,225
------------
Total Metals 945,647
------------
Paper and Forest Products (0.63%)
Fort James Corp. 7,150 327,559
------------
TOTAL BASIC INDUSTRY 2,154,441
------------
CAPITAL GOODS (3.78%)
Aerospace/Industrial (1.39%)
Crane Co. 4,100 168,612
Ingersoll-Rand Co. 5,025 216,389
Precision Castparts Corp. 2,425 157,625
Wyman-Gordon Co. 7,000 183,750
------------
Total Aerospace/Industrial 726,376
------------
Agriculture/Construction Equipment (0.13%)
Deere & Co. 1,250 67,188
Electric Equipment (2.26%)
General Electric Co. 8,500 578,531
General Signal Corp. 5,125 221,656
Motorola Inc. 5,300 380,937
------------
Total Electric Equipment 1,181,124
------------
TOTAL CAPITAL GOODS 1,974,688
------------
CONSUMER CYCLICAL (6.20%)
Autos and Auto Parts (0.76%)
Arvin Industries Inc. 3,500 137,375
Ford Motor Co. 3,050 138,013
Mascotech Inc. 5,950 121,975
------------
Total Autos and Auto Parts 397,363
------------
Automotive and Related (0.63%)
Snap-on Inc. 7,100 327,044
------------
Building Materials (0.42%)
Armstrong World Industries Inc. 3,250 217,953
------------
Miscellanous Consumer Cyclical (0.53%)
Mohawk Industries 5,350 146,456
Tommy Hilfiger Corp. 3,500 130,375
------------
Total Miscellanous Consumer Cyclical 276,831
------------
Retail (3.87%)
Costco Companies Inc. 12,000 279,750
Federated Department Stores Inc. 3,000 100,875
General Nutrition Companies Inc. 7,900 394,506
Intimate Brands 10,125 359,438
Staples Inc. 6,450 242,681
Tandy Corp. 1,200 51,750
The Men's Wearhouse Inc. 11,400 332,025
Toys "R" Us Inc. 9,500 262,438
------------
Total Retail 2,023,463
------------
TOTAL CONSUMER CYCLICAL 3,242,654
------------
CONSUMER SERVICES (1.38%)
Healthcare Management (0.29%)
Olsten Corp. 8,150 151,284
------------
Healthcare Services (0.47%)
Medpartners Inc. 5,400 115,763
Sun Healthcare Group Inc. 6,200 127,488
------------
Total Healthcare Services 243,251
------------
Miscellaneous Consumer Services (0.35%)
Cognizant Corp. 4,550 185,412
------------
Publishing/Newspaper (0.27%)
The New York Times Co. 2,675 140,438
------------
TOTAL CONSUMER SERVICES 720,385
------------
CONSUMER STAPLES (13.86%)
Biotechnology (1.17%)
Centocor Inc. 2,725 129,608
Genzyme Corp. 9,900 294,525
Nabi 10,875 79,523
PathoGenesis Corp. 3,000 106,500
------------
Total Biotechnology 610,156
------------
Drugs (5.13%)
American Home Products Corp. 6,500 474,500
Bristol-Myers Squibb Co. 9,775 808,881
Forest Laboratories Inc. 6,000 252,750
Johnson & Johnson 4,125 237,703
R.P. Scherer Corp. 4,550 281,816
SmithKline Beecham PLC 12,850 628,044
------------
Total Drugs 2,683,694
------------
Food Merchandising (0.79%)
Great Atlantic & Pacific Tea Co. 3,000 95,250
McCormick and Co. Inc. 8,500 204,531
Quality Food Centers Inc. 2,800 114,625
------------
Total Food Merchandising 414,406
------------
Foods (4.50%)
ConAgra Inc. 1,350 89,100
Dole Food Co. Inc. 9,350 422,503
Flowers Industries Inc. 12,500 254,688
See Accompanying Notes to Financial Statements.
17
<PAGE>
Schedule of Investments--Balanced Portfolio, continued
General Mills Inc. 5,100 $351,581
H.J. Heinz Co. 6,225 287,517
Pepsico Inc. 13,325 540,495
Sara Lee Corp. 2,000 103,000
The Quaker Oats Co. 6,000 302,250
------------
Total Foods 2,351,134
------------
Hospital Supplies (0.37%)
DENTSPLY International Inc. 3,450 193,200
------------
Household Products (0.55%)
Newell Co. 7,250 290,000
------------
Medical Devices (0.36%)
Mentor Corp. 6,000 190,500
------------
Tobacco (0.99%)
Philip Morris Co. Inc. 12,475 518,492
------------
TOTAL CONSUMER STAPLES 7,251,582
------------
ENERGY (7.16%)
Miscellaneous Energy (0.20%)
Offshore Logistics Inc. 5,800 104,400
------------
Natural Gas Diversified (0.57%)
Coastal Corp. 4,900 300,125
------------
Oil/Gas Production (1.28%)
Anadarko Petroleum Corp. 2,250 161,578
Burlington Resources Inc. 5,300 271,956
Comstock Resources Inc. 7,700 89,031
Swift Energy Co. 5,000 140,938
------------
Total Oil/Gas Production 663,503
------------
Oil/Integrated Domestic (2.44%)
Amerada Hess Corp. 3,400 209,737
Phillips Petroleum Co. 6,175 318,784
Pennzoil Co. 1,700 135,469
USX-Marathon Group 11,600 431,375
Valero Energy Corp. 5,450 178,829
------------
Total Oil/Integrated Domestic 1,274,194
------------
Oil/Integrated International (1.98%)
British Petroleum Co. PLC 3,500 317,844
Mobil Corp. 9,700 717,800
------------
Total Oil/Integrated International 1,035,644
------------
Oil Services (0.69%)
Ensco International Inc. 2,750 108,453
Noble Drilling Corp. 7,900 254,775
------------
Total Oil Services 363,228
------------
TOTAL ENERGY 3,741,094
------------
FINANCIAL (9.36%)
Banks (4.46%)
Comerica Inc. 2,000 157,875
Crestar Financial Corp. 5,550 260,156
Fleet Financial Group 5,600 367,150
PNC Bank Corp. 14,750 719,984
Sovereign Bancorp. Inc. 13,320 233,100
The Chase Manhattan Corp. 3,600 424,800
Union Planters Corp. 3,000 167,625
------------
Total Banks 2,330,690
------------
Finance Companies (1.71%)
Firstplus Financial Group Inc. 4,900 275,013
Green Tree Financial Corp. 6,000 282,000
Household International Inc. 3,000 339,563
------------
Total Finance Companies 896,576
------------
Financial Services (0.89%)
Marsh & McLennan Co. Inc. 6,100 467,413
------------
Insurance (1.69%)
Conseco Inc. 2,550 124,472
Hartford Financial Services Group 4,900 421,706
Hartford Life Inc. 3,000 115,313
W.R. Berkley Corp. 5,138 221,234
------------
Total Insurance 882,725
------------
Miscellaneous Financial (0.23%)
Liberty Financial Co. Inc. 2,250 118,125
------------
Savings and Loan (0.38%)
Bank United Corp. 4,500 199,125
------------
TOTAL FINANCIAL 4,894,654
------------
PRODUCER DURABLES (1.39%)
Identification Control and Filter Devices (1.15%)
Honeywell Inc. 6,600 443,438
Hubbell Inc. 3,400 157,250
------------
Total Identification Control and Filter Devices 600,688
------------
Machinery/Agriculture (0.24%)
Agco Corp. 4,000 126,750
------------
TOTAL PRODUCER DURABLES 727,438
------------
TECHNOLOGY (10.36%)
Aerospace (0.68%)
The Boeing Co. 6,500 353,844
------------
Communications Peripherals (0.14%)
Computer Products Inc. 2,500 74,375
------------
See Accompanying Notes to Financial Statements.
18
<PAGE>
Computer Peripherals (0.34%)
American Power Conversion Corp. 6,300 $ 177,188
------------
Computer Software (3.85%)
Adobe Systems Inc. 8,700 438,262
Cadence Design Systems Inc. 11,250 601,875
Parametric Tech Corp. 3,650 161,056
Microsoft Corp. 5,050 668,178
Symantec Corp. 6,250 142,188
------------
Total Computer Software 2,011,559
------------
Computer Service (0.71%)
Computer Sciences Corp. 3,200 226,400
Sabre Group Holdings Inc. 4,050 145,041
------------
Total Computer Service 371,441
------------
Computer Systems (1.61%)
International Business Machines 7,975 844,851
------------
Electronic Systems (0.41%)
Symbol Technologies Inc. 4,925 216,392
------------
Miscellaneous Technology (0.71%)
Dynatech Corp. 5,650 232,003
General Cable Corp. 3,950 140,225
------------
Total Miscellaneous Technology 372,228
------------
Miscellaneous Telecommunicatons Equipment (0.62%)
Scientific-Atlanta Inc. 14,250 322,406
------------
Networking Equipment (0.78%)
Cabletron Systems Inc. 5,950 190,400
Cisco Systems Inc. 2,950 215,534
------------
Total Networking Equipment 405,934
------------
Semi-Conductors and Related (0.51%)
Intel Corp. 2,875 265,398
------------
TOTAL TECHNOLOGY 5,415,616
------------
TRANSPORTATION (0.42%)
Airlines (0.42%)
Southwest Airlines Co. 6,800 217,175
------------
UTILITIES AND REITs (5.91%)
Communications (3.20%)
Ameritech Corp. 9,250 615,125
Bell Atlantic Corp. 5,665 455,678
SBC Communications Inc. 9,875 606,078
------------
Total Communications 1,676,881
------------
Electric (1.22%)
Duke Power Co. 2,500 123,594
FPL Group Inc. 2,700 138,375
New York State Electric & Gas 6,175 165,953
Pinnacle West Capital Corp. 6,175 207,634
------------
Total Electric 635,556
------------
Natural Gas (0.76%)
Columbia Gas Systems Inc. 4,825 337,750
Consolidated Natural Gas Co. 1,000 58,187
------------
Total Natural Gas 395,937
------------
Real Estate Investment Trusts (0.73%)
Innkeepers USA Trust 7,500 128,906
LTC Properties Inc. 2,550 48,450
Nationwide Health Properties Inc. 5,000 120,313
Omega Health Investors Inc. 2,400 86,400
------------
Total Real Estate Investment Trusts 384,069
------------
TOTAL UTILITIES AND REITs 3,092,443
TOTAL COMMON STOCKS (cost $29,108,964) $33,432,170
SHORT-TERM INVESTMENTS
(3.85%) Par Value Value
- -------------------------------------------------------------------------------
U.S. AGENCY OBLIGATIONS (1.32%)
Federal Home Loan Bank
0.0000% 01-12-1998 $ 700,000 $ 689,105
------------
TOTAL U.S. AGENCY OBLICATIONS (cost $689,105) 689,105
------------
VARIABLE RATE DEMAND NOTES (2.53%)
American Family
5.1553% 12-31-2031 309,000 309,000
Johnson Controls Inc.
5.1650% 12-31-2031 415,358 415,358
Pitney Bowes
5.1441% 12-31-2031 354,692 354,692
Wisconsin Electric
5.1852% 12-31-2031 245,194 245,194
------------
TOTAL VARIABLE RATE DEMAND NOTES (cost $1,324,244) 1,324,244
------------
TOTAL SHORT-TERM INVESTMENTS (cost $2,013,350) $ 2,013,349
------------
TOTAL INVESTMENTS IN SECURITIES (99.39%) (cost $47,448,962) $ 51,964,955
------------
OTHER ASSETS LESS LIABILITIES (0.61%) $ 318,581
NET ASSETS (100.00%) $ 52,283,536
============
See Accompanying Notes to Financial Statements.
19
<PAGE>
Schedule of Investments, continued
Intermediate Fixed Income Portfolio
September 30, 1997 (unaudited)
LONG-TERM DEBT SECURITIES
(97.84%) Par Value Value
- -------------------------------------------------------------------------------
CORPORATE BONDS (27.62%)
FINANCE (27.49%)
Automobile (4.01%)
Ford Motor Credit Co.
6.3750% 04-15-2000 $ 72,784 $ 75,310
Ford Motor Credit Medium Term Note
5.9000% 06-09-1998 49,555 50,064
GMAC Medium Term Notes
7.5000% 11-04-1997 185,103 185,312
6.5000% 12-06-2004 474,047 497,432
------------
Total Automobile 808,118
------------
Banks (3.61%)
Banc One Corp.
7.3750% 12-01-2002 726,150 728,197
------------
Consumers (2.60%)
American General Finance
6.8750% 01-15-2000 24,638 25,386
Beneficial Corp. Medium Term Notes
6.5100% 12-03-2003 493,397 498,507
------------
Total Consumers 523,893
------------
Credit Card (2.58%)
Discover Credit Medium Term Note
8.3500% 05-06-1999 101,277 103,482
Nordstrom Credit Medium Term Note
7.8900% 02-14-2000 407,921 415,643
------------
Total Credit Card 519,125
------------
Diversified (7.52%)
Associates Corp. of North America
7.5000% 05-15-1999 100,863 102,256
Associates Corp. of North America
Medium Term Notes
6.3750% 06-01-2000 24,292 25,103
6.8400% 07-03-2001 298,279 304,554
Commercial Credit TRV
6.5000% 06-01-2005 303,786 296,396
General Electric Capital
6.6600% 05-01-2018 183,271 182,103
Household Finance Co.
Medium Term Note
7.0000% 09-18-2001 603,077 605,786
------------
Total Diversified 1,516,198
------------
Insurance (3.37%)
Allstate Corp.
5.8750% 06-15-1998 247,032 250,153
CNA Financial Note
8.8750% 03-01-1998 226,542 227,938
USLIFE Corp.
6.7500% 01-15-1998 199,225 200,584
------------
Total Insurance 678,675
------------
Leasing Companies (0.99%)
International Lease Finance
6.2500% 10-15-2000 197,636 200,226
------------
Other (2.81%)
Dean Witter Discovry and Co.
6.2500% 03-15-2000 38,718 40,165
Merrill Lynch
6.3750% 03-30-1999 24,649 25,111
7.0500% 04-15-2003 94,435 100,929
Merrill Lynch Medium Term Note
7.0500% 06-04-2001 175,453 178,997
Morgan Stanley Group
6.1250% 10-01-2003 192,075 195,620
6.3750% 12-05-2003 24,992 24,745
------------
Total Other 565,567
------------
TOTAL FINANCE 5,539,999
------------
INDUSTRIAL (0.13%)
Automotive (0.13%)
Ford Motor Co.
7.5000% 11-15-1999 24,985 25,667
------------
TOTAL CORPORATE BONDS 5,565,666
------------
See Accompanying Notes to Financial Statements.
20
<PAGE>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (68.33%)
U.S. AGENCY OBLIGATIONS (15.66%)
Federal Farm Credit Bank (FFCB) Bond
5.6500% 02-03-1998 $2,999,648 $ 3,001,443
Federal Farm Credit Bank (FFCB)
Medium Term Note
7.5500% 03-25-1999 151,022 153,664
------------
TOTAL U.S. AGENCY OBLIGATIONS 3,155,107
------------
U.S. TREASURY OBLIGATIONS (52.67%)
Certificate of Accrual Treasury Securities
6.5800% 11-15-1999 85,958 88,336
U.S. Treasury Notes
9.0000% 05-15-1998 421,219 423,689
6.3750% 01-15-1999 249,403 252,031
7.0000% 04-15-1999 124,590 127,266
7.8750% 11-15-1999 352,688 358,908
7.1250% 02-29-2000 299,928 308,438
6.7500% 04-30-2000 253,074 255,234
6.2500% 05-31-2000 99,982 100,969
7.7500% 02-15-2001 1,446,843 1,456,332
7.5000% 11-15-2001 1,036,610 1,054,688
6.3750% 08-15-2002 592,776 609,376
6.2500% 02-15-2003 345,517 353,500
5.7500% 08-15-2003 780,144 ,001
7.2500% 05-15-2004 1,047,517 1,062,813
7.2500% 08-15-2004 1,309,173 1,330,079
6.5000% 05-15-2005 1,018,305 1,021,876
6.5000% 08-15-2005 992,393 1,021,876
------------
TOTAL U.S. TREASURY OBLICATIONS 10,613,412
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS $13,768,519
------------
FOREIGN BONDS
(U.S. DOLLAR DENOMINATED) (1.89%)
Hydro Quebec
7.3750% 02-01-2003 $ 121,211 $ 129,986
Ontario Global Bond
7.3750% 01-27-2003 242,848 250,418
------------
TOTAL FOREIGN BONDS 380,404
------------
TOTAL LONG-TERM DEBT SECURITIES (cost $19,464,942) $19,714,589
------------
SHORT-TERM INVESTMENTS
(1.10%) Par Value Value
- -------------------------------------------------------------------------------
COMMERCIAL PAPER (0.05%)
Bank of NY Wilmington
9.1500% 01-06-1998 $ 10,000 $ 10,000
------------
TOTAL COMMERCIAL PAPER (cost $10,000) 10,000
------------
VARIABLE RATE DEMIND NOTES (1.05%)
Johnson Controls Inc.
5.1450% 12-31-2031 111,526 111,526
Wisconsin Electric
5.1650% 12-31-2031 101,663 101,663
------------
TOTAL VARIABLE RATE DEMAND NOTES (cost $213,189) 213,189
------------
TOTAL SHORT-TERM INVESTMENTS (cost $223,189) $223,189
------------
TOTAL INVESTMENTS IN SECURITIES (98.94%) (cost $19,688,131) $19,937,778
------------
OTHER ASSETS LESS LIABILITIES (1.06%) $212,922
------------
NET ASSETS (100.00%) $20,150,700
============
See Accompanying Notes to Financial Statements.
21
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Rainier Investment Management Mutual Funds
September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Small/Mid Intermediate
Cap Equity Core Equity Balanced Fixed Income
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities at market value
(cost of $252,957,931, $363,022,643
$47,448,962 and $19,688,131 respectively) $296,791,056 $416,179,852 $ 51,964,955 $ 19,937,778
Cash 1,114,138 11,534 921 --
Receivables
Investment securities sold 3,026,881 1,274,479 460,058 --
Dividends and interest 184,110 446,833 353,322 329,309
Net deferred organization costs 7,953 7,953 7,953 7,953
Prepaid expenses 29,863 38,944 659 2,851
---------------------------------------------------------------------
Total assets 301,154,001 417,959,595 52,787,868 20,277,891
---------------------------------------------------------------------
LIABILITIES
Payables for investment securities purchased 10,012,163 3,590,931 180,038 --
Distributions to shareholders -- -- 270,830 99,454
Due to Investment Advisor (Note 3) 243,473 320,652 36,177 1,090
Other accrued expenses 21,916 29,229 17,287 26,647
---------------------------------------------------------------------
Total liabilities 10,277,552 3,940,812 504,332 127,191
---------------------------------------------------------------------
Net assets $290,876,449 $414,018,783 $ 52,283,536 $ 20,150,700
=====================================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $220,252,714 $303,114,472 $ 41,500,257 $ 19,906,666
Accumulated undistributed
net investment income 103,681 1,136,865 8,766 1,520
Accumulated undistributed
net realized gain (loss) on investments 26,686,929 56,610,237 6,258,520 (7,133)
Net unrealized appreciation
on investments 43,833,125 53,157,209 4,515,993 249,647
---------------------------------------------------------------------
Net assets $290,876,449 $414,018,783 $ 52,283,536 $ 20,150,700
=====================================================================
Number of shares issued and outstanding
(unlimited shares authorized) no par value 11,811,872 16,874,250 2,976,153 1,630,346
=====================================================================
Net asset value per share $ 24.63 $ 24.54 $ 17.57 $ 12.36
=====================================================================
</TABLE>
See Accompanying Notes to Financial Statements
22
<PAGE>
STATEMENTS OF OPERATIONS
Rainier Investment Management Mutual Funds
For the six months ended September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Small/Mid Core Intermediate
Cap Equity Equity Balanced Fixed Income
Portfolio Portfolio Portfolio Portfolio
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income
Dividend income $ 1,240,888 $ 2,479,559 $ 224,702 $ --
Interest income 169,243 193,663 575,848 627,536
------------------------------------------------------------------
Total income 1,410,131 2,673,222 800,550 627,536
------------------------------------------------------------------
Expenses
Investment advisory fees (Note 3) 897,497 1,256,785 164,196 44,735
Custodian fees 25,251 38,952 15,808 2,570
Administration fees (Note 3) 75,772 95,395 23,394 20,055
Fund accounting fees 19,360 25,853 13,292 13,091
Transfer agent fees 11,599 13,968 5,772 5,382
Legal fees 2,632 4,961 752 375
Distribution fees (Note 3) 263,970 418,928 58,641 9,941
Insurance 2,290 4,195 716 319
Audit fees 8,524 11,736 5,125 4,124
Miscellaneous fees 3,477 6,099 2,318 1,410
Reports to shareholders 11,264 14,112 3,132 2,004
Registration fees 26,081 34,568 7,034 7,020
Trustees fees 4,491 4,491 4,491 4,491
Amortization of deferred organization costs 2,130 2,130 2,130 2,130
------------------------------------------------------------------
Total expenses 1,354,338 1,932,173 306,801 117,647
Less: expenses reimbursed (Note 3) -- -- (27,668) (62,972)
------------------------------------------------------------------
Net expenses 1,354,338 1,932,173 279,133 54,675
------------------------------------------------------------------
Net investment income 55,793 741,049 521,417 572,861
------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments sold 16,545,527 34,695,575 3,527,868 (6,687)
Net change in unrealized appreciation
on investments 43,624,841 49,647,439 4,480,570 458,959
------------------------------------------------------------------
Net gain on investments 60,170,368 84,343,014 8,008,438 452,272
------------------------------------------------------------------
NET INCREASE IN
NET ASSETS RESULTING
FROM OPERATIONS $60,226,161 $85,084,063 $ 8,529,855 $ 1,025,133
==================================================================
</TABLE>
See Accompanying Notes to financial Statements.
23
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Rainier Investment Management Mutual Funds
<TABLE>
<CAPTION>
Small/Mid Cap Equity Portfolio Core Equity Portfolio
-----------------------------------------------------------------------------
For the six For the fiscal For the six For the fiscal
months ended year ended months ended year ended
09/30/97* 03/31/97 09/30/97* 03/31/97
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
Operations
Net investment income $ 55,793 $ 292,102 $ 741,049 $ 1,382,321
Net realized gain (loss) on
investments sold 16,545,527 16,142,537 34,695,575 30,203,631
Net change in unrealized appreciation
(depreciation) on investments 43,624,841 (3,369,874) 49,647,439 (2,396,132)
-----------------------------------------------------------------------------
Increase in net assets resulting
from operations 60,226,161 13,064,765 85,084,063 29,189,820
-----------------------------------------------------------------------------
Distributions to shareholders
From net investment income -- (308,354) -- (1,262,143)
From net realized gain on investments sold -- (10,030,448) -- (13,714,949)
-----------------------------------------------------------------------------
Total distributions -- (10,338,802) -- (14,977,092)
-----------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold 116,408,787 96,287,091 110,614,410 176,244,166
Net asset value of shares issued on
reinvestment of distributions -- 10,111,612 -- 13,857,557
Cost of shares redeemed (22,099,347) (52,278,448) (42,308,798) (51,350,687)
-----------------------------------------------------------------------------
Net increase from
capital share transactions 94,309,440 54,120,255 68,305,612 138,751,036
-----------------------------------------------------------------------------
Net increase in net assets 154,535,601 56,846,218 153,389,675 152,963,764
NET ASSETS
Beginning of period 136,340,848 79,494,630 260,629,108 107,665,344
-----------------------------------------------------------------------------
End of period $ 290,876,449 $ 136,340,848 $ 414,018,783 $ 260,629,108
=============================================================================
CHANGE IN SHARES
OUTSTANDING
Shares sold 5,506,542 5,221,248 5,054,966 9,611,640
Shares issued on reinvestment of distributions -- 567,235 -- 776,911
Shares redeemed (1,045,557) (2,882,015) (1,924,875) (2,787,624)
-----------------------------------------------------------------------------
Net increase in shares outstanding 4,460,985 2,906,468 3,130,091 7,600,927
=============================================================================
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Intermediate Fixed
Balanced Portfolio Income Portfolio
-------------------------------------------------------------------------
For the six For the fiscal For the six For the fiscal
months ended year ended months ended year ended
09/30/97* 03/31/97 09/30/97* 03/31/97
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (Decrease)
IN NET ASSETS
Operations
Net investment income $ 521,417 $ 978,989 $ 572,861 $ 791,019
Net realized gain (loss) on
investments sold 3,527,868 4,125,731 (6,687) (219)
Net change in unrealized appreciation
(depreciation) on investments 4,480,570 (1,187,032) 458,959 (330,754)
------------------------------------------------------------------------
Increase in net assets resulting
from operations 8,529,855 3,917,688 1,025,133 460,046
------------------------------------------------------------------------
Distributions to shareholders
From net investment income (515,143) (983,196) (561,709) (800,647)
From net realized gain on investments sold -- (2,897,392) -- (5,863)
------------------------------------------------------------------------
Total distributions (515,143) (3,880,588) (561,709) (806,510)
------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold 5,252,159 28,696,866 511,646 10,867,359
Net asset value of shares issued on
reinvestment of distributions 461,987 3,801,012 564,448 748,944
Cost of shares redeemed (2,075,600) (23,984,319) (692,207) (1,706,775)
------------------------------------------------------------------------
Net increase from
capital share transactions 3,638,546 8,513,559 383,887 9,909,528
------------------------------------------------------------------------
Net increase in net assets 11,653,258 8,550,659 847,311 9,563,064
NET ASSETS
Beginning of period 40,630,278 32,079,619 19,303,389 9,740,325
------------------------------------------------------------------------
End of period $ 52,283,536 $ 40,630,278 $ 20,150,700 $ 19,303,389
========================================================================
CHANGE IN SHARES
OUTSTANDING
Shares sold 320,594 1,939,290 41,603 887,089
Shares issued on reinvestment of distributions 29,763 262,719 46,228 61,083
Shares redeemed (126,823) (1,657,681) (56,452) (139,004)
------------------------------------------------------------------------
Net increase in shares outstanding 223,534 544,328 31,379 809,168
========================================================================
</TABLE>
*Unaudited
See Accompanying Notes to Financial Statements.
25
<PAGE>
FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Semi-Annual Report. The
calculations are based on a share outstanding for each period.
Rainier Investment Management Mutual Funds
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Small/Mid Cap Equity Portfolio
------------------------------------------------------------------
For the six For the fiscal For the fiscal From 05/10/94
months ended year ended year ended through
09/30/97* 03/31/97 03/31/96 03/31/95**
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.54 $ 17.89 $ 13.89 $ 12.00
Income from investment operations
Net investment income 0.01 0.05 0.05 0.10
Net realized and unrealized
gain (loss) on investments 6.08 2.43 5.17 2.18
------------------------------------------------------------------
Total from investment operations 6.09 2.48 5.22 2.28
------------------------------------------------------------------
Distributions
From net investment income -- (0.06) (0.06) (0.07)
From net realized gains - -- (1.77) (1.16) (0.32)
------------------------------------------------------------------
Total distributions -- (1.83) (1.22) (0.39)
------------------------------------------------------------------
Net asset value, end of period $ 24.63 $ 18.54 $ 17.89 $ 13.89
==================================================================
Total return 32.85%+ 14.57% 38.38% 19.38%+
==================================================================
Net assets at end of period (in 000's) $290,876 $136,341 $79,495 $10,120
==================================================================
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.28%++ 1.33% 1.46% 2.93%++
After expense reimbursement/recoupment n/a 1.40% 1.48% 1.48%++
==================================================================
Ratio of net investment income to
average net assets (net of expense
reimbursement/recoupment) 0.05%++ 0.27% 0.66% 1.40%++
==================================================================
Portfolio turnover rate 60.48% 130.54% 151.37% 152.21%
==================================================================
Average commission rate paid^^ $ 0.0593 $ 0.0588 $0.0562 --
==================================================================
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Core Equity Portfolio
-----------------------------------------------------------------
For the six For the fiscal For the fiscal From 05/10/94
months ended year ended year ended through
09/30/97* 03/31/97 03/31/96 03/31/95**
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.97 $ 17.53 $ 13.84 $ 12.00
Income from investment operations
Net investment income 0.04 0.13 0.11 0.11
Net realized and unrealized
gain (loss) on investments 5.53 2.86 5.13 2.00
-----------------------------------------------------------------
Total from investment operations 5.57 2.99 5.24 2.11
-----------------------------------------------------------------
Distributions
From net investment income -- (0.13) (0.11) (0.07)
From net realized gains -- (1.42) (1.44) (0.20)
-----------------------------------------------------------------
Total distributions -- (1.55) (1.55) (0.27)
-----------------------------------------------------------------
Net asset value, end of period $ 24.54 $ 18.97 $ 17.53 $ 13.84
=================================================================
Total return 29.36%+ 17.88% 38.64% 17.87%+
=================================================================
Net assets at end of period (in 000's) $414,019 $260,629 $107,665 $20,430
=================================================================
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.15%++ 1.18% 1.30% 1.86%++
After expense reimbursement/recoupment n/a 1.22% 1.29% 1.29%++
=================================================================
Ratio of net investment income to
average net assets (net of expense
reimbursement/recoupment) 0.44%++ 0.74% 1.07% 1.25%++
=================================================================
Portfolio turnover rate 78.70% 146.12% 138.02% 133.18%
=================================================================
Average commission rate paid^^ $ 0.0586 $ 0.0591 $ 0.0575 $ --
=================================================================
</TABLE>
*Unaudited.
**Commencement of operations 05/10/94.
+Not Annualized.
++Annualized.
^^For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on which
commissions are charged. This amount may vary from period to period and fund
to fund depending on the mix of trades executed in various markets where
trading practices and commission rate structures may differ.
See Accompanying Notes to Financial Statements.
27
<PAGE>
Financial Highlights, cont.
Rainier Investment Management Mutual Funds
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Balanced Portfolio
---------------------------------------------------------------
For the six For the fiscal For the fiscal From 05/10/94
months ended year ended year ended through
09/30/97* 03/31/97 03/31/96 03/31/95**
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.76 $ 14.53 $ 12.96 $ 12.00
Income from investment operations
Net investment income 0.18 0.37 0.38 0.30
Net realized and unrealized
gain (loss) on investments 2.81 1.28 2.82 1.13
--------------------------------------------------------------
Total from investment operations 2.99 1.65 3.20 1.43
--------------------------------------------------------------
Distributions
From net investment income (0.18) (0.37) (0.37) (0.31)
From net realized gains -- (1.05) (1.26) (0.16)
--------------------------------------------------------------
Total distributions (0.18) (1.42) (1.63) (0.47)
--------------------------------------------------------------
Net asset value, end of period $ 17.57 $ 14.76 $ 14.53 $ 12.96
==============================================================
Total return 20.29%+ 11.83% 25.58% 12.23%+
==============================================================
Net assets at end of period (in 000's) $52,284 $40,630 $32,080 $13,724
==============================================================
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.31%++ 1.31% 1.50% 2.29%++
After expense reimbursement/recoupment 1.19%++ 1.19% 1.19% 1.19%++
==============================================================
Ratio of net investment income to
average net assets (net of expense
reimbursement/recoupment) 2.22%++ 2.50% 2.76% 3.04%++
==============================================================
Portfolio turnover rate 66.73% 133.68% 114.85% 92.40%
==============================================================
Average commission rate paid^^ $0.0587 $0.0576 $0.0587 --
==============================================================
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Intermediate Fixed Income Portfolio
----------------------------------------------------------------------
For the six For the fiscal For the fiscal From 05/10/94
months ended year ended year ended through
09/30/97* 03/31/97 03/31/96 03/31/95**
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.08 $ 12.33 $ 12.00 $ 12.00
Income from investment operations
Net investment income 0.35 0.65 0.70 0.57
Net realized and unrealized
gain (loss) on investments 0.28 (0.25) 0.34 --
----------------------------------------------------------------------
Total from investment operations 0.63 0.40 1.04 0.57
----------------------------------------------------------------------
Distributions
From net investment income (0.35) (0.64) (0.70) (0.57)
From net realized gains -- (0.01) (0.01) --
----------------------------------------------------------------------
Total distributions (0.35) (0.65) (0.71) (0.57)
----------------------------------------------------------------------
Net asset value, end of period $ 12.36 $ 12.08 $ 12.33 $ 12.00
======================================================================
Total return 5.26%+ 3.35% 8.85% 4.92%+
----------------------------------------------------------------------
Net assets at end of period (in 000's) $ 20,151 $ 19,303 $ 9,740 $ 6,370
======================================================================
Ratio of expenses to average net assets
Before expense reimbursement/recoupment 1.18%++ 1.53% 2.17% 2.44%++
After expense reimbursement/recoupment 0.55%++ 0.95% 0.95% 0.95%++
======================================================================
Ratio of net investment income to
average net assets (net of expense
reimbursement/recoupment) 5.76%++ 5.42% 5.69% 5.57%++
======================================================================
Portfolio turnover rate 3.07% 8.37% 15.49% 5.21%
======================================================================
Average commission rate paid^^ -- -- -- --
======================================================================
</TABLE>
*Unaudited.
**Commencement of operations 05/10/94.
+Not Annualized.
++Annualized.
^^For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for security trades on which
commissions are charged. This amount may vary from period to period and fund
to fund depending on the mix of trades executed in various markets where
trading practices and commission rate structures may differ.
See Accompanying Notes to Financial Statements.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Rainier Investment Management Mutual Funds
September 30, 1997 (unaudited)
Note 1. Organization
Rainier Investment Management Mutual Funds (the "Trust") was organized as a
business trust in Delaware on December 15, 1993 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified,
open-end management investment company. The Trust consists of four separate
series of portfolios: Small/Mid Cap Equity Portfolio, Core Equity Portfolio,
Balanced Portfolio, and Intermediate Fixed Income Portfolio (each a "Fund" and
collectively the "Funds").
Note 2. Significant Accounting Policies
The following significant accounting policies are consistently followed by
the Funds in the preparation of its financial statements, and such policies are
in conformity with generally accepted accounting principles for investment
companies.
A) Security Valuation: The Funds invest in a range of securities, generally
including equities and U.S. Government securities. Equity securities are valued
at the last sale price (for exchange-listed securites) or the last bid price (if
lacking any sales and for over-the-counter securities). Debt securities
generally are valued at the mean between the last bid and asked prices. Debt
securities with 60 days or less remaining to maturity are valued on an amortized
cost basis.
Securities for which market quotations are not readily available are valued
at fair value as determined in good faith by or under the direction of the Board
of Trustees. There were no such transactions for the period ended September 30,
1997.
B) Security Transactions, Dividends and Distributions: Security
transactions are recorded on trade date. Dividend income is recognized on the
ex-dividend date, and interest income is recorded on an accrual basis. Realized
gains or losses are reported on the basis of identified cost of securities
delivered. Bond discounts are accreted and premiums are amortized. Distributions
to shareholders are recorded on the ex-dividend date.
C) Federal Income Taxes: The Funds intend to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of their net investment income and any net realized
capital gains to shareholders of the Funds. Therefore, no provision is made for
Federal income or excise taxes. Due to the timing of dividend distributions and
the differences in accounting for income and realized gains (losses) for
financial statement and federal income tax purposes, the fiscal year in which
amounts are distributed may differ from the year in which the income and
realized gains (losses) are recorded by the Funds.
On the Statement of Assets and Liabilities, as a result of permanent
book-to-tax differences, reclassification adjustments have been made between the
capital paid in, undistributed net investment income and undistributed net
realized gain (loss) on invesment accounts.
D) Deferred Organization Costs: Organization costs of $22,375 have been
capitalized for each Fund as of April 8, 1994 and are being amortized over a
period of 60 months beginning on the date the Funds' registration became
effective. Rainier Investment Management, Inc.(R) (the "Investment Advisor") has
agreed that, in the event any of the initial shares are redeemed during the
60-month period for amortizing the Funds' organization costs, the proceeds will
be reduced for the unamortized balances of such costs in the same proportion as
the number of shares redeemed bears to the number of initial shares outstanding
at the time of redemption.
E) Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of income and expenses at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Note 3. Investment Management Fee and Other Transactions with Affiliates
A) Investment Management Agreement: The Trust, on behalf of the Funds, has
entered into an investment management agreement with the Investment Advisor.
Under the terms of the agree-
30
<PAGE>
ment, the Trust will pay a fee equal to the following annual percentages of
average daily net assets:
Small/Mid Cap Equity Portfolio 0.85%
Core Equity Portfolio 0.75%
Balanced Portfolio 0.70%
Intermediate Fixed Income Portfolio 0.50%
For the fiscal year beginning April 1, 1997, the Investment Advisor has
voluntarily undertaken to limit the management fee for the Intermediate Fixed
Income Portfolio to 0.45% of the Portfolio's average annual net assets.
Although not required to do so, the Investment Advisor has agreed to
reimburse each Fund to the extent necessary so that its ratio of operating
expenses to average daily net assets will not exceed the following levels.
Overall operating expense for each Fund will not fall below the applicable
percentage limitation until the Investment Advisor has been fully reimbursed for
fees foregone and expenses paid by the Investment Advisor under this agreement:
Small/Mid Cap Equity Portfolio 1.48%
Core Equity Portfolio 1.29%
Balanced Portfolio 1.19%
Intermediate Fixed Income Portfolio 0.55%
These percentages are based on the average daily net assets of the Funds,
exclusive of interest, taxes, brokerage commissions, extraordinary expenses and
sales charges. This agreement may be terminated by either party upon 60 days'
written notice.
B) Distribution Plan: The Trust, on behalf of the Funds, has approved a
Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the 1940 Act.
The Plan provides that the Funds will pay a fee to the Investment Advisor at an
annual rate of up to 0.25% of each Fund's average daily net assets. The fee is
paid to the Investment Advisor as reimbursement for, or in anticipation of,
expenses incurred for distribution-related activities.
For the fiscal year beginning April 1, 1997, the Investment Advisor has
voluntarily undertaken to limit the distribution fee for the Intermediate Fixed
Income Portfolio to 0.10% of the Portfolio's average annual net assets.
C) Administrative Service Agreement: The Trust, on behalf of the Funds, has
entered into an administrative services agreement with an unrelated third party.
Under the terms of the agreement, each Fund will pay a monthly fee based on the
greater of $40,000 annual minimum or the annual rate of:
0.10% of first $100 million of average daily net assets
0.05% of next $100 million of average daily net assets
0.03% of average net assets over $200 million.
Note 4. Purchases and Sales of Securities
The aggregate security purchases and sales, other than short-term
obligations and U.S. Government securities, for the period ended September 30,
1997 were as follows:
Fund Purchases Sales
Small/Mid Cap Equity Portfolio $217,978,880 $123,926,651
Core Equity Portfolio 331,328,086 260,684,949
Balanced Portfolio 32,450,445 29,215,652
Intermediate Fixed Income Portfolio 18,926,041 17,750,000
Balanced Portfolio and Intermediate Fixed Income Portfolio purchased
$1,008,438 and $1,251,347 respectively, and sold $718,063 and $0, respectively,
of U.S. Government securities. There were no purchases or sales of U.S.
Government securities by the Small/Mid Cap Equity Portfolio and Core Equity
Portfolio.
The aggregate unrealized appreciation and depreciation of portfolio
securities at September 30, 1997, based on costs for federal income tax purposes
were as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Fund Appreciation Depreciation Appr./(Depr.)
Small/Mid
Cap Equity $43,833,125 $ 0 $43,833,125
Core Equity 53,267,688 110,479 53,157,209
Balanced 4,567,165 51,172 4,515,993
Intermediate
Fixed Income 249,647 0 249,647
Note 5. Related Party Transactions
Certain officers and Trustees of the Funds are also officers and/or
directors of the Investment Advisor. Outside Trustees are compensated by the
Trust at the total rate of $4,000 per year plus $1,000 for each meeting of the
Board of Trustees attended and any travel expenses incurred in such meetings.
31
<PAGE>
DIRECTORY OF FUNDS' SERVICE PROVIDERS
Investment Advisor
Rainier Investment Management, Inc.,(R) 601 Union Street, Suite 2801, Seattle,
WA 98101
Distributor
First Fund Distributors, Inc., 4455 E. Camelback Road, Suite 261-E, Phoenix, AZ
85018
Administrator
Investment Company Administration Corporation, 2025 E. Financial Way, Suite 101,
Glendora, CA 91741
Custodian, Transfer Agent and Fund Accountant
Firstar Trust Company, 615 E. Michigan Street, Milwaukee, WI 53202
Independent Auditors
KPMG Peat Marwick LLP, 3100 Two Union Square, 601 Union Street, Seattle, WA
98101
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP, 345 California Street, San Francisco, CA
94104
INDEX DESCRIPTIONS
------------------
The Standard & Poor's 500 Stock Index is an unmanaged index composed of 500
industrial, utility, transportation, and financial companies of the U.S.
markets. The Index represents about 75% of New York Stock Exchange ("NYSE")
market capitalization and 30% of NYSE issues. It is a capitalization-weighted
index calculated on a total return basis with dividends reinvested.
The Russell 1000(R) Index, the Russell Midcap(TM) Index and the Russell 2000(R)
Index are unmanaged indices composed of the equities of companies ranging in
value from approximately $0.5 to $223.3 billion, $0.5 to $17.6 billion, and $0.1
to $2.6 billion, respectively, as of September 30, 1997.
The Lehman Brothers Government/Corporate Intermediate Bond Index ("Lehman
Intermediate Bond Index") is an unmanaged index composed of all bonds covered by
the Lehman Brothers Government/Corporate Index with maturities between one and
9.99 years.
The Consumer Price Index ("CPI") is a measure of change in consumer prices as
determined by a monthly survey of the U.S. Bureau of Labor Statistics.
The Salomon Brothers 3-Month Treasury Bill Index ("91-Day U.S. Treasury Bill
Index") is an unmanaged index of equal dollar amounts of three-month Treasury
bills purchased at the beginning of each of three consecutive months.
The "Balanced Index" consists of 50% Standard & Poor's 500 Stock Index, 40%
Lehman Brothers Government/Corporate Intermediate Bond Index, 10% 91-Day U.S.
Treasury Bill Index.
32
<PAGE>
RAINIER
INVESTMENT
MANAGEMENT
Mutual Funds
601 Union Street, Suite 2801
Seattle, Washington 98101
phone (800) 248-6314
